Interim Profit Of $57.1 Million Announced
21 February 2005
Skycity Entertainment Group Announces Interim Profit Of $57.1 Million And Reintroduction Of Dividend Reinvestment Plan
Trans-Tasman gaming and entertainment company SKYCITY Entertainment Group continues its growth record, reporting today a NZ$57.1 million net profit for the half year ended 31 December 2004. The result is a 4% increase over the same period in the FY04 year, when SKYCITY reported an interim profit of NZ$55.1 million. As in past years, SKYCITY shareholders will share in this surplus with more than 90% of the profit to be paid in dividends.
A fully-imputed interim dividend of 12.0 cents per share has been declared, up from 11.0 cents per share for the corresponding period last year. SKYCITY has announced that a dividend reinvestment plan is being reintroduced and will apply to the interim dividend (1 April 2005). SKYCITY Managing Director Mr Evan Davies said that SKYCITY has established a solid portfolio of properties, with three New Zealand and two Australian properties and, while the period had been a challenging one for the Group with regulatory intervention, Group performance was solid and significant progress had been made on the range of capital works projects underway at its properties.
SKYCITY acknowledges that changes to New Zealand legislation and the gaming industry’s regulatory framework, with regards to the Smokefree Environments Act and Gambling Act, have impacted on operations and financial results. The company is comfortable with current analyst net surplus after tax expectations for FY05 of $114m - $119m. The company is comfortable with these expectation ranges for its full year result, provided pre December predictions for the impact of smoking bans in New Zealand are in line with actual outcomes. Mr Davies said, “As predicted, first half gaming operations were affected by a range of factors including the note acceptor limitation on gaming machines in New Zealand and the recent introduction of smokefree legislation.
Changes to smoking legislation naturally impacted business, however with the legislation only coming into force in December, it is too early to identify any change to pre-legislation expectation.”
“SKYCITY properties were well prepared for the smoking legislative changes, as seen by the ease of transition our properties experienced in complying with the new regimes. A range of initiatives, including ticket technology, were put in place to assist customer enjoyment when note acceptor limitations were imposed, however technical issues associated with its implementation have impacted first half performance. These installation issues are expected to be resolved by March 2005. We remain committed to working with our regulators to ensure that any harm minimisation initiatives are well targeted and effective.” SKYCITY Entertainment Group Federal House 86 Federal Street PO Box 6443 Wellesley Street Auckland New Zealand Ph +64 (0)9 363 6141 Fax +64 (0)9 363 6140 www.skycity.co.nz 2 | 3 Group revenues for the half year rose 19% on 1H04, from NZ$295.8m to NZ$351.1m.
Total New Zealand operations contributed 71% of total revenues, with Australian operations at 29%. Group EBITDA (operating profit before interest, tax, depreciation and amortisation) increased 17% on the corresponding period last year. SKYCITY’s largest New Zealand property, SKYCITY Auckland, showed a steady performance, however the company confirmed this was hampered by various legislative changes. The property increased revenues by 4% to NZ$206m and delivered an EBITDA of NZ$104m, comparable to the corresponding period. During 1H05, extensive capital works were undertaken at SKYCITY Auckland. Construction of the NZ$85 million SKYCITY Grand Hotel above the new convention centre (which officially opened in July 2004) is nearing completion, with the hotel due to open in April this year.
Mr Davies said, “We are pleased by the positive industry response to date for the SKYCITY Grand Hotel, with forward bookings exceeding expectations. The new 5-star hotel will result in increased visitation throughout the SKYCITY Auckland property and will complement the 4+star SKYCITY Hotel, together offering 660 rooms in the heart of Auckland City.” The SKYCITY Grand Hotel, while offering 320 luxury rooms and a range of premium guest facilities, will also feature the 70-seat signature restaurant ‘Dine – by Peter Gordon’ managed by the internationally acclaimed chef. Mr Davies said, “The complementary combination of ‘Dine – by Peter Gordon’ with our 5-star hotel and new convention centre promises to be an exciting draw card, one that we are confident will be well received.
The SKYCITY Auckland Convention Centre has already proved a needed resource for Auckland, with forward bookings to 2010 and recent confirmation as host venue for New Zealand’s prestigious Tourism Industry Association conference in September 2005. This conference has not been staged in Auckland for many years due to lack of an appropriate venue and we are pleased that Auckland now has a facility worthy of this event.” SKYCITY’s newest property, SKYCITY Darwin performed very well in 1H05.
The property contributed to the company’s revenue streams for the first time this period, with revenue of A$39m and EBITDA of A$17m. Purchased by SKYCITY in July 2004, a key priority for the business over 1H05 was to integrate it into Group operations and introduce the SKYCITY brand. Future opportunities for the property include potential growth in VIP play, where the property’s proximity to the Asian market is advantageous. An additional ten hotel rooms are currently under construction at SKYCITY Darwin due to high demand for premier rooms. Mr Davies said, “This is the first period that the Darwin operation has contributed to SKYCITY’s result and it has performed above expectations. We are also pleased with the property’s relatively seamless integration into the SKYCITY Group.”
SKYCITY Adelaide increased revenues by 6% to A$56m over the same period last year with EBITDA at A$11.9m being comparable to the corresponding FY04 period. The property is close to completing the first stage of a proposed A$70m development which will greatly expand the property’s entertainment offerings. Due for completion in May 2005, the new development includes a bistro-style restaurant and upmarket bar, new private function and gaming facilities and an entertainment facility.
Mr Davies said, “The South Australian development programme is well underway and, when completed, will position the SKYCITY Adelaide complex as the favoured entertainment destination in South Australia. The proposed next stages include a 450 space underground car park and redevelopment of the main gaming areas. Prior to SKYCITY purchasing the complex, the entertainment offering was narrow. SKYCITY is bringing the property into line with the company’s strategy of broad-based entertainment offerings and we are confident that the new facilities will drive increased customer visitation and spend.”
SKYCITY Hamilton reported a strong performance for the period, with revenues up 6% for the period to NZ$16.5m and EBITDA up 16%. Mr Davies said, “We are pleased with our Hamilton operation. The property continues to perform well and has successfully established itself within the Waikato community as an entertainment hub.” SKYCITY Cinemas performed steadily for the period with revenues down slightly to NZ$16m compared to NZ$17m in 1H04. Ticket sales were in line with the industry and tracking to local trends here and in Australia. The second half of the 2005 financial year is predicted to perform well for cinema operations, with a diverse range of new film product available.
Three new Village SKYCITY cinema developments are planned in conjunction with Westfield, with complexes opening in Queensgate (Lower Hutt) this year, and at Albany and Manukau City (Auckland) in 2006. A major redevelopment of the Rialto in Newmarket commences next month and includes two additional screens, while Rialto in Dunedin installed three new screens prior to Christmas. SKYCITY is confident that 2H05 will show continued success as the company benefits from additional New Zealand and Australian revenue streams contributed by the new property in Darwin, the SKYCITY Grand Hotel, the Adelaide redevelopment projects and through premium play expansions on both sides of the Tasman.