Managing expansion has kept Sky City’s CEO Evan Davies’hands full this year. In the past 12 months the company has assumed ownership of SkyCity Adelaide, opened its third property – Sky Alpine Queenstown casino, entered into joint venture to open New Zealand’s first Hard Rock Cafe, commenced construction of the Riverside Gaming and Entertainment Complex in Hamilton, and made new investments with cinema operator, Force Corporation (50.2 percent) and internet sports wagering business, Canbet (22 percent).
A standout sharemarket performer over the past year, the casino operator’s multinational, multi-site and multi-destination expansion saw group revenues jump 49 percent for full year 2001 to $442 million. Sky City Auckland grew its revenues by eight percent to $318 million. Meantime, new group revenues from SkyCity Adelaide added $105 million.
During the year the company changed it name from Sky City to Sky City Entertainment Group to reflect the company’s ever widening array of entertainment interests – now encompassing: gaming, restaurants and bars, live entertainment, accommodation and tourist attractions. Underscoring this expansion, says Davies, is the continued development and innovation of its core business.
Excellent operational performance
Despite the costs associated with Sky City’s expansion strategy – including major refurbishment on Sky City Adelaide, Davies says the company has maintained excellent operational performance. The company recorded full year to (30 June 2001) profit of $68.3 million (after non-recurring items) – up 13% from $60.3 million the previous year.
“We remain the most efficient gaming and entertainment company in Australasia in converting revenue to profit, with Sky City Auckland maintaining its market leading EBITDA, ratio, now 54 percent,” says Davies.
Auckland’s premier landmark, since its opening early 1996, the Sky Tower has become leading tourism icon. In fact, of the 700,000 international tourists who visit annually, 500,000 stay to play.
The company is expecting some near-term softening of demand for hotel rooms in Auckland as international visitor numbers decline in the wake of September 11 terrorism. But Davies remains confident that events such as the America’s Cup should inject demand back into this market next year.
Equally favourable investor confidence in Sky City’s future has boosted market capitalisation by $480 million to $1.1 billion during the financial year. Davies’ strategy of growing the business across multiple sites is based on offering customers variety of entertainment experiences rather than simply gaming experience.
It’s also hedged the company from having all its eggs in one basket. Had the company remained single site business Davies says Sky City would have been over-exposed to economic, financial and regulatory risks.
“Our strategy of growing the business across multiple sites is based on our belief that we can apply our successful fun and entertainment vision, as well as our management expertise and business philosophies, to other comparable gaming and entertainment businesses,” says Davies.
In keeping with this philosophy, construction will soon commence on new conference and function centre at Sky City Auckland. Designed to help Auckland to compete for the growing mid-sized conference market, the new centre will be able to seat 1000 for formal dinners.
Exporting the vision
Exporting Sky City’s fun and entertainment vision to Australia has seen Davies spend much of last year commuting between Auckland and Adelaide. Since taking over the Adelaide operation 30 June 2000, the company has injected $12 million into complete renovation of the two gaming floors. Additional money spent marketing the revamped property brought early success. Improved visitation and revenues, says Davies, proves that the re-launch has been successful in attracting broader range of entertainment seekers to the property.
SkyCity Adelaide is also adopting cooperative relationship with tourism providers to integrate the casino into the Riverbank precinct of the city.
Closer to home, Sky Alpine Queenstown casino opened 7 December 2000. The Queenstown site has traded below expectations. But the company’s investment in internet gaming technology, Canbet is doing the opposite. In fact, Canbet has experienced three-fold growth in revenues since its listing in the ASX in April 2000.
Davies will continue to explore future expansion opportunities throughout Australasia. But the focus for the current year, he adds, is to restructure the Force Corporation, and complete construction on the fourth property, Riverside in Hamilton, due to open September 2002. “The growth, both financially and operationally, that we have experienced would not have occurred without the dedication of our 3400 strong workforce and management team. Achieving our entertainment vision means we will continue to enhance our existing products and services, introduce new initiatives and provide great customer service to ensure our guests enjoy their experience at Sky City each and every time they visit.”
Beyond entertainment and gaming, Sky City makes significant commitment to community support. The company is national sponsor of the Special Olympics Foundation. This year the Sky City Community Trust distributed over $1 million throughout the Auckland region.
