Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SkyCity Entertainment Group Ltd (ASX:SKC, Financial) maintained strong customer visitation across its properties, including a welcome increase in international tourists to Auckland.
- The company successfully refinanced part of its debt facilities, reaffirming its triple-B minus credit rating by S&P Global Ratings.
- The Horizon by SkyCity hotel opened on August 1, 2024, adding a significant asset to the Auckland precinct.
- SkyCity Entertainment Group Ltd (ASX:SKC) is making progress on its transformation program, including a complete refresh of the board and the creation of a dedicated Risk and Compliance Committee.
- The company is actively investing in its online gaming capability and is encouraged by the New Zealand government's recent announcement regarding potential regulation of the market.
Negative Points
- SkyCity Entertainment Group Ltd (ASX:SKC) reported an 8% decline in underlying EBITDA to around $277 million due to a challenging economic environment and a change in revenue mix.
- The company decided not to pay a final dividend for the financial year 2024, reflecting a cautious approach given the current economic conditions.
- The reported net impact was a loss of just over $143 million, including the impact of several accounting items.
- SkyCity Entertainment Group Ltd (ASX:SKC) faces ongoing regulatory challenges, including a $67 million AUD penalty for historical noncompliance with Australian AML and CFT laws.
- The implementation of mandatory carded play is expected to have a 15% to 20% impact on uncarded gaming revenue, adding uncertainty to future financial performance.
Q & A Highlights
Q: What is the expected impact of mandatory carded play on revenue, and will pre-commitment limits be implemented?
A: (Jason Walbridge, CEO) Mandatory carded play is part of our transformation program to better care for customers by monitoring their playtime. (Callum Mallett, COO, New Zealand) We already offer pre-commitment options, and we are working with regulators and technology providers to ensure machines won't work without a card and will disable at required times. The review of the $5,000 daily cash limit in Adelaide is ongoing and expected to complete in the next month or two.
Q: How has the win per unit per day for Auckland tracked, and what is the outlook?
A: (Callum Mallett, COO, New Zealand) We have seen consistency in the last few months, despite the earlier benefit from international tourism. We expect gradual improvement moving into Christmas, but not a quick turnaround.
Q: What is the sustainable EBITDA margin for Auckland, considering upcoming changes?
A: (Callum Mallett, COO, New Zealand) We target a mid to high 30s margin, though it will fluctuate with the impact of mandatory carded play and other changes. The NZICC will have a low margin, but we expect overall business benefits from increased visitation.
Q: What is the outlook for Adelaide's performance and regulatory proceedings?
A: (Callum Mallett, COO, New Zealand) Adelaide's business is rebased, particularly around tables. We have made cost reductions and are focused on regulatory advancements. (Jason Walbridge, CEO) We are executing a program of work submitted to the CBS Commissioner and expect improved business focus with recent management changes.
Q: Can you clarify the expected revenue reduction from mandatory carded play and strategies to mitigate it?
A: (Jason Walbridge, CEO) The 15-20% reduction is based on current uncarded play revenue. We are focused on customer onboarding to ensure a smooth transition. Our higher initial carded base and competitive landscape in New Zealand versus Australia also factor into our assumptions.
Q: Why introduce mandatory carded play in Adelaide, and what is the rationale?
A: (Jason Walbridge, CEO) Introducing mandatory carded play in Adelaide is part of our commitment to responsible hosting and improving our capabilities in anti-money laundering and customer care.
Q: What is the expected regulatory framework for online gaming in New Zealand?
A: (Jason Walbridge, CEO) We are encouraged by the government's recent announcement and expect more details soon. We advocate for fewer operators, strict compliance, and limited advertising to ensure a fair and regulated market.
Q: How competitive will the auction process for online gaming licenses be, and who are the key competitors?
A: (Jason Walbridge, CEO) The structure of the auction process is not yet detailed, so it's hard to gauge competitiveness. We advocate for a strict regulatory regime to limit the number of compliant operators.
Q: What are the key priorities for SkyCity's transformation program?
A: (Jason Walbridge, CEO) Key priorities include embedding a risk management framework, establishing a culture shift program, and implementing mandatory carded play. We aim to reduce risk and complexity while enhancing our regulatory compliance.
Q: What is the outlook for SkyCity's financial year 2025?
A: (Jason Walbridge, CEO) We reiterate our guidance for underlying group EBITDA of between $245 million and $265 million. We do not expect to pay a dividend for FY 2025, focusing on maintaining a conservative balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
