Sky City deals winner to new shareholders

By Karyn Scherer

Investors who took a gamble on Sky City instalment receipts this year were rewarded yesterday with a better-than-expected profit and dividend payout.

Freed from the shackles of both Brierley Investments and American casino operator Harrah's, the company has managed to keep a lid on costs while continuing to boost revenue from casino operations.

Slot machines again proved the biggest drawcard, helping to boost revenue 8 per cent for the year ended June, from $239.6 million to $257.7 million. Gaming operations make up 80 per cent of total revenue.

The improving economy and the bounce-back in tourist numbers in the second half of the year also helped boost bottom-line profit to $45.6 million.

The result was slightly above analysts' expectations and higher than the company's forecast of $42 to $43 million.

While last year's slump in tourism saw revenue from Sky City's tourism-related operations fall 11 per cent, the company kept down fixed costs, including its wage bill, and overheads.

But the $9 million saved by severing links with Harrah's was largely eaten up by other costs, such as promotion, repairs and maintenance.

Although revenue from its hotel dropped due to an accommodation glut in Auckland, the company was pleased with its occupancy rate of 69 per cent, down only slightly on last year.

Numbers visiting the Sky Tower also fell slightly, to 650,000, although revenue from the tower remained much the same at $13.7 million.

However, Sky City is confident it has now got its bars and restaurants sorted out, improving revenue slightly to $14.8 million.

In March, more than 20,000 new shareholders were added to the company's register, following Brierley Investments' decision to quit its majority stake in the company.

They agreed to pay a $4 down-payment on instalment receipts, with the final payment of $3.55 not due until April next year.

Since then, the company's share price has traded as high as $7.92 and sunk to $6.82. It closed last night up 10c at $7.40.

Investors who bought into the company a year ago have done even better, however. In the past year, its share price has risen over 40 per cent.

The company is hoping to boost revenue at least 5 per cent over the next year, but concedes growth will slow after the America's Cup and other big events expected to improve Auckland's economy this year.

It is also mindful it will be setting up at least one new operation, in Queenstown, with word expected soon on whether it has been successful in Hamilton. Both casinos are expected to open in early 2001.

The board has decided on a final dividend of 26c a share, taking the dividend for the year to 43c a share, up from 29c last year.