New Zealand – Positive domestic sector offsets SkyCity’s weaker international performanceBy Phil - 14 February 2020
SkyCity Entertainment’s results for the first half of the 2020 financial year demonstrated an underlying positive performance from the New Zealand businesses and a satisfactory performance from Adelaide, offset by a weaker performance from its international operations.
Chief Executive Officer Graeme Stephens said the company’s core New Zealand businesses have slightly exceeded expectations in 1H20, but this has been offset by a significantly weaker international performance. He said the company was ‘growing really well in Auckland, and are still continuing to grow in Auckland at double-digit on a like-for-like basis down at Hamilton and Queenstown.’
“Overall at the half-year, our underlying performance is broadly in line with the guidance we provided at the beginning of the year,” Mr. Stephens said. “It’s been okay in Adelaide with a relatively poor start to the year Q1, but a much better Q2 and a couple of months in a row now of decent performance, which is hopefully reflective of its future. It’s fair to say that the environment is very challenging, not only the construction of the expansion, but — and the car park and everything else around them, but internally in the existing building, we’ve pushed ahead with our master plan for the existing. So we’ve been renovating gaming floors and disrupting from within.”
Auckland EBITDA was up four per cent on a like-for-like basis, and Hamilton and Queenstown both delivered double-digit EBITDA growth on a like-for-like basis. Adelaide had a satisfactory performance with a weak first quarter offset by a stronger second quarter.
“We have been closely monitoring the coronavirus outbreak. There have been no significant impacts evident for our domestic businesses over the past three weeks, though there has been a negative impact on international over the Chinese New Year period and some planned visits from key customers have been postponed or cancelled. We are seeing some softness in table games and that might be related to Corona. I’m sure there is something in that. But at the same time, we are renovating core components of our tables.”
“It is too early and uncertain to estimate any future financial impacts – but based on past precedent, we expect any impact to be temporary. Fortunately, international typically represents around only 10 per cent of our Group EBITDA.
Michael Ahearne, SkyCity COO, said: “Gaming machine performance continues to be solid, 3.5% growth in the half, which is pleasing. We are benefiting from ongoing investment in new product, a refinement of the product mix that we have on the floor. We currently have about 100 machines less than we are licensed for on our floors, but we’re seeing actually an improved performance with that less product as we give a much better experience to customers. We will get those machines back on our floors as we open the new VIP gaming area in May, [when] we’ll be back to our full complement of machines on property.
“Table games performance, a little bit faster than game machines, but we saw growth there. And what we’re actually seeing there is we’re seeing the automated table games, particularly the semi-automated products, which is using the live dealer, performing very strongly, and we’re seeing customers moving to that product and cannibalizing the traditional property, the traditional table games product.”
Mr. Stephens added: “Turning to the outlook for FY20, given the weaker outlook for international in the second half, we expect to be slightly below the previous EBITDA guidance for the full year.”
Regarding the fire at the New Zealand International Convention Centre (NZICC), Fletcher Construction is expected to provide SkyCity with a full reinstatement plan by the end of February. We have recently been advised there will be material delays to the completion of the construction, and hence the project is unlikely to be delivered in 2021.
Mr. Stephens said it is incredibly disappointing that in light of this information, it now seems certain that APEC will be unable to be hosted at the NZICC. SkyCity continues to work closely with Fletcher Construction to bring this iconic project to completion as soon as possible.
SkyCity remains comfortable with its contractual position on the project and is not anticipating any material change to previous guidance for total project costs.
The Adelaide expansion is progressing well for an October 2020 opening. The project remains within its A$330 million budget and will be a world-class facility once completed.
In early August 2019 SkyCity launched the SkyCity Online Casino for New Zealand customers via a Maltese subsidiary, in partnership with Gaming Innovation Group Inc, a leading European based online gaming platform provider. The business has seen encouraging customer interest during the first six months, with around 3,500 sign-ups to date and sequential growth month-on-month since launch.
“Our investments into the Auckland precinct are progressing well with a make-over of our VIP gaming facilities due to complete in a few months and the All Blacks Experience and Make Believe – A Weta Workshop Experience due to open in the second half of 2020. SkyCity is privileged to be partnering with these two iconic global brands which, together with the Sky Tower, will create a must-see entertainment destination in Auckland,” he added.