Sky City Puts Adelaide Casino Expansion on Hold
By Gavin Evans
http://www.bloomberg.com/apps/news?pid= ... =australia
July 14 (Bloomberg) -- Sky City Entertainment Group Ltd., New Zealand's largest casino operator, has deferred plans for further expansion of its Adelaide casino in South Australia pending negotiations with the state government.
Sky has spent as much as NZ$30 million ($23 million) at the site in recent years improving its performance. Further major investment, including construction of an underground car park, is unlikely unless the state eases some of the restrictions the site operates under, Chief Executive Officer Nigel Morrison said.
``We're probably going to put our development plans on hold'' unless the company can improve Adelaide's business model, he said in an interview today. ``It's a very constrained casino.''
Morrison, in the job since March, is taking a firm line on investment and costs after earnings plunged a year earlier at Sky's main Auckland casino and losses mounted at its cinema unit. The $53 million car parking project at Adelaide, first mooted in 2003, has been under review since March.
Revenue and earnings are increasing at Adelaide, and the state economy is strong, Morrison said.
Still, the casino will struggle to compete with the likes of the Crown site in Melbourne and Burswood in Perth without some loosening of the rules it operates under, he said. He wouldn't comment on the changes he is seeking from the state government.
``We just think it could be made a lot better for South Australia and for us,'' he said.
Stock Gains
Sky rose 2 cents, or 0.7 percent, to NZ$3.02 at the 5 p.m. close of trading in Wellington, its first gain in five days. The stock has fallen 23 percent the past six months, compared with a 15 percent decline in the benchmark NZX 50 index the same time.
Earlier, Morrison said Auckland-based Sky may report net income of as much as NZ$110 million for the year ended June 30, excluding a NZ$60 million writedown on its cinema arm. The guidance, unchanged from February, compares with a NZ$98.4 million profit a year earlier.
While the company's Adelaide and Darwin casinos appear to be benefiting from Australia's commodities boom, New Zealand companies are spending less on accommodation and entertainment as the local economy slows, he said.
Still, leisure and consumer spending is still performing ``reasonably well'' and the company isn't seeing the level of decline experienced by some retailers.
``We are a different kind of business,'' he said. ``People still want to go out and have a drink and have a bit of fun.''
