SkyCity Warns of Potential Decreased Earnings for Fiscal 2024
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SkyCity Entertainment Group, based in New Zealand, has revised its financial outlook for the 2024 fiscal year, signaling a potential decline in adjusted EBITDA. This comes after previous statements suggesting an increase was expected.
According to a recent trading update, SkyCity estimates adjusted EBITDA for FY24 to be in the vicinity of AU$290 million. This projection is based upon the company's performance during the initial five months of the fiscal year.
In FY23, SkyCity reported an adjusted EBITDA of $310 million and had initially predicted a modest rise for FY24. However, due to a variety of factors, the company has now lowered its guidance, indicating a possible decrease in earnings.
Challenges Impacting SkyCity's Performance
A key factor affecting SkyCity's earnings is the decrease in electronic gaming machine (EGM) revenue across its New Zealand locations. SkyCity attributes this downturn to the rising cost of living and economic uncertainty, which are influencing consumer spending habits.
Additionally, SkyCity's Adelaide property in Australia has underperformed expectations. The lower revenue outlook is also pressured by ongoing legal and compliance costs. SkyCity is currently reassessing the cost base for this location.
Another element impacting earnings is the decline in car park revenues following the termination of a prior agreement. Furthermore, the company is investing in preparation for the potential regulation of online gambling in New Zealand. Despite the legislative process being in its early stages, SkyCity sees this as a promising growth opportunity and remains “optimistic” about the medium-term earnings growth that the new gaming regulations could bring.
Future Projections and Regulatory Concerns
For the upcoming period, SkyCity predicts a net profit after tax to be between $125 million and $135 million, with more details to be revealed in the FY24 interim results due in February. However, the company has raised concerns regarding a possible suspension in New Zealand.
In September, a proposal was made to suspend SkyCity’s casino license for an estimated ten days, involving the subsidiary SkyCity Casino Management Limited. This subsidiary oversees SkyCity’s operator license for multiple locations in New Zealand, and a decision on this matter is still pending.
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