SkyCity Entertainment withdraws sales forecast, profits likely to fall
New Zealand casino operator SkyCity Entertainment expects its full-year operating profit to be flat or down from last year. That was down from previous forecasts predicting improved sales.
The company, which owns casinos in New Zealand and Australia, attributed the outlook to falling revenue in both countries. There is uncertainty over the repossession of its car park following an agreement with Macquarie Group.
SkyCity currently forecasts normalized pre-tax profit for the 2024 financial year to be in the range of NZ$290 million to NZ$310 million ($178.3 million to $190.58 million). Last year's figure was NZ$310 million, and the latest update contradicts the company's October report, which suggested growth was likely, albeit modest.
Last August, SkyCity reported 45% year-on-year revenue growth for the year to June 2023.
Profits drop as players exit
SkyCity said in a filing to the New Zealand Stock Exchange that it expected profit after tax to be between NZ$125 million and NZ$135 million ($76.85 million to $83 million). This is a significant decrease from NZ$138.8 million (US$85 million) in 2022.
Driving factors for the lower earnings guidance include a decline in video game revenue in New Zealand. SkyCity attributed the decline to ongoing "cost of living pressures and economic uncertainty" which are driving changes in discretionary spending habits.
Additionally, revenue from the SkyCity-operated Adelaide casino may be reduced due to "legal and compliance cost pressures". To address these challenges, the company is currently auditing the casino's books.
SkyCity also announced an increase in investment in its iGaming business operating in Malta. New Zealand still does not have a legal online gambling system, so SkyCity left the country to tap into the growing market.
In particular, the forecast does not take into account the possibility of New Zealand license suspensions. The company is currently under investigation by the New Zealand Gambling Commission for alleged breaches of responsible gambling regulations.
Additionally, the company could face significant penalties in Australia. The Australian Transaction Reports and Analysis Center (AUSTRAC) is still investigating whether its Adelaide casino breached Australian anti-money laundering regulations.
SkyCity share price follows trend
SkyCity's share price has continued to fall over the past 12 months, with the only bright spot being the August revenue announcement. The stock traded at NZ$2,660 ($1,635.37) in December and has not reached that level since.
SkyCity's share price has fallen steadily, but there have been some peaks. The most recent advance came on August 31, when it hit a five-month high of NZ$2,370 ($1,457.08). It immediately fell to NZ$2,020 ($1,241.90).
The stock hit new lows on Nov. 22, bottoming at NZ$1,720 ($1,056.46). The stock has since regained some confidence among investors, although it closed at NZ$1,790 ($1,100.49) on Friday.
The highest level over the past two years was NZD 3,200 (USD 1,967.36), reached on December 9, 2021.
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Source: www.casino.org
