SkyCity taking a punt on double-digit growth

Rod McGeoch told shareholders at SkyCity's AGM yesterday that political sentiment in Australia had turned against the gaming sector. Photo / Dean Purcell

SkyCity Entertainment is betting on double-digit growth next year despite uncertainty about how the recession and recovery will play out.

And the company - with four casinos in New Zealand and two in Australia - has signalled trouble ahead at Darwin and Adelaide.

A smoking ban is expected to hurt revenue and there is growing anti-gambling sentiment among politicians, chairman Rod McGeoch said yesterday.

Chief executive Nigel Morrison, speaking to investors at the annual meeting in Auckland yesterday, said growth would flow from improvements to facilities.

These had led to a turnaround in Adelaide last year, and promised good results in the recently refurbished Darwin casino. Initial results for the first half would help counter the revenue cut from the smoking ban.

Morrison estimated that the ban, starting in Australia on January 2, would stub out 10 to 15 per cent of gaming machine revenue from the Darwin and Adelaide casinos.

In New Zealand a smoking ban cut revenue 10 to 12 per cent, affecting pokies more than table games like roulette and poker.

He believed there were more smokers in Australia, particularly in Darwin.

Marcus Curley, an analyst at Goldman Sachs JB Were, said that investors had factored in a drop of 10 per cent from the smoking ban so 15 per cent was slightly higher.

A packed meeting was told that SkyCity - and other gaming companies - were facing a change in attitude to gambling across the Tasman.

The Productivity Commission had recently presented a draft report recommending changes.

Morrison said that "on balance given our specific gaming tax rates, the mix of our gaming product and the current state-based regulations under which we operate, SkyCity does not expect the ultimate implementation of the final recommendations to materially impact" the company.

But McGeoch is warning that under the new federal Government "sentiment has shifted and is running against the gaming sector".

Revealing figures for the first three months of the 2010 financial year to September, Morrison said that Adelaide Casino revenue was up 8 per cent.

The recently upgraded Darwin casino was up 7 per cent.

Quarterly revenues for Auckland casino were up marginally by 1.1 per per cent and gaming revenues were flat.

Auckland gaming machine revenue was still outperforming machines in pubs and clubs.

The New Zealand cinema business - which Morrison said had improved from a low base - showed admissions up 17 per cent and revenue up 14 per cent.

Curley described the company's first quarter as "solid".

IN THE POT

SKYCITY ENTERTAINMENT GROUP
* Casinos by size Auckland, Darwin, Adelaide, Christchurch, Hamilton, Queenstown.
* Employees: 7360
* Gaming machines: 4312
* Hotel rooms: 780
* Gaming tables: 298
* Restaurants, bars: 50
* Cinema screens (NZ): 123