Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SkyCity Entertainment Group Ltd (SKYZF) maintained attractive margins at 27%, showcasing business resilience.
• Non-gaming activities contributed close to 30% of overall income, reflecting a strategic balance in revenue streams.
• The company is actively addressing regulatory changes through a multi-year risk transformation program.
• SkyCity is strategically investing in technology, including advancements in AI, to enhance customer experience and operational productivity.
• The opening of the New Zealand International Convention Center in February 2026 is expected to significantly increase visitation and earnings.

Negative Points

• Underlying revenue was down 5% compared to the prior period, primarily due to reduced spend levels at Auckland gaming operations.
• The financial performance was impacted by increased costs from the transformation program in Adelaide.
• The company reported a net profit after tax of only $6 million, affected by interest costs from a casino duty dispute.
• Economic conditions remain challenging, particularly in New Zealand, affecting consumer discretionary spending.
• The company does not expect to pay a dividend for the financial year 2025 due to current earnings outlook.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with SKYZF.

Q: Can you provide an update on the contingent asset related to costs you're hoping to recover from contractors? A: Peter Fredrickson, CFO: We are confident in the amount, which is supported by invoices and costs incurred due to delays. However, we cannot comment on when we might recover this amount.

Q: Is there a risk that the $60 million B3 cost estimate for Adelaide is too light, and how are you managing costs for the convention center given further delays? A: Jason Walbridge, CEO: We have spent significant time understanding the program and resources needed, and we are confident in our cost estimates. Peter Fredrickson, CFO: The February opening date for the NZICC is only a slight delay, and we don't expect significant revenue loss or increased costs.

Q: How are you approaching asset monetization and capital recycling, especially with the potential need for an online license? A: Jason Walbridge, CEO: We have a five-year plan and are considering which assets to monetize. We are preparing for the online license process, but details on the regulatory framework are still pending.

Q: Can you elaborate on the assumptions around the revenue impact of the mandatory card at play? A: Jason Walbridge, CEO: Our assumptions remain unchanged, and we are confident in our ability to provide a smooth sign-up process. Callum Mallett, COO: We expect the enrollment process to be quick and are pleased with the technology and partnerships in place.

Q: How is the risk transformation program in Adelaide progressing, and what are the expected costs? A: Jason Walbridge, CEO: The program is designed to fulfill all obligations under the license, focusing on preventing financial crime and host responsibility. Peter Fredrickson, CFO: We expect to spend $60 million over three years, with $18 million in the current financial year, and these costs will not continue beyond 2027.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.