The ongoing COVID-19 pandemic has been a difficult time for almost all sectors and businesses all over the world, with huge drops in revenue due to reduced economic activity. Government lockdowns and restrictions have meant that many businesses had to shut shop earlier this year, and many small shops have been unable to reopen even after restrictions have been lifted, as they did not have the cash to survive months without any earnings. There have been millions of jobs lost globally, many of them permanently so, and the resulting economic impact is likely to be felt for years to come.
The gambling and casino sector has been one of the hardest-hit, as physical casinos were mostly forced to close due to various government restrictions. It is the same case in Canada as well, where we can see an example of one of the biggest casino companies, Great Canadian Gaming, and the impact of the lockdown on its operations. Great Canadian Gaming had closed all 25 of its properties across the country on 16th March 2020, in line with the government’s restrictions to combat COVID-19.
However, the company has now announced that it will be reopening some of its locations. The 11 properties in the province of Ontario will be reopened on 28th September, more than six months after they were closed, as part of Ontario’s Stage 3 guidelines for the reopening of the economy. There are rules and restrictions which will have to be followed, including an indoor limit of 50 people at maximum, while table games and other amenities will not operate at first.
Similarly, the Casino New Brunswick property in New Brunswick will also be reopening on 28th September, as part of the province’s COVID-19 recovery plan. Again, similar rules as seen in Ontario will apply here too – capacity reduced to approximately 25%, only half of the property’s slot machines being operational, and most other amenities being suspended at the moment. It is a slightly different story in Nova Scotia, where the management of the company is still closely working with the Nova Scotia Gaming Corporation on the preparations needed to safely reopen the two properties in the province. Finally, the company’s properties in British Columbia will remain closed for the time being, as mandated by the provincial government.
In the backdrop of this pandemic, it was interesting to see the company’s financial results for Q2 2020. Due to nearly zero revenue from its properties during much of the year, the company incurred a net loss to shareholders of $31.4 million, compared to a net profit of $48 million in the same period last year. Revenue was at $62.8 million from the quarter, which was mainly comprised of the Ontario bundles’ annual service provider fee entitlement for permitted capital expenditure, and continued fixed service provider fees. Cash flow was negative to the tune of $123.4 million, with a cash outflow of $383.7 million during the quarter. Nevertheless, the company was still able to end the quarter in a relatively healthy cash position, as it had a cash balance of $498.2 million and $1,106.7 million in available credit balance from its credit facilities as well, giving it the ability to ride out the current situation and thus emerge from this environment in a strong position to invest and grow again.
The situation of Great Canadian Gaming is a great example to show the impact that the pandemic has had on the gambling sector. All companies are expected to take some amount of financial damage during this year, but some will cope better than others, and Great Canadian Gaming’s strong cash balance and support from its banking partners means that they should be able to navigate this period relatively unharmed.