SkyCity looks to shake off 'shackles'

Nigel Morrison. Photo / Glenn Jeffrey

SkyCity Entertainment is betting on a more benign regulatory environment now that National is in power.

Chief executive Nigel Morrison said that while at this time last year "it seemed anything could happen", he was confident the National Government would not impose more regulations.

Morrison announced financial results for the year to June 30 yesterday, saying SkyCity's New Zealand operations faced onerous compliance rules.

He was talking to the Government about removing some of the "shackles" that were hurting tourism revenue.

"There an opportunity if we take the shackles off a little. When economies turn sour the perspective on casinos changes and people want to focus on jobs, tourism and investment."

The company was "keen to develop some structured thoughts" with the Government about changes to regulation.

"They are prepared to listen - they are aware of the benefits for jobs, tourism and capital expenditure," said Morrison.

After removing last year's $60 million writedown in cinema assets, SkyCity announced net profit of $115.3 million compared with $102 million adjusted last year.

SkyCity shares closed up 10c, or 3 per cent, at $3.40.

Morrison said that he was pleased with SkyCity's results, which picked up in the second half. They were bolstered by a turnaround at its long-struggling Adelaide casino, where revenue was up A$12.4 million, or 10.5 per cent.

Market player and commentator Arthur Lim said the Adelaide result boded well for SkyCity. "They put a lot of time and management energy into Adelaide, which has been a noose around its neck."

Revenue from SkyCity's newly renovated and expanded Darwin casino was up $8.2 million or 8.1 per cent to $109 million.

New Zealand casino revenue was flat, with Auckland earning $404.6 million, Hamilton $38.9 million and Christchurch/Queenstown casinos $13.9 million.

Morrison took over SkyCity 18 months ago after a long and failed sale process for the cinemas division when the company performance was criticised by investors. Management and board upheavals followed and he said he was focused on change, including regulation

Underlying revenue was up 6 per cent to $846.5 million while earnings before interest, depreciation and amortisation (ebitda) were up 4 per cent to $300.5 million.

Morrison said ebitda was up 10 per cent in a stronger second half of the year.

Net debt was down 29 per cent from $960 million in June 2008 to $681 million.

Under a new dividend policy announced this year, the company reduced its dividend payout from 90 per cent of net profit to 60 to 70 per cent and issued a dividend of 6.5c a share, reaching a total of 15.5c for the year.

Earlier this year the company raised $228 million from a share issue and its gearing ratio of net debt to ebitda fell from 3.3 times to 2.3 times.

The company aimed to appeal to investors through growth rather than dividends, Morrison said.

While table revenue - for games like roulette, poker, and blackjack - was up on last year, the company had been unable to boost revenue from poker machines, he said. These were down 3 per cent in the first half and flat in the second half.

The company now had a focus on increasing revenue from the gaming machines.

Morrison said occupancy rates for the hotels were up in the 660 rooms but it was hard to grow earnings in challenging economic times.

In its strategic outlook, SkyCity said it aimed to deliver double-digit earnings growth in net profit after tax next year.