For the 12 months ending on June 30, SkyCity Entertainment Group has announced a revision to its earnings projections. The underlying group EBITDA (earnings before interest, taxes, depreciation, and amortization) is now expected to be between NZ$280 million (£136 million/€159 million/US$173 million) and NZ$285 million, a figure that falls short of their initial estimate of NZ$290 million to NZ$310 million. In terms of net profit, the forecast has been scaled back to a range of NZ$120 million to NZ$125 million, down from an earlier projection of NZ$125 million to NZ$135 million.
Several factors have contributed to this reduction in guidance. SkyCity has highlighted that the prevailing challenging economic environment has negatively influenced customer spending patterns. Despite this, the group is keen to point out that visitor numbers across all its locations have remained robust. This dichotomy of high footfall but reduced spending is a significant driver behind the revised financial outlook.
Adding to the economic woes is the delay in the opening of SkyCity’s Horizon Hotel in Auckland, New Zealand. The hotel’s launch has been pushed from its initial March opening to August, which has also affected financial projections. Furthermore, the group is bracing for a potential increase in casino duty expenses in Adelaide, Australia. This comes in the wake of the South Australian Court of Appeal’s interpretation of the Adelaide Casino Duty Agreement, particularly regarding loyalty points.
SkyCity has also provided an outlook for the 2025 financial year, indicating that current trading conditions paint a picture of ongoing economic challenges, particularly noted in Auckland. This tough economic climate is expected to persist throughout the year, impacting the group’s performance metrics.
The group will also face several one-off financial hits in the upcoming year. These include costs associated with the delays in the Horizon Hotel, pre-opening operational costs for the New Zealand International Convention Centre (NZICC), preparatory expenses for forthcoming online gambling regulations in New Zealand, and ongoing risk and compliance upgrades in Adelaide. Considering these factors, SkyCity has issued a forecasted underlying group EBITDA of NZ$250 million to NZ$270 million for FY25, both figures notably lower than the adjusted amounts for FY24. The one-off items are expected to impact the group’s finances by between NZ$20 million and NZ$30 million.
It’s important to note that this guidance does not take into account a potential suspension of SkyCity’s casino license in New Zealand.
. Initially set for a private hearing in April, the matter has now been deferred to August. In September of the previous year, New Zealand’s Secretary of the Department of Internal Affairs had applied to suspend SkyCity’s casino license for an estimated period of 10 days. This application pertained to SkyCity Casino Management Limited (SCML), the subsidiary responsible for operating the SkyCity Auckland, SkyCity Hamilton, and SkyCity Queenstown casinos.
The roots of this suspension application trace back to a complaint lodged in February 2022 by a former customer of SkyCity Auckland. The complainant had gambled at the Auckland casino from August 2017 to February 2021. The Secretary of the Department of Internal Affairs stated that SCML did not adhere to the requirements of its Host Responsibility Program at SkyCity Auckland, particularly in terms of detecting continuous play by the customer.
In light of this potential license suspension, SkyCity has managed to settle other regulatory issues. In New Zealand, SkyCity reached a settlement with the Department of Internal Affairs over breaches of anti-money laundering and countering financing of terrorism (AML/CFT) obligations. Earlier in the year, the Department had announced plans to file high court proceedings against SkyCity and its SCML subsidiary for alleged non-compliance with the country’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009. After reviewing significant compliance issues, the group was able to reach a settlement and jointly proposed a penalty of NZ$4.16 million with the Department, pending court approval.
Across the Tasman Sea in Australia, SkyCity has recently agreed to a settlement with the Australian Transaction Reports and Analysis Centre (Austrac), making a payment of AU$67 million for historical AML/CTF failures. This settlement awaits approval from the Federal Court of Australia, with separate submissions from the operator and Austrac being reviewed at an upcoming hearing.
This legal and regulatory scrutiny comes amidst a period of significant change in SkyCity’s executive team. In April, the company appointed seasoned gambling executive Jason Walbridge as its new CEO, effective from July, succeeding Michael Ahearne. Additionally, CFO Julie Amey has resigned but will remain in her role until September 25. Andrew McPherson has also been confirmed as Chief Information Officer, having served in the interim role since November.
SkyCity plans to publish its full-year 2024 results on August 24, which will provide further insights into how the group is navigating these turbulent times.
