Strong Business Recovery In 1H23

SkyCity Entertainment Group (NZX/ASX:SKC) has seen a strong recovery across its business operations in the first half of the 2023 financial year following several years where its land-based operations were significantly impacted by COVID-19.

Group reported and normalised results were up significantly over the prior comparable period reflecting strong performances in the company’s domestic gaming, hospitality and tourism businesses following the return of international tourism, especially to Auckland.

Chief Executive Officer Michael Ahearne said, “SkyCity has had a positive financial start to the 2023 financial year, with a good recovery of visitation across all of our properties.

“I’m very proud of the SkyCity team, who have worked really hard to deliver exceptional customer service in what has been a challenging operating environment.”

Key Features of 1H23 Result

Operations

“A positive recovery in domestic customer visitation has been the key driver of performance in this half. The return of tourism to New Zealand has been a real benefit to SkyCity.

“It is fantastic to welcome international guests back to our properties. We saw the first of many cruise ships coming back to Auckland late last year after a two-year absence with more to come,” said Mr Ahearne.

“Visitation to the Sky Tower in December 2022 was up six times that of the corresponding period last year, which is a great result for Auckland.

“SkyCity Adelaide is now benefiting from the investments we have made, including our new hotel EOS by SkyCity, restaurants and bars and upgraded casino facilities. SkyCity Adelaide continues its award-winning streak, having recently won Best Business Event Venue and Best 5 Star Hotel at the South Australian Tourism Awards 2022,” said Mr Ahearne.

“SkyCity Hamilton and SkyCity Queenstown performed well and continue to be popular with local customers.”

Staffing

“I feel incredibly proud of how our team has dealt with the opportunities and challenges over this period, and in particular our customer facing staff who have been incredibly flexible as we have navigated through this recovery period.

“Since July 2022, we have hired 1,200 people across the SkyCity Group. However, there are currently more than 450 vacancies left to fill.

“While retention and recruitment are a key focus, over the past year we have managed staffing shortages by reducing hours and/or closing outlets with capacity constraints. We expect that we will be able to reopen and refresh our outlets throughout this year, including the opening of a new Chinese restaurant in our Hamilton precinct in a few months’ time,” said Mr Ahearne.

“SkyCity has also successfully completed enterprise/collective bargaining in New Zealand and Adelaide with a positive outcome for our employees and business.”

Regulatory and Compliance

The casino and gaming industry has continued to see increased regulatory scrutiny over the period.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) commenced civil penalty proceedings against SkyCity Adelaide in December 2022. SkyCity is carefully considering the allegations in AUSTRAC’s Statement of Claim, but there is still considerable work required to complete this process and it could potentially take 1 to 2 years to resolve the proceedings.

The independent review announced in July 2022 by the South Australian regulator (Consumer and Business Services) into SkyCity Adelaide’s suitability to continue to hold the casino licence in South Australia, and SkyCity Entertainment Group Limited’s suitability to continue to be a close associate of SkyCity Adelaide, has been put on hold pending the conclusion of the AUSTRAC proceedings.

Further details on these processes are included in our investor presentation.

“SkyCity will continue to cooperate with our regulators and our priority remains on ensuring that our compliance enhancement programmes meet the expectations of our regulators and are embedded deep into the organisation,” said Mr Ahearne.

New Zealand International Convention Centre (NZICC) and Horizon Hotel Project

“The rebuild of the NZICC and Horizon Hotel in Auckland is progressing well with construction of the roof now underway - a significant milestone for the project,” said Mr Ahearne.

“The project remains very complex, but the latest programme from Fletcher Construction continues to indicate completion of the Horizon Hotel during 2024 and of the NZICC during 2025.

“The interest in convention bookings is still very robust, and we are seeing strong international demand.”

Auckland weather events

“Fortunately, the SkyCity Auckland property was not significantly impacted by the widespread adverse weather events experienced by many parts of New Zealand recently,” said Mr Ahearne.

“SkyCity has donated $50,000 to each of Dave Letele’s BBM Programme and the Vision West Community Trust to assist with their flood recovery efforts and has provided support to charity partners who are assisting those impacted by the floods.”

Please refer to SkyCity’s interim financial statements and 1H23 investor presentation for more information.

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