SkyCity reports $22M loss in H2 amid pandemic uncertainty; online casino exceeds expectations

New Zealand-based gambling firm SkyCity Entertainment Group has shared interim results for FY22. For the six months to December 31, 2021, the company experienced “another challenging period” in which financial performance was impacted by significant COVID-19 disruption, in particular in Auckland, where SkyCity Auckland was closed for 107 days.

Even though the New Zealand domestic gaming business performed well once allowed to open without restrictions, SkyCity says the tourism-related businesses continued to be negatively impacted by international border closures. As a result, the company, which operates five casino properties in New Zealand and Australia, experienced losses for the first half of FY22.

The group has reported a loss of NZ$33.7 million ($22.3 million), down 143% from a profit of NZ$77.9 million ($51.6 million) in the prior corresponding period. Revenue also fell 35% from NZ$449.9 million ($298.2 million) to NZ$289.8 million ($192.1 million) during the first half of FY22.

SkyCity has announced its FY22 Half Year Result – read more here - https://t.co/r9t2PPxgdB pic.twitter.com/8M1MGqUvdH

— SkyCity (@SkyCityGroup) February 13, 2022

“COVID-19 has continued to extensively impact the business and operations at each of SkyCity’s properties in the first half of the financial year,” said CEO Michael Ahearne. “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 8 days.”

Normalized profit after tax (NPAT) was down 145.3%, and normalized EBITDA was down 69.2%. Reported EBITDA faced an 86.4% drop, and reported NPAT was down 143.3%. This resulted from performance being impacted by pandemic-related disruptions faced during the period, although local gaming activity once fully operational, and online casino, “performed well.”

“What we have observed is that our New Zealand domestic gaming business demonstrates resilience and is quick to rebound when operating without restrictions,” added Ahearne in his assessment. “SkyCity Adelaide operated with significant capacity limits, CBD disruptions and workforce disruptions due to COVID-19. Performance is expected to improve as restrictions are relaxed, interstate borders progressively open and international tourists are welcomed back to Australia.”

SkyCity Adelaide.

The company also issued an update on the New Zealand International Convention Centre (NZICC) and Horizon Hotel project in Auckland, which was materially affected by a fire that broke out on October 22, 2019. While the project remains “complex,” progress is “being made” and SkyCity is working closely with Fletcher Construction on completion. The Horizon Hotel is currently expected to be completed during 2024 and the NZICC during 2025.

Positive progress has also been made on enhancing the Group-wide AML program, including senior AML appointments, the company claims, while the balance sheet is “well-positioned” to manage near-term challenges from COVID-19 with “a good level of liquidity.”

“We’ve enacted a flexible operating model across the group, adjusting when necessary to prepare for COVID-19 disruptions, and we’ve mandated vaccination certificates across all our properties in order to keep our staff and customers safe (from 1 December 2021 in New Zealand and from 10 February 2022 in Adelaide),” the operator said.

SkyCity Entertainment Group Chief Executive Officer Michael Ahearne has announced that COVID-19 Vaccination Certificates (CVC) will soon be a requirement for entry to all SkyCity sites across New Zealand. Click here for more information - https://t.co/1MSJrv9Lhv pic.twitter.com/XsiEnWe9fK

— SkyCity (@SkyCityGroup) October 29, 2021

The business lists the performance of its SkyCity Online Casino as a “highlight for the period,” exceeding expectations and delivering significant growth in revenue, EBITDA and customer numbers. The product was launched offshore in August 2019, and the company has seen “a significant correlation” between iGaming and lockdowns.

“It is evident that the online casino business presents a significant long-term growth opportunity with potential to monetize gaming in the future, subject to regulation of the online casino market in New Zealand,” added SkyCity’s CEO. The company continues to prepare “for a regulated industry.”

SkyCity Online Casino revenue and earnings grew over the period, with around 10,000 active customers weekly. An expanded strategic partnership with Gaming Innovation Group Inc. (GiG) was unveiled in December, through proposed equity investment.

Both parties entered into a binding agreement to subscribe for NZ$40 million ($26.5 million) of new equity in GiG to help fund GiG’s purchase of Sportnco, a European-based B2B online sports and player account management provider. Settlement is expected to occur during the first quarter of the 2022 calendar year.

“Turning to the outlook for FY22, we will continue to focus on navigating through the ongoing uncertainty and near-term challenges presented by COVID-19 while ensuring financial resilience through ongoing cost and capital control and effective cash management,” the company said.