3 Sep 2020

SkyCity reports 60% drop in normalised profit

2:08 pm on 3 September 2020

Casino operator SkyCity has reported a 60 percent drop in its normalised profit.

Sky City logo

Photo: RNZ / Claire Eastham-Farrelly

SkyCity says it has been a challenging year due to the New Zealand Convention fire and Covid-19, with significant operational and financial impacts.

Profits were boosted by a $337 million insurance payout for the Convention Centre fire in October, and asset sales.

Reported net profit was $235m for the year ended June, which also included a $66.4m gain from the sale of its Auckland car park concession in August last year.

However its normalised profit, which removed those one off gains, was 60 percent less than last year, at $66.3 million.

Its earnings, excluding interest, tax and other adjustments were down almost 40 percent, to $201m after they were significantly disrupted by the fire and the Covid-19 restrictions.

The company also wrote down the value of its Adelaide casino by $161m.

Chair Rob Campbell has told investors the 2020 financial year has been "a tough one".

He said Covid-19 halted business across all locations.

The delay in completing the New Zealand International Convention Centre was "deeply exacerbated" by the fire late last year, he said.

"SkyCity can operate under current trading conditions, but at present we do not have an operating model which can optimise the business to previous levels without a recovery in the economy and international tourism," he said.

Chief executive Graeme Stephens said despite the tough year, it has a strong balance sheet and could cope if more lockdowns were imposed.

"A wide range of strategic decisions and actions have had to be taken to mitigate the impacts of, first, the fire and then the impacts of Covid-19.

He cited a cut in the New Zealand workforce by around 25 percent, a capital raising and debt restructure and "significant operational effort has been focused on closing and reopening our properties with rigorous health and safety measures in place."

He said the wage subsidy schemes in New Zealand and Australia partially mitigated the impact of the pandemic.

SkyCity received $31.1m from the government's wage subsidy and subsidy extension scheme.

In June it raised $230m through a share issue to strengthen its balance sheet and increase liquidity in response to the uncertainty caused by the pandemic.

It also extended its bank facilities of $170m, took on new debt of $160m and secured covenant waivers and relief from its existing lenders.

Stephens said domestic business in both countries had recovered more quickly than anticipated, but the outlook remained uncertain.

"The other aspects of our business that are more reliant on international visitors - including VIP gaming, hotels and restaurants - can only fully recover when country borders reopen. Our international business activities should recover once travel restrictions are lifted, but the parts of our business driven by corporate travel and by tourism, such as our hotels and the Sky Tower will take longer."

He said the recent Auckland lockdown cost the company more than $30m in lost revenue, however since the first lockdown while there were fewer visitors, they spent more. He also expected the online casino operation, which is based in Malta for legal reasons, to become a more significant revenue earner.

The company does not expect to lay off any more staff, after making about 1000 redundant over April and May.