Reef Casino Trust (RCT) went for the Friday dump with half yearly results posted to ASX at 6:49pm last Friday, or maybe it was just a very long board meeting. The headline result of a $23.7 million loss included non cash impairment charges for property, plant and equipment:

Due to the continuing uncertainty of COVID-19, a non-cash impairment charge of $19.374 million was recorded in relation to the carrying value of the Reef Hotel Casino property plant and equipment as at 30 June 2020. This was based on adjusting rental income forecasts for the probability weighted uncertainty created by COVID-19 which includes the potential for further enforced government restrictions including further shutdowns of the complex and the unknown duration of existing or new international and domestic travel bans.

In context this results in a 22% decline in this valuation from $95.8million to $74.6million. RCT also drew down cash during the period as well as drawing $4million from a loan facility, with $4.5million outstanding at June 30. RCT also advised “The Federal Government’s JobKeeper program assisted the Trust’s rental income by approximately $800,000”. Operational outlook provided for the second half following the casino re-opening on July 3:

The operator of the Reef Hotel Casino in Cairns has reported positive trading in July and so far in August. This has resulted in positive rental income for the Trust and a return to Trust profitability for the month of July. The rental income reported by the Reef Hotel Casino was partly assisted by the positive impact of the Federal Government’s JobKeeper program on its overall results. The current JobKeeper program will continue to 27 September 2020. This JobKeeper program has been extended to March 2021 by the Federal Government. Based on currently available information it is unlikely the Reef Hotel Casino will be eligible for the extended JobKeeper program. While the Trust has had a solid start to the 2nd half year of 2020, due to the on-going COVID-19 situation, economic and trading conditions in Cairns and the region remain challenging. The outlook regarding the COVID-19 situation itself is also uncertain.

RCT is a complex structure so care must be taken with appropriate comparisons as the statutory results can be misleading with half of any distributable profit classified as a financing component to unitholders. Statutory distributable profit reported was “Nil”. This is the most appropriate underlying comparison with previous periods stripping out the $19.4 million impairment:

Note: There was also a $667K impairment on receivables for a $750K loan during the period to provide working capital to the hotel lessee under an arrangement with the trust. This is included in the numbers represented here subject to review as it’s an interesting arrangement given the lessee is supposedly Accor. It mostly balances out the JobKeeper revenue anyway.

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