SkyCity comfortable with Fletcher delay on convention centre

SkyCity says it's comfortable with the "slight delay" from Fletcher Building in completing its $470 million convention centre, announced today as Fletcher's share price has plunged following a profit downgrade and immediate departure of its chief executive.

The New Zealand stock exchange said it will be investigating Fletcher Building's additional profit warning for the year ended June 30, and the departure of chief executive and managing director Mark Adamson, in addition to its ongoing investigation into the disclosure of Fletcher's previous earnings downgrade in March 2017.

Fletcher has slashed its full-year earnings guidance because of problems with two major construction projects. Today it said losses at those projects, which it refuses to identify but which are widely understood to be SkyCity's Auckland convention centre and the Justice and Emergency precinct in Christchurch, would be larger than expected and also announced a $220 million impairment against its Iplex Australia and Tradelink business units.

In a statement, SkyCity said Fletcher had provided an update on the convention centre, with it and the Hobson Street hotel now due to be completed around the middle of 2019.

"SkyCity remains comfortable with the contractual arrangements we have with Fletcher Construction and the project remains on-budget," the company said. "This slight delay will not impact on any of the NZICC's confirmed bookings to date."

When Fletcher won the contract in October 2015, construction was predicted to start in late December that year and last 38 months, meaning the centre would have been delivered in February 2019. The 33,000 square metre facility will be the largest purpose-built convention centre in the country.

Fletcher today said operating earnings in the year ended June 30 were about $525 million, down from $682 million in 2016 and below the $610 million-to-$650 million range the company gave in March, when its slashed earlier guidance by about 15 percent. The shares dropped as low as $7.38 after the news was announced this morning, and recently traded at $7.74, down 4.3 percent.

(BusinessDesk)