Coronavirus: SkyCity takes $55m hit but extra $85m insurance payout expected

A timeline of Covid-19 as the number of confirmed cases increases around the world.

SkyCity Entertainment Group's business has been hit by the tourism downturn to the tune of $55 million but it also expects an extra $85m insurance in the next month from October's NZ International Convention Centre fire.

New border controls, social distancing requirements and mass gathering restrictions here and in Australia where it operates will hurt the business, it said today.

Chief executive Graeme Stephens said that the current market conditions being experienced as a result of Covid-19 were unprecedented for all businesses in New Zealand and Australia.

"We fully understand and support the priority to slow the spread of Covid-19 in order to save lives. SkyCity always seeks to be a responsible leader in our communities, and we will play our part in working with governments to help and protect our customers, staff and other stakeholders."

The company expects to receive a further insurance payment of $85m over the next month to fund initial repair works arising from the fire at the convention centre.

The business provided a full rundown of impacts in March, with revenue was down against internal budgets and expectations.

Here's a full rundown of the impact:

Auckland

• Visitation to the precinct down around 15 per cent;
• Electronic gaming machine revenue down 14 per cent;
• Domestic table and automated table game revenue down 43 per cent;
• Hotel revenue down 19 per cent with average occupancy of 79 per cent;
• Food, beverage and conventions revenue down 32 per cent;
• Sky Tower revenue down 35 per cent;

Hamilton

• No impact on gaming revenue
• Non-gaming revenue down 12 per cent;

Queenstown

• Combined revenue down 37 per cent

Adelaide

• Gaming revenue down 7 per cent;
• Non-gaming revenue down 14 per cent.

International Business

• Substantial decline in activity with Asian customers not able to travel to New Zealand and Australia
 
SkyCity expected the tightened restrictions to have a continued impact on the business across Australia and New Zealand.

"We anticipate further restrictions on mass gatherings in Australia and New Zealand," Stephens said.

"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.

SkyCity boss Graeme Stephens. Photo / File

It's also helpful that our customers are already segregated into different tiers and spaces through our loyalty programs".

Stephens also saw a complete lockdown as a possibility, which would lead to the potential closure of facilities.

SkyCity currently estimates an ebitda impact of around $55m in relation to previous guidance for the full year.

As a result of these impacts, SkyCity now expects normalised ebitda for FY20 to be in the range $230-250m and normalised NPAT for the financial year to be in the range $85-100m

These ranges are based on the best information currently available and reflect the continued uncertainty regarding the impacts of Covid-19 through to the end of FY20. The updated guidance also assumes that all SkyCity properties remain open for business.

SkyCity has taken a number of measures to protect both staff and customers.

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This includes encouraging employees to take voluntary leave, pausing all travel and suspending marketing activity that could drive spikes in visitation.

The company will also be reviewing all non-essential capital expenditure and corporate overheads for the next 12 months.

SkyCity has over 5000 employees currently and remains optimistic that it will be able to expand this team in the future.

"SkyCity is looking beyond the current challenges presented by Covid-19 and will seek to preserve existing jobs in New Zealand and Australia," said Stephens.

On a positive note, SkyCity has also this week reopened Eight, its premium domestic tables salon in Auckland, following a refurbishment and expansion which took many months.

While bricks and mortar visits were down, SkyCity has noted more offshore online casino business.

"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," said Stephens.

SkyCity still has a strong balance sheet, the statement said, owning property assets with an estimated market valuation of around $2b and, following the payment of its interim dividend last week and the repayment of $21m of US private placement notes earlier this week, it has undrawn bank facilities of $337m.

SkyCity said it will provide further updates to the market as new material information becomes available.

"The focus for now is on reacting rapidly to the situation, which is evolving daily, and on ensuring that we can continue to trade in a way that is responsible and protects the thousands of people that work at SkyCity and our customers, largely domestic, who continue to choose to visit us," said Stephens.