SkyCity Faces Tough Year Ahead as Earnings Decline Continues

SkyCity Entertainment Group is grappling with another challenging financial year, as revealed during its recent annual meeting. Chief Executive Jason Walbridge informed shareholders that the upcoming financial year, 2026, is projected to be a “trough year” for earnings, continuing a trend that has plagued the company since 2019. Despite a modest improvement in the New Zealand economy, trading results for the first quarter of the new financial year have yet to show signs of recovery.

The difficulties for SkyCity have been profound. Shareholders have witnessed a dramatic decline in the value of their investments, with shares plummeting from over $3.70 to just above $0.70. This decline has been attributed to a series of setbacks, beginning with a catastrophic fire at the nearly completed international conference centre at the Auckland casino, hotel, and entertainment complex.

Financial Outlook and Challenges

During the meeting, Julian Cook, Chairperson of SkyCity, candidly addressed the company’s recent performance. He noted that revenue fell by 5.2%, largely due to the challenging economic conditions in New Zealand. Cook expressed gratitude towards shareholders for their continued patience, emphasizing that the board recognizes the financial struggles faced by investors.

Despite these setbacks, SkyCity reported a modest profit for the 2025 financial year, recovering from a significant loss of $143 million in the previous year. However, the company has not yet reinstated dividends, and shareholders recently endured a discounted $240 million capital raise aimed at strengthening the balance sheet and improving credit ratings.

Cook indicated that dividends would not resume until the company successfully upgraded its credit rating from BBB- to BBB. This upgrade is contingent upon the sale of approximately $200 million in property assets. “We have a programme which will achieve that over the next 12 to 18 months,” he stated, adding that stabilizing earnings is crucial for dividend recommendations in the future.

SkyCity’s operational challenges have also been compounded by failures in anti-money laundering and problem gambling supervision, which have led to regulatory scrutiny in both Australia and New Zealand. Notably, the company faces uncertainty regarding its Adelaide casino, where a threat remains pending against its operations.

Future Prospects and Strategic Developments

In response to inquiries regarding the Adelaide casino, Cook acknowledged that returns from that location have been disappointing but confirmed the company’s commitment to improving its performance rather than divesting. Additionally, he highlighted the need for the renewal of casino licenses in Queenstown in 2027 and Hamilton in 2026.

Looking ahead, Walbridge expressed optimism about the forthcoming opening of the international conference centre in Auckland, which has faced significant delays. The company is currently pursuing $330 million in compensation from Fletcher Building for these setbacks. “We did not take this step lightly, but it is necessary to achieve an outcome on this matter,” Walbridge commented, describing the conference centre as a cornerstone of SkyCity’s growth strategy.

Moreover, the anticipated launch of a regulated online casino market in New Zealand has generated excitement within the company. The government plans to introduce legislation next year to regulate the estimated $700 million spent by New Zealanders on unregulated overseas online casinos. Walbridge expressed a desire for SkyCity to emerge as “the local hero” in the online gaming sector.

As SkyCity navigates this tumultuous landscape, shareholders are left to weigh the company’s potential for recovery against the backdrop of ongoing challenges and regulatory scrutiny. The path forward appears fraught with obstacles, but the leadership remains hopeful for a turnaround in the coming years.