SkyCity Adelaide’s expansion windfall, valuation take a hit
The earnings windfall from SkyCity Adelaide’s $330m expansion will take longer to come, says its NZ parent, who has slashed the value of the Adelaide casino licence by half.
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The “recent and expected ongoing impacts” of COVID-19 have pushed out expectations of an earnings windfall from SkyCity Adelaide’s $330m expansion.
NZ-based SkyCity Entertainment Group told investors it was slashing the value of the Adelaide Casino licence by $150m.
The licence was valued at $283m at the end of June, the same week SkyCity Adelaide reopened its doors and reinstated 950 jobs following three months of lockdown.
“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 company told investors.
“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.”
The business warned the valuation would remain subject to further reviews.
SkyCity Adelaide general manager David Christian said the local team remained confident of growth in earnings as they prepared for the opening of the new Eos by SkyCity hotel later this year.
About 700 new workers will be needed just for the hotel’s four restaurants and two bars.
“Our expansion is on track and we are hiring a large number of people – more than anyone else right now,” Mr Christian said.
“The earnings boost we expected will come, but over a longer term due to COVID, but the management in NZ and we in SA remain bullish about the prospects of the facility,” he said.
The non-cash impairment was first flagged when SkyCity – owner of casinos and hotels in Adelaide, Queensland, Hamilton and Auckland and dual-listed in Australia and New Zealand – tapped investors to raise NZ$230m to shore up its balance sheet.
The group has taken a massive hit from closures to stem the spread of the virus and its Auckland casino closed again in recent weeks following new cases of coronavirus in NZ.
Late last year, an accidental fire destroyed most of its nearly-complete $700m convention centre and hotel project in Auckland, NZ.
The insurance proceeds from that fire will contribute to its expected full year net profit of between NZ$65 million and NZ$67 million.
SkyCity Entertainment will release full year results on September 3.