SkyCity eyes centre after big result

SkyCity wants to build a new convention centre and larger casino area. Photo / Supplied

The global economy may be teetering, but SkyCity Entertainment has delivered a record interim profit of $78.8 million.

And the good times have rolled on into January and February, the company said yesterday.

Now the market is waiting to see if the casino company will hit an even bigger jackpot with the Government easing gambling rules in a trade-off for a $350 million new national convention centre - a business that typically demands heavy investment but delivers poor returns to owners.

At the company's results briefing yesterday, SkyCity chief executive Nigel Morrison would not specify exactly what was on the table in talks but confirmed the conference centre deal was still live. He said that if the deal hammered out with the Government was not good for shareholders, SkyCity would not go ahead,

"Obviously we have a view of what we need to make it work for us. There is a lot of science to it - but there is bit of art and there is some risk."

Morrison emphasised the fundamentals of the business were strong regardless of the outcome.

"One thing we are certain of is that of there is good demand in our core business - and currently we are challenged to meet that growth."

The market remains vitally interested in what talks with the Government will deliver and what the return to SkyCity's bottom line - from easing of regulations - would be, analysts said yesterday.

Morrison confirmed that an early renewal of New Zealand licences that fall due in 2021 was still among the issues that were on the table.

He insists "it's not worth hundreds of millions of dollars". But he acknowledged that renewal - avoiding another regulatory review - might be very valuable to the company.

SkyCity is seeking additional rights to pokie machines and table games. It is seeking removal of any rules in New Zealand that are more restrictive than its casinos face in Sydney or Melbourne.

Even before any easing of regulations, SkyCity's results were buoyant for the six months to December 31.

The company predicts it will end the financial year on June 30 at the top end of forecasts in "the high $140 millions'.

Morrison said the record half-year results were due in part to strong fundamentals and development at its Auckland casino.

Revenue was up at $494 million from $447.7 million in the previous corresponding period.

SkyCity found the Rugby World Cup did not live up to its hype as an earner.

It added a disappointing $11 million to revenue and $6 million to earnings before interest depreciation and amortisation,

But Morrison said capital expenditure, such as the development of the eighth floor and facilities for international gamblers, had provided a 20 per cent boost in revenue from August 31 to December 31. The strong results are despite tough times in the retail sector on both sides of the Tasman. SkyCity is active in the restaurant and hotel markets.

Shares closed down 5c at $3.59.

Morrison said that SkyCity was comparable to Australian JB Hi-Fi which had performed well. Both are entertainment based companies targeting discretionary income. In the current environment people were happy to spend $50 on entertainment, but less likely to spend $2000 on a bigger purchase such as new whiteware.