Reef Casino: bleached by night?

Despite the recent flow of positive tourism news Reef Casino seems to have turned in a weaker first half going by the recent distribution announcement: Reef Casino Trust profits in Cairns falls by $700,000. The ‘reef by night’ slogan may have missed its target on these numbers.

With another week’s trading before the end of the first half financial year, our current estimate of the distributable profit* for the six months ended 30 June 2016 is approximately $5.7 million.   This compares well with the average of the previous 4 first-half years (2012 – 2015) of $4.9 million. In 2015, it was $6.4 million.

I’m not sure that 4 year average comparison works for me as previous years, not inclusive of 2016, also include the additional one-off costs of the collapsed takeover and weaker trading periods, particularly back in 2012 when the upper level was closed throughout the first half for refurbishment. The most recent update on trading was at the AGM in May:

Overall, our performance for the first 4 months is within our expectation for trading during this time of the year.  Table games grind revenue and hotel revenues, especially room revenues are higher than last year.  Electronic gaming revenues were slightly lower compared to 2015 which set new records as I had earlier mentioned.  Premium revenue is lower compared to the same period last year due to a lower premium play win rate however it is not unusual for premium play win rates to fluctuate in the short term.

Reef is the only listed Casino operator which doesn’t provide ‘normalised’ profit results with accounts adjusted for theoretical premium win rate. I did query Alan Tan on this at last years AGM and it was indicated that this wasn’t considered a large enough component of the Reef business to be material.

I will await release of full half yearly results to dig out and update my old analysis files from the Aquis takeover. Updated chart:

ReefNote: 2014 results adjusted for one-off costs related to Aquis takeover and a high roller bad debt. 2016 1H is in line with the average of the most recent 4 years (2013-2016).

Advertisements

Employment data on Cape York

A further look at the Cape York employment data following previous post on Aurukun. There was reform to indigenous employment schemes for remote communities from July 2015 with the implementation of the Community Development Program (CDP). This would correlate with the trend change in the Small Area Labour Market (SALM) data from that date.

The SALM explanatory notes do seem to indicate that some account is taken for this in the Centrelink data applied in the methodology. The increased unemployment rate in the SALM data for Aurukun is derived from both an increase in the number unemployed and a fall in the labour force size.

However the SALM methodology is also intended to be consistent with and also derived from the ABS Labour Force Survey for the SA4 region. The SA4 data for Outback follows the same clear trend from July 2015. This is Outback SA4 with a 12 month moving average and also  the Conus Trend (blue):

Outback1

Again the trend break in July 2015 is significant across all factors reported by ABS (unemployed, labour  force, participation, etc.) contributing to the increased unemployment rate. The 12 month average just like the 4 quarter SALM data tends to  smooth what was a sharp break from July 2015. It isn’t clear to me why the labour force survey results for the entire SA4 region should be influenced so significantly by any CDP changes.

As suggested previously the Outback SA4 region is statistically difficult with a relatively low population (and sample size) covering a vast geography from Torres Strait to Birdsville with not much economic connection between those. It is also possible that much of what we are seeing in the trend reflects issues in the labour force sample for Outback.

The ABS sample rolls over eight months with only an eighth of the sample rolling in and out for successive months. The recent period has seen some extraordinary volatility even for Outback. In the recent March quarter of the SALM data the raw ABS unemployment rate for Outback SA4 has varied between 1.5% and 19.0% in successive months. Which is of course nonsense.

When the SALM methodology is applied to all the SA2 areas in Outback SA4 the unemployment rates look like this.

Outback2

I don’t know. It may be worth a query to ABS and Dep’t of Employment.

SALM and unemloyment in Aurukun

I intend to add a specific page on the Small Areas Labour Market data as I get back to building this website. Meanwhile there is a current post on this at Conus to which I have contributed some comments on the most recently updated SALM data: Small Area Labour Market data confirms the weaker NQ picture; Townsville losing work force

However I have looked initially at some of the data for the statistically difficult Outback region which stretches all the  way from Birdsville to Cape York and found this:

SALM1

The SALM quarterly data is smoothed as a 4 quarter moving average. No, not naive. I know there can be difficulties around employment statistics in indigenous communities. Was there some change in employment programs last year or some other factor?

 

Airport data updated to May

Now hopefully recovering from some debilitating technical frustrations so can update two months of data up to May for Cairns Airport.

May is a seasonally quieter month but domestic growth remains robust at 6% with previous indications from the airport also of capacity growth around that in coming months. International growth pulled back into single digits at 9.5% but that is probably to be expected as previous exceptional growth was off a very low base which is now working through the numbers.

