The SkyCity Entertainment Group, based in New Zealand, has alerted investors that its modified earnings before interest, taxes, depreciation, and amortization (EBITDA) for the 2024 financial year might decrease, despite previous projections of expansion.
In a recent market update, SkyCity indicated that it now anticipates its adjusted EBITDA for the 2024 fiscal year to be between NZ$290 million (GBP 141.2 million/EUR 164.6 million/USD 177.1 million) and NZ$310 million. This prediction is grounded in the company’s performance during the initial five months of the fiscal year.
SkyCity reported adjusted EBITDA of NZ$310 million for the 2023 fiscal year and had previously projected moderate growth for the 2024 fiscal year. However, a series of factors have prompted SkyCity to revise its expectations downward, potentially resulting in a decrease in earnings.
These factors encompass a decline in electronic gaming machine (EGM) revenue across New Zealand. SkyCity attributed this downturn to ongoing cost-of-living pressures and economic uncertainty, impacting consumer spending patterns.
SkyCity also highlighted the underperformance of its property in Adelaide, Australia. Amidst weak revenue prospects, persistent legal and compliance cost pressures have led SkyCity to currently assess the cost structure of this location.
The operator further stated that its parking revenue has diminished due to the termination of a prior agreement.
SkyCity is preparing to introduce online gambling operations in New Zealand.
SkyCitys financial performance was also affected by investments made in anticipation of potential online gambling regulations in New Zealand.
SkyCity indicated that although any form of legislation is still in its initial phases, it has recognized this market as a sector with growth potential. The operator expressed its continuing optimism regarding the medium-term earnings expansion that regulation will bring.
SkyCity stated that, based on the five-month period, net profit after tax is likely to fall between NZ$125 million and NZ$135 million. More detailed information will be provided in the 2024 financial year mid-year results, which are scheduled for release in February.
SkyCity clarified that the guidance does not reflect the potential impact of a possible suspension in New Zealand, and concerns regarding a potential suspension have also emerged.
In September, the New Zealand Department of Internal Affairs Secretary submitted an application to suspend SkyCitys casino license for approximately 10 days. This involved the subsidiary SkyCity Casino Management Limited, which oversees SkyCitys operating licenses in Auckland, Hamilton, and Queenstown, New Zealand.
A decision has not yet been reached.
SkyCity encountered some challenges in 2023. At the end of the previous year, the Australian Transaction Reports and Analysis Centre initiated a federal legal action against SkyCity. This action was related to SkyCity Adelaide’s shortcomings in anti-money laundering (AML) procedures.
During the month of May, SkyCity underwent an evaluation of its counter-terrorism financing and anti-money laundering plan at the request of the South Australian gambling oversight body, the Department of Consumer and Business Services. In August, SkyCity also declared that it had allocated AU$45 million to cover potential civil penalties from the Australian Transaction Reports and Analysis Centre (Austrac).
In October, SkyCity revealed that Michael Ahearn would be departing his position as Chief Executive Officer.
Ahearn will leave the organization in March 2024 to return to Europe and spend more time with his family. He has been SkyCity’s CEO since November 2020, having previously served as Chief Operating Officer.
SkyCity has initiated the process of identifying a replacement.
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