Economy, hotel delay, Adelaide: SkyCity Entertainment downgraded, dividends suspended

SkyCity has revised down its earnings expectations for the 2024 financial year and suspended dividend payments for two years. The reasons cited were the “difficult” economic situation, delays in the opening of the new Horizon Hotel and problems in Adelaide.

This is the second downgrade of the casino company’s earnings forecast. In December, the company had already revised its earnings forecasts downward due to a decline in revenue from slot machine sales and regulatory compliance costs.

In a statement to the NZX, the company said it now expects “adjusted” earnings before interest, tax, depreciation and amortisation (EBITDA) of $280 million to $285 million for the year to June 2024, up from the previously revised estimate of $290 million to $310 million. SkyCity now expects adjusted group net profit to be between $120 million and $125 million, compared to the previous forecast of $125 million to $135 million.

The company also said it was suspending dividend payments to shareholders until 2026 and noted that it faces a fine of A$67 million (US$73 million) for anti-money laundering violations at its Adelaide casino.

“The Board of SkyCity has decided to suspend dividends for H2 2024 and FY 2025. SkyCity notes that it continues to have adequate liquidity headroom,” it said today.

“This preliminary forecast does not take into account the impact of a potential temporary suspension of SkyCity Casino Management Limited’s casino operating license in New Zealand (as previously communicated by SkyCity to the market on 3 September 2023).

“SkyCity advises that the private hearing on this matter, previously scheduled for the week of 15 April 2024, has been postponed due to scheduling constraints and a new private hearing is scheduled for August 2024.”

The company, which will release its annual results in August, said the key factors influencing the new earnings forecast were:

SkyCity expects to pay a civil penalty of A$67 million next month, noting that the amount is subject to approval by an Australian federal court, which is due tomorrow.

The company said it had also committed approximately $76 million in capital expenditure to complete the NZICC.

The hotel, located on Hobson Street next to the NZ International Convention Centre, was scheduled to open in March but was then postponed to May and has now been rescheduled for August.

Fletcher Construction was awarded the contract to build this hotel and the NZICC.

SkyCity said current trading conditions reflected a difficult economic environment, particularly in Auckland, where the company generates the majority of its revenue.

“SkyCity expects this to continue throughout its 2025 financial year. In addition, financial performance in its 2025 financial year is expected to be impacted by a number of one-off items, including ongoing delays in the completion of the Horizon Hotel, operating costs prior to the opening of the New Zealand International Convention Centre, preparation for online gambling regulation in New Zealand and ongoing risk and compliance enhancement activities at SkyCity Adelaide,” the company said.

SkyCity’s results will be released on August 22. Shares were trading at around $1.73.

Anne Gibson was the Heraldhas been working as a real estate editor for 24 years, has won numerous awards, written books and reported extensively on real estate at home and abroad.