'Lacklustre' result no bar to big hotel plans

Nigel Morrison
Nigel Morrison
Undeterred in reporting a lacklustre full-year result yesterday, casino operator SkyCity has launched expansive plans for a new 12-storey, 300-bed hotel, with a string of hospitality and boutique outlets, in Auckland's CBD.

Reported revenue was down 4.8% to $821.4 million and after-tax profit slumped 22.6% to $98.5 million for its trading year to June.

The new hotel is part of the controversial agreement with the Government to pay for construction of the $500 million-plus New Zealand International Convention Centre.

The casino operator took hits from several directions during the year, including a $9.9 million loss in Australian foreign exchange, $A4.1 million ($NZ4.5 million) in Adelaide redevelopment disruption and a waning win rate - from what was a record International Business turnover of $6.5 billion - which, in theory, should have reaped $88 million but came in at $63.2 million.

SkyCity chief executive Nigel Morrison said the five-star hotel with its 570 car parks, restaurants, boutique shopping and linking air bridge would be built on land it owns in the Nelson and Hobson Sts block.

''This new 300-bed hotel is a major New Zealand tourism project and will complement other hotels being built in downtown Auckland,'' he said.

''Taken together, these developments are a major vote of confidence in Auckland's future as a vibrant, evolving city of international standing.''

Estimated to cost $170 million to $180 million, the hotel would bring SkyCity's total beds and car parks in its precinct to almost 1000 and 1350 respectively.

SkyCity shares were initially up 2.8% at $3.65 following the announcement.

Forsyth Barr broker Haley Van Leeuwen said the result was ''very close'' to the brokerage's forecast.

''As expected, the result was impacted by soft economic conditions in Australia, translating Australian dollar earnings at a strong New Zealand dollar, and disruption during the redevelopment of the Adelaide casino,'' she said.

The second-half performance was more pleasing at several properties, Auckland in particular, and this momentum had continued into early 2015 trading, which was encouraging.

Craigs Investment Partners broker Peter McIntyre said the result was ''disappointing and lacklustre'', largely because of the foreign exchange losses and low win rate from International Business.

''The only real positive was a solid performance from Auckland.''

For the current financial year to August 10, SkyCity said revenues were up 4% and the International Business win rate was back to its theoretical gains.

While SkyCity Auckland's revenue had started the new year up 9%, the company did not expect that to continue.

Mr McIntyre said: ''With the capital expenditure envelope expanding and performance remaining subdued, some attention is turning to funding.''

Net debt was $659 million, with $330 million of undrawn banking facilities.

Capital expenditure during the next six years was about $807 million, for the Auckland conference centre and entire redevelopment of the Adelaide casino.

simon.hartley@odt.co.nz

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