SkyCity says NZ lockdown is costing it about $1m in profit a day

Wednesday, 25 August 2021

The closure of its casinos during lockdown is hurting SkyCity.

SkyCity Entertainment says the closure of its casinos, bars, cafes, restaurants and partial closure of hotel operations under level 4 is costing it about $1 million a day in profits.

The company, which operates casino and hospitality businesses in Auckland, Hamilton and Queenstown, said in presentation notes released to the NZX with its annual profit result that the closure of its New Zealand properties from August 17 was impacting its earnings before interest, tax, depreciation and amortisation by around $1m a day.

Since the start of the current financial year on July 1, SkyCity’s New Zealand businesses had been performing consistently with the final quarter of last year, as its pokie machine business remained resilient, and its other businesses benefited from strong domestic tourism and weekend and holiday trading peaks. That is until they were closed when the country moved to level 4 lockdown last week.

Conversely, its online casino business based in Malta had benefited from lockdown, with an uplift in customer activity from August 17, achieving record weekly turnover and gaming revenue. The online casino business has 45,000 active customers spread across the country.

The online casino, which SkyCity launched in August 2019, contributed $9.1m in pre-tax profits and revenue of $13.1m in the 2021 financial year.

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SkyCity said it was unable to provide profit guidance for the current financial year due to the changeable operating settings and uncertain near-term outlook due to Covid-19.

The local gaming businesses in New Zealand were expected to perform well when they were open with no operating restrictions, particularly the pokie machines. It expected a consistent performance from its online casino, which benefited from alert level escalation.

However it said its tourism-related businesses would continue to be negatively impacted by international border closures.

The company said it had a strong balance sheet and financial flexibility, and noted it had adequate liquidity to fund its commitments and withstand one-off events and Covid-19 disruptions.

SkyCity was paid $10.2m through the government’s Covid-19 wage subsidy scheme over the past year, and despite having met all the respective eligibility criteria, the board resolved to make a voluntary payment of $6.7m on July 27, due to its improved financial performance during the year.

The company intends to also repay $3.3m of its $16.6m JobKeeper grant back to the Australian government in September.

SkyCity didn’t pay a first-half dividend to preserve cash, but will pay shareholders a final dividend of 7 cents a share, at a cost of $53.2m. It paid a 10 cent dividend in 2020.

In the year to June 30, SkyCity reported a net profit of $156.1m, down 34 per cent from the previous year.

The results were impacted by a fire at its convention centre construction project in October 2019, and the sale of an Auckland car park concession.

Excluding unusual items such as these, the company said normalised profit rose 37 per cent to $90.3m.

SkyCity’s flagship Auckland business was closed for 29 days and its Adelaide casino for 3.5 days during the past year, while its Queenstown Wharf casino has been closed since March last year due to its dependence on international tourism which was hit by border closures.

Shares in SkyCity were up 4.5 per cent to $3.24 in mid-afternoon trading on the NZX.