SkyCity Entertainment Group has reported a significant 73% drop in its bottom- line interim profit, primarily due to a downturn in gambling revenue and challenging market conditions. The New Zealand gambling company, which operates casinos and hotels, recorded a net profit of NZ$6.1 million for the half- year ending December 31, 2024, a stark decrease from the NZ$22.5 million reported in the previous corresponding period.
Revenue Decline and Costly Regulatory Adjustments
Group revenue also fell by 5%, from NZ$442.8 million to NZ$422 million, with earnings before interest and taxes (EBIT) down by 22%, from NZ$144.3 million to NZ$113.1 million. This downturn was exacerbated by a 12% drop in Auckland gaming revenue. "We continue to operate in challenging market conditions with subdued consumer confidence," noted CEO Jason Walbridge, highlighting the impact of a five-day closure of their Auckland operations last year.
NZICC Opening Delayed Amid Ongoing Challenges
Additionally, SkyCity has postponed the opening of its New Zealand International Convention Centre (NZICC) to February next year. This delay is attributed to the complex commissioning phase currently underway, with completion expected by June 30, 2025, according to Fletcher Building's managing director Andrew Reding.
Mandatory Carded Play to Enhance Compliance
The financial strain is further compounded by increased regulatory costs and mandatory implementation of carded play, intended to enhance compliance and customer care. This new system requires all customers to use a SkyCity card containing their identity and other relevant information, which tracks their play duration, spending, and prompts breaks. This initiative aligns with similar measures adopted by regional competitors and follows settlements with both Australian and New Zealand regulators over past compliance failures.
Financial Forecast and Strategic Adjustments
SkyCity's revised FY25 guidance anticipates a deferral of majority NZICC pre- opening costs of approximately NZ$11 million into FY26, reflecting ongoing financial management efforts to stabilize the company. Analysts from Forsyth Barr have rated the stock as underperform, citing "structural issues and cyclical challenges" that continue to affect operational performance.
Long-Term Strategy Amid Financial Turbulence
Despite these challenges, SkyCity reported a NZ$143.3 million net loss for the year to June 30, 2024, driven by tough operating conditions and cost-of-living pressures in New Zealand and Australia. The company has suspended dividend payments until 2026 and noted an increase in net debt from NZ$444 million in FY23 to NZ$663 million, following significant capital expenditures including the buy-back of the Auckland car park concession.
Vision for Future Growth and Recovery
Looking ahead, SkyCity is focused on a major transformation program aimed at de-risking the business and ensuring better regulatory compliance. This includes a five-year master plan to monetize select assets, reduce debt, resume dividend payments, and pursue growth opportunities. The company remains committed to playing a significant role in the tourism sector and eagerly anticipates the opening of the NZICC, which is expected to enhance its position in the market.