Questions for Sky City Entertainment Group CEO Nigel Morrison

Read the Interview

After being emailed yesterday by Nigel Morrison, CEO of Sky City Entertainment Group [SKC.NZ] over a piece that I wrote last week about Bruce Sheppard's take on the company's debt levels, he ended the email asking if there is anything he could do to help out.

I sent back an email thanking him, then it occurred to me that there was something I wanted from him.

An interview!

So I emailed him back asking if he would answer some questions from myself, other Sky City shareholders and other readers of this blog and he kindly answered in the affirmative.

So, now is the chance dear readers to put some questions to Nigel.

You can submit them at the Share Investor Forum here or email them to me here and I will submit the best ones to Nigel.

The interview will come out after the company Full Year result that is now coming out early, on Wednesday 19 Aug instead of the following week. It will be published here sometime in early September as I will be away for a couple of weeks in Bangkok soon, so it will take some time to put together.

Read the Interview

Disclosure: I own SKC shares in the Share Investor Portfolio

Sky City Entertainment Group @ Share Investor

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c Share Investor 2009

Sky City CEO doubles down

The rationale for Sky City Entertainment [SKC.NZ] loading up the balance sheet with extra shares and as a consequence around NZ$230 million of cash isn't completely clear to me over the last few days since SKC were put on a trading halt on Tuesday 21.

My confusion is compounded by the fact that the $230 million raised appeared to be for two different reasons, for purchase opportunities and "strengthening the balance sheet" in uncertain times but if a purchase is made how does that strengthen the balance sheet? especially if it involves drawing down on the half a billion in unused credit facilities that Sky City currently has.

I am going try to unwind my confusion and explain my point of view on this subject in the following column.

This from a story in Stuff.co.nz might give you an indication on where I might be heading:

But despite its $916 million of debt, SkyCity plans to put the money it raises in a bank deposit account, at least for now.

Chief executive Nigel Morrison said that was because SkyCity "owes no bankers anything."

Just one question though, if you have access to cash in the bank and a rather large debt hanging around your neck don't you pay some of it down?

Well, Nige did say when posted to his position as CEO last year that one of his main tasks would be to be prudent with shareholder funds:

"Our shareholders have made it clear to us that they want us to focus on maximising the performance of the assets we operate. This is what we will be doing. as we have said previously, we expect to achieve this within an 18-month time frame. We will retain tight control over capital and not expend capital unless we are very confident of healthy returns for shareholders".

The emphasis on unnecessary capital spending in addition to paying down debt has been made several times since then and one could be forgiven for thinking that this task was going to be paramount to everything else until performance at the company was "maximised".

That certainly of direction needed to be achieved as the company has floundered directionless over the last 5 years under the previous CEO Evan Davies.

Now of course Morrison does have to be fleet footed and have the ability to change tack as economic circumstances change but the clear direction that he outlined last year has forked out into another, possibly expensive direction:

"For anybody to suggest that the money it just going to sit on deposit in a bank account earning 3 per cent for three years, that's ludicrous," he said. "It's a position of strength. We're not beholden to any financier or any bank." Morrison said it also gave the company funding for acquisitions should opportunities arise. Full Story

Now I am not about to suggest that Morrison is going to plunder more shareholder money on overpriced assets as Evan Davies did, as his reputation for being a canny operator who rejuvenates casinos is well known but I get a little edgy when he is asking shareholders to put their hands in their pockets to buy more casino assets, even if they are as he said, now going for knocked down prices.

It is the move away from the previous stated 18 month aim of being financially prudent and rejigging the business that has me worried and to then focus on other plans that involve large capital expenditures would be a more realistic goal, especially as those casino assets he may now be talking about could be alot cheaper in 6 months time.

It seems to me that he may already have a target casino in mind.

Time to cross your fingers if you are a shareholder. I am.

Sky City @ Share Investor

Sky City Entertainment 2009 Interim Profit Review
Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
Sky City Cinemas no Blockbuster
Sky City Entertainment share price drop
New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit

Discuss this topic @ Shareinvestor.net.nz

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Sky City outlines a clear future plan

Today's newsletter to Sky City Entertainment [SKC.NZ] shareholders got me a little excited for the company and its future direction, and that hasn't happened for a few years.

The content of the newsletter outlined the direction that CEO Nigel Morrison wanted the company was to proceed towards, how it was going to get there, and a time frame to stick to.

The language was clear, to the point, and had none of the "management speak" of past shareholder communication.

It reminds me somewhat of the management at Mainfreight Ltd [MFT.NZ] and their no nonsense approach to ramming their point home.

Now whether management achieve their stated goals is another question, but previous management were truly awful communicators; to their shareholders,within the company and definitely to their customers and the market.

A clear way of communication in business often translates into positive results. Uncomplicated communication gives a clear direction for employees and can translate into a more productive and happier workforce and hopefully a better bottom line.

Morrison has also made practical moves towards the stated company goal, new management have been hired to grow individual casino businesses and a focus on organic growth is emphasised throughout the shareholder communication.

The direction the company is headed is most directly apparent in the outlook for 2009.

"Our shareholders have made it clear to us that they want us to focus on maximising the performance of the assets we operate. This is what we will be doing. as we have said previously, we expect to achieve this within an 18-month time frame. We will retain tight control over capital and not expend capital unless we are very confident of healthy returns for shareholders".

Lets hope the follow through shows some concrete results in the following 18 months.


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New broom at Sky City set to sweep

A new boss at Sky City Entertainment Group Ltd [SKC.NZ] brings a whole new broom to the company closet, a CEO with a long history of casino experience.


Nigel Morrison

Nigel Morrison has more than 18 years' experience in the casino business throughout Australia and in Asia and his tenure at the New Zealand entertainment company is a welcome relief from the current temporary head, Elmar Toime, with no gaming experience, and the previous one, Evan Davies, who got his casino experience on the job when he started with the company right at the beginning.

Morrison's pedigree, having just left the Macau-based Galaxy Entertainment Group, former chief executive of the Federal Group, Australia's largest private casino and gaming company and as chief operating officer at Crown Limited where Morrison played a big role in restructuring the business.

It is that experience, "restructuring" the likes of Crowns' massive riverside Melbourne gambling mecca, that will come in handy with his new role as the head of Sky City.

Sky City's business units all need a good sorting out, they are over-laden with middle management and there is plenty of fat to trim and Morrison's appointment looks to be one of managements best decisions in some time. Morrison's reputation for sorting out Crown can be seen as an indication of the direction that Sky City will be going over the short to medium term.


Part of Sky City Darwin Casino, one of the better performing
casinos in the gaming group.

Adelaide Casino needs a close look and will be kept and "refocused", as does the Auckland flagship casino, Sky Citys' chief money spinner. Previously the company talked of selling the Adelaide Casino.

Sky City Cinemas are definitely for the chop and management have been remiss of late in informing shareholders as to a date when the cinemas will be sold, or if there is indeed a buyer.

The whole takeover process over the last 4 months has been complicated and disclosure to shareholders has been confusing, changeable and misleading at times.

It looks like the the promise of a takeover has come to an end and it is time to get down to the real business and Morrison must achieve the objective of rebuilding the company to its former glory.

Morrison's $NZ3.7 million remuneration package, with around a third made up of "bonus" shares and lets hope it is results based, is generous, and he should be given 12 months to see things materially start to change, if he makes the right decisions to begin with, and then we should judge his leadership.

For Sky City shareholders lets hope he does the business.

He takes up the reigns in March 2008.


Disclosure: I own SKC shares in the Share Investor Portfolio


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Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
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c Share Investor 2007