SkyCity Entertainment Walks Back Revenue Forecast, Could See Drop in Earnings

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New Zealand-based casino operator SkyCity Entertainment has announced that it anticipates its full-year operating earnings for the fiscal year to either remain stagnant or decrease compared to last year. This is a step backward from earlier guidance that projected revenue improvements.

The facade of the SkyCity Auckland casino in New Zealand. SkyCity Entertainment has lowered its revenue forecast for fiscal year 2024. (Image: Stuff)

The company, which owns casinos in New Zealand and Australia, attributes this outlook to diminished revenue in both. This is coupled with uncertainties surrounding the repossession of its parking garages after an agreement with Macquarie Group fell through.

SkyCity now forecasts normalized earnings before tax for fiscal year 2024 to fall between NZD290 million and NZD310 million (US$178.3 million and $190.58 million). Last year’s figure was NZD310 million, and the latest update contradicts the company’s October report.

That had hinted at a possible, albeit slight, increase. This past August, SkyCity reported a 45% year-on-year increase in revenue for the fiscal year ending June 2023.

Profits Slip As Gamblers Step Away

SkyCity said in a filing with the New Zealand Stock Exchange that it also predicts an after-tax profit between NZD125 million and NZD135 million (US$76.85 million and $83 million). This is a noticeable decline from the NZD138.8 million (US$85 million) from 2022.

The driving factors behind this downward adjustment in earnings guidance include a drop in revenue from electronic gaming machines at its New Zealand properties. SkyCity attributes this decline to ongoing “cost-of-living pressures and economic uncertainties” that are forcing changes in discretionary spending habits.

Additionally, the Adelaide casino operated by SkyCity will likely experience lower revenue due to “legal and compliance cost pressures.” The company is now scrutinizing the casino’s books in response to these challenges.

SkyCity also disclosed increased investments in its iGaming operations, which it hosts in Malta. New Zealand still doesn’t have a legal online gaming regime, so SkyCity went out of the country to tap into the growing market.

Notably, the forecast does not factor in the possibility of a suspension of its New Zealand license. The company is currently under investigation by the New Zealand Gambling Commission for allegedly breaking responsible gambling regulations.

Additionally, the company faces potential significant penalties in Australia. The Australian Transaction Reports and Analysis Centre (AUSTRAC) is still investigating its Adelaide casino for reported violations of Australia’s anti-money laundering regulations.

SkyCity Stock Follows the Trend

Over the past 12 months, the company’s stock price has continued to fall – the only bright spot was the August revenue announcement. In December of last year, the stock was NZD2,660 (US$1,635.37) and it hasn’t reached that price again since then.

SkyCity has witnessed a steady decline in its stock price, although it also saw a few high points. The most recent one was on August 31, when it hit a five-month high of NZD2,370 (US$1,457.08). Immediately after that, however, it dropped to NZD2,020 (US$1,241.90).

On November 22, the stock hit a new low when it bottomed out at NZD1,720 (US$1,056.46). It has regained some investor confidence since then, although it closed at NZD1,790 (US$1,100.49) today.

The highest point it has been in the past two years was NZD3,200 (US$1,967.36), which it reached on December 9, 2021.

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