19th March 2020 By Chris Hutching | chris@tourismticker.com | @tourismticker.com
SkyCity Entertainment has nearly halved its full year profit expectations and warns that closure of properties may be on the cards.
Based on estimates of recent travel restrictions due to coronavirus, SkyCity estimated a decline in earnings before interest depreciation and tax (EBITDA) of around $55m.
SkyCity now expected normalised EBITDA for the full year be in the range $230m-$250m and normalised net profit after tax between $85m-$100m or nearly half previous forecasts. The 2019 June full year profit was $173m.
“These ranges are based on the best information currently available… The updated guidance also assumes that all SkyCity properties remain open for business,” the operator said.
Although it did not give totals in today’s update to the NZX, SkyCity said its revenue from domestic table and automated table games fell 43% to March 18.
Electronic gaming machine revenue was down 14%, hotel revenue was down 19% with average occupancy of 79%, food, beverage and conventions revenue was down 32%, and Sky Tower revenue down 35%.
At its Hamilton casino, there was no effect on gaming revenue but non-gaming revenue was down 12%.
At the Queenstown casinos, the combined revenue was down 37%, while in Adelaide the gaming revenue was down 7% and non-gaming revenue down 14%.
The recently announced enhanced border controls, social distancing requirements and restrictions on mass gatherings now imposed in New Zealand and Australia would have further negative impacts, SkyCity chief executive Graeme Stephens said.
The group’s tourism-related businesses such as SkyCity Grand Hotel, SkyCity Hotel and Sky Tower, were vulnerable to the low to visitor numbers caused by the coronavirus outbreak.
“We anticipate further restrictions on mass gatherings in Australia and New Zealand,” said the company.
“We will need to understand these restrictions in more detail as they evolve to ascertain whether they will apply to our properties. Casinos are similar to shopping centres in that they have multiple smaller areas within a larger precinct, and these areas can be used in flexible ways to comply with enhanced mass gathering restrictions.
“It’s also helpful that our customers are already segregated into different tiers and spaces through our loyalty programs. It is possible that a full lockdown is implemented in New Zealand and/or Australia, which would lead to the temporary closure of the SkyCity properties.”
The updated profit downgrade assumes that all SkyCity properties remained open for business.
Stephens said while SkyCity had experienced a decline in visitation at its properties, it had also observed a continued increase in sign-ups to, and activity on, SkyCity’s offshore online casino.
“Perhaps this reflects that our New Zealand customers are choosing to gamble online in response to the social distancing requirements and restrictions on mass gatherings.”
SkyCity also expects to receive a further insurance payment of $85m over the next month to fund initial repair works arising from the fire at the New Zealand International Convention Centre.
The share price eased slightly this morning to $2.10 a share.
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