SKYCITY has signalled a probable legal fight with contractor Fletcher Construction over the delay to the completion of the New Zealand International Convention Centre (NZICC).
In its interim results released today, SKYCITY said the delivery date of mid-2019 of the NZICC and Hobson Street hotel projects would be six months after the contracted date of January that year. That is double the initial three month delay announced last year.
SKYCITY chief executive Graeme Stephens told the Ticker this morning his company was entitled to claim damages because of the delay, which he had always considered to be six months.
“We are flagging that now because we are getting to the phase of the construction where the end is in sight,” he said.
“Nothing is currently happening but we are flagging the liquidated damages that we are entitled to and, simultaneously, Fletchers, which would be likely to challenge our ability to claim them.”
In its interim results, SKYCITY said: “We remain comfortable with our contractual arrangements, which provide for liquidated damages that should mitigate our losses through delay, but legal challenges from Fletcher Construction are possible.”
Stephens added he wanted to be transparent about the possibility of legal action as “there is going to be some degree of claiming and counterclaiming when we get to the end”.
The delay followed ructions at Fletcher Construction last year, which saw its share price plunge in July after a profit downgrade and the immediate departure of its chief executive, Mark Adamson.
SKYCITY said today it had noted a “positive change” over the past six months in the construction of its two projects with Fletchers.
“The overall programme is well advanced with the core of the Hobson Street hotel now up to the eighth floor (of thirteen) and the slab for the final floor in the NZICC nearing completion,” said the company.
“Overall, we expect our investment in the projects to be in-line with our original budget. We continue to escalate our sales and marketing efforts to confirm the pipeline of convention bookings and, pleasingly, we have secured six major international conferences for 2020.”
SKYCITY said it had lifted its net profit by 11.6% to $93.5m for the six months ended December 2017 citing growth at its NZ properties and a recovery in its international business for the result.
The company reported EBITDA up 6.8% to $180.6m off revenue of $554.7m, up 4%.
Stephens said the results were in line with the company’s expectations.
“We continue to make progress on our current strategic initiatives and the significant developments underway in Auckland and Adelaide position the company for earnings growth and creation of shareholder value over the medium-term.
“Despite ongoing disruption from capital works in Auckland and Adelaide and a slightly less favourable New Zealand economic environment, we remain confident we can continue to deliver growth from our existing assets as well as the new projects in the pipeline.”
One of those projects is the company’s partnership with New Zealand Rugby and Ngāi Tahu Tourism to deliver the All Blacks Experience at SKYCITY Auckland in 2019.
“Having the All Blacks Experience at SKYCITY aligns us with an iconic global brand and will enhance the family and tourism entertainment experience on the precinct,” said the company.
SKYCITY had also begun “master planning work for both our Auckland and Hamilton properties – we believe both properties present future opportunities for development which will create value for shareholders”.
And it was evaluating strategic options in Queenstown with a view to better leveraging the potential of its two casino licences and improving its offering to appeal to a broader customer base.
The company said its International Business, what it calls its high-roller income, recovered after a challenging FY17, which saw its performance fall dramatically. Turnover grew 9.4% to $4.8bn and normalised EBITDA was up 87.1% to $14m.
A fully imputed interim dividend of 10 cents per share was declared.
Read our full interview with SKYCITY chief executive Graeme Stephens on Monday