The airport commentary this month has also provided an estimate using passenger surveys, the international visitor survey, and immigration data of all airport passenger numbers, both domestic and international services, by nationality.

Home Country Passengers: Australia 3,340,000 China 430,000 Europe 420,000 North America 270,000 Japan 210,000 Korea/Taiwan/Hong Kong 95,000 New Zealand 80,000 India 50,000 Papua New Guinea 35,000 South East Asia with Singapore 30,000 Rest of World 40,000 Total 5,000,000

I think I would prefer to see Korea grouped with Japan in that as a more closely related market with similar trends.

Comparative airport data from BITRE has also been updated to March. Standout for the month is high growth at  the tourism destinations (Cairns, Gold Coast, Sunshine Coast) with seasonal factors contributing around Easter. Also good international growth numbers at Sydney and Melbourne the two largest gateways.

Graphs and details updated at Cairns Airport.

More on percentages and percentage points

This: Immigration and wages: getting the numbers right

Is immigration from the EU pushing down the wages of British workers, especially the low paid? This has become a central theme for the Leave campaign. The Sun reported:

“Open-door immigration knocks 10% of UK wages, claims Iain Duncan Smith…He quoted a Bank of England report that found wages fall by 2% for every 10% increase in immigration.  Calling for voters to back Leave on June 23, Mr Duncan Smith said: “We have seen a 50% rise in immigration, which means around a 10% fall in wages.”

Boris Johnson and Gisela Stuart, not coincidentally, repeated this claim in their ITV debate

“There is a 10% growth in immigration and a 2% reduction in wages and that bears thinking about”

The problem is that Mr Duncan Smith’s arithmetic is simply wrong, by a factor of at perhaps 25. It’s true that net migration has risen by about 50% over the last two years. But that’s not the right number to look at. The Bank of England paper he quotes is talking not about the immigration rate, but the number of immigrants as a proportion of the workforce – percentage points, not %.

And how much has that risen over the same period? Not by 50 percentage points.  Or even 10 percentage points. But by about 2 percentage points. The implied impact on wages, then, wouldn’t be a fall of 10%, but rather of about 0.4%. Actually, it would be considerably lower than this, since the numbers from the Bank report refer only to wages in one sector (semi/low skilled service workers),  not for all workers

percentage_pointsSource: XKCD

Dransfield Hotel Futures

2016 Dransfield Hotel Futures report was recently released. As always it’s difficult to know how much credibility to give to reports of this kind and haven’t delved into the detail. It does though include a good deal of information and commentary on the Cairns & Port Douglas hotel accommodation market.

We know tourism numbers have been positive recently so rather than demand the comments on supply are what matter more:

Supply Forecasts • Supply forecasts to FY2023 represent a small absolute downgrade, with delays appearing as Market Response hasn’t occurred • Dransfield’s supply forecast is for 1,550 new rooms to enter the market over the next 9 years (20% of current stock) at an average annual growth rate of a low 2.0%
– We expect the low level of anticipated supply to be fully absorbed over the life of the forecast, and for the development trigger (70% + Occupancy) to switch on towards the middle of the forecast
– The potential large scale Aquis project will also inhibit developers from undertaking scoping exercises until more certainty is reached • Supply growth in the medium term to FY2018 is expected to average a low 0.3% growth p.a (just 79 rooms)
– Proposal activity has slowly started to recommence as market performance improves and occupancies edge towards 70%. At this stage most proposal activity appears in its infancy
– The tiered nature of the market, with large and branded properties substantially outperforming smaller independents may cause some of these smaller properties to fall out of the market as new supply comes online increasing the competitive environment

Is Townsville water mispriced?

Bill and Mal. Mal and Bill. Have been competing over funding for the Townsville water supply. This is interesting because the current Townsville web page on water supplies says this:

Townsville residents use over four times more water per person than in most major cities

The average Townsville household uses 1,700 litres of water per day, while in Brisbane, Sydney and Melbourne households use around 210 to 285 litres per day

More than 70% of Townsville’s water supply is currently being used on residential lawns and gardens

On those numbers the “average” Townsville household also uses just more that three times the “typical” Cairns household indicated on the Cairns Council website.

At the same time a Townsville household can be supplied with a fixed quantity three times the typical Cairns household at a rate more than 10% lower per KL. Water costs in SEQ are substantially higher again by significant multiples.

It is not at all clear to me why the rest of Australia appear to be required to fund the costs of inappropriate water pricing policy in Townsville? Perhaps I have missed something?

This should not be interpreted as a criticism of Cairns water pricing. Also it is wise to remove water pricing in any relevant comparison of council rates.

Update: Gene Tunny has previously posted on this at Queensland Economy Watch: Unsurprising Townsville running out of water when Council is charging so little for it