SkyCity Entertainment Group, based in New Zealand, has cautioned that its modified earnings before interest, taxes, depreciation, and amortization (EBITDA) for the 2024 financial year is projected to decrease, despite earlier predictions of expansion.
SkyCity signals that profits may fall in the 2024 financial year
In a recent market update, SkyCity indicated that it anticipates 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 projection is based on operational performance during the initial five months of the fiscal year.
SkyCity reported adjusted EBITDA of NZ$310 million in the 2023 financial year and had previously forecasted moderate growth in the 2024 fiscal year. However, a number of factors have prompted SkyCity to revise its expectations downward, leading to a possible decrease in earnings.
These include a reduction in electronic gaming machine (EGM) revenue across New Zealand. SkyCity attributed this to ongoing cost-of-living pressures and economic uncertainty, which have affected consumer spending.
SkyCity also mentioned the underperformance of its property in Adelaide, Australia. The decline in revenue outlook is set against a backdrop of ongoing legal and compliance cost pressures, with SkyCity currently reviewing the cost structure of the site.
The operator also stated that a decrease in parking revenue due to the termination of a previous agreement has impacted it.
SkyCity is preparing for the online gambling market in New Zealand.
New Zealand’s prospective online gambling rules are also affecting the company’s profits.
SkyCity stated that while any form of legislation is still in its initial phases, they see the market as a place for expansion. The operator remains hopeful about the long-term earnings growth that regulation will bring.
SkyCity reported that based on a five-month period, net profit after tax could be between NZ$125 million and NZ$135 million. Additional details will be revealed in the 2024 financial year interim results, which will be released in February.
Concerns about a possible suspension in New Zealand
SkyCity stated that the guidance does not reflect the potential impact of a possible suspension in New Zealand.
In September, the Secretary of the New Zealand Ministry of Internal Affairs requested to suspend SkyCity’s casino license for approximately 10 days. This involved the subsidiary SkyCity Casino Management Limited, which manages SkyCity’s operating licenses in Auckland, Hamilton, and Queenstown in New Zealand.
No decision has been made on this matter yet.
SkyCity has experienced some difficulties in 2023. At the end of last year, the Australian Transaction Reports and Analysis Centre filed a federal lawsuit against SkyCity. This was connected to SkyCity Adelaide’s anti-money laundering (AML) shortcomings.
The South Australian gambling watchdog, Consumer and Business Services, conducted a review of SkyCity’s anti-money laundering and counter-terrorism financing program in May. SkyCity also revealed in August that they had reserved $45 million to potentially cover penalties from the Australian Transaction Reports and Analysis Centre (Austrac).
In October, SkyCity declared that Michael Ahern would be departing as CEO.
Ahern will be leaving the organization in March 2024 to return to Europe to be with his family. He has held the position of CEO since November 2020, having previously served as the chief operating officer.
SkyCity is presently searching for a successor.