SkyCity Entertainment Groups first-half profit has taken a hit from Covid-19 as border closures and restrictions to control the pandemic hindered trading at its casinos.
Net profit fell 76 per cent to $78.4 million in the six months to December 31, the company said on Thursday. Revenue fell 38 per cent to $449.9m. The figures are distorted by insurance the company expects to receive for a 2019 fire at its convention centre, and a settlement with Fletcher Building.
The gambling and entertainment company has had to turn its focus to domestic customers after borders were closed to control the pandemic. That dried up funds from lucrative high-rollers and tourists prompting SkyCity to downsize its business, cutting 1000 jobs. Chief executive Michael Ahearne said on Thursday that although the outlook remains uncertain, it has re-hired 150 workers.
SkyCity said its local gaming operations continue to perform well when open, particularly pokie machines, however its tourism-related businesses were significantly impacted by operating restrictions and international border closures. It closed its Auckland casino and entertainment facilities this week when the city moved to Alert Level 3 following three new cases of Covid-19 in the community.
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Its been a pretty tough period, as you can imagine for them, and this week highlights again how fluid the trading backdrop is, said Chelsea Leadbetter, a senior analyst at Forsyth Barr.
But by and large when they have been back open, the business has been performing pretty well. Youd have to say there has been strong execution from the company through the period.
SkyCity had to close its Auckland property for 19 days during the first-half, which cost it about $20m of operating profits.
The companys flagship Auckland business, which generates the bulk of its profits, reported a 25 per cent drop in revenue to $230.8m, with operating earnings down 31 per cent to $94.9m.
SkyCity said its Auckland property was closed for 19 days during the period, which shaved about $20m off operating profits, and had a further 37 days at Alert Level 2 restrictions. While the non-gaming businesses were significantly impacted by Covid-19 disruptions, pokie machine revenue was 95 per cent of the year earlier period after adjusting for the period the casino was closed.
By contrast, profits at the companys Hamilton business lifted 22 per cent to $18.1m, and Queenstown rose 51 per cent to $2.2m. The New Zealand businesses benefited from $10m of wage subsidy payments during the period.
In Australia, SkyCitys refurbished Adelaide casino lifted revenue 16 per cent to A$89.5m (NZ$96.5m), and operating profit by 96 per cent to A$25.2m, helped by about A$13m of Australian government JobKeeper payments.
The Adelaide casino performed strongly in December, following its expansion, although prior to that its operations were impacted by Covid-19 and construction disruption, SkyCity said.
Revenue from its fledgling online gaming business, whose activities werent curbed by the pandemic, jumped to $7.5m from $187,000. The company is looking at how it can better integrate its land-based and online businesses.
In the first half, SkyCity recognised $39.5m of payments that it withheld from Fletcher Building after the construction company failed to meet agreed milestones for the convention centre and Horizon hotel developments.
SkyCity has increased by about $67m the amount it expects to get back from insurance for a fire at the convention centre in October 2019. In the year earlier period it recognised $241m of expected insurance income. It expects ro recover $342m in insurance from the damage to the hotel and convention centre, and estimates it lost a further $117.9m which it is seeking to recover.
The casino operator named Shell Australias Julie Amey as its new chief financial officer. She replaces Rob Hamilton, whose resignation was announced in November along with former chief executive Graeme Stephens and chief marketing officer Liz McNally. The company said chief executive retirement cost it $3.5m in the first half.
SkyCity said it expects to pay a dividend at the full-year. The company had forewarned that it wouldnt pay a dividend for the first half, after nixing its final payment at the end of last year to preserve cash.
The company expects to give an update on its profit expectations for the full year in early May.
Shares in SkyCity rose 1.4 per cent to $2.91 in mid-afternoon trading on Thursday. The shares have dropped 19 per cent over the past year.
