Sky City pays price of bad bet

By GEORGINA BOND

A bad bet sliced $20.9 million from casino operator Sky City Entertainment's annual profit.

Yesterday, it posted a 6.5 per cent drop in profit to $100.22 million, after writing off its 33 per cent stake in Australian online sports betting firm Canbet.

Managing director Evan Davies said Canbet ran up significant trading losses and the investment was deemed "no longer a strategic positioning".

The company faces the uncertainty this year of the effect of a looming smoking ban.

Before the Canbet write-off, net earnings for the June year rose 13 per cent to $121 million.

Sales rose 6.1 per cent to $598.7 million.

Davies said the final result was disappointing, but reflected a challenging year for the company.

The March introduction of a $20 note limit on New Zealand gaming machines weakened the Auckland gaming result in the June half.

Davies said the operational difficulties and inconvenience for higher-end customers cut operating profit by an estimated $7 million.

The company would introduce tokens and ticket technology, develop "premium play spaces" and introduce new VIP machines, expecting those measures to return revenue to normal this year.

Davies said the company was preparing for the December start of the smoking ban in pubs and clubs with the construction of balconies at its New Zealand casinos.

With a negative impact from the ban possible, analysts are conservative about the outlook for the 2005 year, with median net profit expectations of between $116 million and $119 million.

Overall group earnings climbed 6.1 per cent to $598 million, with New Zealand operations making up nearly 80 per cent of the figure.

The strong performance by Sky City Hamilton continued, with revenue ahead of expectations at $31 million. Sky City Queenstown's revenues were up 5.5 per cent at $6.4 million.

Davies said the strong performance of its Australian operations was encouraging.

The Grand Darwin Casino and Hotel, bought for A$195 million ($211 million) in February, was trading beyond expectations with revenue up 14 per cent to A$38.1 million.

Sky City Adelaide significantly improved on its disappointing first half, with revenue up 7 per cent to A$110 million. Stage one of its redevelopment was scheduled for March.

Davies expected most of this year's growth to come from New Zealand.

Earnings per share were 24c, against 25.5c.

A fully tax-paid final dividend of 15.5c will be paid on October 8, making a full-year dividend of 26.5c. Shares in the company dropped briefly to $4.48 before closing steady at $4.57. Additional reporting, NZPA