The benefits of an improved half-year performance by Skycity casinos was eroded by a $60 million write-down of its cinema operations, which saw the entertainment company report a 97% fall in net profit.
Skycity Entertainment Group yesterday reported a net profit of $1.3 million compared with $45 million for the previous corresponding period (pcp) last year, but, without the writedown, the pre-tax operating surplus was up 28.8% to $82.6 million ($64 million pcp).
Group revenue was up 1% to $424 million and earnings before interest, tax, depreciation and amortisation (ebitda) was 9.1% higher at $161.4 million.
Net profit before write-downs grew 36.2% to $61.3 million, but, after the write-down, it was $1.3 million. Revenue from the cinema division was flat at $32.5 million ($35 million pcp), with the earlier result including $2 million from Skycity Metro, which was sold in June last year.
Compounding the cinema division's flat contribution were increased costs and depreciation, encouraging the company to write-down the value of the asset.
Negotiations with potential buyers for its cinema business continue. ‘‘If a satisfactory price and sale structure is not able to be achieved, the company will evaluate restructuring and revenue regeneration options,'' Skycity said in a statement.
ABN Amro Craigs adviser Chris Timms described it as a good result. All divisions performed well except cinemas, but the group's performance could see Skycity draw attention from other companies interested in acquiring it.
Revenue from Skycity Queenstown, in which the company has a 60% shareholding, grew 20% over the pcp, with gains from gaming tables 12%, table games 22% and food and beverage 18%.
The venue also benefited from extra marketing, which increased visitors and revenue, helping boost ebitda.
Queenstown enjoyed a busy January and February, which the company said ‘‘has seen a positive start to the second half of 2008''.
Overall, the company said it focused on managing operating margins in the period under review, which saw an improvement in the performance of its Darwin business and from international ‘‘very important person'' players.
The Auckland venue performed steadily during refurbishment and the contribution from its Adelaide centre, which is being retained as a core gaming asset, also improved.
Total revenue from the Auckland venue was up 0.8% to $205.3 million on the pcp, and earnings before interest, tax, depreciation and amortisation were up 0.4% to $107 million.
But gaming revenue was flat and the contribution from gaming machines fell 4% as a result of refurbishment, while table revenue grew 7%.
The Adelaide operation grew revenue 2.2% to $A62.5 million and ebitda 7.1% to $A12 million, but smoke-free regulations introduced on November 1, saw an 8% decline in revenue over the November-December period compared with a year earlier.
Revenue from the Darwin venue was up 10.9% to $A55 million but ebitda growth was exceptionally strong at 25.7% to $A23.5 million.
Hamilton also grew its revenue, up 2.6% to $20 million and Christchurch Casino, in which Skycity has a 41% shareholding, increased $200,000 to $2.7 million.
Write-downs aside, directors said the first-half result was acceptable given disruption to management from having to appoint a new chief executive, takeover approaches, asset sale reviews and renovations at Auckland Casino.
Skycity anticipates an improved full year performance with a net profit at the upper end of a range between $108 million and $110 million.
An interim dividend of 11c a share (9c pcp) is to be paid.
