New Zealand-headquartered SkyCity Entertainment Group has warned adjusted EBITDA could decline in its 2024 financial year, despite previously saying it expected to report an increase.
In a trading update, SkyCity said adjusted EBITDA for FY24 should be between AU$290.0m (£152.5m/€177.7m/US$191.6m) and AU$310.0m. This is based on performance during the first five months of the financial year.
SkyCity posted $310.0m in adjusted EBITDA during FY23 and had forecast a modest increase in FY24. However, several factors have led to SkyCity reducing guidance to the point where earnings could in fact decline.
These include a reduction in electronic gaming machine (EGM) revenue across New Zealand locations. This, SkyCity said, is due to ongoing cost-of-living pressures and uncertainty over the economy, with this impacting consumer spending.
SkyCity also referenced a weaker-than-expected performance at its Adelaide property in Australia. Lower revenue outlook comes against a background of continued legal and compliance cost pressures, with SkyCity currently reviewing cost base for the location.
The operator also said it was impacted by lower car park earnings due to the ending of a previous agreement.
SkyCity planning for online gambling in New Zealand
Earnings were also affected by investment into preparations for the potential regulation of online gambling in New Zealand.
While any sort of legislation remains at an early stage, SkyCity said it has highlighted the market as a growth area. The operator said it remains “optimistic” about medium-term earnings growth that regulation offers the group.
Based on the five-month period, SkyCity said net profit after tax is likely to be to between $125.0m and $135.0m. Further details will be set out in the FY24 interim results release, which is due in February.
Concerns over possible New Zealand suspension
SkyCity said the guidance does not reflect the impact of a potential suspension in New Zealand.
In September, New Zealand’s secretary of the department of internal affairs applied to suspend SkyCity’s casino licence for an estimated 10 days. This concerned subsidiary SkyCity Casino Management Limited, which controls SkyCity’s operator licence for the SkyCity Auckland, SkyCity Hamilton and SkyCity Queenstown locations in New Zealand.
A decision over the matter is yet to be reached.
SkyCity has experienced something of a turbulent 2023. The operator ended last year with Australia’s Transaction Reports and Analysis Centre launching federal proceedings against SkyCity. This was in relation to anti-money laundering (AML) failings at SkyCity Adelaide.
In May, SkyCity launched a review into its counter-terrorist financing and AML programmes as ordered by Consumer and Business Services, the gaming regulator for South Australia. SkyCity in August also noted that it had made a provision of AU$45m ahead of an assumed civil penalty from Austrac.
In October, SkyCity announced Michael Ahearne is to step down from his role as chief executive.
Ahearne will leave the business in March 2024 to return to Europe and spend more time with his family. He has served as CEO of SkyCity since November 2020 having previously been chief operating officer.
SkyCity has already launched a process to identify a replacement.