SkyCity Entertainment Ltd. announced that its Darwin casino has suffered a significant revenue decline due to the Northern Territory government’s decision to remove the limit on the gambling machines, which unleashed a great competitive pressure between operators, leading to Darwin’s impairment of goodwill.
SkyCity Entertainment Group is a gaming business, which operates 2 monopoly casinos in Australia, including Adelaide and Darwin. The latter SkyCity-owned gaming facility came under the spotlight after the company declared a goodwill impairment, estimated to be A$95 Million or nearly US$75.4 million.
The company assigned the responsibility for the massive impairment charge to the Northern Territory (NT) government, which decided to remove the restrictions on the number of gambling machines in the area, allowed to operate. The implementation of the policy in July 2015 led to the increase in the number of the gambling machines in the area and to the market oversaturation. This, on the other hand, unleashed a great competition between the operators, fighting for the customers’ attention.
SkyCity explained that the government’s decision came out of the blue and it is the main culprit of Darwin’s current troubles, which suffered a significant decline in the number of customers. Consequently, this affected the company’s income in a negative way and depreciated the company’s goodwill. The amount of amortization is said to be A$95 Million.
The company’s representatives noted that Darwin started to experience a drop in the revenue since the beginning of 2016 and up to now the figures keep on sinking. The current situation of the gambling facility will be accurately estimated when SkyCity releases its financial report, which is to happen most probably on 9th August.
SkyCity also shared its fears that that the goodwill impairment of Darwin will decrease its market value to A$195 million. SkyCity also hinted that the company will launch a business strategy, aiming to maximize Darwin’s value, but the company did not provide any more details. This gave rise to rumours regarding the possible sale of the casino, but there are no proofs of that, as the company preferred to keep its next step in secret.
The future of the SkyCity-owned casino Darwin remains blurred, as the gambling facility suffers a significant financial decline due to policy changes and it is hard to say if the casino will manage to find its feet and stabilize its revenue. The financial impairment significantly reduced the company’s goodwill value, which is now supposed to invest efforts in maximizing the value of the casino property. The real dimension of the damages is yet to become clear with the release of the financial report.
