SkyCity’s big hitter gambling drops off
Angel investors shelled out a ‘‘solid’’ $23 million in the first half of the year but Angel Association chairman Marcel van den Assum said five to 10 times that sum would be needed to help the country’s young businesses reach their full potential.
The level of investment was up from $20m in the same period last year, but down on the $26m invested in the first half of 2014.
Venture Investment Fund (NZVIF) director Bridget Unsworth said only $5m of the total went into new businesses.
More than three-quarters was ‘‘follow-on’’ investment into businesses in which angels had already taken a stake.
Van den Assum estimated there were about 600 to 800 angel investors.
Their investment appeared to have settled at a sustainable level and was likely to trend upwards as more opportunities came out of the likes of business accelerators, he said.
‘‘But the bigger challenge for us is the next round, the growth round.’’
The risk was that angels were stuck with the job of providing follow-on funding to their more mature investments, rather than recycling investments into newer ventures.
‘‘Angels are responding very well to business accelerators, which are a government initiative – fantastic – but we now need to ensure we see that through.’’
Van den Assum said the followon funding could come from KiwiSaver funds or from immigrationrule changes that obliged wealthy migrants settling in New Zealand to invest in riskier assets than bonds and property.
The latter idea, which was first proposed by The Icehouse chief executive Andy Hamilton last year, was ‘‘definitely getting favourable consideration’’, he said.
‘‘With bank interest rates being what they are, there are a lot of people looking at angel and growth funds as a better place to put their money.’’
NZVIF and the Angel Association estimated in their young company finance report that businesses had raised an additional $11m during the half-year through equity crowd-funding, which lets companies raise up to $2m a year by selling shares to the public with little red tape.
That was up from $8m in the first six months of 2015.
Rodney Craig, a corporate lawyer with Minter Ellison Watts, estimated businesses had raised about $30m through equity crowdfunding since it became legal in 2014.
Equity-crowdfunding had settled into a steady pace after an initial surge in capital-raisings, he said.
Craig believed the funding option had been a success, though it was still early days.
But he said it was most suited to companies that had the right sort of following to bring a crowd of investors with them, with breweries being a classic example.
Other lesser-known legal challenges that coincided with the launch of equity crowdfunding had also removed red tape and made it easier to raise money, he said.
‘‘We are doing a lot of capitalraisings for all sorts of startups and growth companies and on the whole the good companies aren’t having trouble accessing capital. The fact there are several different options makes it easier.
‘‘You have got to do it properly and have a decent story and a value proposition, but I don’t think there is a shortage of capital per se.’’
Angel investing and equity crowdfunding are small beer compared to other forms of financing, such as people ‘‘bootstrapping’’ their businesses and funding ventures through loans and savings.
But van den Assum said angel investing was also about providing experience. ‘‘If you look at the combined business experience of angels it is extraordinary.’’ SkyCity’s ‘‘high worth’’ VIP customers have been taking fewer trips to the casino and the arrest of Australian billionaire gaming mogul James Packer’s workers in China could hurt spending further still.
But the casino company was confident it would continue to grow after a ‘‘slightly disappointing’’ start to the year following successive years of record profits.
SkyCity made an after tax profit of $145.7 million for the year to June 30 as VIP high-rollers gambled at record levels.
The company’s international business - what it calls its international VIPs - had a record year and it opened three new ‘‘Grand Horizon’’ salons in Auckland accordingly, where you could place bets worth as much as $300,000 a hand.
But SkyCity interim chief executive John Mortensen said gaming revenue had dropped in Auckland during the first part of this financial year, in part because of less gambling by its premium players.
SkyCity’s international business revenue fell 20 per cent, he said at its annual general meeting in Auckland, which reflected fewer trips from its larger VIP customers.
‘‘However, I would highlight that activity in our international business can be quite volatile from period-to-period reflecting a smaller number of large customers which can influence the business based on the timing of their trips.’’
Mortensen also addressed recent events in China, after 18 employees from Australia’s Crown Resorts casino were arrested in the country.
Police were reportedly preparing to charge them with organising gambling activities for mainland nationals overseas.
SkyCity does not have staff in China, but did use independent contractors there, although none of them had been detained in the raids.