SkyCity committed to dividends

SkyCity Entertainment Group, New Zealand’s only listed casino company, is looking to free up cash from its existing assets during a period of heavy investment while it commits to protecting dividend payouts.

The Auckland-based company is investing A$330 million in the redevelopment of its underperforming Adelaide casino, $703m in a convention centre and Hobson St hotel in Auckland, and has committed to buy the neighbouring AA Centre for $47m and flagged the potential for further development in accommodation, food and beverage, new gaming spaces and entertainment. It’s also considering enhancement at its Hamilton casino and is investing in IT to upgrade aging infrastructure and allow for future growth. However while it has upped its spending, the company doesn’t want to lower its dividend levels to divert funds to reinvestment. It has a policy to pay out 80 per cent of net profit after tax adjusted for capitalised interest, subject to a minimum 20 cents per share per annum.

SkyCity expects its total debt to peak at around $1 billion in 2020, with $1.06b of debt facilities due to mature between 2020 and 2028. It’s committed to keeping its debt at the level needed to retain its BBB- credit rating with Standard & Poor’s.

The company earlier decided against selling its Hobson St hotel after failing to attract high enough bids but in an investor presentation yesterday detailed other ways of releasing cash to fund future growth, saying it is moving to an “assetlighter” approach to monetise selected property assets, divest non-core businesses and co-invest in new developments with suitable partners, with the aim of improving returns and allocating capital more efficiently.

It also announced plans to pay its New Zealand-based staff at least $20 an hour by 2020, increasing the pay of 1750 of its 4000 local staff.

SkyCity shares closed down 1.3 per cent to $3.85. — BusinessDesk