Shareholders reassured over proposed convention centre

Photo / Supplied

SkyCity Entertainment Group shareholders have been reassured that the $350 million Auckland convention centre will go ahead only if it stacks up financially.

The full-year results presentation, out yesterday, told how the group hoped that it would proceed, but not if it was unprofitable.

About 350,000 delegate days could be delivered annually, generating $90 million extra spending, equivalent to a Rugby World Cup every two years.

"Shareholders should remain assured that the proposed transaction will only proceed on the basis that an acceptable return on capital can be delivered from the total project," the company said of its controversial pokies-for-centre proposal.

The Auditor-General is reviewing the Government's expressions of interest process and SkyCity said that while it was a matter for the state, it supported the inquiry and expected a result within one to two months.

"We hope to re-engage with the Government and conclude these negotiations," it said, explaining how $30 million had been invested acquiring a land bank opposite the main Auckland site around 101 Hobson St, beside TVNZ's national headquarters.

Jeremy Simpson, Forsyth Barr analyst, who retained his buy recommendation on the shares which he valued at $4.30, said the result was very close to guidance

"Auckland was a bit stronger than we were going for in terms of revenue, I guess," Simpson said.

"The strong performances were Auckland revenue lines from gaming, international and local tables.

"They were ahead of what we were going for but that was offset by some slightly higher corporate costs."

The market was awaiting further details of the convention bid.

"I certainly think it will be good for Auckland and good for SkyCity, depending on how the deal is structured," he said.

Convention centres were often not profit generators as stand-alone assets.

"The important thing is to get a return on capital," Simpson said of the convention proposal.

Elsewhere, it was reported that Goldman Sachs estimated SkyCity would need 350 to 500 extra machines to profit from the deal, generating $46 million of revenue in the first full year of operation.

Nachiket Moghe of Morningstar said the 2013 year's growth was likely to come from Auckland and Adelaide and the 2012 result was in line with expectations.

SkyCity said the Rugby World Cup had been a big boost to its flagship Auckland casino/hotel complex, lifting sales 14 per cent to $527.4 million.

Auckland gaming revenue was also up 10 per cent, which SkyCity attributed to its new private gaming areas.

"The four Horizon private gaming salons and seven suites have proven to be highly popular with international, mostly Asian [and] Chinese customers," it said.

"We have expanded our sales network in Asia to maintain growth in FY13 and beyond."

SkyCity shares fell slightly yesterday to $3.56 after gaining about 4 per cent this year.

THE NUMBERS
* 350,000 delegate days annually.
* 180,000 delegates brought to Auckland.
* $90 million in extra spending will be gained.
* Similar to a Rugby World Cup every 2 years.
* 1000 jobs during construction phase.
* 800 jobs once fully operational.
Source: SkyCity