SkyCity to remove aluminium cladding from International Convention Centre

Wednesday, 13 February 2019

In 2017, a fire killed 72 people killed at London's Grenfell Tower. Aluminium panels were partly to blame for the blaze spreading so rapidly.

SkyCity is removing aluminium composite panels from its Auckland International Convention Centre over fire fears at a cost of around $25 million.

The move was prompted by blazes in buildings in Australia, the Middle East, and the UK, which have led to aluminium composite panels (ACP) being replaced on buildings around the world.

SkyCity chief executive Graeme Stephens said ACP cladding has been partly responsible for the devastating Grenfell Tower fire in London in 2017.

'It's a public building. We decided we needed to lead the way with non-ACP,' he said.

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ACP panels were common around the world, Stephens said.

'It's on a lot of New Zealand buildings.'

'We had a version of ACP for the building, which would have been highly unlikely to have been a problem in the case of a fire,' he said.

It's the latest episode in the saga of the International Convention Centre, and Horizon Hotel.

SkyCity now expects the delayed Horizon Hotel to be completed within 12 months, and the also delayed New Zealand International Convention Centre to open in second half of 2020.

It was in constructive talks with construction company Fletcher Building over the delays to the two Auckland projects, but expected Fletchers to have to pay total compensation of just under $40 million because of the delays.

An artist's impression of the 300-room, 5-star hotel at the International Convention Centre in Auckland.

Of that money, $30 million was to compensate for losses caused by the conference centre delays, with another $9.5m due for losses caused by delays to completing the hotel, SkyCity said.

Thousands of bookings at the convention centre, which was due to open this month, would now be reviewed as a result of the continued wait for it to open.

Despite the delays, SkyCity reported growing earnings, and expected to have grown its net earnings after tax by 11.4 per cent in the six months to the end of December, due to strong results from its Auckland casino.

SkyCity's Hamilton casino operation also showed growth, and the A$330m project to expand SkyCity's Adelaide casino complex was progressing well.

The company hoped to complete the sale of its Darwin casino by the end of June.

The building of the convention centre has contributed to big losses at Fletchers.

Sky City's Auckland casino dominates the company's earnings.

The company has several big strategic moves planned.

The first is to expand its hotel business, including developing a separate brand for it. It also remain keen to finding an investment partner on the hotels.

It said its plan to launch an online casino was progressing well.

It was in advanced discussions with preferred offshore partner, and had hired an online director to head the development.

Stephens said SkyCity would launch into the online space as if it were regulated like onshore gambling is, including a focus on 'harm reduction'.

'At the moment we are a bit like a shopping centre without an online offering,' he said.

He said overseas-based online casinos were already targeting Kiwis, and he expected, in time, for online casinos to be regulated in New Zealand, and SkyCity had spoken with the government about the gap in regulation.

Stephens had plans to unveil further accommodation, food and drink, and entertainment offerings on Auckland's Federal Street.

'Late last year we announced the world-renowned digital effects studio Weta Workshop as a long-term tenant of our new entertainment precinct alongside the All Blacks Experience, with both set to open next year. We have more plans for this space which we hope to reveal soon,' he said.

'Plans to move the company's headquarters to the adjacent AA Centre building from May remain on track, which will in time free up Federal House for redevelopment. In addition, plans to sell the company's main site carpark are progressing well, which will help release capital to further diversify our business.'

The positive announcement is not a surprise to the market.

SkyCity reported a strong end to end to 2018, and last month said it expected to report better-than-expected earnings growth thanks to its Auckland business performing well, in part due to the return of overseas high-roller, big stakes gamblers.

A good year for shareholders means a good year for the bosses too, with SkyCity reporting 'higher corporate costs due to corporate bonus provisions'.

The company also said it would use spare cash to buy back up to five per cent of the companies shares.

Stephens said: 'We've had a really positive first half of this financial year, aided by some strong gains in International Business turnover and a good result from our flagship Auckland property, particularly on the gaming floor.'

'One of the initiatives I'm most excited about is the plan we've announced today to go carbon neutral in New Zealand this year and to put a price on all our carbon usage. Climate change is one of the biggest issues facing not just businesses but the entire planet and we're determined to do our share in helping mitigate its effects and to create an awareness of its importance among our staff.'

SkyCity would set up a green fund to offset emissions, and fund staff-led carbon reduction initiatives.