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New Zealand-based SkyCity Entertainment Group has warned that adjusted EBITDA could fall in fiscal 2024, despite previously expecting an increase.
In a trading update, SkyCity said FY24 adjusted EBITDA was between AU$290.0m (£152.5m/€177.7m/US$191.6m) and AU$310.0m .AU$ should be. The basis for this is the performance in the first five months of the financial year.
SkyCity reported adjusted EBITDA of $310.0 million in FY23 and had forecast a slight increase in FY24. However, several factors have led SkyCity to reduce its guidance to the point where earnings could actually decline.
This includes a decline in electronic gaming machine (EGM) revenue across all New Zealand locations. According to SkyCity, this is due to continued pressure on the cost of living and uncertainty about the economy, which is impacting consumer spending.
SkyCity also cited a weaker-than-expected performance at its Adelaide property in Australia. The lower sales prospects come against the backdrop of ongoing cost pressure in legal and compliance requirements, with SkyCity currently reviewing the cost base for the location.
The operator also said it would be affected by reduced revenue from the car park due to the termination of a previous agreement.
SkyCity is planning online gambling in New Zealand
The result was also hit by investments in preparations for possible regulation of online gambling in New Zealand.
Although any kind of legislation is still in its early stages, SkyCity has highlighted the market as a growth area. The operator said it remains “optimistic” about the medium-term profit growth that regulation offers the group.
Based on the five-month period, SkyCity said net income after taxes is expected to be between $125.0 million and $135.0 million. Further details will be provided in the interim results release for the 2024 financial year, due in February.
Concerns about possible suspension of New Zealand
SkyCity said the guidance does not reflect the impact of a potential suspension in New Zealand.
In September, New Zealand’s Home Affairs Minister requested that SkyCity’s casino license be suspended for an estimated 10 days. This affected the subsidiary SkyCity Casino Management Limited, which controls SkyCity’s operating license for the SkyCity Auckland, SkyCity Hamilton and SkyCity Queenstown locations in New Zealand.
A decision on this matter is still pending.
SkyCity has experienced a turbulent 2023. The operator ended last year with the Australian Transaction Reporting and Analysis Center launching a federal case against SkyCity. This was related to anti-money laundering (AML) failures at SkyCity Adelaide.
In May, SkyCity launched a review of its terrorist financing and anti-money laundering programs, as ordered by Consumer and Business Services, the gambling regulator for South Australia. SkyCity also discovered in August that it had set aside a AU$45 million provision ahead of an alleged civil penalty from Austrac.
In October, SkyCity announced that Michael Ahearne would be stepping down from his role as chief executive.
Ahearne will leave the company in March 2024 to return to Europe and spend more time with his family. He has been CEO of SkyCity since November 2020, previously he was Chief Operating Officer.
SkyCity has already begun a process to find a replacement.
