SkyCity Entertainment Group’s Adelaide casino will be forced to pay outstanding casino duty totalling AU$13 million (US$8.5 million) after the South Australian Court of Appeal ruled that loyalty points converted by customers and used as credits on gaming machines must be included in gaming revenue for the purpose of calculating casino duty.
According to details filed by SkyCity, the case followed an agreement between the company and the Treasurer to seek declaratory relief from the South Australian Courts as to the proper construction of the state’s Casino Duty Agreement to determine the correct interpretation on both issues. The two parties had previously disagreed on such interpretation.
The ruling found both that credits on gaming machines arising from the conversion of loyalty points must constitute gaming revenue and that loyalty points earned by customers for gaming machine play may not be deducted from gaming revenue.
The resulting AU$13 million back-payment relates to deductions for loyalty points made from January 2014 to January 2024.
However, SkyCity said the court has ruled in its favor on the interpretation of an interest clause in the Casino Duty Agreement, leaving the door open for SkyCity Adelaide to argue the clause is unenforceable as a penalty.
“As a result, the question of the applicable interest rate for outstanding duty, and whether the contractual interest provision is enforceable, remains to be determined by a single Judge of the Supreme Court at a later date,” the company explained.
Should the Supreme Court’s decision be unfavurable to SkyCity Adelaide, the company may be obliged to pay penalty interest on the additional casino duty of up to AU$20 million (US$13.1 million), it added.
“SkyCity Adelaide is currently considering its position in relation to the Court of Appeal’s judgment and the impact on the current structure of its customer loyalty programme,” the company explained.
Providing an update to its earnings guidance, revealing the expected impact of the Court of Appeal’s ruling on SkyCity’s underlying Group EBITDA in FY24 will be around AU$2 million (US$1.3 million), with the balance of the additional casino duty payable for previous periods to be provided for as a one-off cost.
SkyCity’s underlying FY24 Group EBITDA is still expected to be between NZ$290 million and NZ$310 million (US$180 million and US$192 million) and underlying FY24 Group NPAT is expected to be between NZ$125 million and NZ$135 million (US$77.5 million and US$83.7 million).
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