Sky City shares continues falling on smoke ban proposal

By NZPA

Thursday 20th March 2003

Sky City Entertainment shares continued to fall today after a big dive yesterday on news that tough anti-smoking legislation was likely to be enacted.

The casino operator, one of the market darlings of the last three years, dropped 22 cents to $8.10 to add to yesterday's 44 cent fall.

Some $140 million has been wiped off the value of the stock over the two days. There was heavy turnover both yesterday and today.

Parliament's health select committee released a report on Tuesday recommending a complete ban on smoking inside pubs, restaurants and casinos.

The public consultation process is complete and it is now up to MPs to make any further changes. With the Labour and Green parties supporting, it is considered likely to pass into law largely as the committee has recommended. Scope for further lobbying by the hospitality industry has the support of Labour, United Future and the Greens.

A previously mooted law allowing smoking in specially ventilated rooms of hospitality businesses was rejected by the committee.

It said ventilation systems would be too costly for businesses and would not adequately protect workers who were exposed to smoking customers.

Sky City generates almost half its group revenue from its Auckland casino operations. It also has small casinos in Hamilton and Queenstown.

In a submission it made to the health select committee last October, the company said it risked losing tens of millions of dollars in business from high-rolling gamblers if smoking laws were tightened.

Many wealthy customers would gamble in other countries if smoking was banned in Sky City's premier player rooms, the casino said. Many of its biggest gamblers are Asians, a high proportion of whom smoke.

The company's managing director, Evan Davies, said the select committee's report held few surprises and was "much as we expected and have been preparing for".

Mr Davies said the parliamentary process still had some way to go, and the company would "take a strong interest in the remainder of the discussion".

He said Sky City would continue to push for an exemption to the smoking ban for its high-roller rooms.

"Without this New Zealand would effectively become the only area in Australasia trying to compete in the valuable international VIP market without offering smoking facilities," he said.

"We hope the Government assesses that risk further."

Another concern was that the new legislation needed to be phased in over time, Mr Davies said.

The select committee has recommended a 12-month lead-in time.

JB Were's manager of private stock broking, John Cobb, said his firm's assessment was that the law change would not be a serious blow for Sky City.

About 40 percent of the company's gambling areas were already non-smoking and more than half of the areas where the bulk of revenue is generated -- on the tables -- were also smoke-free.

"You are talking significant change for them, but not necessarily massive," Mr Cobb said.

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