Threats to temporarily suspend SkyCity’s casino licence at the start of Gambling Harm Awareness Week have spooked investors, with the bombshell announcement wiping a quarter of a billion dollars off the company’s market value.
The shock hammered the shares, which immediately fell 23c, or 9.9 per cent, to $2.10 when the market opened, then sunk to $1.99, wiping off around $260 million. The business had a $1.7 billion market cap before trading today, and by lunchtime that had shrunk to $1.51b.
Analysts expressed surprise at several issues, with one noting today marked the start of Gambling Harm Awareness Week, due to finish on Sunday.
A SkyCity spokesman said the company disclosed to the market information about the application promptly and without delay as per NZX rules.
“We didn’t know about the DIA’s application at the time of the annual results.”
Jarden analyst Adrian Albon said the issue was not so much the amount of money the casino giant might lose if the licence was temporarily suspended.
“They are trying to clean up their past behaviour. It’s not so much suspension of their licence, but the broader contagion of industry reviews,” Albon said, referring also to Australian investigations the business is facing as well.
Just when the business was “getting some momentum, these legacy issues flare up”, Albon said, calling the situation disappointing.
He was referring to the company’s excellent annual result last month, where last year’s loss turned into a profit, although the business acknowledged a “softer recovery” because electronic gaming revenue was still down on what it was pre-pandemic.
Revenue rose from last year’s $639m to $926.2m and Ebit from $96m to $165.9m, with dividends resuming at 12cps.
He estimated a $10m to $20m one-off hit to earnings if the licence was suspended for 10 days.
“[The] bigger issue we see, however, is an NZ public spotlight on heightened regulatory process and compliance over a period where SkyCity was trying to manage potential contagion risks from Australian industry reviews and Australian Transaction Reports and Analysis Centre fines (still in progress) to its NZ operations.”
Matt Goodson, managing director of Salt Funds, said the market was concerned about the possible long-term impact of the move.
“The concern, obviously, is not so much any temporary suspension of the licence if it goes forward,” Goodson said.
“It’s what it signals in terms of the Department of Internal Affairs’ attitude to SkyCity, and [whether there are] other issues that will come out in the wash.”
A third analyst said the DIA move was unexpected, despite what’s going on in Australia with the Adelaide casino.
The DIA has now referred the New Zealand matter to the Gambling Commission, which will decide whether to make an order to suspend the casino operator’s licence and, if so, for how long. A decision may not be forthcoming for months, the statement said.
The application was made under the New Zealand Gambling Act 2003 after a complaint last February to the department by a former customer who gambled at the Auckland casino from August 2017 to February 2021.
The secretary said the casino business did not comply with requirements in its Auckland host responsibility programme relating to the detection of incidences of continuous play by the customer.
John Crocker, national secretary of Unite Union - with around 700 members at SkyCity - and union organiser Mike Treen went to a meeting with SkyCity’s HR people.
“Our role is to ensure that the workers are not disadvantaged in this process. If they can’t gamble for 10 days, we want to make sure none of the workers miss out,” Crocker said of a potential 10-day suspension.
The company said its objectives were to prevent the onset of gambling or alcohol-related harm, facilitate responsible gambling, provide effective staff training, a safe gambling environment and identify problem gamblers.
On August 14, the company provided $49m in its accounts to cover a civil court penalty over its Adelaide casino’s alleged anti-money laundering failures. That case is yet to be heard in the Federal Court.
In its investor presentation on August 23, the company said “engagement with DIA continues, including scheduled audit of anti-money laundering function”. On compliance, it said it had 84 employees across the group working in the anti-money laundering and host responsibility departments, supported by frontline operations.
Compliance costs across the group of $18m included one-off enhancement and legal costs of $10m. A new chief risk officer role was created to lead risk, anti-money laundering and host responsibility functions.
Carolyn Kidd was appointed to that role last July, according to her LinkedIn profile. She previously worked with insurers and banks, most recently Westpac.
SkyCity’s investor presentation said facial recognition technology was introduced at the main Auckland gaming site’s ATMs and would shortly go into Hamilton. A dedicated host responsibility room, Te Whare Haumaru, was opened in Auckland for customer education and support.
Patron scan technology trials were ongoing in Auckland’s main casino entrance to help find minors and those with false IDs. New responsible gambling manager and host responsibility compliance manager roles had been created.
The company employs more than 4500 people in New Zealand and in Adelaide. It took on an extra 669 staff in the past year: the food and beverage area got 440 extra people, gaming 100 more, and hotels and the tower gained 74 more staff.
Facial recognition technology has run in Auckland for years and is about to go into Hamilton. Ahearne told the Herald last month that new, more sophisticated versions would be installed above ATM machines within casinos.
“The technology has advanced over the years. We brought it in to track people coming in at the first stage, but now it monitors individual behaviours on the gaming floors,” Ahearne said at the time.
SkyCity used Guardian facial recognition technology from Hamilton’s Torutek “for recognising persons of interest as they enter and move around casinos and gaming locations”.
That was aimed at detecting people with gambling addictions:
“It’s been very helpful to us. We were excited to be able to partner with a local company,” Ahearne said in August.
Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.