SkyCity earnings fall

By Paul McBeth

Monday 23rd February 2009

SkyCity Entertainment Group, the country's biggest casino operator, posted a drop in earnings before one-time items as the deteriorating economy squeezed its profit margin. The company is reducing the ratio of profit it pays as dividends.

Earnings before non-recurring items fell 13.4% to $55.6 million in the six months to December 31. Net income jumped from $1.3 million a year earlier, when the company wrote down the value of its cinemas by $58.4 million. Revenue rose 0.1% to $422.1 million.

"The cost of growing revenue whilst still providing value has seen margins soften somewhat," chief executive Nigel Morrison said in a statement. "We're cautious in our outlook in relation to the economies of both New Zealand and Australia, and our future performance will be influenced by how these economies unfold."

Revenue at its largest centre, Auckland SkyCity Hotel and Casino, fell 1.2% to $202.9 million, with earnings from gaming down 2.4%. Non-gaming revenue rose 2.5% to $53.2 million.

The company will pay a dividend of 9 cents per share, and will offer a 2.5% discount on distribution shares offered as a buyback option. Future dividends will be limited to 60-70% of net profit as SkyCity aims to retain capital to repay debt. Its stock fell 1.1% to $2.69 in early trading on the NZX 50 index.

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