Analysts applaud Sky City results

By NZPA

Tuesday 27th August 2002

Shares in casino operator Sky City Entertainment Ltd shot to an all-time high this morning after the company posted a net after tax profit of $57 million for the year to June 30.

The stock was up 10 cents at $6.70 in late-morning trade as investors rewarded the company for its strong earnings and positive growth outlook.

"Everyone is pretty positive about Sky City at the moment," ASB Securities dealer Andrew Kelleher said.

"It has such a dominant market position and there is still potential for growth. It is paying a good dividend for a market leader and the story is reasonably positive."

Sky City will pay a dividend of 22.5 cents per share.

Today's result beat most analysts' forecasts, but was lower than the $68 million profit recorded for the same period a year earlier.

Analysts surveyed by Multex Global Estimates had forecast an average net profit after tax and before abnormals of $78 million.

The result was marred by a $27.9 million write-down from Sky's cinema subsidiary Force Corp. Excluding that, the company recorded an $85 million operating surplus -- up 21 percent on last year.

"Just from a preliminary look at it, the figures we're looking at are total operating revenue up almost 16 percent and the operating surplus before unusual items up 21 percent," said Kate Skinner, a research analyst with DF Mainland.

"The market was expecting that there would be a write-down of some sort for Force, so yeah, I think it's a good result and you've seen that immediately (in the share price)."

UBS Warburg broker Paul Nicolson said the result was solid.

"It has exceeded expectations and the final dividend is one cent ahead of our expectation," he said.

UBS Warburg was at the higher end of private sector forecasts, predicting a pre-abnormal profit of $82.1 million and a net profit of $54.4 million.

Sky City managing director Evan Davies said the result was "very pleasing" and reflected the company's focus on earnings growth from its core businesses and consolidating its strategic investments.

The company, which has casinos in Auckland, Queenstown and Adelaide in South Australia, is New Zealand's eighth largest listed company with a market capitalisation of about $1.35 billion.

Leading today's result was a 17 percent increase in group revenues to $510 million and a 15 percent increase in earnings before interest, tax depreciation and amortisation (ebitda) .

Sky City's flagship Auckland operation achieved consistent revenue growth across all business sectors, with ebitda of $183 million.

At its Adelaide casino, revenue increased by 15 percent to $A95 million ($NZ111.67 million), with gaming revenue up 14 percent.

Force Corp increased ebitda to $10.1 million from $300,000 in the previous financial year.

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