Troubled SkyCity records major loss
SkyCity Entertainment Group has reported a nearly 2000 per cent decrease in profit amid an ongoing investigation into whether the group is suitable to hold South Australia’s only casino licence.
SkyCity, which runs five casinos across Australia, New Zealand and online, recorded a net loss of $130.8 million in the 12 months to June 30, a 1897.4 per cent decrease from the previous report.
The group said this loss was due to “significant accounting adjustments” including an $86.2 million impairment to SkyCity Adelaide assets and a $118.3 million tax adjustment following New Zealand tax legislation changes.
Underlying group net profit after tax (NPAT) was down 7.2 per cent to $112.4 million, while underlying revenue saw a 0.3 per cent increase to $875.6 million, $664.0 million of which was attributed to gaming.
Underlying group EBITDA was down 8 per cent to $253.5 million and attributed to “a change in revenue mix and ongoing investment” in the business.
SkyCity Adelaide recorded a total underlying revenue of $234.7 million in a 4.2 per cent decrease, with $170.9 million being gaming revenue. The casino saw $182.7 million of expenses in FY24, leaving earnings before interest and tax (EBIT) at $6.8 million, a 214.7 per cent increase from FY23.
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SkyCity Adelaide undertook a value assessment during the financial year which led to an $86.2 million impairment being recognised. The impairment related to expected impacts of Mandatory Carded Play implementation and legal costs in ongoing proceedings.
“SkyCity is coming off a very challenging financial year, with the combination of the soft economy, cost-of-living-pressures in both New Zealand and Adelaide, and responding to various regulatory matters,” CEO Jason Walbridge said.
In May SkyCity suspended the final dividend for FY24, as well as both dividends for FY25. It said dividends were not expected to resume until FY26.
“We are acutely aware that our financial results and share price performance are not welcome developments for shareholders,” SkyCity board chair Julian Cook said.
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“It is clear that historically SkyCity’s focus, resources and investment have fallen short… SkyCity has failed to meet the standards expected of us, and we are rightly being held to account for them.”
SkyCity has been involved in a number of legal proceedings in South Australia in recent years, having recently launched an appeal in the High Court regarding a finding that gaming machine credits arising from loyalty point conversion should be included in gaming revenue when calculating casino duty.
SkyCity Adelaide said the judgement meant it could be liable for an estimated $13 million of additional casino tax, as well as a further $20 million in penalty interest. The ongoing appeal could see the $20 million payment reduced to $2 million.
In a separate South Australian matter, SkyCity paid a $67 million civil penalty payment following a Federal Court finding that its anti-money laundering and counter-terrorism financing programs failed to meet legislative requirements.
Former Supreme Court Judge Brian Martin KC is currently investigating SkyCity Adelaide’s suitability to hold a casino licence in South Australia, with a determination expected by December 31 2024.
Cook said “historical shortcomings” could be summarised as “insufficient importance placed on compliance within the business, lack of investment in systems and people to support this, and a lack of capability and expertise in these areas”.
“This makes for uncomfortable reading, but our regulators, shareholders, customers and wider stakeholders need to have confidence that we fully understand the nature of the issues which need to be fixed.”
The SkyCity group reported $2.5 billion of total assets as at June 30, with liabilities leaving net assets at $1.2 billion.
At the time of writing SkyCity’s share price had dropped 1.72 per cent since the market opened, to $1.42.
