KEY POINTS:
SkyCity Entertainment's flat result for the first half of the financial year reflects the different market and economy that exist now, says chief executive Nigel Morrison.
Morrison said yesterday that results for the six months to December 31 were satisfactory and New Zealand revenue was "reasonably resilient", but the company had started to feel the downturn.
He warned that future performance would depend on jobs and job security of the wider population, but declined to discuss trading since January 1.
SkyCity, which runs cinemas, hotels and a conference centre but makes the bulk of its money from casinos in New Zealand and Australia, says it is important that the Government creates jobs.
"We are increasing revenue but spending more to achieve it."
He predicted tougher times for non-casino revenue from hotels and five-star restaurants.
"People are more inclined to have a sandwich in the boardroom than a significant five-star lunch."
Morrison said job losses had more impact on revenue from gaming machines - the pokies - than gaming tables.
Table games such as poker and roulette tended to attract more wealthy clientele who enjoyed taking risks. "They have probably not felt the full impact of the recession yet."
Morrison said the demographic for gaming machine players would be stable until they or their household partner faced the prospect of losing their jobs, a threat that was increasing daily.
Morrison, who has headed SkyCity for 12 months, was pleased with "flat results".
Profit before interest, tax and depreciation fell to $148.5 million from $158.7 million.
Net income rose to $54.8 million from $1.3 million in the first half of last year, when SkyCity wrote off $60 million from the value of its cinema assets. Not including extraordinary items, net profit was down $300,000 or 0.5 per cent to $55.6 million.
Yesterday the company also unveiled a new, more conservative approach, reducing the proportion of profits that are returned to shareholders as dividends.
Jeremy Simpson, an analyst for the sharebroker Forsyth Barr, said the reduction from 90 per cent to 60 to 70 per cent of net profit would be supported by many shareholders who thought it was better to reduce debt.
The interim dividend of 9c was based on the 90 per cent figure and the final dividend will be based on the new lower figure.
Morrison said the change was sensible in the current environment and reducing debt would make the SkyCity stock more attractive to investors.
But he said debt was not excessive and was diversified, with no significant refinancing needed until 2012, when $485 million was due.
More detailed results showed Australian casino earnings before interest, tax depreciation and amortisation were up 7.6 per cent to $44 million. New Zealand casinos were down 4.7 per cent for the first half with SkyCity Auckland casino down 5.2 per cent to $121 million. SkyCity's Hamilton casino earned $8.8 million and the Christchurch and Queenstown division took in $3.8 million.
Morrison said SkyCity was refocusing its international business - essentially bringing in big gamblers from overseas - away from a few big spending individuals to a greater number of smaller spenders.
The approach, allied to attracting more significant gamblers from the underused Australian market, would make results for the international business less volatile.
Simpson said the only surprise was the Adelaide casino had performed better than expected. He said results showed SkyCity holding up a lot better than many other companies.
SkyCity Entertainment yesterday closed unchanged at $2.72.
