SkyCity Entertainment Group profit downgrade: pokie, economic slump

SkyCity Entertainment Group has downgraded its full-year profit forecast, blaming reduced revenue from pokie machines and the economic downturn as two of four influencing factors.

Instead of making $310 million Ebitda for the year to June 30, 2024, the company now expects to make $290m to $310m.

The company today said key drivers to this change in earnings guidance were:

• A reduction in electronic gaming machine revenue across the New Zealand sites, reflecting continued cost-of-living pressures and economic uncertainty, impacting discretionary consumer spending;
• A weaker-than-expected performance in the Adelaide property based on a lower revenue outlook with continued legal and compliance cost pressure;
• A delay in settlement of the termination of the Auckland car park concession agreement with MPF Parking NZ (Macquarie), resulting in lower car park earnings;
• Accelerated investment in the group’s New Zealand online gaming operations ahead of potential regulation of that market.

One institutional investor said SkyCity wasn’t alone.

“Today’s profit downgrade adds to a growing list of companies noting weakness in domestic activity,” the market source said.

“It adds to evidence from other listed consumer-facing companies over the last few months. Air New Zealand has been talking about softness over the last quarter with the trend continuing to accelerate in recent weeks,” he added.

Retail mall owner Kiwi Property had also talked about mall traffic dropping during the last six weeks, the investor noted.

SkyCity said today it expected group normalised net profit after tax for the 2024 year of $125m to $135m.

“This reflects the lower level of financing costs due to the delay in settlement of the Auckland car park concession agreement, which partially offsets the lower earnings of the Auckland car park assets,” the company said.

It will give more details in interim result release in February.

The updated group normalised Ebitda and profit guidance did not reflect the impact of any potential temporary suspension of SkyCity Casino Management’s casino operator’s licence in New Zealand.

The Gambling Commission is considering a suspension after the Department of Internal Affairs made an application in September for a period “in the range of 10 days”, the business said.

Due to uncertainty around the potential adjustments required as part of SkyCity’s accounting processes, SkyCity is unable to provide an update for FY24 reported statutory results, it said.

Shares are trading around 41.87, giving a market capitalisation of $1.4 billion, down 30 per cent annually.

Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.