Strong First Quarter for SKYCITY

Strong First Quarter for SKYCITY
Strategic Investments a Priority

First Quarter Highlights
Revenue up 3.3%
Normalised NPAT up 3.7%
Normalised NPAT, up over 5% on a like with like basis, excluding cinema operations
International VIP villas and gaming salons to be developed at SKYCITY Auckland

SKYCITY Entertainment Group today announced at its annual meeting a positive first quarter result following on from the record Net Profit after Tax of $141.7 million for the year ended 30 June 2010.

The result has been driven by a range of initiatives across the SKYCITY properties, including the ongoing strategy to grow International Business. Turnover for International Business was up over 85 percent on the first quarter last year.

First Quarter 2011 Trading Update
FY11 has started well for the Group with first quarter revenues up 3.3 percent over the corresponding period last year. Auckland revenues, including its International Business revenue, were also up 3.3 percent and show a strong turnaround from second half last year.

Table revenues in the first quarter were up 12.1 percent up on the average quarterly result in second half 2010, machine revenues were up 3.2 percent and non-gaming revenues up by 5 percent.

Chief Executive Officer, Nigel Morrison says he is pleased with the start to the 2011 financial year.

“This is a pleasing recovery for our local Auckland revenues which are then complemented by strong growth in International VIP Business at Auckland, also up strongly.

“Across the Group we are pleased with the revenues achieved in the first quarter which has resulted in normalised net profit after tax up 3.7% over first quarter last year and up over 5 percent on a like with like basis, excluding cinema operations.”

SKYCITY’s balance sheet continues to strengthen with $340m of debt retired since July 2008. The ACES notes (A$150m) will be repaid in December. By not renewing them it allows Australian franking credits to be attached to future dividend payments.

“We are in a great position to embark on a number of strategic growth opportunities which will optimise, grow and maximise the potential of our existing casino operations and licences, particularly in Auckland, Adelaide and Darwin.”

Mr Morrison believes there are significant opportunities to grow these businesses.

“We are planning a series of significant strategic investments at our properties that will generate superior returns on capital for shareholders.”

Auckland
“SKYCITY has recently received approval from the Gambling Commission to create an exciting dedicated VIP gaming offering, featuring new VIP villas and gaming salons on the top level of the SKYCITY Hotel. This investment of NZ$27m is to cater for both our premium and International VIP Businesses.

“We are currently working through various approvals but expect construction to commence toward the end of this year. Completion is scheduled for prior to the 2011 Rugby World Cup in September/October.

“We are also working closely with the Auckland Council to transform Federal Street from an unattractive traffic thoroughfare to a destinational pedestrian-friendly restaurant, bar and entertainment precinct.

“Phase one involves a capital investment of $10m and will feature up to four new iconic restaurant and bar outlets. An example is a new steak and seafood grill located in the entrance of the Grand Hotel. It will offer exceptional meat and seafood choices, fine wines and feature the highest levels of service.

“Also a New Zealand bar featuring boutique beers from the country’s leading micro breweries with snack food that will be matched to regional beer selections.”

Rugby World Cup 2011
Rugby World Cup 2011 will significantly contribute to a strong first half for FY12 for our New Zealand business. We estimate that our SKYCITY Auckland earnings for the first half next year will be up by 20 to 25 percent compared to the first half last year.

Australia
Adelaide
“We are continuing to work with the South Australian Government regarding a potential major investment that will involve the redevelopment and expansion of the Adelaide Casino. There is the potential to create a much larger integrated gaming-based entertainment complex featuring a broader range of hospitality offerings that is more befitting of a city of Adelaide’s stature and scale.

“Our potential investment will become part of the exciting new Adelaide Riverbank Precinct development, recently announced by the South Australia Government. This includes the Adelaide Oval and Events Plaza redevelopment planned to be completed by 2014 and cost A$535m and the expansion of the Adelaide Convention Centre that will be completed by 2015 and cost A$395m. Both of these projects will be significant drivers of additional foot traffic to the Adelaide Casino precinct. We look forward to working together with the South Australia Government to realise this vision.”

Darwin
“Our Darwin property has significant potential, both in the domestic and international markets. We are committed to further investments at our Darwin property, which is located on Asia’s doorstep. The Little Mindil events site has been completed and the Lagoon Resort development is underway. The total capex for the Lagoon Resort will be around A$40m and is expected to be completed by mid 2012. Additionally, we are planning to significantly enhance our VIP gaming offering by creating dedicated gaming facilities and amenities, targeting the South East Asian markets.

“We have also recently appointed Brad Morgan as the new property GM for Darwin. Brad has extensive gaming industry experience in both the Australian and New Zealand markets. He was most recently chief operating officer of Lasseters International Holdings. I’m delighted to welcome Brad to our team.”

International Business
Normalised International Business revenues continue to grow significantly and were up over 85 percent compared to the first quarter in 2010.

“Our planned capital investment of NZ$27m for our VIP gaming facilities in Auckland is well supported given the vast majority of the revenue growth in International Business was achieved at SKYCITY Auckland.”

Outlook for 2011
“SKYCITY has achieved a pleasing first quarter with normalised revenue up over 3 percent on the first quarter last year and Normalised NPAT up 3.7 percent and over 5 percent on a like with like basis, excluding cinema operations. While we expect the personal tax cuts in New Zealand to be positive, consumers have to date had a focus on deleveraging and this coupled with the GST increase on 1 October makes it difficult to predict the full year outcome at this time. However we note analyst consensus Normalised NPAT for FY11 is $127.4m and we would be disappointed if we didn’t achieve this.”

2010 Highlights:
Record Net Profit, $141.7m* up 23%
Reported underlying Net Profit of $129.1m up 12%
Resilient performance during the recessionary environment
Continued growth in all key markets
Strong growth in international business, particularly at SKYCITY Auckland
Strong balance sheet with low gearing ratio at 2.0 times
Earnings per share up 5.1% at 24.6cps

*Prior to deferred tax adjustment arising from the New Zealand Government change to tax depreciation on buildings
ENDS

The SKYCITY AGM will be webcast from 10am New Zealand time.
WEBCAST LINK
http://www.thomson-webcast.net/au/dispatching/?event_id=9a71fedca5af57ecbca2f4353c3fb80a&portal_id=a9ddd07fe337513e000ac46e8dc27139

About SKYCITY Entertainment Group
• SKYCITY Entertainment Group includes six casino and hotel complexes across New Zealand and Australia (Auckland, Hamilton, Christchurch, Queenstown, Adelaide, Darwin).
• SKYCITY Entertainment Group employs more than 7,000 people throughout Australia and New Zealand.

ENDS

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