THE Scottish Exhibition and Conference Centre (SECC) achieved an underlying trading profit of about £350,000 in its last financial year – more than double what it expected in a "difficult economic climate" – and chiefs view the outlook as extremely promising.
The trading profit achieved in the year to March 31 was down from £628,000 in 2010/11, but it was about £200,000 better than anticipated because its concert and events business was ahead of budget. Exhibition business was weaker than expected.
SECC chief executive John Sharkey highlighted "better-than-anticipated business plan projections" for The Hydro, the new arena which is under construction and due to open in September 2013.
He cited these improved projections as the reason why a planned impairment charge taken in 2011/12 in respect of The Hydro's value was £4 million less than had been envisaged, at £36.1m. The Hydro now has a projected net carrying value in the books of £46m.
The plan is the impairment charge relating to The Hydro will be offset by receipts from the eventual disposal of land at the west end of the SECC site which is earmarked for residential development.
SECC noted it had recognised a gain of more than £6m in the year to March 31 from the development of a 1600-space car park adjacent to The Hydro, which has been sold forward to Canada Life.
Mr Sharkey highlighted a healthy calendar of dates for concerts and events at The Hydro.
He said the SECC made earnings before interest, tax, depreciation and amortisation (EBITDA) of £1.7m in the year to March, "in line with the previous year".
He expected a rise in earnings on this basis to nearly £2m in the current financial year to next March, an increase to nearly £3m in 2013/14, and EBITDA of about £6m for 2014/15, the first full financial year of operation of The Hydro.
The SECC is owned and operated by SEC Ltd, a private Scottish company. The shareholding in SEC Ltd is 90.86%-owned by Glasgow City Council, with private institutions such as banks, pension funds and insurance companies holding the other 9.14%.
Mr Sharkey highlighted a bridging finance arrangement through a £40m sale-and-leaseback deal with the city council in the spring to cover the cost of The Hydro development and ensure the SECC is not forced into a fire sale of the near-20-acre development area at the west of the site which is earmarked for about 1000 homes. This sale-and-leaseback deal covers about 44 acres of the SECC site, but excludes the area earmarked for development and disposal.
The SECC said yesterday it had attracted annual commercial sponsorship revenues for The Hydro of £2.6m – more than eight times the original target of £300,000. Partnerships have been finalised with naming rights sponsor and Scottish Hydro-Electric owner SSE and soft drinks giant Coca-Cola.
The SECC said a "significant number of other sector deals" had been agreed and were in the course of contract completion, citing beer pouring rights, consumer electronics, salted snacks, public transport, banking, security and information and communications technology. These deals are included in the £2.6m per annum figure.
Mr Sharkey highlighted potential for further sponsorship revenues, and scope to generate between £1m and £1.6m-a-year of revenues from hospitality at events at The Hydro.
He said forward bookings in SECC's key conference business were healthy and business opportunities from enhanced capacity in existing SECC halls look set to be captured.
He plans to attract more international trade exhibitions when capacity in SECC halls is freed up with the opening of The Hydro and the staging of most concerts in this 12,000-seat arena.
In the year to March, the SECC hosted Arctic Monkeys, Coldplay, Elton John, Katy Perry, Rihanna and Westlife.
Mr Sharkey said of the 2011/12 figures: "These are encouraging results when you consider the fine balancing act of running a trading business, while building a new arena.
"I am pleased to report that our original impairment estimation has been significantly reduced and this is largely as a result of better than anticipated business plan projections for The Hydro."
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