Operator News
New Zealand – Table gaming brings slight growth to SkyCity as slots are hit by ‘challenging environment’
By Phil - 22 February 2024
New Zealand casino group SkyCity Entertainment has reported a ‘resilient performance in challenging economic environment’ over the last six months with revenue coming in at $490.2m, up 0.6 per cent from last year.
Chief Executive Officer, Michael Ahearne, said: “The challenging economic climate impacted our business this half, particularly in domestic Electronic Gaming Machine (EGM) revenues. Pleasingly, our hospitality businesses and table games in Auckland have performed well. However, we also see ongoing cost inflation in addition to our further investment in compliance activities.”
Visitation trends have been positive across SkyCity’s properties with 2.5 million people visiting the Auckland property, which was up eight per cent on the same period last year and underpinned the improvement in revenue across the hospitality businesses, including the Sky Tower.
The recovery in Auckland table games has continued, reflecting higher opening hours as labour constraints have eased. Over the period, table games opening hours were 17 per cent higher than the prior period. EGM revenues were lower than the prior year driven by lower customer spend levels.
Food and beverage growth was supported by the ongoing refreshment programme which saw the opening of a number of new offerings since the prior period, including Cassia, Metita and SkyBar.
“Cassia, Metita and SkyBar have been great additions to the Auckland precinct over the past six months. It is wonderful to welcome Michael Meredith and Sid and Chand Sahrawat to our already amazing line-up of outlets,” said Mr Ahearne.
Auckland hotel revenue growth was driven by a significant improvement in occupancy rates from just over 77 per cent in 1H23 to 87.5 per cent in the current period. The Sky Tower recorded a 31 per cent increase in visitation over the prior period.
Auckland’s overall EBITDA margin was c40% and reflected both a change in the revenue mix and a higher cost base, mainly due to additional staffing levels and general inflation.
The Hamilton property saw an impact across all of its revenue lines due to the challenging economic environment. Encouragingly, visitation to the property grew 5.2 per cent over the prior period, but there was a reduction in spend per person across both the gaming and non-gaming business segments.
In Queenstown, the overall reduction in gaming revenue was largely driven by lower premium play during the half. SkyCity has commenced the process for the renewal of the Queenstown casino venue licence to extend the licence for a further period of 15 years from December 2025. SkyCity is also continuing with the process to exit the Wharf casino venue licence and property lease.
The SkyCity Adelaide business continues to be impacted by a challenging operating environment with revenues and profitability declining over the six-month period. Underlying EBITDA of $16.9m was 10 per cent lower than the same period last year. Although Adelaide gaming revenues declined, non-gaming revenues increased over the period. The Adelaide business has implemented changes in its cost base to reflect the more challenging operating environment.
The casino and gaming industry has continued to see increased levels of scrutiny across Australia and New Zealand.
“Our compliance and uplift activities remain the key priority for the Board and management team as we focus on continuous improvement,” said Mr Ahearne.
SkyCity will engage constructively with its regulators with a view to resolving the current regulatory matters expeditiously, particularly with the Department of Internal Affairs in regard to its application to temporarily suspend SkyCity’s New Zealand casino operator’s licence under the Gambling Act 2003 and the civil penalty proceedings recently filed in the High Court under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
As previously announced, SkyCity Adelaide and AUSTRAC have jointly informed the Federal Court that the parties have come to an agreement in relation to the contraventions that SkyCity Adelaide will admit in the AUSTRAC civil penalty proceedings and the amount of a civil penalty they will jointly propose as appropriate in the circumstances, subject to finalisation of a Statement of Agreed Facts and Admissions.
In Adelaide, Kroll was appointed as the independent expert in August 2023 in relation to SkyCity Adelaide’s AML/CTF and host responsibility programmes and SkyCity Adelaide is advancing the Programme of Work that will be approved by the South Australian Liquor and Gambling Commissioner and monitored by Kroll.
In New Zealand, SkyCity has recently updated its Host Responsibility Programmes. The updated programmes were approved by the Gambling Commission and include a commitment to implement mandatory carded play across SkyCity’s New Zealand properties by July 2025. A project is underway to implement mandatory carded play with dedicated staff in place.
“We have a lot to look forward to over the next year. Horizon by SkyCity, our new 5-star hotel in Auckland, is planned to open in April 2024. Along with the opening of Horizon by SkyCity, we will also see the return of The Grill restaurant a favourite of both Kiwis and visitors alike.
“We look forward to the New Zealand International Convention Centre being open and operational in 2025. The international and local demand for conference bookings continues,” said Mr Ahearne.
SkyCity confirms its previous FY24 earnings guidance provided to the market on 8 December 2023 of Group EBITDA of between $290 million and $310m and underlying Group NPAT of between $125mand $135m.
Reflecting on his time as Chief Executive Officer, Mr Ahearne said, “Having been CEO of SkyCity and having the opportunity to live in New Zealand for the last few years has been a great privilege. I want to thank all the SkyCity team who have supported me and helped make this a great business.”
