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Sky City profit drops

Tuesday 17th August 2010

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Sky City Entertainment Group posted a 12% drop in profit on weaker returns from its main Auckland base and the impact of tax changes. The outlook is uncertain, it said. 

Net income fell to $102 million in the 12 months ended June 30, from 115.3 million a year earlier, the company said in a statement today. The result included a one-off charge of $39.7 million including for changes to tax depreciation on property. Total revenue fell 1% to $837.8 million while expenses climbed 1.2% to $539.6 million.

The company, whose stock is rated 'outperform' based on the consensus of recommendations compiled by Reuters, said its Auckland casino and hotel complex continues to be in "a challenging economic environment," with slot machine revenue falling 2.4% and sales from its main floor tables unchanged from the previous year.

Earnings from Auckland fell 5.5% to $193.8 million, the biggest single impact on its operating returns. The company has sold assets including its cinema chain to focus on its core businesses.

"Sky City has made quite good progress on developing their core business after selling their cinema assets, and I think the outlook in the long term is extremely good for company," said Grant Williamson, a director at Hamilton Hindin Greene.

"Their forward comment was quite dull, with performance dependent on economic conditions, which I think that's pretty acceptable given what has happened over the past year."

Sky City will give an update of its first-quarter performance at its annual meeting in October.

"Gaming markets and economic conditions remain uncertain, which will impact on earnings," the company said in presentation documents with its results. "However, we expect to see continuing improvements in returns as the economy recovers."

The company will pay a final dividend of 9.25 cents, making 17.5 cents for the year, up from 15.5 cents in 2009.The shares were unchanged at $2.99 and have declined 9% this year.

Earnings from Australia fell 0.9% to A$69.9 million, reflecting a 7.1% gained in EBITDA from Adelaide to A$31.5 million and a 3.8% decline at Darwin to A$38.4 million.

Among the company's other New Zealand assets, the Hamilton casino reported a 7.3% gain in EBITDA to $19.2 million, while Christchurch and Queenstown fell 9.2% to $6.9 million.

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