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SkyCity Announces Full Year Results

SkyCity Entertainment Group (NZX/ASX:SKC) has announced its financial results for the year ended 30 June 2021. The 2021 financial year was another challenging year for SkyCity. Despite a tough operating environment, SkyCity has maintained a strong financial position over the period, delivering a credible operating performance when open.

SkyCity’s New Zealand domestic gaming business performed well when the business was operating normally at alert level one. Our hospitality businesses including hotels, food and beverage and attractions and International Business continue to be significantly impacted by international border closures. SkyCity Adelaide had an encouraging performance post opening of the expansion. SkyCity’s online casino continues to grow with a broad geographic spread among New Zealand customers.

Key Features of FY21

  • Group normalised profit after tax (NPAT) is up 36.3% and earnings before interest, tax, depreciation, and amortisation (EBITDA) is up 25.5%, but well below (17%) FY19 like for like EBITDA comparative.
  • Reported EBITDA is down 8.9% and reported NPAT is down 33.7% down versus prior year.
  • Adelaide expansion completed on time and on budget during December 2020, with consistent performance when open.
  • NZICC and Horizon Hotel project progressing and we’re working closely with Fletcher Construction on completion of the Horizon Hotel in 2024 and NZICC likely late 2024.
  • SkyCity Online casino revenue and earnings have grown over the period, with over 45,000 active customers.
  • Strong balance sheet and financial flexibility – comfortably met financial covenants for June 2021 testing period and FY21 dividend of 7cps declared.

Commenting on the results, Chief Executive officer Michael Ahearne says it has taken significant skill, energy, and dedication from the SkyCity team to deliver a solid performance, despite the challenging environment.

“Local gaming has performed well when open and operating without restrictions, while our tourism-related businesses including hotels, food and beverage, attractions and International Business had weaker results primarily due to ongoing international and domestic (Australian) border closures.

“COVID-19 has continued to significantly impact the business and operations at each of SkyCity’s properties in FY21. Government mandated lockdowns in New Zealand and South Australia resulted in the closure of SkyCity Auckland for 29 days and SkyCity Adelaide for 4 days. When permitted to reopen, the properties have initially operated under significant constraints due to restrictions on mass gatherings and physical distancing requirements.

“At a property level, SkyCity Auckland delivered resilient local gaming activity, but this was offset by non-gaming performance being significantly impacted by COVID-19. SkyCity Hamilton and SkyCity Queenstown delivered strong EBITDA performances led by local gaming revenue growth combined with disciplined cost management. 

“SkyCity Adelaide’s performance prior to the expansion opening was impacted by COVID-19 disruption but since opening the new facilities has significantly improved across all activities. SkyCity has been making operational adjustments to the business when necessary and we continue to adhere to all government guidance to ensure our staff and customers are managed safely.

“Going forward SkyCity’s strategic plan is focused on our core business, executing our major projects, continuing to navigate the business through COVID, delivering on the omnichannel opportunity and the efficient allocation of capital,” says Ahearne.

Regulatory and Compliance

Ahearne says SkyCity recognises the importance of protecting its casino licences and enhancing its social licence to operate.

“Considering the regulatory and governance environment in which the Group operates, SkyCity is committed to maintaining a casino and entertainment business which is characterised by high levels of service, customer enjoyment and safety, staff safety, diversity and inclusion, social and environmental responsibility, economic and investment returns and ethical conduct in all respects.

“As the result of a strategic review into the International Business division undertaken in April 2021, SkyCity decided to permanently cease dealing with junket operators, but to continue to operate the division under a revised operating model where SkyCity will deal directly with patrons after appropriate ‘know your customer’ and customer financial due diligence requirements are satisfied.

“Minimising harm to customers remains a key focus and we have made a number of investments in people and technology (such as facial recognition and specialised customer screening tools) over the past year to keep our customers safe. SkyCity is committed to ensuring that it provides safe and responsible experiences and environments and places significant importance on its host responsibility and AML obligations.”

In June 2021, SkyCity was informed by AUSTRAC that it had identified potential serious non-compliance by SkyCity Adelaide with regards to its AML and KYC practices and the matter had been referred to its enforcement investigation team.

“The SkyCity Board and management team take the concerns raised by AUSTRAC seriously and we have taken immediate steps to investigate and appropriately address the concerns raised. SkyCity will continue to fully cooperate with AUSTRAC with regards to its inquiries and with the investigation of SkyCity Adelaide,” says Ahearne.

Major Projects

In December 2020, SkyCity completed its A$330 expansion of the Adelaide property, transforming it into an integrated resort of international scale and quality.

“EoS by SkyCity, a new 120 room boutique hotel, and new gaming, hospitality and entertainment areas were completed on-budget and have been well received by customers with consistent operating performance post opening.

“In Auckland, SkyCity opened new food and beverage facilities on the main gaming floor, improved VIP gaming facilities on levels 8 and 9 and welcomed the arrival of the All Blacks Experience and Weta Workshop Unleashed, two world-class attractions to the precinct.

“Ongoing delays continue to the New Zealand International Convention Centre (NZICC) and Horizon Hotel project, caused by the fire in October 2019. SkyCity continues to work closely with Fletcher Construction on the project and the latest programme received from Fletchers now indicates completion of the Horizon Hotel in 2024, and NZICC likely late 2024,” says Ahearne.

Online Gaming

SkyCity has continued to operate its offshore online casino venture with Gaming Innovation Group.

“SkyCity supports the regulation of online gaming in New Zealand with an emphasis on strong host responsibility and delivering community benefits to New Zealand. We continue to prepare for a regulated industry that ensures the highest standards of host responsibility and high-quality trusted operators are licenced.

“Without proper regulation and with the growth of online gaming market, there is a risk harm minimisation is not prioritised by all providers in the market. There has been a move by many jurisdictions to regulate for this reason.”

People and Community

“We’ve continued to create and support a positive employee culture over the past year, focusing on initiatives to enhance workplace flexibility, wellbeing, and diversity. SkyCity was delighted to receive the Diversity and Inclusion award at the 2020 Deloitte Top 200 awards for the second time in three years for Project Nikau, an initiative to employ and develop career pathways for youth with a focus on Maori and Pasifika.

“SkyCity has also made progress on refocusing our Community Trusts in New Zealand on initiatives that will enhance the employability and advancement of youth and have upweighted strategies to ensure our supply chain is ethical and supports local business,” says Ahearne.

Outlook for FY22

Commenting on the outlook for FY22, Mr Ahearne says given the current unpredictable operating environment and uncertain near-term outlook due to COVID-19, SkyCity is unable to provide detailed earnings guidance at this time, but this will remain under regular review.

“SkyCity as one of New Zealand’s largest and most popular venues, unsurprisingly has been a place of interest in the latest COVID-19 outbreak. SkyCity has mobilised a team focused on working closely with public health authorities to provide as much information as possible for contact tracing purposes. Our strong planning has ensured we have responded quickly to this current outbreak and will stand us in good stead to respond to further outbreaks in Australia and New Zealand.

“I’d like to acknowledge the incredible commitment, work ethic and dedication of the entire SkyCity whanau in New Zealand and Australia. Finally, I would like to thank our customers, SkyCity doesn’t exist without them and we are extremely grateful for their ongoing support,” says Ahearne.

A full copy of this year’s financial results is available here:

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