SkyCity reduces FY2020 guidance on Adelaide impairment
New Zealand casino operator SkyCity Entertainment Group has revised its earnings forecasts for its fiscal year to 30 June, factoring in a higher than expected insurance payout and an NZ$161m (£79.6m/€88.4m/US$104.7m) impairment to the value of its casino in Adelaide, Australia.
SkyCity said that its normalised earnings before interest, tax, deprecation and amortisation – adjusted to remove exceptional items to give an indication of a business’ underlying performance – and profit would now beat its earlier projections.
This, SkyCity explained, was due to higher estimates for an insurance payout due to the business following a fire at the New Zealand International Convention Centre and Horizon Hotel in October 2019. The venue was under construction at the time, and is an extension of the existing SkyCity complex.
The insurance payout means normalised EBITDA is expected to come in between $199m and $202m, above its initial guidance of between $185m and $205m. Normalised net profit after tax, meanwhile, is now projected in the range of $65m and $67m, compared to a prior estimate of $52m and $67m.
However, reported earnings will be offset by a $161m impairment charge of SkyCity’s Adelaide Casino’s book value. This will be made against the intangible asset value of the venue’s casino licence.
The operator explained that it had written down the value of the licence due to the time it will take to achieve its long-term potential earnings, which have been reduced by a project to expand the property. This was then exacerbated by the ongoing impact of novel coronavirus (Covid-19), which shuttered the venue until 30 June.
As such, reported EBITDA – including exceptional items – will fall in the range of $346m to $349m for the year to 30 June, down from the original estimate of between $440m to $480m.
Reported net profit after tax is expected to come in between $234m and $236m, down from $330m and $360m.
The exact value of the impairment remains subject further review by SkyCity’s board of directors and its auditor.
The operator will release its financial results for the year on 3 September.
Its flagship Auckland property is once again closed, from 12 August, following the enforcement of a local lockdown in the city. Earlier this week it said the property will remain closed to visitors until 26 August.
Its venues in Hamilton and Queenstown remain open, though with Alert Level 2 in place, will be limited to a maximum of 100 patrons.