Smoking ban drags down Sky City result

Photo / Dean Purcell

Casino operator Sky City Entertainment Group said first-half net profit fell 5.5 per cent to $67.1 million, dragged down by a smoking ban affecting its Darwin casino, falling earnings at its key Auckland casino and the October increase in goods and services tax.

The result was also dragged lower by earnings from the cinemas business, sold in February last year, being included in the previous first-half results.

See the results here.

On a normalised basis, profit was up 2 per cent while revenue rose 2.6 per cent to $447.7 million.

Its key Auckland casino saw revenue fall slightly while operating earnings, accounting for nearly two-thirds of the total, fell 3.6 per cent to $96.9 million.

Operating earnings from its next biggest asset, the Darwin casino, fell 13.4 per cent in Australian dollar terms, reflecting the impact of the smoking ban introduced in January last year, but its Adelaide casino achieved a 5.9 per cent lift in operating earnings.

Its Hamilton casino lifted earnings 3.1 per cent while the contribution from its Queenstown and Christchurch operations was flat.

Chief executive Nigel Morrison said the result was solid "in the context of continuing challenging economic conditions in New Zealand and a softening retail environment in Australia."

The Darwin comparison was always going to be difficult and the GST increase in New Zealand from October 1 added nearly $3 million in costs.

He said there are positive signs of momentum into the second half, revenue in the first six weeks of which was up more than 9 per cent on the same period last year.

The company is well advanced on a number of projects which will be completed in time for the expected influx of 85,000 plus visitors for the Rugby World Cup, Morrison said.

Consistent with previous guidance, "we would be disappointed if we did not achieve normalised NPAT (net profit after tax) of $127.4 million for the 2011 financial year," the company said.

Sky City shares fell 0.9 per cent to $3.30, having traded between $2.79 and $3.45 during the last 12 months.