Today SKYCITY Entertainment Group published its FY09 full year results for the year ended 30 June 2009. Group revenues were up 6% on the prior year with a strong second half performance with all business units except International where FY08 had produced a high win rate. Group profit was up 13% with annual net profit of NZ$115 million. Adelaide EBITDA was up more than 40%, underpinned by strong revenue growth. However, gaming machine revenue was disappointingly flat in Auckland.

The company says challenging economic and tourism markets in New Zealand have made it difficult to grow earnings from its hotels and tourism‐related businesses in Auckland, despite significantly increased occupancies in the 660 hotel rooms. Margin contraction in Darwin has been a disappointment but with new facilities now complete SKYCITY management is focused on optimising operational performance and anticipates enhanced returns.

Options are being explored for upgrading the Auckland property to include extending convention facilities, refurbishing VIP gaming rooms and enhancing restaurant and bar areas. The report states: ‘While the economic outlook appears to have stabilised and may be starting to improve, should unemployment continue to increase we would expect this to curtail our growth opportunities.’ A smoking ban to be introduced in Darwin on 2 January 2010 is expected to have a negative impact on gaming machine revenue there. SKYCITY is reserving judgement on the impact of Player Information Displays on New Zealand’s gaming machines, which became mandatory on 1 July this year. As yet no discernable fall in revenue has been detected but it is too soon to make an accurate assessment.

The company believes that it has delivered on its promise made in August 2008 to maximise the potential of existing assets. The new management team has been focused on driving revenue and operational efficiencies and maximising EBITDA while tightly controlling capex. It has delivered an improved customer experience across all properties, focusing on customer service, effective marketing and enhanced entertainment experiences. Improvements to IT and systems capabilities, and employee engagement and advocacy have been undertaken, and international VIP commission-based play has grown and diversified.

As with last year, SKYCITY management is budgeting for growth across all business units in both revenues and EBITDA. The report comments: ‘While our objective is to deliver double digit earnings growth again in 2010, we recognise this will be challenging in the current economic environment, both in Australia and New Zealand.’ (E-08.19.09)

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