Casino says growth forecast hampered by building work

The acting head of casino operator Sky City Entertainment Group said growth next year would be tempered by a smoking ban in Adelaide and the completion of its Auckland refurbishments.

The company has predicted a 10 to 12 per cent increase in net profit for 2008.

Executive director Elmar Toime said the Auckland and Adelaide factors would temper growth in market share but he was unconvinced that forecasts of a tightening economy would have a major effect.

Today Sky City reported a net profit of NZD 98.4 million (USD 68.3 million) in the year ended June 30, compared with a NZD 120.1 million profit the year before.

The company, which is engaged in a cost-cutting exercise, also said it was willing to sell its Adelaide casino, following expressions of interest from potential buyers, but only if offers exceeded its own valuation.

It was also prepared to sell its New Zealand cinema business, which had received informal expressions of interest.

Mr Toime said a number of one-off losses and funding adjustments in the previous two years had masked the company’s underlying performance.

Underlying net profit after tax for 2007 was up 7.2 per cent to USD 89.3m, but high rollers had been luckier this year than in the very strong 2006 year.

Mr Toime said Sky City had come down from high levels of profit two or three years earlier, before no-smoking legislation and the refurbishment of the Auckland casino’s main gaming floor, which had had more impact than expected.

„They are well-performing businesses, they haven’t performed as well as they have but in benchmark terms, I think they’re well performing businesses.“

Sky City was doing work on customer segmentation and developing loyalty programmes to attract new clientele, and that had „scope, not withstanding the potential for a contracting economy“.

During the year, the casino operator’s total revenue was up 6.7 per cent to USD 816 million.

Group earnings before interest, tax, depreciation and amortisation (ebitda) were down 1.3 per cent to USD 297.2m, with ebitda at the flagship Auckland casino down 2.9 per cent to USD 208.6m.

The company declared a final dividend of 12 cents a share, taking the total for the year to 21c, compared to 26c last year.

Mr Toime said Darwin and Hamilton had been going well, with ebitda at Darwin up 6.7 per cent to AUD 35.2m (NZD 40.7m), up 12.1 per cent at Hamilton to USD 19.5 million.

Adelaide’s ebitda there down 9.5 per cent to AUD 20.9m as it battled for market share with the established pubs and clubs scene.

Cinemas ebitda was up to $ 13m from USD 9.9m, but given that Sky City’s ownership moved from 50 per cent the previous year to 100 per cent in the latest year, the underlying ebitda performance was down significantly, the company said.

The search for a replacement for former CEO Evan Davies, who resigned suddenly in June, looks likely to end in October, subject to regulatory approvals.

Sky City shares were flat at USD 4.20 in late afternoon trading today. The stock has traded between USD 5.42 in February and a year low of USD 4.20 last Friday.