Wednesday, February 28, 2007

Sky City Casino 2007 HY Profit

Read it and weep dear readers, i mean actually weep. The profit drop was canvassed back in October but nothing sobers you up more than the fact and a cut of the dividend.

Let's hope the next half can play some catchup:

Sky City Entertainment Group Limited (NS) - Announcements


REL: 0924 HRS Sky City Entertainment Group Limited (NS)

HALFYR: SKC: : Interim Result 2007

FLYR: SKC: Summary half year to 31/12/06 $45.0m ($58.6m) -23.2% 9.0 cps


Name of Listed Issuer: SKYCITY Entertainment Group Limited

For half-year ended: 31 December 2006

Current Half Year NZ$'000; Up/Down %; Previous Corresponding Half Year

Operating revenue: $419,170; up 8.5%; $386,261


Unusual items for separate disclosure: None

OPERATING SURPLUS BEFORE TAX: $64,123; down 18.9%; $79,029

Less tax on operating profit: $19,030; down 7.8%; $20,642

$45,045; down 23.2%; $58,615

Extraordinary items after tax attributable to Members of the Listed Issuer:
$0; nil%; $0

OF THE LISTED ISSUER: $45,045; down 23.2%; $58,615

Earnings per share: 10.3 cps; 14.0 cps

Interim distribution: 9.0 cps

Record Date: 14 March 2007. Date Payable: 13 April 2007

Bonus Issue 

The attached Appendix 7 relates to SKYCITY Entertainment Group's FY07 interim
profit distribution by way of a bonus share issue with an option to have the
bonus shares bought back by the company for cash. Full imputation credits
will be attached to distributions made to shareholders who elect to have their bonus shares bought back for cash.

Appendix 7 sets out the relevant dates for the bonus issue and the cents per
share (9cps) that the distribution will be calculated from.
The example below shows how the number of bonus shares issued to each
shareholder will be calculated.


Distribution amount per share $0.09
Weighted average sale price of SKYCITY shares on NZSX (this is indicative
only and for illustrative purposes uses the weighted
average SKC price on the NZSX for the period 19/2/07-23/2/07 adjusted for the
distribution) $5.2336
Discount 2.5%
Strike price $5.2336 x (1 - 2.5%) $5.10276
The bonus issue ratio is calculated as $0.09 / $5.10276
The bonus issue ratio is therefore 0.0176375 bonus shares for every one share

Note that the above is an example only and will vary depending on the final
strike price. The strike price will be advised to NZX together with an
updated Appendix 7 on Thursday 22 March 2007.


Amount per security $0.09
Imputation Credits $0.044328 (applicable to shareholders who accept
associated buy back offer)
Record Date 14/03/07
Application Date 13/04/07

Supplementary Dividend
Amount per security $0.015882
Payment Date 13/04/07
(applicable to sharehoolders who accept buy back offer)


SKYCITY Entertainment Group today reported a $45 million interim net profit
for the six months to December 2006 and an interim distribution to
shareholders of 9 cents per share. A steady underlying Group performance has
been offset by weaker Auckland trading conditions and losses from
VIP/commission play, as indicated in SKYCITY's October 2006 profit guidance. 

As a consequence, the reported profit of $45 million was 23% down on the
$58.6 million profit recorded in 1H06. After adjusting for non-recurring
items and VIP volatility, the underlying normalised 1H07 profit was $48.2
million. SKYCITY Entertainment Group Managing Director, Evan Davies, said the
normalised profit gave a clearer indication of underlying business
performance by removing the volatility of VIP/commission play and one-off
capital-related transactions. SKYCITY has therefore provided the normalised
profit figure of $48.2 million as a guide to shareholders, restating VIP play
at theoretical outcomes,deducting non-recurring gains from capital restructuring and normalising the company's tax rate. SKYCITY Entertainment Group revenues rose 8.5% to $419.2 million (1H06 $386.3 million), with gaming revenues comprising 72% or $300 million. SKYCITY's Hamilton, Christchurch, Queenstown, Darwin and Adelaide properties all traded in line with or ahead of expectations. 

