In 2021, Austrac announced that SkyCity Adelaide and some other casino operators in that country were being investigated for non-compliance with legislation designed to counter money laundering and the financing of terrorism.
The following year South Australian state authorities announced they were reviewing whether SkyCity was still a suitable operator to hold a casino licence in Adelaide.
Allbon and Cao cited a worse scenario for others - the potential for A$300m ($327m) of fines which might be owed by ASX-listed casino operator and SkyCity rival, Star Entertainment Group.
The A$50m was potentially conservative when compared to the A$300m factored into Jarden’s Star Entertainment Group estimates for the New South Wales state fine of A$100m ($109m), estimated Queensland state fine which Jardens put at a potential A$100m and estimated Austrac fine of A$100m, which in total equate to around 15 per cent of Star Entertainment Group revenues, the kiwi analysts said.
Star Entertainment Group told the ASX last June it took its anti-money laundering obligations “very seriously and will fully be co-operating with Austrac in relation to its requests for information and documents and the investigation”.
But there was some good news for SkyCity Adelaide. Allbon and Cao wrote: “We also note mitigating features for SkyCity Adelaide distinct against Star Entertainment Group being SkyCity have not been issued any enforcement notice to date, its operations in Adelaide were not using China Union Pay and SkyCity Adelaide didn’t operate a hotel at the time and had much more limited VIP play vs both Star Entertainment Group and Crown.”
Cook told last month’s meeting the company was co-operating fully with the two investigations and said risk management - particularly regulatory compliance - was the single biggest project his board was undertaking.
“We continue to operate with Austrac in relation to its enforcement investigation which commenced in June 2021, into potential serious non-compliance by SkyCity Adelaide,” Cook told the AGM. “The engagement has included the provision of information and documents required by Austrac. We are continuing to respond to a significant number of questions and information requests from Austrac which we are treating very seriously.”
But Cook also reminded shareholders that the 2022 annual report said Austrac hadn’t filed proceedings against the business or indicated whether any enforcement action would occur.
“However, given that Austrac’s enforcement investigating remains ongoing and we have identified certain areas where enhancements to the Adelaide anti-money laundering and counter-terrorism financing programme are required or appropriate, there is a possibility that Austrac could bring enforcement action and any associated penalties could have a significant financial and reputational impact on SkyCity,” Cook told shareholders.
The business was also continuing to co-operate with Brian Martin KC on behalf of Consumer and Business Services in South Australia in relation to the independent review of the Adelaide business announced in July, Cook said.
On a happier note, the Jarden analysts noted how a Covid recovery phase was well under way, with the possibility of dividend payments resuming early next year. They noted the trading update for the latest quarter which they said might indicate shareholders could once again get payouts.
“No mention of when dividends may resume but we think 1Q trading would support an interim dividend in February,” they said in a report headed “SkyCity ASM update: earnings recovery on plan”.
The company’s performance was being driven by a strong recovery in hospitality sites, particularly in Auckland and Hamilton and especially electronic gaming machines, they noted.
Management was cautious about extrapolating the first-quarter results on the entire 2023 financial year because of global and local economic uncertainties, while positive trends like the tourism recovery had to be balanced against rising pressures on domestic discretionary spending, the analysts said.
SkyCity shares have been trading on the NZX at around $2.81, down 12 per cent.
