Sky City half year results:
Revenue - $422m up 0.1pc
Profit - $55.6m down 0.2pc
Dividend - 9 cents per share
KEY POINTS:
Casino operator Sky City Entertainment Group is to cut the proportion of profit it pays out in dividends as it puts a greater focus on reducing debt.
The company today reported underlying net profit for the six months to the end of December of $55.6 million, slightly down on the $55.9 million a year earlier.
It is to pay an interim dividend of 9 cents per share, compared to 11cps in the first half of the 2008 financial year, and said that in future it plans to reduce its distribution payout ratio.
Starting from the second half of the current financial year, Sky City's payout ratio will be between 60 per cent and 70 per cent of net profit to retain additional capital for debt retirement.
Previously the policy was to payout 90 per cent of net profit.
The company said it would increasingly focus on a more conservative capital management positioning.
"Priorities have changed in the current environment from a high payout ratio to an increased focus on using funds available to reduce debt."
Sky City chief executive Nigel Morrison said the possibility of introducing the new payout ratio from the first half had been debated.
"We thought people had invested in Sky City on the basis of a policy that had been enunciated in the past, and we thought it important that we didn't want to retrospectively surprise anybody," he said.
The company said operations in this country were "relatively resilient" despite the challenging economic environment, while the performance by Australian casinos was solid.
Underlying revenues for the latest half year were up 3 per cent on a year earlier to $422m.
Underlying ebitda (earnings before interest, tax, depreciation and amortisation) dropped 1.5 per cent to $150m, partially reflecting the increased costs of operating and generating revenues.
Net profit of $54.8m for the latest half year was well ahead of reported net profit for the previous half year of $1.3m, which was affected by a write-off in the company's cinemas unit.
Morrison said Sky City was cautious in its outlook in relation to the economies of both New Zealand and Australia, and its future performance would be influenced by how those economies unfold.
Both hotels in Auckland had so far maintained strong occupancy, and conventions and events strategies had been successful in delivering sustained revenue flows, he said.
"One of the major challenges facing the Auckland casino has been to improve the performance of the gaming machines business. Second quarter revenues from gaming machines improved following a significant re-layout and re-design of product, and focus on enhanced customer services."
Gaming machine revenues in Auckland were down 3.2 per cent on a year earlier to $102.7m, but were 3.3 per cent ahead of the most recent preceding period, the second half of 2008.
"The cost of growing revenue whilst still providing value has seen margins soften somewhat, but, on balance, we're satisfied with the performance of our Auckland property in the current environment," said Morrison.
In Australia, the company was pleased with the performance of its businesses and the revenue growth achieved in both Adelaide and Darwin.
Adelaide delivered 3 per cent revenue growth and an 18 per cent growth in ebitda, despite the introduction of full smoking bans in November 2007.
Ebitda for the Australian Casinos unit rose $3.1m to $44m, while New Zealand Casinos were down $5.8m to $114.7m, International Business was down $11.8m to $800,000, and Cinemas was up $500,000 to $2.5m.
Revenue from the Auckland casino eased 1.2 per cent to $202.9m, while the Adelaide casino produced revenue up 3.2 per cent to A$64.5 ($82.6m) and Darwin casino revenues were up 4.7 per cent to A$57.5m.
New 10-screen complexes at Albany and Manukau increased Sky City's share of the Auckland market to more than 65 per cent, the company said.
Turnover levels for International Business were down 16 per cent to $640m, with Sky City's win rates substantially less at 1.3 per cent (being at theoretical) compared to 3.2 per cent last year. Gaming revenues from International Business were down to $7.6m from $21.9m, as a result of the high win rate last year.
Sky City shares were up 3c to $2.75 in mid-afternoon trade, having ranged between $3.98 and $2.67 in the past year.
- NZPA
