SkyCity Entertainment Group today (22 August) reported a NZ$140.4m (£66.0m/€77.5m/US$86.4m) net loss during what it described as a “challenging” 2024.
The operator’s bottom line was hit by tax changes and impairments, as well as financial settlements during the 12 months to 30 June.
In March, the country’s government removed the ability for owners to depreciate commercial buildings with a useful life of 50 years or more for tax purposes.
SkyCity said this effectively reduced the tax base of its New Zealand buildings to nil (from a depreciation perspective) and resulted in a one-off tax expense of NZ$129.4m for the 2024 financial year. It also recorded an NZ$94.3m impairment charge of its SkyCity Adelaide property in Australia.
When it issued the profit warning on 19 August it said underlying EBITDA and net profit after tax were the key metrics for determining the business’ profitability.
“Considerable upheaval” for SkyCity in 2024
Reflecting on the full year, SkyCity chair Julian Cook acknowledged the financial results are not “welcome developments” for shareholders. However, he added these must be seen in the “context of needing to address shortcomings” across the business.
SkyCity faced regulatory action related its anti-money laundering and countering terrorism financing processes (AML/CTF) during the year.
It agreed an AU$67.0m settlement with the Australian Transaction Reports and Analysis Centre (Austrac) for historical failings, after it was notified of potential wrongdoing in 2021. This forms part of a wider investigation into the Australian casino industry.
This also resulted in a NZ$4.2m penalty imposed by New Zealand’s secretary of the department of internal affairs (DIA) over further AML/CTF breaches. These failings also mean SkyCity will next month close its Auckland casino for five days under a temporary licence suspension.
Changes in the C-suite for SkyCity
In addition to this, there have been several changes at the top for SkyCity. Jason Walbridge joined as new CEO, replacing Michael Ahearne, who has left the group. Meanwhile, Julie Amey has joined as chief financial officer and Andrew McPherson joined as chief information officer.
All these developments, Cook said, place SkyCity in a stronger position moving forward.
“The 2024 financial year can be marked as one of considerable upheaval, challenge and change for SkyCity, culminating in some significant internal and external developments,” Cook said. “It is clear historically SkyCity’s focus, resources and investment have fallen short of what was required of the business in meeting our regulatory obligations.
“In short, SkyCity has failed to meet the standards expected of us and we are rightly being held to account. We acknowledge and genuinely apologise for these failings. As a board and executive, we are wholly committed to meeting obligations, caring for our people, customers and communities and delivering appropriate returns.”
Non-gaming growth offsets gaming revenue decline
Taking a closer look at the full-year figures, revenue at SkyCity in 2024 was 0.6% higher year-on-year at NZ$861.0m. In its analysis, SkyCity said growth from non-gaming operations offset a drop in gaming revenue.
Total gaming revenue in 2024 hit NZ$632.2m, down 2.2%. The group noted revenue was lower at both of its Auckland and Adelaide land-based casinos, as well as other gaming operations in New Zealand.
Non-gaming revenue, on the other hand, increased 10.6% to NZ$222.7m. This includes revenue from hotels and conventions, food and beverage, the Sky Tower in Auckland and car parking.
As for online, revenue is generated from the New Zealand offshore online casino it operates out of Malta with GiG. During 2024, revenue fell 39.6% to $9.3m with SkyCity putting this down to increased competition.
Incidentally, New Zealand is yet to legalise online gambling. However, the government in July set the wheels in motion to regulate igaming, with the hope of launching a legal market in 2026. It is expected the market could be worth NZ$500m in its first year.
SkyCity said it remains supportive of future regulation of online casino gaming in New Zealand.
SkyCity counts the cost of tax changes
Looking now to expenses, costs were generally higher across the board. Staff benefits were again the main outgoing at NZ$314.7m, while impairment grew as a result of the Adelaide assets.
In addition, reported EBITDA was down 16.7% year-on-year to NZ$138.2m while underlying EBITDA was 8.0% lower at NZ$277.8m.
After accounting for depreciation, amortisation and finance costs, this left a pre-tax profit of NZ$30.1m, down 41.8%. Then came the heavier tax bill of NZ$173.5m, more than three times the $43.8m SkyCity paid last year. This left a NZ$143.3m net loss after tax, compared to an NZ$8m profit in 2023.
SkyCity also noted the impact of foreign currency translation and hedging reserve costs. As such, it ended the 2024 financial year with a net loss of NZ$140.4m, in contrast to last year’s NZ$2m profit.
On the back of posting its full-year results, shares in SkyCity ended the day 3.7% down on opening price at NZ$1.55 on the New Zealand Stock Exchange earlier today.
“There is much to be excited about at SkyCity as we work hard to deliver an industry-leading, safe entertainment destination that delivers great outcomes for our people, customers, regulators, shareholders, communities and local economies,” Cook concluded.
