SkyCity Entertainment Group, based in New Zealand, has issued a warning that its adjusted EBITDA may decrease during its 2024 financial year. This is a change from its previous expectation of reporting an increase in earnings.
The trading update from SkyCity stated that it anticipates adjusted EBITDA for FY24 to be approximately AU$290.0m, based on the company’s performance over the first five months of the financial year. This comes as a surprise, as the company had projected modest growth for the year after posting $310.0m in adjusted EBITDA during FY23.
The decrease in projected earnings is attributed to several factors. SkyCity cited a reduction in revenue from electronic gaming machines (EGMs) across its locations in New Zealand, driven by ongoing cost-of-living pressures and economic uncertainty impacting consumer spending. Additionally, the company noted weaker-than-expected performance at its Adelaide property in Australia and lower car park earnings due to the expiration of a previous agreement.
Furthermore, SkyCity mentioned that it invested in preparations for the potential regulation of online gambling in New Zealand, causing a further impact on its earnings. Although the timing and details of any potential regulation remain uncertain, SkyCity views the online gambling market as a growth opportunity in the medium term.
In addition to addressing its financial performance, SkyCity raised concerns about the potential suspension of its casino license in New Zealand. The company’s subsidiary, SkyCity Casino Management Limited, is currently facing the possibility of a suspension, and a decision on the matter is pending.
SkyCity has faced a challenging year, including legal and compliance issues in Australia, with federal proceedings being brought against SkyCity by Australia’s Transaction Reports and Analysis Centre regarding anti-money laundering (AML) failings at its Adelaide property. In response, the company has conducted reviews and made provisions for potential civil penalties.
On the organizational front, SkyCity announced that its chief executive, Michael Ahearne, will be stepping down in March 2024. Ahearne, who has led the company since November 2020, will be returning to Europe. The company has initiated the process to identify a replacement for the CEO role. These developments add to the uncertainty surrounding SkyCity’s financial outlook for FY24.