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UPDATED: Sky City's profits rise but shaky consumer confidence a risk


Sky City Entertainment Group has unveiled its half-year earnings this morning to show net profit rose 2.1% to $67.4 million for the six months to December 31.

Georgina Bond
Wed, 16 Feb 2011

Shaky consumer sentiment is one of the main challenges for  Skycity, but it's confident momentum is picking up towards Rugby World Cup.

The hotel and casino operator this morning revealed its half-year net profit rose just over 2% to $67.4 million for the six months to December 31, stripping out impacts of the cinema business it got rid of a year ago.

But if you don’t take that in to account, net profit fell 2.2% to $67.1 million.

The result was on revenue of $447.1 million, up 3.4% on the same time last year – driven largely by increased international revenue where, as of February 8, group international turnover had exceeded the total for all of the 2010 financial year.

Shares in Skycity fell 3 cents to $3,27 following the results announcement this morning, against a year high of $3.45 and low of $2.79.

Although the softer retail market on both sides of the Tasman remained Skycity’s biggest challenge going in to the second half, chief executive Nigel Morrison said he would be disappointed if full-year net profit of $127.4 million was not achieved.

There were positive signs momentum was picking up, with gaming machine revenues already up 9% for first six weeks of the second half and positive signs momentum from key business segments was picking up ahead of Rugby World Cup, he said.

The key Auckland casino had struggled during a flat period, impacted by softer table gaming revenue in the local premium play business.

“Mainly, self-employed, small business people in Auckland, property, construction, restaurant and bar owners are still finding life tough,” said Mr Morrison.

“There’s still deleveraging taking place in the economy and in reality there’s little retail joy in Auckland.

"There’s nothing the government has done to motivate or incentive consumption and we understand that’s appropriate, but nevertheless that makes it difficult if you’re a retailer in Auckland and that’s continued to manifest itself in our premium play business,” he said.

Local, premium table play revenue, up 3.8% over the half, was expected to be boosted by new VIP facilities due for completion mid-year.

The Hamilton casino produced a stronger result, with revenues rising 5% compared to the same time last year, buoyed by the stronger rural-based local economy.

Earnings from the Christchurch casino, affected by the negative impact on consumer behaviour following the September 4 earthquake and ongoing aftershocks, were expected to recover slowly as economic conditions improved.

Across the Tasman, revenues at the Darwin casino had taken a hit from the smoking ban introduced on January 2. Overall revenues were down 5% against the pre-smoking ban period for the first half.

Plans were underway to improve facilities in Auckland ahead of the Rugby World Cup, including new restaurants in the Federal St precinct, new a new gaming suites
No update was given on Skycity’s national convention centre proposal, still under consideration by the government.

Mr Morrison was optimistic an outcome would be known within the next six months.

Skycity will pay a fully tax-paid half-year dividend of 8 cents per share, in line with last year, on April 1.

Georgina Bond
Wed, 16 Feb 2011
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UPDATED: Sky City's profits rise but shaky consumer confidence a risk
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