Archive | SkyCity

SkyCity Entertainment Group Ltd chair Chris Moller highlighted, when he addressed the company’s annual meeting on Friday, that the international convention centre it’s about to build won’t be a great earner in itself.

But there’s a second leg to its development, which has come into play immediately – earnings from extra gambling concessions.

SkyCity has awarded the $477 million construction contract to The Fletcher Construction Co Ltd to build both the convention centre & adjoining hotel, and is now looking at “partnership options” for the hotel. The company expects to turn the first sod on the development before Christmas and is aiming for an official opening in the second quarter of 2019.

Chief executive Nigel Morrison said the company’s total bill would hit $700 million including land, the convention centre development, Hobson St hotel development, connecting airbridges, retail/restaurant laneway development between Nelson & Hobson Sts and the additional parking spaces under the convention centre, increasing the total carpark to 1327 spaces, which, in addition to SkyCity’s existing ca park of 2000 spaces, will increase its total parking to 3327 spaces.

Mr Moller said it was timely to reflect on the benefits to SkyCity of the convention centre transaction: “Everyone knows that convention centres are not of themselves significant profit generators and the board is under no illusion about that. However, the extension of SkyCity’s Auckland licence to 30 June 2048, the tax certainty obtained and the attraction of more visitors to the SkyCity precinct will be of significant benefit to the company.

“The gaming concessions will also enhance our profitability and, whilst they are controversial in some quarters, our corporate social responsibility programme is how we retain our social licence to operate. Accordingly, and as you would expect, it stands at the heart of our strategy.”

Mr Morrison said the extra gaming concessions, including gaming tax rates being locked in, were activated when the construction contracts were signed on 11 November.

SkyCity’s main atrium, undergoing transformation.

Mr Morrison also said the company had engaged international architects YWS to design & deliver “a world-class entry experience” in its main atrium on the corner of Victoria St West & Federal St, and would spend $24 million on the improvements.

Stage 1, well under way, is scheduled for completion next month and stage 2 by mid-2016. The changes include a new main escalator providing more direct access to the main gaming floor, a second new escalator linking levels 2 & 3, and the addition of ‘Andy’s’ gourmet burger bar to the food & beverage offerings. The main gaming floor will be extended through a partial infill of the atrium space.

Mr Morrison said SkyCity was well placed to fund the forecast $580 million convention centre & hotel development costs from future operating cashflows & existing debt facilities. Following the recent $125 million bond issue, SkyCity had over $300 million of committed undrawn bank facilities.

In addition, Mr Morrison said: “As part of its longer‐term funding plan, SkyCity continues to explore property-related funding options, including the potential sale of the Federal St carpark and securing external investors to fund & ultimately own the Hobson St hotel development.”

JLL has been appointed to secure external investors for the Hobson St hotel, with an information memorandum due out this month.

In a trading update for the first 4 months of the 2016 financial year, to 31 October, Mr Morrison said highlights included normalised group revenue up 11.1% to $373.2 million and normalised ebitda (earnings before interest, tax, depreciation & amortisation) up 20.5% to $121.8 million.

SkyCity Auckland, the company’s flagship property, continued to perform strongly, reporting growth across all business segments. Normalised revenues rose 6.2% to $209.3 million, and normalised ebitda rose 13.6% to $89.6 million.

International business turnover rose 50.7% to $4.5 billion, including significant growth in Adelaide. SkyCity’s Queenstown property was also buoyed by strong international growth.

SkyCity Hamilton lifted normalised revenue 11.3% to $18.1 million and normalised ebitda 27.9% to $7.8 million.

Mr Morrison said the company had made progress in addressing the cost structure of the Adelaide operations which, together with the growth in international business, had increased normalised ebitda by 77.2% to $A14.7 million.

SkyCity Darwin continued to experience challenging trading conditions, underpinned by soft hotel occupancy and restaurant & bar revenue. However, international business growth contributed to a satisfactory overall performance. Normalised revenue rose 3.3% to $A52 million and normalised ebitda rose 7.8% to $A16.6 million.

Attribution: Company release, meeting notes.