One of the best results this reporting season, so far was the interim 2010 profit for the six months ended 31 December 2009 for Sky City Entertainment Group Ltd [SKC.NZ] which was revealed this morning.While most companies that have already reported in February have recorded lower or stagnant profits, Sky City has delivered net profit of $NZ71 million for the half year, compared to $55 million for the first half last year - around 30% up on last year. A figure to be quite proud of if you are a shareholder, especially in these tough economic conditions.
Of particular interest to me was that this profit was produced on revenue that was up only 6%.
The increased profit has come mainly from cost savings due to much lower interest costs and from higher revenue from their Australian casinos. Their other properties in New Zealand were slightly up with the exception of the big money spinner, Auckland, which was even on last year.
The dividend, at 8c is down from 9c and pleasing to see more money being returned to pay down more debt.
The focus by Nigel Morrison in his next 12 months as CEO is continue to keep costs down, the efficient use of capital, maximising returns on existing assets and finding ways to grow revenue and profit rather than rely on savings in the business to get more bang for shareholders. As I mentioned above, this is especially true of the Auckland Casino where this asset has been in a lull revenue wise for several years and has more that can be squeezed out of it.
Company indications for the next 6 months of operations are to expect a $10-15 million increase on last years $115 million full year profit and for the company to operate in a "challenging environment". Nothing earth shattering about that but I think this will continue until well into 2011 when an impact on patronage from Rugby World Cup visitors kicks in.
Sky City shares were up 6c to NZ$3.19 on roughly double the normal volume traded, in a market up 28 points. Shares were initially up 12c this morning on the announcement.
Disclosure: I own SKC shares in the Share Investor Portfolio
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