Sun. Sep 25th, 2022


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SkyCity net profit falls 76%, company blames pandemic and fire

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SkyCity Entertainment Group’s half-year net profit dropped 76 per cent from last year’s $249.6 million to $78.4m.

The fire at the NZ International Convention Centre, the pandemic and a settlement agreement reached with Fletcher Construction last November were all cited by the business for the profit drop.

Revenue for the half-year to December 31, 2020fell 37 per cent to $449.9m.

“SkyCity’s results have been significantly impacted by the following factors:

• “The fire at the NZICC on October 22, 2019;
• “The Auckland carpark concession transaction that completed on August 19, 2019 [which had boosted that result];
• “Covid-19;
• “A settlement agreement entered into with The Fletcher Construction Company in November 2020.”

Group performance was hit by pandemic disruptions, particularly tourism-related businesses like SkyCity’s hotels, restaurants and bars, it said.

On the plus side, the Adelaide expansion had been completed on time and on budget, with positive trading there after it opened.

A transition had been made to a new chief executive and new senior appointments had been confirmed. Julie Amey is the new chief financial officer joining from Shell, Australia. Callum Mallett has been appointed chief operating officer for New Zealand. David Christian is the new chief operating officer for Australia and Matthew Ballesty is the new chief casino officer.

Shareholders will get no interim dividend but a final year-end dividend for FY21, ” assuming no prolonged property closures”.

SkyCity in Auckland was temporarily shut during August and in Adelaide during November due to Covid, it noted and those closures fell within the reported period.

Michael Ahearne, new CEO, told The Herald this morning: “The first half has been pretty challenging due to Covid. The best way to look at it is with normalised net profit. That only fell41.7 per cent to $43.7m.

“The local casino and gaming businesses have proved resilient although tourism-related is really challenging.”

Asked to reveal the settlement amount between Fletcher and SkyCity, Ahearne refused, saying “it’s not a significant amount. It amounts to pre-fire. Fletcher and ourselves are focused on the future, post-fire.”

The Adelaide project was a A$330m venture but Ahearne said he had not been able to see the completed building work due to the pandemic “and I’m not sure when I’ll get over there”.

Forsyth Barr analyst Chelsea Leadbetter yesterday forecast the numbers would fall.

“We expect SkyCity to report a profit decline in 1H21, given Covid-19 related restrictions, albeit greater focus will likely be on outlook/trading insights and longer-term drivers. Of particular interest is early trading from the Adelaide expansion, discussion around regulatory, AML and risk protocols, after the recent review of Crown Resorts and dividend
reinstatement timing. Valuation metrics are attractive, particularly looking beyond COVID-19 disruption,” Leadbetter said in a note this week.

The forecast assumed a recovery to normal by the full financial year to June 30, 2023, and the resumption of a supportive dividend yield, she said.

The latest half-year result would reflect last year’s temporary closure in Auckland, various periods of restriction and negligible VIP customers and overseas tourists, she said.

“No interim dividend will be paid, but an update on restatement timing intentions is of interest. We forecast 6cps in 2H21. SkyCity has material liquidity and headroom available and covenant waivers to manage temporary closures,” Leadbetter said.

The company had a sudden and perplexing executive exodus, announcing late last year CEO Graham Stephens was being replaced immediately by chief operating officer Michael Ahearne, chief financial officer Rob Hamilton was leaving this month and chief marketing officer Liza McNally was also leaving next month.

Asked about Stephens today, Ahearne said: “He’s retired.”

SkyCity has a market capitalisation of $2.1b on the NZX where it has been trading around $2.87, down 83c or 22 per cent in the last year. On the ASX, it is around A$2.87, down 5c lately.

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