A government decision to limit the amount in expenses that pubs should be paid for having poker machines has been upheld in the Court of Appeal. The gaming machine society Pub Charity claims that the decision will mean a loss of up to NZ$28 million to community arts, sports and charity groups. However, the government maintains that there is no evidence of a loss of community funding.

The Department of Internal Affairs’ new rules authorise expenses of up to NZ$150 per machine per week, Pub Charity sought dispensations of NZ$250 for some of their sites. The government stated that this would mean that a pub was claiming NZ$234,000 a year to operate 18 gaming machines, and that consultants and accountants for the Department came to the conclusion that costs were much less.

The last year saw profits on poker machines in clubs and pubs rise to NZ$1 billion. The gaming societies received NZ$264 million to cover expenses, which the government considers covers their costs. The Charity Gaming Association claims that the Department of Internal Affairs is relying on pure speculation to defend rules that are harming community groups.

The tighter regulatory gaming environment is not expected to have a negative effect on shareholders of Sky City Entertainment Group. The Auckland-based company is the dominant player in the NZ$2 billion gaming industry, and recent acquisitions and continued growth are keeping profit forecasts optimistic.

The Auckland casino, Sky City, the convention centre and hotel accounted for more than 80% of operating profit the last fiscal year. The company sees the December 10 smoking ban in New Zealand as causing an initial NZ $10 million earnings cut, but that recovery should be made by 2006. The company’s expanded Australian operations are expected to provide 30% of earnings in the current year. The Darwin casino acquisition had exceeded expectations and the Adelaide casino was the second biggest contributor to the group’s sales. After losses in 2003, the company’s cinema business in New Zealand, Sky City Leisure that it took over earlier this year, is now in profit.

Investors stand to gain from the long-term outlook for the Sky City Group and the company understands the government’s position on the reduction of problem gambling whilst not agreeing with all their recent changes to the law, such as banning notes bigger than NZ$20 for slot machines. Gaming revenues for the government, casino operators, pubs and clubs seem set to continue to rise in the foreseeable future.

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