SkyCity Entertainment Group interim result shows $33.7m net loss

Cranes lift Auckland’s SkyCity convention center pedestrian air bridge into place. video / supplies

Pandemic-hit SkyCity Entertainment Group has reported a loss for its latest half-year of $33.7 million, down 143 per cent on the previous corresponding profit of $77.9m.

Revenue fell 35 per cent from $449.9m to $289.8m, the business citing Covid disruptions and the material impact that has had on how it performed.

Construction of its $700m-plus NZ International Convention Center and new Horizon Hotel in Auckland’s center “remains complex but is progressing well” and the company is working closely with Fletcher Construction, it said.

The business, which employs 4000 people, has just released the result for the six months to December 31, 2021 declaring no interim dividend for shareholders.

Michael Ahearne, SkyCity chief executive, has previously said that for every day Auckland is shut, the company loses around $1m revenue.

Today, Ahearne said: “Covid has continued to extensively impact the business and operations at each of SkyCity’s properties in the first half of the financial year.
Government-mandated lockdowns resulted in the closure of SkyCity Auckland for 107 days, SkyCity Hamilton for 65 days, SkyCity Queenstown for 22 days and SkyCity Adelaide for eight days. When permitted to reopen, the properties have operated under significant constraints due to restrictions on mass gatherings and physical distancing requirements.

“What we have observed is that our New Zealand domestic gaming business demonstrates resilience and is quick to rebound when operating without restrictions.

Michael Ahearne of SkyCity announced today's interim result.  Photo / Michael Craig HBG
Michael Ahearne of SkyCity announced today’s interim result. Photo / Michael Craig HBG

“SkyCity Adelaide operated with significant capacity limits, CBD disruptions and workforce disruptions due to Covid. Performance is expected to improve as restrictions are relaxed, interstate borders progressively open and international tourists are welcomed back to Australia,” he said.

The company is looking towards the end of this month, citing the Government announcing a staged reopening of our borders from the end of February. People from Australia, Britain, the United States, Singapore, Japan and Korea might be able to travel here again from July if they are vaccinated, the business noted.

“When we’re open and operating normally, last July and August the gaming business [was] performing well. However, tourism-related businesses are impacted by the border closure,” Ahearne told the Herald today.

Online gaming had resulted in 10,000 customers per week which is a positive feature of the trading period, he said.

VIP in Auckland is all ready, but where are those VIPs?  Photo / supplied
VIP in Auckland is all ready, but where are those VIPs? Photo / supplied

New Zealand hotel mid-week occupancy was around 20 per cent but weekends could be as high as 60 per cent, he said.

In Adelaide, the hotel was 50 to 60 per cent occupied, Ahearne said.

Ahearne said he supported the Government’s vaccination mandate “but we’re a business that is significantly impacted – probably one of the most impacted – by restrictions.

“We are managing through a tricky time. We look forward to an environment getting through this period of Omicron quickly and reopening activity levels. I think the Government has had tricky decisions to make. We back the Government on the vaccine policy. But we’ re also looking forward to seeing the economic recovery and the CBD recovery. The next month to two months is really important”.

Adrian Allbon analyzed today's result.  Photo / supplied
Adrian Allbon analyzed today’s result. Photo / supplied

Adrian Allbon, Jarden equity research director, said today’s outcome was anticipated.

“Overall, the result was broadly consistent with our expectations and heavily impacted by Covid-19 restrictions. 1H ebitda beat provides welcome 2H buffer compared to existing forecast for balance sheet with Omicron disruption still ahead. Our positive investment case remains value-based and medium -term outlook from SkyCity highlights potential earnings leverage once Covid-19 restrictions ease,” he said.

While it was academic, Auckland and online gaming were stronger than expected, partly offset by weaker contributions from Hamilton and Adelaide, Allbon wrote.

On major capital expenditure projects, there were no material changes to previous guidance with the company spending around $750m on the NZICC, he said.

SkyTower, SkyCity - one second left to walk.  Photo / Alex Robertson
SkyTower, SkyCity – one second left to walk. Photo / Alex Robertson

“Operationally, management [note the] project remains complex, reinstatement progressing but slower than expected,” Allbon said.

On the outlook, no formal earnings guidance was provided, as expected, he noted.

Logical operating comments were made with corporate costs down materially compared to the last guidance and the previous corresponding period.

“Suspect the latter reflects a natural tightening of the belt and no management bonuses. Our FY22 ebitda is currently $115m, implying 2H $79m,” Allbon wrote today.

He and fellow analyst Jason Cao released an in-depth analysis of the outlook for the company this month.

On December 23, the company said it had done a deal with Europe’s Gaming Innovation Group, providing €25m (NZ$42.8m) of new equity to help fund the purchase of France-Pari/Sportnco.

Shares were trading last week around $3.01, down from $3.77 in early 2020 before the pandemic’s restrictions. That trading price gives a market cap of around $2.2b.


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