Macau casino operator SJM Holdings has admitted that gross gaming revenue, and non-gaming amenities will be seriously affected by COVID-19 “for an indefinite period”, after reporting an HK$1.41bn (£140.9m/€155.3m/US$181.9m) loss for H1 2020.
The holding firm behind Sociedade de Jogos de Macau reported a 74.4% year-on-year drop in net revenue to HK$4.37bn for the 6 months ending June 30, a time that saw gambling halls closed for 15 days in February.
Entry restrictions were put in place for mainland China, Hong Kong and other places with transport to and from the special administrative region limited and quarantine requirements imposed until the end of the reporting period.
This largely curtailed visits to Macau, which only lifted a 14-day quarantine for visitors from China’s mainland in mid-July.
This hit SJM’s gaming revenue in the first half of this year, which was additionally down 74.4% from 2019, at HK$4.27bn.
However, this significantly cut gaming taxes paid by the company in H1, from HK$7.93 billion in the first 6 months of 2018 to HK$1.98 billion.
The greater percentage of gaming revenue in H1 came from mass market table games, which accounted for HK$3.29 billion of the total, down 73.5%. VIP gaming’s share dropped 81.6% to HK$1.37 billion, while earnings from slots was down 59.2% at HK$234.8m.
Money paid in commission and incentives to partners additionally dropped significantly from HK$3.71 billion in 2019, to HK$622.4 million.
SJM’s H1 gaming revenue came to a 15% share of the Macau gaming sector, including 22% of mass market table games, as well as 8.6% of VIP earnings.
Revenue from hotel and catering, retail and related services also plummeted sharply, down 71.2% to HK%102.0 million. This broke down to HK$81.6 million (a 62.4% drop) from catering and retail, and only HK$20.4 million from hotel operations, down 85.1%.
This was due to the travel restrictions and quarantine requirements largely reducing visits to Macau. As per the special administrative region’s Statistics and Census Service, visitor numbers were down 68.8% in Q1, and 99.5% in Q2.
Tourism from mainland China dropped by 69.2% in the first quarter, followed by 99.3% in the second quarter. In Q1, SJM’s flagship property Casino Grand Lisbora received more than 1.2m during the reporting period, averaging around 6,600 visitors per day.
This marks a major drop on approximately 6.3m visitors in the first half of last year, or 35,000 patrons per day.
Whereas the reduction in visitation and gambling activity majorly reduced costs in the first half, this drop was not as quick as that of revenue, resulting in SJM’s earnings being hard.
Apart from marketing and promotional expenses, which dropped from HK$3.14 billion to HK$94.2 million, the 42.1% falls in costs of sales as well as administrative costs (down 10.9%) were not that much steep.
This contributed to a pre-tax loss of HK$1.47 billion, rising to HK$1.48 billion after taxes of HK$13.4m. If losses from non-controlling interests were eliminated, it came to a net loss of $1.41 billion attributable to SJM Holding’s owners.
“SJM’s first half results reflect the severe contraction in travel and tourism caused by the Covid-19 pandemic,” the operator’s vice chair and CEO Dr Ambrose So said. “In this environment, we strive to control our running costs at a prudent level.
“We are confident that when the region emerges from the pandemic, SJM will be at the forefront of Macau’s resumed development into a world centre of tourism and leisure.”
However, the firm admitted there was no sign as to when the effect of the COVID-19 crisis on gaming revenue, and its hotel, restaurant and other non-gaming facilities, would come to an end.
“Whilst certain travel restrictions are likely to be gradually lifted, and that visitation and spending will respond positively to such lifting, we do not expect a return to our previous level of revenue during any part of 2020,” it said.
“In particular, it is not known when China’s group and individual travel visas, which are critical to Macau’s tourist flow, will be reinstituted on a national basis,” SJM explained. “Even after such visa resumption, moreover, it is not possible to predict whether there will be lingering economic effects and health concerns caused by Covid-19 that will affect our business for a longer period.”
The firm will push ahead with intentions to start its new resort on Cotai, the Grand Lisboa Palace. Construction of other property was completed late 2019, and subject to securing operating licenses, SJM hopes to commence business by the end of 2020.