2016 08 09 - S&O Agenda - Item 8, Att 2 - AEC Noosa Convention & Performing Arts Centre Pre-feasibility Review

PRE-FEASIBILITY OF CONVENTION AND PERFORMING ARTS CENTRES


Table 5.8: Estimated Profitability – Base Case
    Item                                             Conv. Centre          Perf. Arts   Combined           The J
                                                                             Centre
    Total Operating Revenue                            $1,450,724      $1,030,675       $2,481,399     $466,625
    Total Operating Expenditure                        $2,285,402      $1,880,849       $4,166,251     $925,662
    Earnings Before Interest, Tax and Depreciation      -$834,679          -$850,174    -$1,684,852    -$459,037
    Depreciation                                         $571,429          $428,571     $1,000,000     $274,511
    Earnings Before Interest and Tax                   -$1,406,107    -$1,278,745       -$2,684,852    -$733,548
Source: AEC.

As a direct point of comparison, the Gladstone Entertainment Convention Centre – which includes convention and
performance arts components of a comparable size to that proposed by CCIQ Noosa – the net operating loss is
$2.344 million before depreciation (compared to the $1.7 million above for the combined position) and $3.269
million after depreciation (compared to the $2.7 million above for the combined position).

It should be noted here that financial performance would deteriorate considerably should capital funds need to be
borrowed to finance the project instead of the centres being 100% funded from external sources. Full funding via
borrowings would increase the loss by $1.2 million per annum (representing interest on borrowings) at an assumed
interest rate of 4%.

As outlined earlier, cost recovery of similar facilities – excluding interest costs – is generally in the range of 40% to
67% excluding depreciation and 30% to 50% including depreciation. This pre-feasibility financial assessment
estimates that the cost recovery level (excluding any applicable financing costs) would be:

      63% for the proposed Convention Centre (51% after depreciation).

      55% for the proposed Performing Arts Centre (45% after depreciation).

      60% for the two facilities in aggregate (48% after depreciation).

The modelled outcomes lie within the cost recovery range identified during the benchmarking assessment.

Applying the demand scenario proposed by CCIQ Noosa for the proposed Convention Centre – i.e. 60 conferences
with 450 delegates on average – produces the following financial outcome, after reducing the labour cost
contribution to 20% of expenditure (from 30% of expenditure under the base case above). It should be noted that
the revenue and expenditure figures are driven by the daily fee levied on delegates for catering, etc. CCIQ Noosa’s
proposed demands equate to 67,500 delegate days per annum compared with the 19,500 delegate days within the
adopted base case.

Table 5.9: Estimated Profitability – CCIQ Noosa Convention Centre Demands
    Item                                             Conv. Centre          Perf. Arts   Combined           The J
                                                                             Centre
    Total Operating Revenue                            $4,642,763      $1,030,675       $5,673,438     $466,625
    Total Operating Expenditure                        $5,545,855      $1,880,849       $7,426,704     $925,662
    Earnings Before Interest, Tax and Depreciation      -$903,092          -$850,174    -$1,753,266    -$459,037
    Depreciation                                         $571,429          $428,571     $1,000,000     $274,511
    Earnings Before Interest and Tax                   -$1,474,521    -$1,278,745       -$2,753,266    -$733,548
Source: AEC.


5.7            OTHER CONSIDERATIONS

5.7.1          Business Interruption
Should The J’s site be utilised, there will be business interruption during the construction period both in terms of:

      The construction of the proposed adjacent/adjoining Convention Centre.

      The construction of the Performing Arts Centre given The J would need to essentially shut down during
       construction if the proposed centre is to be an augmented version of the current facility.




                                                                                                                      21