SkyCity delivers strong first half result, but says an Austrac court action won’t be resolved soon

SkyCity Entertainment Group has delivered a robust first half profit, but warns the potential downside from an ongoing Austrac money laundering case is unquantifiable.

SkyCity’s legal woes surround its dealings with high rolling gamblers.

SkyCity Entertainment Group has warned it will take “one to two years” to resolve the proceedings financial crimes regulator Austrac has brought against it for “serious and systemic noncompliance” with Australia’s anti-money laundering and counter-terrorism financing laws.

The company also said in its first half financial report that given Austrac has alleged SkyCity contravened the relevant Act on “an innumerate number of occasions, it is not possible to determine a theoretical maximum penalty for the alleged breaches’’.

While reporting a 167 per cent jump in first half net profit to $NZ22.8m on Wednesday, the trans-Tasman casino operator’s chief executive Michael Aherne said the company was working hard on its compliance regime, including creating a new position of chief risk officer, and working with regulators at the state and federal level.

“SkyCity is carefully considering the allegations in Austrac’s statement of claim, but there is still considerable work required to complete this process and it could potentially take one to two years to resolve the proceedings,” Mr Aherne said.

“SkyCity will continue to co-operate with our regulators and our priority remains on ensuring that our compliance enhancement programs meet the expectations of our regulators and are embedded deep into the organisation.

“We’ve previously disclosed any associated penalties could have a significant financial and reputational impact on SkyCity.’’

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Austrac in December last year filed a statement of claim in the Australian federal court alleging that more than $4bn was gambled through the SkyCity Adelaide casino by 59 suspicious customers over six years, including individuals casino staff knew were facing money laundering and drug trafficking charges.

The claim, which runs to more than 800 pages, is seeking penalties for 124 alleged breaches over six years, each of which carries a maximum penalty of between $18m and $22.2m.

A state-level investigation into whether the company is fit to hold a casino license, which started mid-last year, was recently put on hold while the federal court matter plays out.

Mr Aherne said the company was progressing a number of initiatives proactively to enhance its anti-money laundering protections, including instituting a cash limit of $5000 per day at the Adelaide casino.

Broadly across the group, SkyCity had a strong half, while demand continues to exceed supply, with the group looking to employ a significant number of new staff.

“Retention and recruitment of our people has been a significant priority for the group and while we’ve made a lot of progress on recruitment, there are still a large number of vacancies across the group, approximately 450 positions, particularly in Auckland,’’ Mr Aherne said.

SkyCity’s revenue from continuing operations was up 59.6 per cent to $NZ462.6m for the half, while net profit was up 167.8 per cent to $NZ22.8m.

The normalised net profit, adjusting for the inherent volatility of the sector and one offs, was $NZ73.1m, up 474.3 per cent.

Normalised earnings for the company’s Auckland operations, which also include tourist attractions such as the Sky Tower, increased from $NZ14.8m to $NZ128m.

SkyCity Adelaide more than doubled its pre-tax earnings to $NZ22.8m, up from $NZ10.2m, with a strong performance operationally offset against “significant cost pressures, with increases largely arising from increased compliance and governance, professional advisory services and property utilities’’.

The international business segment in Adelaide delivered earnings of $NZ1.9m, up from a $NZ4.4m loss in the previous corresponding period, with the company saying international border closures were still having a significant effect on visitation and “a material recovery (is) not anticipated in the near term given ongoing uncertainty’’.

SkyCity said it is expecting EBITDA to for the full year to track ahead of the last pre-Covid full year in FY19, “With estimates ranging from $NZ305m to $NZ320m excluding upside from integration of the Auckland carpark’’.

The company said it saw “no indications yet of a recessionary environment although (the) group remains cautious’’.

Increased investment in compliance as well as new staff hires would also lead to an increase in costs.

SkyCity will pay a NZ6c per share dividend on March 17, with a record date of March 3.

SkyCity’s Australian-listed shares were 2.2 per cent higher in morning trade at $2.28.

Originally published as SkyCity delivers strong first half result, but says an Austrac court action won’t be resolved soon