Report from BusinessDesk
SkyCity Entertainment Group’s first-half profit jumped 17% to a record on improved earnings from its flagship Auckland casino and hotel complex, which benefitted from the Rugby World Cup and a turnaround in gaming revenue.

Profit rose to $78.8 million, or 13.7 cents a share, from $67.1 million, or 11.7 cents, a year earlier, the Auckland-based company said in a statement. Sales rose 10.3 percent to $494 million.

The company said the momentum of the first six months continued into January and February, giving it the confidence to forecast ‘normalised’ full-year profit at the top end of its guidance, in “the high $140 millions.” SkyCity spent $50 million revamping its Auckland operations, including new VIP gaming facilities.

The biggest improvement in Auckland came from slot machines, where revenue jumped about 17 percent, while non-gaming revenue from hotel, restaurants, the Sky Tower, conventions and parking, rose about 23 percent.

The improved results were “mainly due to strong fundamentals in our Auckland gaming business,” said chief executive Nigel Morrison. That momentum “has continued through the first half of the 2012 financial year and through in January and February.”

Shares of SkyCity traded yesterday at $3.64 and have gained about 7 percent in the past 12 months. The stock is rated ‘outperform’ based on a Reuters poll of 11 analysts.

The company will pay a first-half dividend of 9 cents, up from 8 cents a year ago and beating the 8.5 cents payment forecast by Forsyth Barr.

SkyCity said talks are continuing with the government over the construction of a National Convention centre, which if concluded would see the company invest $350 million in the project.

In return it wants an early renewal of its Auckland casino licence beyond 2021, an increase in gaming and changes to gaming regulations.

“Discussions have been progressing proactively” since the National government was returned in last year’s elections, it said.

The Rugby World Cup provided a one-time revenue boost of $11.5 million and added $4.7 million to profit, the company said, adding that the impact “was less significant than expected.”

In Auckland, gross gaming revenue rose 12 percent to 197 million and non-gaming revenue climbed to $71.9 million from $58.5 million. Slot machines generated $117.9 million in sales, up from $101 million.

At SkyCity Hamilton, revenue climbed 14 percent to $26.5 million.

Press Release – SkyCity
Strong half-year for SkyCity.
Record first half result with Reported NPAT of $78.8m, up $11.7, (+17%)
Group Revenues $494m, up $46.3m (+10.3%)
Flagship Auckland Revenues $268.9m, up $33.8m (+14.4%)
$50m capital investment in Auckland showing strong returns on invested capital

Strong balance sheet, enhanced by new attractively priced 7-Year $185m bank funding
Net Debt to EBITDA 2.0 times, with $585m undrawn committed facilities
Earnings per Share of 13.7cps up 2 cps (+17%)
Interim dividend of 9.0 cents per share, up 1.0 cent (+12.5%) on 1H11

Ongoing negotiations with NZ Government on National Convention Centre
Continuing discussions with SA Government on Adelaide
re-development and expansion

SKYCITY Entertainment Group today announced a strong result for the six months ended 31 December 2011, with continued strong momentum in its core businesses.

Chief Executive Officer Nigel Morrison says it is pleasing to see that the momentum which commenced in January 2011 has continued through the first half of the 2012 Financial Year and through into January and February 2012.

“The 2012 Financial Year has started well for SKYCITY with the first six months revenues up $46.3 million (+10.3 %) over last year and up $41.9m (+9.4%) on a normalised basis. This has continued to firm from the 8.8% revenue increase over the first four months, announced at the company’s Annual Meeting in November. The positive result was partly driven by the Rugby World Cup finals in New Zealand in October, which we estimate delivered around $11.5m in revenues and $6.5m in EBITDA. However, it is mainly due to strong fundamentals in our Auckland gaming businesses, much of which is attributable to the recent $50 million revitalisation of the Auckland property and the continued growth in our International Business following the opening of our Horizon suites and salons in July 2011. Revenues from our International Business in Auckland grew to over $20m (+31%) and to $18.6m on a normalised basis.

“Our businesses in Adelaide (+6.9%) and Hamilton (+13.7%) also delivered good revenue growth.

“Strong revenue growth has led to Group EBITDA increasing to $168.2m up $17.3m (+11.5%) over last year and to $165.5m up $14.1m (+9.3%) on a normalised basis.

“This has delivered a record first half Net Profit after Tax of $78.8m up $11.7m (+17.4%) and of $77.0m up $9.6m (+14.2%) on a normalised basis.

“The momentum of the first six months has continued into January and February 2012, with total YTD group normalised revenues to 12 February 2012, up 10.0%, compared to 9.4% at the half year.

“Given the strong first half results, the continued momentum we have experienced in January and February, including a strong Chinese New Year, the strong demand for our Horizon suites and salons and the success of our CapEx programme in Auckland, we expect our Normalised Net Profit for the full year to be at the top end of our previous guidance range – in the high $140 millions, up from $1309m last year.

