SkyCity Forecasts Potential Earnings Decline in FY24

Just a few weeks ago, SkyCity predicted a grim financial future for themselves and now are predicting a potential earnings decline. We cover all the information and updates right here in our news blogs.

SkyCity, in a recent trading update, has indicated that its adjusted EBITDA for the financial year 2024 is expected to range between NZ$290.0 million and NZ$310.0 million. This projection, based on the first five months of the fiscal year, suggests a potential decrease from the FY23 figure of NZ$310.0 million, previously anticipating a modest rise for FY24.

A Combination of Factors Influencing Revised Guidance

The revised earnings forecast is influenced by multiple factors, including a notable dip in electronic gaming machine (EGM) revenues across its New Zealand establishments. SkyCity attributes this downturn to the increasing cost of living and prevailing economic uncertainties, which have adversely impacted consumer spending habits.

Furthermore, the performance at its Adelaide property in Australia has been weaker than expected. This, coupled with the ongoing legal and compliance-related expenditures, has prompted a review of the cost base for this location.

Another factor impacting earnings is the diminished income from car parking, following the termination of a prior agreement.

Online Gambling in New Zealand: A Focal Point

SkyCity is also channeling funds into preparing for the potential regulation of online gambling in New Zealand. Despite the legislative process being in its nascent stages, the company is optimistic about the growth opportunities and medium-term earnings prospects this sector could offer.

Projected Net Profit After Tax

Based on the performance in the initial five months, SkyCity anticipates its net profit after tax to be between $125.0 million and $135.0 million. Detailed information is expected to be released in the FY24 interim results, due in February.

Potential Licence Suspension in New Zealand

A significant point of concern for SkyCity is the potential suspension of its casino licence in New Zealand. In September 2023, the Secretary of New Zealand’s Department of Internal Affairs sought to suspend the licence for an estimated ten days. This suspension would affect SkyCity Casino Management Limited, which oversees the operator’s licences for its Auckland, Hamilton, and Queenstown locations. A decision on this matter is pending.

A Year of Challenges for SkyCity

SkyCity’s 2023 was marked by various challenges, including the initiation of federal proceedings against it by Australia’s Transaction Reports and Analysis Centre for anti-money laundering (AML) shortcomings at SkyCity Adelaide.

Additionally, the company initiated a review of its counter-terrorist financing and AML programmes in May, as directed by Consumer and Business Services, South Australia’s gaming regulator. In August, it also made a provision of AU$45 million for an expected civil penalty from Austrac.

Leadership Transition

In a significant leadership change, Michael Ahearne announced his departure from the role of CEO in October 2023. Ahearne, who has been at the helm since November 2020, plans to leave in March 2024 to return to Europe and spend more time with his family. SkyCity is currently in the process of finding his successor.

Some Markets are Not Slowing Down

Despite the challenges faced by SkyCity and the broader casino industry, it's important to note that some sectors are witnessing definite growth. Particularly, the online casino industry in New Zealand is thriving. This segment is introducing an array of new games, attractive promotions, and the launch of new online casinos is anticipated in 2024.

For those interested in exploring these developments, we encourage you to visit our dedicated pages where you can find the latest information on new games, exciting promotions, and up-and-coming online casinos set to make their debut in the coming year. This segment of the industry represents a dynamic and growing field, offering fresh opportunities for entertainment and engagement for casino enthusiasts.