New Zealand – Mixed year in New Zealand for Sky CityBy Phil - 8 September 2014
New Zealand operator Sky City reported a mixed year for the year ended 30 June 2014, with profit of NZ$123.2m.
EBITDA for the year declined by $12.9m, down 4.3 per cent from $300.5m to $287.6m. Of this, $9.9m was attributable to the exchange rate impact of the strengthened NZ dollar and A$6.4m to the transformation of Adelaide and the consequential significant disruption to the local operations.
Sky City Chief Executive Nigel Morrison said: “The overall financial result for 2014 was mixed, with some very pleasing improvements offset by the costs of transitioning some of our key businesses, positioning them for future growth. We delivered good growth in our Auckland and International businesses, particularly in the second half; the second half results of Auckland were a real highlight of this result. These were overshadowed by the significant disruption of the extensive construction works, at the Adelaide Casino transforming that property to take advantage of the reforms negotiated with the SA Government. The impact of the strong New Zealand dollar has also materially reduced the value of our Australian revenues and earnings.”
“Pleasingly, Sky City Auckland, our largest business, experienced good growth across all business segments, particularly in the second half with revenues up nine per cent and with momentum continuing into the first quarter FY15. The strong management team lead by John Mortensen and Matt Ballesty are optimising the investments made in the Auckland property over the last three years.
“Our International Business turnover grew strongly in the second half resulting in a record turnover for the year of $6.5bn. Focusing on growing our International Business and becoming more competitive in the region, we increased our maximum table differential in December 2013, which has, over this short period, increased volatility as we build up volume. The FY15 year has started well with IB turnover to 10 August of $1.2bn with a win rate of 1.3 per cent”.
“The 2014 year was a very significant year for Sky City with the execution of the agreements with the NZ and SA Governments and the passing of the enabling legislation by the respective parliaments. These agreements providing licence and tax certainty, enable us to invest with confidence and position these properties to better compete in their regional markets. The hard work has now started in implementing these agreements, which will underpin the foundations of Sky City’s long term future growth.
“In addition to maintaining the momentum in our largest business, Auckland, and continuing to grow our international business, the focus for FY15 will be completing the Adelaide Casino transformation by the end of calendar 2014, finalising the NZICC development plans, achieving resource consent and awarding the construction contract for the NZICC by the end of the FY15 year.
“As part of the NZICC site master plan Sky City announced today that we will also develop a 300 room five star international hotel which will complement and enhance the NZICC development.”
“I am also delighted to announce that after an extensive international search we have appointed Mr Rob Hamilton as Chief Financial Officer. Rob is currently the Managing Director and Head, Investment Banking at First NZ Capital in Auckland and will commence on 13 October”. Mr Morrison said.
Auckland’s Normalised EBITDA improved 3.9 per cent to $218m, with good growth in 2H14 with Normalised EBITDA up 7.4 per cent on 2H13. “Auckland is seeing strong momentum in both gaming and non-gaming revenues. This, combined with tight cost control has seen pleasing growth in Auckland’s EBITDA and an improving margin. Auckland has continued to trade well into the FY15 year (through to 10 August 2014) with nine per cent revenue growth,” Mr Morrison said.
Sky City and the Crown have agreed the NZICC Concept Design in accordance with the NZICC Agreement and Sky City is on track to apply for Resource Consent in the fourth quarter of 2014. Subject to a favourable outcome of the resource consent process we would expect the construction contract to be executed towards the end of this 2015 Financial Year. At that time the NZICC concessions will become operative.
The NZICC will enhance the rejuvenation of the western edge of the CBD and will provide a catalyst for further visitor and entertainment development in Victoria Quarter and Sky City’s Federal Street. Auckland businesses of all sizes will benefit from increased high-value visitation. It will reinforce Auckland’s reputation as a leading, vibrant, international city.
Mr. Morrison said the project was entering an exciting phase. “These key concepts are the first steps in establishing what the NZICC is going to look like, not only in terms of the physical scale and appearance, but also the breadth and complexity of what the building can offer,” he explained.
Simon Jamieson, General Manager NZICC Development and Tourism, and his team have been leading our discussions with the Crown and other stakeholders for the NZICC.
Hamilton normalised revenue of $48m was down 6.9 per cent on FY13, which benefited from strong table games performance. While still facing a tough environment, some positive signs have emerged in the second half.
Queenstown saw positive normalised revenue growth of over 50 per cent on the back of improving International Business and the acquisition of The Wharf in July 2013.
The rest of New Zealand had normalised revenue growth of two per cent unfortunately this did not translate to normalised EBITDA growth, which was down 16 per cent on FY13.
2014 was significantly impacted by the sheer scale of changes made to the Adelaide Casino. Every inch of the main gaming floor and up to 80 percent of the rest of the facility has been affected in some way, which has led to significant disruption for our customers. At any one time, up to 40 per cent of the floor and/or 40 per cent of our product have been unavailable. We expect the A$40m refurbishment of Adelaide Casino to be substantially completed by the end of the 2014 calendar year.
As a result, Adelaide’s local normalised EBITDA was down 18.2 per cent. However, this was partially offset by the significant growth in our Adelaide International Business with normalised EBITDA up 85 per cent, highlighting the significant potential of Adelaide as an IB destination.
Between December 2013 and June 2014, we completed an extensive staged programme of works significantly transforming the Adelaide Casino, currently housed within the existing Heritage listed Adelaide Railway Station. These, together with the new taxation and regulatory framework will now enable the Adelaide Casino to compete nationally and internationally for the first time.
The extensive works that were completed over this period include a new Baccarat Pavilion and Table Gaming area, new Platinum EGM room, the upgraded Grange Table Games room, the refurbishment of main gaming floor F&B outlets including Chandelier Bar and Cafe Junction, new cashiers facilities, loyalty reception areas and gaming support facilities, new Barossa Room; and a new VIP customer Bar and Lounge
Sky City continues to develop detailed plans for the expansion of Adelaide Casino which includes the construction of a new contemporary iconic building housing Sky City’s new 6 star Hotel, additional gaming capacity, Horizon Gaming suites and villas and additional signature restaurants and bars transforming the Adelaide Casino into a truly integrated tourism and entertainment complex.
Darwin continues to show resilience with local revenues up marginally, but offset by cost pressures in the local economy.
The luxury Lagoon Resort in Darwin has continued to operate at close to full occupancy, attracting both local and international players alike with its five restaurants, eight bars and two Horizon international gaming villas and salons. This year, we completed the redevelopment of the Sky Room for local VIPs and increased automated table gaming. We have also introduced TITO gaming in the Sky Room and Diamond Room and on the main gaming floor. This gives us a clear competitive advantage locally and means we are now able to compete with other casinos.
“We remain confident that large infrastructure projects, along with an increased focus on tourism and more flights to and from Asia should underpin long-term growth in Darwin,” Mr. Morrison said.