Sky City Reviews Adelaide Plan; Early Decision Sought

Sky City Entertainment Group Ltd., New Zealand’s largest casino operator, is reviewing expansion plans for its Adelaide casino in South Australia in a bid to limit the cost of the AUD 55 million (USD 51 million) project.

The proposal, including a AUD 30 million underground car park, has languished the past 18 months as profit fell at Sky’s key Auckland casino and the company fielded takeover offers for the group. Chief Executive Officer Nigel Morrison travels to Adelaide this week to review the Adelaide development plan and wants a clear decision on how to proceed by mid-year.

„It would be a very expensive car park to build,“ Morrison said in an interview from Auckland today. „I’m really looking to explore what the options may be.“

Sky is ramping up efforts to improve earnings from its second-largest asset after withdrawing Adelaide from sale late last year. It is increasing marketing after tight cost controls helped lift pretax earnings 19 percent in the first-half.

Sky bought Adelaide, sited in the city’s historic railway station building, for AUD 180 million in 2000. Plans for a 450- vehicle underground car park were first outlined in December 2003 as part of a AUD 76 million development proposal. Since then AUD 21 million has been spent on refurbishment.

Adelaide is probably the only major casino in Australia and New Zealand without a dedicated car park, Morrison said, adding he personally thinks casinos need them. Working from a protected building also limits some options, he said.

Still, Adelaide is a good casino and the company has no choice but to make it work, he said. „We can’t shy away from the competition,“ he said.

Shares Decline

Sky shares fell 18 percent the past three months as the possibility of a bid for the company evaporated. The stock fell 11 cents, or 2.8 percent, to NZD 3.77 at the 5 p.m. close in Auckland. The benchmark NZX 50 index fell 2 percent today as equity markets throughout Asia fell on concerns U.S. credit market losses may be spreading.

Morrison, former chief financial officer of Macau, China- based Galaxy Entertainment Group, joined Sky this month to replace Evan Davies who left the company in June. Director Elmar Toime held the role until Morrison took over.

At Auckland, the company’s biggest casino, customers are responding well to a just-completed upgrade, Morrison said. Still, more work is needed to lift performance in areas like maintenance, cleanliness and food and drinks service, he said.

Auckland has also lost some good gaming managers and the company will be looking to strengthen that capability in the next six months, he said.