SkyCity denies reports Darwin casino for sale as chief executive resigns to 'take a break'

Thursday 7th April 2016

SkyCity Entertainment Group, whose chief executive Nigel Morrison resigned today to "take a break", has denied Australian media reports it's Darwin casino is being touted to international investors.

The Australian Financial Review's Street Talk column today said SkyCity, New Zealand’s only listed casino company, approached strategic investors last month to gauge interest in a handful of its assets including the underperforming Darwin casino, one of its Auckland hotels, and several carpark facilities.

The AFR also said Australia's Star Entertainment Group was the most likely suitor for SkyCity to create a trans-Tasman powerhouse but the Kiwi-based casino company is too expensive with its shares currently trading at $5.

A Sky City spokesman said the company had no intention of selling the Darwin casino and had assured staff in the Northern Territory of that today.

In February the company reported Darwin had increased ebitda earnings 6.9 percent to A$23.1 million as revenue rose 2.3 percent to A$75 million. At the time, the company said it was in talks with local officials to get more direct flights from Asia into Darwin to bring in more VIP gamblers. The casino is being impacted by the wind-down of construction activity at the INPEX liquid petroleum plant.

Morrison indicated late last year he was looking to sell the new five-star Hobson St hotel in Auckland planned as part of the national convention centre development. He said the capital costs of the hotel including the land were around $160 million to $170 million and he wanted to “do a deal that gets that back and more”. Sky City says it's making good progress on the sale and is likely to update investors in mid-May.

The Federal St carpark in Auckland has also been up for sale for some time and is expected to fetch upwards of $30 million.

SkyCity has said its well-placed to fund the outstanding capital expenditure on the convention centre development, which is forecast at around $580 million, from future operating cash flows and an undrawn $300 million debt facility.

However, it needs to find ways by 2018 of funding the planned expansion of the Adelaide casino, which includes a hotel, villas and suites for its international business and an expanded gaming area, which is expected to cost upwards of $318 million.

Increasing its debt substantially could adversely impact its credit rating.

Morrison said he’s resigned in order to take a break from the "demanding job" following an eight-year tenure.

His departure is effective April 29, and the Auckland-based company has appointed New Zealand chief operating officer John Mortensen as interim chief executive pending a global search, it said in a statement.

Morrison avoided naming his successor after it backfired on him in 2014. The 57-year-old named then-chief financial officer James Burrell as the best person to take over running the business although he said he intended staying on as CEO until around 2017 or 2018. Burrell resigned a month later and returned to the UK for family reasons.

Chairman Chris Moller said the board has been in formal talks with Morrison since September last year and are agreed that the timing is right to transition to a new head.

During Morrison's tenure, SkyCity secured $458 million of gaming concessions from the government as part of a controversial deal to build a convention centre in Auckland, exited its Christchurch operations, and bought a second casino in Queenstown, a popular destination for high-roller gamblers who have been spending record amounts with the company. In more recent times he's helped turn around the company's underperforming Adelaide operations.

Morrison said he is leaving the company in "great shape" with record revenue and profits.

"The leadership team we have in place is very strong and I’m confident the company will continue to go from strength to strength,” he said.

It’s unclear if the Australian will remain in New Zealand once he leaves the company and he's turned down media interviews today.

Shares in SkyCity rose 1 percent to $5 and have gained 12 percent this year. The stock is rated a 'buy' according to the average recommendation of analysts compiled by Reuters.

(BusinessDesk)

BusinessDesk.co.nz

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