'Thought police' slash Sky City's profit

By Nick Stride

Friday 27th August 2004

The heavy hand of government hit Sky City Entertainment's profit last year, and will take a chunk out of this year's earnings.

The $121.1 million June year result before one-offs, although 13% higher than a year ago, disappointed analysts, who had been expecting the Auckland casino operations to do better.

Managing director Evan Davies put much of the blame for the slowdown in casino earnings growth on new rules that make $20 the highest denomination bank note that can be fed into gaming machines.

Sky City introduced the limitation on March 18.

The change is a matter of interpretation of the Gambling Act 2003, which came into force on July 1.

Responsibility for regulating the industry has passed from the Casino Control Authority, with which Sky City is said to have had a cordial relationship, to the Department of Internal Affairs.

The "thought police", as one analyst dubbed the department, has put far more emphasis on the act's "harm minimisation" provisions.

Davies estimated the "regulatory imposition" had cost the company $7 million in pre-tax earnings.

The impact had fallen mostly on Auckland high-stakes customers, he said.

"The company doubts the changes will have had a noticeable impact on the less than 2% of the population potentially at risk from gambling activity."

The company has taken a range of mitigating steps and expects the impact to "wash through" by October.

The introduction on December 10 of a smoking ban is expected to cost Sky City about $10 million in pre-tax earnings.

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