SkyCity Entertainment Group said its $703 million New Zealand International Convention Centre and Hobson St hotel project under construction by beleaguered Fletcher Building will be delayed a further six months.
The projects are now expected to be completed in December next year, the Auckland-based company told the Macquarie Investor Conference in Sydney today.
When Fletcher won the contract in October 2015, construction was predicted to start in late December that year and be finished in February 2019. However after Fletcher ran into problems with cost blowouts, SkyCity said last year that the deadline had been pushed out to mid-2019.
SkyCity said today that its investment in the projects is expected to be in line with the original budget of about $703m, and it remains comfortable with the contractual arrangements. The construction contracts provide for liquidated damages, which should mitigate losses through delay, the company said.
Fletcher has faced cost blowouts in major projects, including the convention centre and the Justice and Emergency precinct in Christchurch, which led to earnings downgrades and the abrupt departure of chief executive Mark Adamson. It has signalled a move away from future vertical construction projects and is selling assets and raising money from share sales to strengthen its balance sheet.
SkyCity said today the first stage of the centre's carpark in Auckland, about 600 spaces, would be finished before the end of next month.
The company said it has secured three major convention bookings since March, in addition to the six previously announced, and continues to work on numerous leads and opportunities. The 33,000sq m facility will be the largest purpose-built convention centre in the country.
New Zealand's only listed casino company is also investing A$330 million ($353.2m) redeveloping its underperforming Adelaide casino, buying the AA Centre next to its Auckland casino for $47m, and potential developments in accommodation, food and beverage, new gaming spaces and entertainment.
It's also considering adding accommodation at its Hamilton casino Riverbank development, and is investing in IT to upgrade aging infrastructure and allow for growth.
The company is looking to free cash from its existing assets to protect dividend payouts.
It said today that Goldman Sachs is testing potential for a full sale of the Darwin casino, and reported "encouraging early interest" from a broad range of buyers.
SkyCity said it expects to post about 3 per cent growth in normalised group earnings before interest, tax, depreciation and amortisation for the 2018 financial year.
It said normalised revenue for its year so far to April 28 was up 4.6 per cent on the previous corresponding period, and domestic revenue excluding international business (IB) was up 2.6 per cent.
So far in the second half of its financial year, covering the period from January 1 to April 28, group normalised revenue was up 7.2 per cent with domestic revenue excluding IB up 2.1 per cent.
Its Auckland business performed well in the third quarter but table games were weaking last month, the company said. Hamilton's performance was stable in the second half to date with strong non-gaming performance offsetting slightly weaker gaming activity, it said.
Performance of its Adelaide business improved in the second half to date thanks to increased premium gaming activity and operating efficiencies, and its Darwin business stabilised and delivered an improved performance, it said.
The company said its international business remained on track to achieve at least $10 billion in turnover for the 2018 financial year despite adjustments it had made due to an error in the way it had been calculating turnover which caused it to overstate turnover the past three years.
SkyCity shares last traded at $4.05, and have dropped 7.1 per cent over the past year. Fletcher shares slipped $6.26 and have shed 22 per cent over the past year.