Reef Casino (RCT) dropped their 1H results on Friday. RCT reports on a calendar financial year so it’s a 1H result:

As suggested in the previous post the first thing to look for is commentary on trading since June 30:

The second half year is traditionally the “high tourist season” in Cairns. The Trust has experienced a better start to the 2nd half compared to the start of the 1st half. However, economic and trading conditions in Cairns and the region remain challenging.

Well that’s useful. Typically a comparison would be with the equivalent half last year particularly given the seasonality. All we have here is that it is something above really awful on a non-comparative basis.

The second thing is the performance of EGM’s (pokies):

Revenues were 2.4% lower than 2018. We continued to implement measures and take action to increase our competitiveness in the local market in terms of marketing, promotions and entertainment.

Maybe I should go back and check previous reports again but I make this the fourth consecutive year since 2015 where RCT has reported negative growth for this category for 1H? This accumulates to 14% decline over the period by my numbers. Since then reported EGM revenue for hotel and club venues in the Cairns City SA2 has increased by 35%. That increase has coincided with a decline in both venues and operating EGM’s within Cairns City SA2 for pubs and clubs. This isn’t weather or cyclical tourism. Refer to previous post: When I taste tequila*

More tourism related:

Table games: Revenues were 51.5% lower than 2018. Premium revenues were impacted by an Australian industry wide downturn affecting premium play and also by a lower win rate by the casino compared to last year.

More general commentary:

Softness in Cairns tourism – This was at a level not experienced for a number of years, made worse by an extraordinary wet season in the 1st half of the year. This has affected tourism into Cairns and visitation to our complex. International visitation to Tropical North Queensland declined by 3.1% in the year ended March 2019. Overall, international flights into Cairns remained static with no growth. The number of domestic passengers has seen a decline of 4.6% in the six months ended June 2019 as reported by Cairns Airport. Cairns and the region saw weak consumer spending and increased local competition which has had an impact on casino slots gaming and to a lesser extent on hotel accommodation. 311 new hotel rooms in the competitive set were added to the Cairns market.
A subdued national economy – This was exacerbated by uncertainties and consumer anxieties leading up to the recent Federal election. One factor has been the escalating trade war between US and China. The Reserve Bank of Australia has reported that economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices.
Short term table gaming variability – This was because of a soft gaming and Chinese tourist market including a soft Chinese New Year season, at a level not experienced in recent years. This has impacted on casino revenues. Chinese visitation declined by 5.9% into Queensland in the year ended March 2019. The Chinese economy has also slowed down. This has particularly impacted premium play.

Note: the 311 new hotel rooms were mostly a return of previous capacity lost with the renovation of Tradewinds by Crystalbrook. What else to look at:

Capital expenditure in the first half year of 2019 consisted mainly of operational requirements of the Reef Hotel Casino including a new cooling tower.

My management team is committed to achieve the best possible outcome given the current challenging conditions including initiatives to cut operating costs.

* When I taste Tequila, baby I still see ya
Cutting up the floor in a sorority t-shirt
The same one you wore when we were
Sky high…

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