Investors are ditching SkyCity’s stock as its gambling business becomes unpalatable for many. Its chairman addresses the major issues putting pressure on its price. Video / NZ Herald
Sky City Entertainment highlighted the regulatory and compliance issues facing the company when presenting a half-year result that showed a dip in statutory and underlying net profit.
Revenue for the six months to December 31, 2023 rose from $487m to $490m but underlying net profit after tax fell8.5 per cent from $72.8m to $66.5m.
Reported net profit edged down 1.3 per cent at $22.5m.
The casino operator faces action from regulators here and in Australia.
On the Australian Transaction Reports and Analysis action against SkyCity Adelaide, a penalty hearing is set for June 7, the company said. Previously the company has provided $49 million for a penalty in that action.
SkyCity Adelaide allegedly allowed customers to spend “dirty money” that appeared to have been wet and previously buried, according to documents lodged in the Federal Court of Australia. Customers posing a high money-laundering or terrorism-financing risk engaged in big-time cash transactions, allegedly using cash in plastic bags, garbage bags, cash bundled together with rubber bands or irregular straps, dirty notes and even cash that appeared to have been buried.
Riverside, SkyCity Adelaide where the company built a huge new hotel.
The Australian Federal Court “has discretion over the final amount”, SkyCity said on a fine for SkyCity Adelaide.
In this country, mid-April is a focus for action by the Department of Internal Affairs (DIA).
“The DIA’s application to temporarily suspend SkyCity’s New Zealand casino operator’s licence is scheduled to be heard by the Gambling Commission in private in the week of April 15,” the company said.
Separately, new voluntary measures are planned to increase controls on gaming next year. SkyCity said it had “agreed with the DIA/Gambling Commission to implement mandatory carded play across all New Zealand properties by July 2025″.
Carded play is where people buy a card loaded up with money from the casino to use on slot machines instead of using their own cash. These cards are also tied to the casino’s loyalty scheme. SkyCity runs carded play via its premier rewards card system.
“Mandatory carded play will mean that customers must use their card to play the electronic gaming machines. The machines won’t work unless they do. Customers will still be able to use cash but this means their play will be monitored, allowing us to enhance our capabilities from host responsibility and financial crime perspectives,” SkyCity says.
Callum Mallett, to be appointed interim chief executive when Michael Ahearne leaves next month, said the Auckland casino already had around 70 per cent carded play.
Callum Mallett will be interim chief executive of SkyCity. Photo / SkyCity Entertainment Group
Julie Amey, chief financial officer, told investors: “The group has continued to ramp up its investment in compliance, with both BAU [business as usual] and on-off compliance cost totalling around $14m in the first half of the financial year which is 47 per cent higher than the prior period.”
Meanwhile, Sky City’s Horizon Hotel won’t now open next month but in April.
Michael Ahearne of SkyCity. Photo / Michael Craig
Asked if he was leaving at a good time, given all the regulatory action, Ahearne said: “Earnings show resilience. However, it’s been a pretty challenging environment we’ve been operating in. Revenue is largely the same but profit is down. In our domestic market, we’ve seen softness in consumer spend particularly in our gaming machine business. We’ve made solid progress on AML and host responsibility to continue to in,vest in compliance capabilities across the organisation.”
Ahearne told the Herald he would finish on March 8 and will leave New Zealand at the end of March.
“I want to take a break and then we’ll see where I go from there.”
Asked about his legacy, Ahearne said: “When I think back, first navigating the organisation through Covid and I think we’ve done that well. The work in compliance and AML and host responsibility has been very significant. We now have a digital business. It’s awesome to see the NZICC and Horizon Hotel. The NZICC will open in 2025.”
Mallett said: “I’ll be working with the team, looking at those focus areas Michael has talked about. It’s about navigating what is a tricky environment. We want to incorporate Horizon Hotel well with our precinct. We fully appreciate the responsibility we have to Auckland and New Zealand that when NZICC opens, it has a great impact on the city and the rest of New Zealand, so a lot of work there.”
Ahearne thanked 4500 staff here, in Australia and Malta, saying “and they make an incredible contribution”.
SkyCity shares are trading on the NZX up today at $1.90, giving a market cap of $1.4b.
Anne Gibson has been the Herald’s property editor for 24 years, has won many awards, written books and covered property extensively here and overseas.
