Sky City profit drops 49%

Monday 25th August 2008

Sky City Entertainment Group, New Zealand's biggest casino operator, posted a 49% drop in full-year profit after writing down the value of its cinemas.

Profit was NZ$49.9 million in the year ended June 30, from NZ$98.4 million a year earlier, the Auckland-based company said in a statement. Excluding the write-down and other one-time items, per-share earnings rose 14%.

The company lopped NZ$60 million from the value of its movie cinemas, citing fine weather keeping customers away and managers distracted by a failed attempt to sell the business. At Sky City's main centre in Auckland, pretax earnings fell 0.3%, which it said was "a sound result" in a waning economy.

"We're cautiously encouraged by what we see as a sound result in a challenging economic environment," said chief executive Nigel Morrison. "We are budgeting for growth in the FY09 year."

Sky City will pay a final dividend of 10.5 cents a share, taking total payments for the year to 21.5 cents, up from 21 cents a year earlier. Shares of Sky City fell 0.6% to NZ$3.41 and have climbed 6% in the past month, outpacing the NZX 50 Index.

Sales rose 6.8% to NZ$804 million, it said today.

The company, which has a BBB- credit rating, repaid NZ$92 million of debt in the latest year. Its financial position strengthened during the year, with operating cash flow rising 6.7% to NZ$286 million. Interest cover rose to 3.8 times from 3.3.

Morrison took over running the company in March, reducing planned spending increases and selling assets including a stake in a Christchurch hotel.

Trading so far in the 2009 year is "satisfactory," he said, without giving details. The focus for the current year is on maximising returns on existing assets and further reducing debt.

By Jonathan Underhill

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