Net earnings before funding costs and income tax (EBIT) fell 7.9% to $110.3
million from $119.7 million in 1H06, with earnings per share at 10.3 cents,
down from 14 cents per share in 1H06. Normalised earnings per share is 11.1

Core business fundamentals 

SKYCITY Managing Director, Evan Davies, said the interim result was at the
lower end of the guidance range advised to the market in October 2006, and
this would be reflected in the FY07 result. 

Nevertheless SKYCITY's core fundamentals remained sound.

"In the past ten years, we have become a diversified trans-Tasman company
with $1.7 billion in strategic assets. This is a strong, established
business. By investing in the customer experience we have acquired market
leadership, market reach and market brand. Our focus is now on ensuring we
deliver profitable growth by driving revenues, minimising costs and
maximising margins."

Focus on SKYCITY Auckland 

SKYCITY Auckland revenues declined 4.7% to $213.1 million in 1H07, driven by
an 8% fall in gaming revenues to $163 million. While both gaming machines and
local table play reported lower revenues, the major impact was due to
significantly reduced revenues from international commission play. After
payment of commissions, international VIP play recorded a loss of $2.9
million for 1H07, a significant reversal of previous VIP/international
results. Overall pre-tax earnings (EBIT) were down 22% to $65.4 million.

Gaming performance was offset by strong non-gaming business results. Hotel
revenues rose 18% to $15.4 million, with the Grand Hotel continuing to grow
both occupancy levels and revenues. SKYCITY Auckland Convention Centre
consolidated its market leadership position, generating $9 million. Food
and Beverage held steady, but new restaurants 'Bellota' and 'dine by Peter
Gordon' performed ahead of expectations. 

SKYCITY Managing Director Evan Davies said the clear focus now was to lift
operational gaming performance. "In recent years, it has been critical for us
to diversify and broaden the Auckland entertainment experience. As a
consequence, non-gaming revenues grew 8% in 1H07," Evan Davies said. "Our
priority now is to reinvigorate our gaming customer experience. Our main
Auckland gaming floor upgrade - the first in a decade - is critical to
re-engaging our customer's sense of gaming excitement and fun. We are
enhancing customer service programmes and introducing a programme to help
customers make choices that best match the entertainment experience they
seek. We must unlock the value growth in the business, while maintaining strict capital management and cost control."

Australian and other New Zealand operations 

SKYCITY's Australian operations continued to deliver sound results. SKYCITY
Adelaide revenues rose 7.5% to $A71 million, boosted by a positive customer
response to the recent refurbishment which helped to drive a 10% increase in
gaming revenues. Earnings before funding and tax (EBIT) grew
10.6% to $A9.4 million.

SKYCITY Darwin continued to benefit from economic and tourism growth. Gaming
and non-gaming growth contributed to a 6.7% revenue increase to $A49.4
million, while EBIT rose 10.4% to $A14.9million.

In New Zealand, SKYCITY Hamilton delivered strong double-digit revenue
growth, up 19% to $19.5 million, boosted by the success of the new 'Zone' bar
and 15% gaming growth. Strict cost management produced EBIT growth of 32% to
$7.4 million.

Christchurch Casino and SKYCITY 

Queenstown both performed in line with expectations.

The SKYCITY Cinemas result has been adversely impacted by a lack of high
quality film product that affected the broader exhibition industry. Cinema
revenues, after accounting for doubling of SKYCITY's ownership interest to
100%, were marginally down at $33 million while overheads increased due to
additional locations and screens. This resulted in a 1H07 EBIT downturn of
$2.4 million to $1.8 million over the comparative period. The release of
higher quality films is expected to lift

SKYCITY Cinema's performance in the second half. 

Going forward, Evan Davies said the management team was intent on maximising
business growth. "The Auckland result has been disappointing and we will be
focusing particular effort in the remainder of the 2007 financial year on
regenerating gaming revenues and tight management of costs in order to
rebuild gaming gross margin performance," Evan Davies said. 

"Across our other business activities, we will concentrate on consolidating
and building value from the strong positions we've established, to ensure we
maximise the potential of our recent capital investment programmes. "

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c Share Investor 2007

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