The COVID-19 pandemic has the entire planet in a stranglehold. Businesses around the world are reeling as governments place their residents in lockdown scenarios. SkyCity Entertainment is just one gambling company that is struggling. Its bosses, while attempting to remain positive, can’t see the light at the end of the tunnel just yet.
Australia’s gambling industry is being battered by the coronavirus. As are New Zealand’s. Casinos closed for a period of time during a full country lockdown and simply haven’t recovered since reopening. The Australian gambling industry is the fifth-worst hit on the planet, according to a recent study. Only Canada, Japan, Nevada, and Singapore are worse off in financial terms.
SkyCity Entertainment announced a huge drop in revenue and profit for the current financial year. Difficult trading conditions, caused by a lack of customers, saw the company’s revenue and profit slump. NZ$779.5 million was the revenue, a reduction of 25%. Net Profit After Tax weighed in at NZ$66.3 million, down 60% year-on-year.
The company was one of many Australian businesses that laid off a large section of its workforce. Other cost-cutting measures were implemented but weren’t enough to stop SkyCity Entertainment from bleeding money.
Graeme Stephens is the Chief Executive of SkyCity Entertainment. He spoke at a virtual Annual General Meeting (AGM) were he informed shareholders there would be no normality until 2022.
“It’s really only 2022 that we expect to be back under full strength. We feel well-positions to ride out what is ahead of us. We won’t be spending a lot of capital. Let’s just get through this period and position ourselves for a future beyond this.”
Extremely Difficult Year For SkyCity Entertainment
SkyCity Entertainment has properties in New Zealand and Australia. All are struggling for business.
The company took a huge hit in October 2019, before the COVID-19 pandemic struck, courtesy of a huge fire at its New Zealand International Convention Centre.
A fire broke out on the roof of the venue, which is part of the SkyCity Entertainment complex. Only construction workers were on site at the time as it wasn’t open to the public. Forty-eight hours of disruption followed in Auckland as firefighters struggled to tackle the blaze. Wind of up to 110km/h fanned the flames, making the task of putting out the fire hazardous. It took 10-days to finally stop the fire.
Rob Campbell, SkyCity Entertainment Chairman, said 2019/20 was a challenging year.
“Little did we know that about a week later the convention centre would go up in fire. But that’s the year we’ve had. It started off really well in the first quarter, we were on track for a record, but the fire came.”
An investigation revealed a gas torch accidentality left on cardboard caused the fire.
Gamblers Return But Not At Pre-Pandemic Levels
Campbell revealed SkyCity Entertainment raised NZ230 million via equities. The company permanently laid off a quarter of its staff and underwent a restructuring process.
Customers have returned to its popular Auckland casino but not in pre-pandemic numbers. Its performance after the second lockdown was consistent with trading during May and June under alert Level 2.
NZ$20 million is the overall cost of the lockdown to StarCity Entertainment in Auckland alone.
“Fortunately we had things like wage subsidies to help us through,” Stephens said.
Shareholders learned rebuilding of the badly damaged convention centre is about to commence. The whole project comes with a NZ$750 million price tag.
Online Casino Provides Some Positivity
The SkyCity Entertainment online casino provided some positivity to the AGM. It launched in August 2019 and operates using a Maltese license. The casino is only accessible to gamblers physically located in New Zealand and who are at least 20-years-old.
It generated revenues of NZ$10.2 million in its first year of operation. The online casino yielded NZ$2.2 million worth of profit.
One shareholder quizzed Campbell as to why the online casino is located in Malta. Campbell explained New Zealand doesn’t allow online casinos but believes it will in future.
“The regulatory system hasn’t caught up with online gambling.”
The SkyCity Entertainment share price remained around NZ$3.1100 per share after the AGM aired. Recovery continues after share plummeted to NZ$1.30 when the first lockdown hit. The recovery is good news for investors who have seen 19.8% of their investment wiped out over the past 52-weeks.