Skycity Updates Fiscal Year Guidance Due To Adelaide Impairment

SkyCity Entertainment Group has revised and updated its fiscal year guidance criteria to June 30, with an adjustment to projections due to higher premium rates and a AU$150 m loss of the book value of Adelaide Casino.

The company based in Auckland says that consolidated earnings results for FY20 are projected to stay within the previous guidance ranges and be at the upper end of them.

The group says that this is due to higher than previous guidance as a result of higher compensation proceeds figures for damage and re-establishment costs for the New Zealand International Convention Center and Horizon Hotel.

In October 2019 a blaze exploded at the New Zealand International Convention Center under construction of the business NZ$703 m (US$ 445 m), whose completion was originally pencilled in for 2020 but was subsequently postponed.

As a result, SkyCity was forced to evacuate its wider area, including the casino, SkyTower, hotels, parking, restaurants and corporate offices of the company.

Thereafter, the EBITDA is forecast to fall through the $199m-$202 m range, exceeding its previous estimate of $185m-$205 m, with net income adjusted from $52m-$67 m to $65m-$67 m.

Offsetting this rise in the company’s estimated profits, SkyCity is planning to accept a book value loss of AU$150 m (NZ$161 m) for Adelaide Casino.

Documenting the Adelaide casino book value loss, SkyCity has explained: “SkyCity has now completed its annual impairment review and proposes to recognise in its FY20 financial statements an impairment of Adelaide Casino’s book value of AU$150m (NZ$161m). This impairment will be made against the AU$283 million intangible asset value of Adelaide Casino’s casino licence.

“The proposed impairment has arisen due to revised expectations regarding the time frame for Adelaide Casino to achieve its long-term potential earnings following completion of the expansion project.

“The reduced earnings outlook for Adelaide Casino has been exacerbated in the short-to-medium term by the recent and expected ongoing impacts of COVID-19, including an expectation that international business activity may take some years to recover.”

This means that the EBITDA has been changed from $440m-$480 m to $346m-$349 m, with net income now forecast to hit $234m-$236 m as compared to $330m-$360 m in previous guidance.

The plan to reduce the book value of Adelaide Casino is also subject to further scrutiny by the board of directors and auditor at SkyCity.