Sky City beats expectations, as smoking ban impact abates

Casino operator Sky City Entertainment today bettered market expectations to post a $58.6 million December half year profit, shrugging off the effects of tougher gaming regulations, a smoking ban and softening consumer spending.

The Auckland-based company, New Zealand's biggest casino operator, traded its way through the tough conditions to report a net after tax profit just 1.7 per cent below the $59.6m profit recorded for the same period a year earlier.

Market commentators had expected Sky City to post a profit closer to $50m as a smoking ban on casinos, pubs and restaurants -- introduced in December 2004 -- and regulatory measures aimed at reducing addiction to gambling, ate into its bottom line.

The company, which has a near-monopoly on the $2 billion New Zealand gaming sector following a Government ban on new casino developments, said operating revenue rose 10.4 per cent to $386m, while earnings before interest, tax, depreciation and amortisation (ebitda) rose 2.5 per cent to $154.6m.

Sky City owns or has a share in five of the country's six casinos and two in Australia .

Shares in Sky City, which declared an interim dividend of 12 cents per share, leapt 17c -- or almost 4 per cent -- to $4.87 on the news, against a year high of $5.39.

Today's dividend was the first under a new scheme, announced last month, of issuing bonus shares, rather than dividends. Sky City said today a fully imputed cash alternative was also available, via an off-market buyback of bonus shares.

The bonus shares would be calculated on the average value of Sky City shares between March 13-17.

The first half of last year included just three weeks of trading under the smoking ban, so analysts were keenly awaiting today's result to see how Sky City fared.

Today's result was significantly ahead of the second half of the 2005 financial year -- the first reporting period post the smoking ban -- when Sky City posted a net profit of just $46.8m.

Sky City Auckland, which generates the bulk of the company's earnings, was trading in line with the same period last year, due to strong performances from gaming, convention and restaurant operations and the new revenue stream from the Sky City Grand Hotel.

Total revenues at the Auckland casino rose 9 per cent to $224m, while ebitda was 1 per cent higher at $105m. Gaming revenue rose 4.5 per cent to $177.1m, while non-gaming revenue rose 27.5 per cent to $46.4m.

Sky City Adelaide, which has undergone a major redevelopment, recorded an 18 per cent revenue lift to A$66m ($74.66m), while ebitda rose 18 per cent to A$13.8m.

Sky City Darwin continued to perform strongly, despite removal of the community slots rebate from July 1, with revenue rising 20 per cent to A$46m and ebitda up 12 per cent at A$18m.

In New Zealand, Sky City Hamilton's revenues and earnings were supported by the new entertainment facilities acquired as part of the Riverside Entertainment Centre in September.

Christchurch Casino was performing in line with the first half of last year, despite the smoking ban.

The only disappointment was Sky City Queenstown, which posted lower revenues following a poor ski season and reduced tourist numbers to the Queenstown region over the summer break.

Sky City's Leisure division held revenues and earnings despite increased competition in the Auckland cinema market and the lack of blockbuster films during the period. Revenues rose 3.8 per cent to $18.9m.

Looking ahead, Sky City said it was well-placed moving into the second half, with the impact of the smoking ban now abating in line with, or slightly ahead of previous earnings guidance.

- NZPA