Skyline’s mixed bag


Good profits but economy and property writedown cut dividend.

Solid trading profit, a dividend cut and a complex property writedown all feature in provisional results from Queenstown business giant Skyline.

Unaudited year-end figures of the tourism, casino and property conglomerate show a trading profit of $24.2 million before tax and building revaluations – slightly up on last year’s $23.4m.

But higher tax means a lower net profit of $16.9m, down $700,000.

Skyline chairman Barry Thomas warns these preliminary results may change – new annual property revaluation rules could affect the accounting treatment of the September 2008 sale of the group’s stake in Christchurch’s Crowne Plaza Hotel.

Any change would be only a paper adjustment and “wouldn’t affect the cash position or taxation of the company”, Thomas says.

“These annual property valuations significantly distort our results, however the underlying trading performance of the group was very good and the fundamentals remain strong.”

Skyline’s board are recommending a “prudent” dividend cut because of heavy capital expenditure commitments, notably the $4m upgrade of Queens­town’s gondola and upper terminal complex – and because of “the overall trading outlook”.

“The impact [of the world economy] on airlines and business generally does cause us to be reasonably conservative with our forward outlook,” Thomas notes.

At the September 19 shareholders meeting, directors will propose a dividend of 22 cents per share, compared with 28c for the past two years.

If approved, the dividend will total $7.4m instead of the previous $9.4m.

Skyline shares have remained stable at $4.15 for several months, down from pre-recession highs of $6-plus.

Thomas applauds managers of Skyline tourism and accommodation properties in Queenstown and Rotorua for “an exceptional job” of holding, or even reducing, overheads to counter declining visitor numbers of around nine per cent.

Luges in Singapore and Canada have recorded small visitor gains, however.

Christchurch Casino, where Skyline has a 46 per cent stake, continues its reliable earnings pattern – profit is virtually unchanged from last year despite major refurbishment.

The group’s other casino interests aren’t so flash, with SkyCity Queenstown only “satisfactory” and Dunedin “not particularly good”, Thomas says.

But Skyline’s $60m Queenstown commercial property portfolio is performing steadily – “although trading is challenging, rent [levels] are generally being held”.

The $4m rebuild of the prime Rees Street property destroyed by fire in late 2007 is on target for completion by the end of this year – there’s good tenant interest.

Thomas closes his profit announcement on a cautiously optimistic note.

“While it’s difficult to predict forward tourism numbers, especially internationally, we believe [recessionary] trends will probably be short-lived and in the not-too-distant future Skyline should be back on a growth platform.”

Disclosure: The writer is one of 820 small Skyline shareholders