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SkyCity Announces Interim Results For FY22

SkyCity Entertainment Group (NZX/ASX:SKC) has announced its financial results for the six months to 31 December 2021.

The first half of the 2022 financial year was another challenging period for SkyCity with the company’s financial performance being materially impacted by significant COVID-19 disruptions, particularly in Auckland where the SkyCity Auckland business was closed for 107 days. When open without restrictions, the New Zealand domestic gaming business performed well, however the company’s tourism related businesses continued to be negatively impacted by international border closures.

Key Features of 1H22 Results

  • Normalised profit after tax (NPAT) down 145.3% and normalised earnings before interest, tax, depreciation, and amortisation (EBITDA) down 69.2%.
  • Reported EBITDA down 86.4% and reported NPAT down 143.3%.
  • Performance materially impacted by COVID-19 disruptions, but resilient local gaming activity when open/fully operational and the SkyCity Online Casino performed well.
  • SkyCity Online Casino revenue and earnings grew over the period, with around 10,000 active customers weekly. Expanded strategic partnership with Gaming Innovation Group Inc through proposed equity investment.
  • NZICC and Horizon Hotel project remains complex as a result of the fire, but progress is being made and SkyCity is working closely with Fletcher Construction to complete the project.
  • Positive progress on further enhancement of the Group-wide AML programme, including senior AML appointments.
  • Balance sheet well positioned to manage near-term challenges from COVID-19 with a good level of liquidity – met gearing covenant for December 2021 and covenant variation secured for June 2022.
 

Commenting on the results, Chief Executive Officer Michael Ahearne said “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. 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. When permitted to reopen, the properties have operated under significant constraints due to restrictions on mass gatherings and physical distancing requirements and I’m extremely proud of how the SkyCity team has adapted to those challenges.

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

“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.

“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 performance of the SkyCity Online Casino business has been a real highlight for the period, again exceeding expectations with significant growth in revenue, EBITDA, and customer numbers.”

Strategic Initiatives

Since the SkyCity Online Casino was launched offshore in August 2019 for New Zealand customers in partnership with Gaming Innovation Group (GiG), there has been a significant correlation observed between online gambling and COVID-19 restrictions and lockdowns.

“It is evident that the online casino business presents a significant long-term growth opportunity with potential to monetise gaming in the future, subject to regulation of the online casino market in New Zealand” said Mr Ahearne.

SkyCity supports the regulation of online gaming in New Zealand with an emphasis on strong host responsibility and delivering community benefits to New Zealand. SkyCity continues to prepare for a regulated industry.

In December 2021, SkyCity expanded its strategic partnership with GiG by entering into a binding agreement to subscribe for €25m (around NZ$40m) of new equity in GiG to help fund GiG’s purchase of Sportnco, a European-based business-to-business online sports and player account management provider. Settlement is expected to occur during the first quarter of the 2022 calendar year.

Optimising the Adelaide expansion and progressing the New Zealand International Convention Centre (NZICC) and Horizon Hotel project remain key priorities.

Reinstatement works are progressing at the NZICC site under the red setting of the COVID-19 Protection Framework, though slower than expected. The Horizon Hotel is currently expected to be completed during 2024 and the NZICC during 2025.

“It has taken significant skill, energy and dedication from our team to continue to deliver a high standard of excellence in such an uncertain operating landscape and this has been recognised in a number of industry accolades over the period. Eos by SkyCity was named best ‘New Tourism Business’ and the Guardsman ‘Best Tourism Restaurant’ at the South Australian Tourism Awards, ‘Best Deluxe Hotel in South Australia’ at the AHA/SA Awards for Excellence and best ‘New Hotel’ at the Hotel Management Awards for Hotel and Accommodation Excellence, and Sol Bar and Restaurant was named ‘Restaurant of the Year’ at the South Australian Restaurant and Catering Awards. SkyCity Auckland was named Oceania’s Leading Casino Resort and received four hats for culinary excellence at the recent Cuisine Good Food Awards.

“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.”

Please refer to SkyCity’s interim financial statements and 1H22 investor presentation for more information.

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