Sky City raising $214 million, sticks with profit guidance

Sky City has announced a placement of 71 million shares, to raise $178.9 million.

Sky City Entertainment Group has announced a $214 million capital raising today and despite a deepening recession said it was confident of meeting annual profit forecasts.

The casino operator said it was carrying out a share placement to institutions and an offer to shareholders to strengthen its balance sheet, a strategy previously highlighted by the company, and provide more financial flexibility.

Sky City is the latest in a list of strong companies, including Freightways and Fletcher Building, that have recently come to the market to raise capital as bank funding becomes increasingly difficult and expensive to obtain.

"Sky City probably doesn't need too much in the way of capital, it's been managing its capital very well," said Paul Richardson of Sky City shareholder BT Funds Management.

Shares in Sky City were placed in a trading halt this morning, to be lifted once a placement of 71 million shares was completed.

The shares were fully underwritten at $2.52 each, a discount to their last trade at $2.85, although the final price would be determined through a book-build.

The company was also hoping to raise up to $35m in new shares in a share purchase plan for existing shareholders.

The price of those shares would be the lower of the placement price, and a 2.5 per cent discount to the five-day, volume-weighted average price leading up to the close of the offer.

Shareholders could apply for up to $12,500 in shares, and applications over $35m would be scaled.

"Sky City has a sound balance sheet with a well diversified debt structure," said company managing director and chief executive Nigel Morrison.

"We have determined, however, that it is prudent to proactively strengthen the company's capital structure and enhance its financial flexibility through an underwritten placement."

If the share issue purchase plan was not fully taken up, a top-up offer of up to $15m would be made to eligible New Zealand shareholders whose holding would be diluted by the placement.

Despite weaker consumer spending amid a slowing economy, Sky City said it was on track to comfortably meet forecasts of annual profit between $99m and $106m on the basis of current market conditions.

Last year, profit rose 19 per cent to $111.9m before one-off items such as a $60m writedown in the company's cinemas division. Including non-recurring items, net profit fell 49 per cent to $49.9m for the year ended June 30, 2008.

Third quarter group revenue of $203m was 4.3 per cent ahead of a year earlier, and revenue for the nine months ended March 31 was up 1.4 per cent.

Earnings before interest, tax, depreciation and amortisation (ebitda) for the nine months to March, before adjustments for one-off and other items, fell 8 per cent to $215.9m.

Adjusted ebitda was down 1.1 per cent at $219.1m.

Sky City did not have to seek shareholder approval for the capital raising after it was granted a waiver to listing rules by NZX.

Sky City operates casinos in Auckland, Hamilton, Queenstown, Adelaide and Darwin.

- NZPA