SkyCity chasing double-digit earnings growth again

Friday 2nd October 2009

SkyCity Entertainment Group, the casino, hotel and cinema operator, is targeting another year of double digit earnings growth, despite soft trading conditions for gaming machines and fears that smoking bans in the Australian Northern Territory will hit Darwin casino earnings.

In the first annual report to cover a full year under new chief executive Nigel Morrison, the report reveals that Morrison took cash home last year of $2.563 million, comprised of $1.5 million in base earnings and a $1.053 million performance bonus, close to the top-end $1.4 million bonus potentially available.

Net profit after tax rose 13.9% in the year to June 30 to $115.9 million, and both Morrison and SkyCity's chairman, Rod McGeoch, identified another year of earnings growth above 10% as desired and achievable.

"If things go to plan, and the economic and regulatory environment does not shift to disadvantage us further, it is certainly our objective to deliver similar growth for shareholders again in 2010," Morrison said.

"While the economic outlook appears to have stabilised and may even be starting to improve, should unemployment increase to any signiﬁcant extent, this may curtail our opportunities for organic growth, particularly in our gaming machines business," said Morrison, noting that gaming machine revenues had been hit by the recession, relative to gaming table revenues.

While the introduction of player information displays on pokies had not had any discernible impact on takings, the current regulatory environment was "certainly not helpful".

"According to Gambling Compliance, a UK gaming monitoring company, regulations governing casinos in New Zealand are some of the most stringent in the world - more so than in Australia, the US, Canada and South Africa," said Morrison in his CEO report to shareholders.

While the 2003 Gambling Act had minimising harm as its main focus, this was not appropriate when it came to casinos, he said, arguing for the approach taken in some other jurisdictions, where job creation and economic activity were also identified statutory purposes.

While preventing harm might be an appropriate focus for some "convenience" forms of gambling, "casinos are not the problem", Morrison says. "Yet we are more tightly regulated than gaming machines in pubs and clubs, Lotto and online gaming operations."

This "unique situation" hampered growth prospects and made it more difficult to attract high-rollers and tourists to New Zealand casinos.

"I continue to have concerns too about the potential impact of smoking bans in Darwin," Morrison said, because Northern Territory gamblers had a greater propensity to smoke than customers in other Australian and New Zealand casinos.

Businesswire.co.nz

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