Auckland CapEx Programme
In commenting on the success of Auckland’s CapEx programme, Mr Morrison said the transformational $50 million revitalisation of the Auckland property was completed part way through this first half year and has contributed significantly to the momentum in SKYCITY’s Auckland results.

“Our new Horizon suites and private gaming salons are attracting new international players, not previously visiting SKYCITY Auckland. First half International Business turnover in Auckland was up 26% against last year and up 195% against the same period in FY10, with turnover exceeding $1.4 billion to 31 December 2011. The Chinese New Year period in January and early February 2012 has continued to demonstrate growth, with international turnover in Auckland up over 50% on the prior year.

“Our new two storey VIP table gaming facilities on top of the SKYCITY Hotel, ’EIGHT’, has significantly enhanced our offering to New Zealand, Australian and international VIPs. Since the opening of ‘EIGHT’ on 31 August, our Auckland table games drop and revenues (excluding International) are up by over 20% and 11% respectively to 31 December 2011.

“Our refurbished VIP ‘Platinum’ room and the successful opening of the new ’Diamond’ private gaming room have been the primary drivers of the strong momentum and increasing market share seen in Auckland’s gaming machine revenues, which were up 16.7% on prior year.

“The development of our three new signature restaurants and bars in Federal Street (The Depot by Al Brown, The Grill by Sean Connelly and Red Hummingbird by Luke Dallow) has been a resounding success and introduced new customers to the SKYCITY precinct. It has reaffirmed SKYCITY’s positioning as Auckland’s leading entertainment destination. We will continue to develop Federal Street and look forward to opening another couple of signature restaurants in Federal Street by the end of the year.

“The new Fortuna Buffet is serving record numbers of gaming customers while The Nations Club Room has provided a focal point for our major sponsorships, The Warriors, The SKYCITY Breakers and The Blues.

Auckland
Normalised revenues at our flagship Auckland property, including Auckland’s share of International Business revenue, were $268.9 million, up $33.8 million (+14.4%) from $235.1 million.

Non-gaming revenues from the SKYCITY Grand and SKYCITY Hotel, along with our bars, restaurants and other facilities were up $13 million (+23%), with this mainly due to the RWC finals period in October and the opening of the new Federal Street outlets.

“The impact of the Rugby World Cup was less significant than expected, delivering approximately $10.7m revenue and $6m EBITDA to our Auckland property. Excluding this, our core Auckland business still showed strong underlying growth trends, with revenue up by 9.8% and EBITDA up 7.3% on PCP.

Stuart Wing, Auckland’s Chief Operating Officer said: “Our revenues have been particularly strong over the period, reflecting not only the value of the capital investment made in the property’s product offering but also the investment that is being made in the customer experience and the renewed emphasis being placed on our marketing execution and customer segmentation.

“We carry great momentum into the second half as we continue to capitalise on the investments that have been made and the strategies put in place.

Regarding the National Convention Centre, Mr Morrison said: “We are continuing to negotiate with the NZ Government on the development of New Zealand’s International Convention Centre. Since the re-election of the National Government in November 2011, discussions have been progressing proactively and we remain focused upon successfully negotiating an outcome which would see SKYCITY investing $350 million to deliver an iconic Convention Centre for New Zealand.

“In return, we are seeking an early renewal of the Auckland casino licence beyond 2021, an increase in gaming product to meet demand and provide for future growth and changes to gaming regulations which would increase the efficiency and attractiveness of the offering we are able to provide our customers. Shareholders should remain assured that unless we are confident of achieving acceptable returns on capital, the project will not proceed.

Hamilton
“Our Hamilton property continues to perform well, with revenues of $26.5 million up $3.2 million (+13.7%) on PCP. Of this, we estimate revenue of circa $0.8 million is due to Rugby World Cup visitors who were present during the early stages of the tournament. Excluding RWC, underlying revenue growth remains strong at circa 10% on PCP.

“The addition of a 4+ star hotel with 135 rooms above our Hamilton property is still being considered. We continue to believe this development would bring much needed quality hotel accommodation to central Hamilton and significantly improve the facilities that we are able to offer to our customers in a market which continues to demonstrate growth.

Outlook for 2012
“Given the strong first half results, the continued momentum we have experienced in January and February, including a strong Chinese New Year, the strong demand for our Horizon suites and salons and the success of our CapEx programme in Auckland, we expect our Normalised Net Profit for the full year to be at the top end of our previous guidance range – in the high $140 millions, up from $130.9m last year.

Full detail of SKYCITY’s interim result is available at the link below.

http://ir.skycityentertainmentgroup.com/phoenix.zhtml?c=162796&p=irol-news&nyo=0

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