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SkyCity Entertainment Group turnaround: Profit up 167%

Anne Gibson, NZ Herald,
Publish Date
Wed, 15 Feb 2023, 9:37am
SkyCity's Sky Tower celebrating 2023's arrival. Photo / Dean Purcell
SkyCity's Sky Tower celebrating 2023's arrival. Photo / Dean Purcell

SkyCity Entertainment Group turnaround: Profit up 167%

Anne Gibson, NZ Herald,
Publish Date
Wed, 15 Feb 2023, 9:37am

SkyCity Entertainment Group pushed its previous $33.7m million interim loss into a $22.8m profit when its operations traded fully after pandemic lockdowns were relaxed.

The Auckland-headquartered company has reported net profit after tax for the December 31, 2022 half-year after tourism returned and casinos could operate once again.

Revenue rose 60 per cent from $289.8m in HY22 to $462.6m in HY23.

The company said its latest result was in line with pre-Covid performance levels.

It noted more New Zealanders visiting and a recovery in the tourism sector.

The NZ International Convention Centre and Horizon Hotel projects were progressing well, the company said.

The hotel is due to be finished next year and the convention centre a year later “with strong pipeline of international demand”.

The company is facing charges that it allowed dozens of gamblers into its Adelaide casino to launder almost A$4b over six years.

SkyCity has acknowledged that court action today and said it could be subject to a civil penalty “which may be material”.

Australian media say fines of up to $2b could be imposed.

Today, the company said the investigation started in June 2021 and concluded with the December 7 announcement that charges were being filed.

“Responses to the allegations [are] currently under consideration with expert advisor support. Resolution of Austrac civil proceedings could potentially take one to two years,” the company said today.

Adelaide had traded in a “robust” way, benefiting from market share growth and competitive offerings.

Michael Ahearne, SkyCity chief executive. Photo / Peter Meecham

Michael Ahearne, SkyCity chief executive. Photo / Peter Meecham

Michael Ahearne, chief executive, said today: “I’m very proud of the SkyCity team, who have worked really hard to deliver exceptional customer service in what has been a challenging operating environment.”

The company had seen a strong recovery across its business operations, “following several years where its land-based operations were significantly impacted by Covid”, it said.

Group reported and normalised results were up significantly over the prior comparable period reflecting strong performances in the company’s domestic gaming, hospitality and tourism businesses following the return of international tourism, especially to Auckland.

On Thursday last week, Forsyth Barr analysts Andy Bowley and Mark Robertson forecast strong operating momentum in today’s result.

“Its 1Q23 trading update highlighted positive early signs in the gaming recovery had been maintained.

“We expect 2Q23 has been more of the same, aided by a full cruise ship summer season in its key market, Auckland, and a progressive recovery in hospitality earning,” the analysts forecast.

Strong electronic gaming machine performance in Auckland and Hamilton was expected.

Adelaide’s ebitda contribution would be suppressed by an increase in costs, particularly in regulatory compliance, they said.

“We expect SkyCity’s hotels to have benefitted from elevated industry yields and for hospitality to provide its first material contribution since Covid,” Bowley and Robertson said.

On February 7, the company announced how one Australian regulator was waiting for another before deciding what action to take against SkyCity Adelaide, facing A$4 billion in money laundering charges.

Timetabling of regulator moves against its Australian operation are being set.

First, the resolution of the Australian Transaction Reports and Analysis Centre’s court action against the casino and gaming giant has to be heard.

Then, South Australian gaming regulator Consumer and Business Services will decide what to do, the company said.

“In the event Austrac’s claim was to be accepted in whole or in part by the Federal Court of Australia, SkyCity Adelaide may be subject to a civil penalty to be imposed by the court which may be material. SkyCity understands that Austrac has not yet identified the level of penalty it intends to seek,” the company said in December.

Austrac is suing the Australian arm of the business for “serious noncompliance” with anti-money laundering laws and failing to monitor telltale signs of money laundering.

That is Austrac’s third live civil court case against a casino group, after cases against Australia’s Crown Resorts and Star Entertainment.

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 in December.

Customers posing a high money laundering or terrorism financing risk engaged in big-time cash transactions, allegedly using cash in plastic bags, garbage bags, dirty notes and even cash that appeared to have been buried.

Shares have been trading around $2.45, down 17 per cent annually, giving a market capitalisation of $1.86b.

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