Pre-pandemic normal returns to SkyCity, but regulatory clouds loom

Michael Ahearne, SkyCity Entertainment Group's chief executive. Photo / Peter Meecham

SkyCity Entertainment Group has signalled a return to pre-pandemic levels of revenue and earnings, but warned investors that it continues to grapple with issues raised in two separate regulatory inquiries into its Australian operations.

The casino operator held its annual general meeting this afternoon - held remotely this year, as with the past two years - and was addressed by chief executive Michael Ahearne, who said revenue and earnings from July to September were about 10 per cent higher than pre-pandemic levels.

“The 2022 financial year was a particularly challenging one for our business, due to both the pandemic and the ongoing regulatory focus on the casino industry,” he said.

Ahearne said exceeding 2019 revenue and earnings levels was encouraging, given that international arrival numbers had yet to similarly recover.

In 2021 Australian casino regulator 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.

Chairman Julian Cook told the 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.

Asked by shareholders whether this focus had come too late to satisfy regulator concerns, Cook was forced to agree: “I’m not going to argue with your comment about being behind the eight ball.

“We are not happy with it and we will not be staying behind the eight ball.”

SkyCity Adelaide’s chairman Glen Davis warned investors the twin probes were still live.

“While we’d all like to have the inquiries behind us, it’s still too early to say which way they’ll go,” he said.

“Whatever the outcome, SkyCity doesn’t want criminal activity to infiltrate its properties ... and the evils of money laundering are many and we want no part of it.”

The casino and entertainment company had been hard-hit by a disastrous 2019 fire at its under-construction - and still to be finished - New Zealand International Convention Centre, and the Covid pandemic, which saw sustained lockdowns and diminished tourist numbers over the past two years, cut deeply into its bottom line.

Its share price dropped in early 2020 from $4.12 to a low of $1.50 that March as the country, and world, locked down. Being heavily reliant on foot traffic and international visitors, the company is a key bellwether for how the New Zealand economy is recovering from the pandemic slump.

In August SkyCity released annual results showing a $33.6 million loss for the year to June 2022, with revenue down a third, largely accounted for by its main complex in Auckland being inoperable for 107 days during the period due to Covid lockdowns.

The main bright spot in the 2022 results was its small but growing online gambling operations, which bucked trends and delivered $14.5m ebitda after revenue grew 21.5 per cent during the year.

The fallout from the convention centre fire continues to pile up, with the company this week announcing that a $220m pre-fire deal to offload its carpark operations to investment giant Macquarie had fallen through due to still-to-be-remediated fire damage.

Opening dates for the long-delayed NZICC and Horizon hotel complex were reaffirmed at the meeting as being in 2025 and 2024 respectively .