SkyCity, the entertainment and gaming company, has provided a trading update for the fiscal year 2024, forecasting adjusted EBITDA to be in the range of AU$290.0 million to AU$310.0 million.
This outlook is primarily based on the company’s performance during the first five months of the financial year.
In comparison, SkyCity achieved adjusted EBITDA of $310.0 million in FY23 and initially anticipated a modest increase for FY24.
However, various factors have led to a downward revision of earnings expectations.
One significant factor affecting SkyCity’s earnings is a decline in revenue from electronic gaming machines (EGMs) at its New Zealand locations.
This decrease is attributed to ongoing cost-of-living pressures and economic uncertainty, impacting consumer spending.
Additionally, SkyCity cited weaker-than-expected performance at its Adelaide property in Australia and mentioned ongoing legal and compliance cost pressures, which are currently under review.
Furthermore, the company’s earnings were impacted by reduced car park revenue due to the expiration of a previous agreement.
SkyCity also invested in preparations for potential regulation of online gambling in New Zealand, despite the legislation being in its early stages.
The company views this market as a growth area and remains optimistic about medium-term earnings growth through regulation.
Based on the performance during the first five months of FY24, SkyCity expects its net profit after tax to fall within the range of $125.0 million to $135.0 million.
Additional details will be disclosed in the FY24 interim results release scheduled for February.
Notably, the guidance provided by SkyCity does not factor in the potential impact of a suspension of its casino license in New Zealand.
In September, New Zealand’s Department of Internal Affairs applied for a 10-day suspension of SkyCity’s casino license, a matter that remains unresolved.
SkyCity has experienced a challenging year in 2023, including legal proceedings related to anti-money laundering (AML) failings in Adelaide.
In May, the company initiated a review of its AML programs as mandated by the gaming regulator for South Australia.
In August, SkyCity made a provision of AU$45 million in anticipation of a civil penalty from Austrac.
In October, the company announced the departure of CEO Michael Ahearne, who will step down in March 2024 to return to Europe and spend more time with his family.
The process to identify Ahearne’s replacement is already underway.