While negotiating with the Government here on its Auckland project, SkyCity Entertainment Group is considering spending more than the A$350 million ($366 million) it originally planned on its Adelaide property.
Announcing the interim result yesterday, chief executive Nigel Morrison revealed a newly expanded plan for Adelaide which the business says would eventually be far bigger than its Auckland casino and entertainment operations. But he did not quantify the exact amount to be spent.
"SkyCity is currently exploring a range of different expansion options including additional Horizon VIP villas and suites and an expanded hotel, which would potentiality increase the costs for the project over the indicative cost of A$350 million," he said.
The casino expansion, a new six-star boutique hotel and extra signature food and beverage offerings are planned and Morrison said he hoped the scheme could be finalised within the next month.
The physical transformation of the existing Adelaide railway station is complete after A$50 million was spent there since 2013.
But it is the next phase and a huge new glass-fronted building between that station and the River Torrens which is now under the spotlight.
"SkyCity remains committed to transforming the Adelaide Casino into a world-class integrated entertainment and casino resort and continues to develop plans for the broader expansion of the property," Morrison said.
SkyCity yesterday announced net profit after tax for the half year to December 31 of $54.6 million, down 10.6 per cent from the previous year.
On a normalised (adjusted according to theoretical win rates) basis, after-tax net profit rose 0.3 per cent from $66.4 million to $66.6 million.
Jeremy Simpson at Forsyth Barr said the result was hit by a below-theoretical win rate. "While disappointing, volumes in the international businesses were strongly up with good momentum in this business. The casino has got lucky in January and the year to date win rate is now above theoretical. The themes are as expected, just more pronounced."
UBS said the result was relatively soft with a strong Auckland upturn offset by a disappointing Adelaide performance during its refurbishment phase.
Craig Lindberg at Craigs said the result was mixed.
"On the positive side, Auckland has returned to growth, outperformed our estimate and highlighted its leverage to a strong macro and tourism backdrop currently. On the negative side, Adelaide was weaker than expected and the company remains constrained in its ability to comment on its group capex profile and longer-term funding options until the negotiations with the Crown regarding NZ International Convention Centre are complete," he said, noting no full-year earnings guidance was issued.
Chris Gaskin of Devon Funds Management said the result was in line with expectations and performance was "more of the usual" with Auckland better but Adelaide not as spectacular due to the disruption from the upgrade. Darwin was relatively flat, probably due to the impact of the mining downturn. What was uppermost in Gaskin's mind was PM John Key's view on the convention centre's cost escalations from $402 million to $470 million-$530 million.
Key on Tuesday would not rule out using taxpayer cash to fund budget over-runs.
Morrison said Auckland was the stand-out in the half-year, with revenue up 17 per cent from $258 million to $302.5 million. But Queenstown's performance declined, with revenue dropping 1.4 per cent from $7.1 million to $7 million, Darwin's revenue only rose 0.3 per cent from $72.9 million to $73.1 million, Hamilton's only rose 1.2 per cent from $24.9 million to $25.2 million while Adelaide's was up 4.7 per cent from $83.4 million to $87.3 million.
Morrison also signalled yesterday SkyCity had left the door open to contribute more money to developing the convention centre. Asked how much extra SkyCity might contribute, Morrison did not rule out paying more, but instead answered: "I'm sure it will come out in due course." Shares closed yesterday up 6c at $3.96.