SkyCity Entertainment Group in turnaround, chief executive’s pay up

Michael Ahearne, SkyCity chief executive. Photo / Michael Craig

Listed Australasian casino giant SkyCity Entertainment Group is in a turnaround phase, its result well up on last year and its chief executive Michael Ahearne now earning more.

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.

Ahearne told the Herald today the business was “pleased and pretty proud of how the team has done in the past year, the rebound from a revenue and earnings point of view”.

The company pushed up revenue from last year’s $639m to $926.2m and Ebit from $96m to $165.9m.

Last year’s $33.6m net loss after tax was converted into an $8m profit, resulting in dividend restoration from suspension to 12cps this year.

Gaming machine revenue of $231m rose 50 per cent yet was still 11 per cent behind 2019, which the company said highlighted the softer recovery.

“The 2023 financial year was marked by the recovery of SkyCity’s core operations with the group’s operating earnings exceeding pre Covid-19 levels,” the annual report said.

SkyCity turned last year’s loss turned into a profit, as its annual report was published today . Photo / Getty Images

The company’s new Hobson St Horizon Hotel is due to be finished next year and the New Zealand International Convention Centre and adjacent laneway are expected to be completed in 2025, the annual report said.

Asked if he regarded the result as a post-Covid turnaround, Ahearne said: “Yes, that’s right. It’s a year where we’ve had no interruptions, a normal year of operations. Our domestic customers are coming back and it’s great to see the tourists and have the Fifa World Cup here.

“The Chinese market is starting to come back and over the course of the summer, we’ll see that recover. The VIP business won’t be as much a feature of our business as it was previously. We’ve exited the junket business. We did that two years ago. We’ve restructured.”

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 74 more staff.

On the NZICC fire, the annual report said: “As at 30 June 2023, the total insurance income recognised since the date of the fire of $657.1m represents what the group has determined to be virtually certain under the insurance policy.”

Asked if that meant SkyCity expected $657.1m fire insurance payout, Ahearne said accounting on the proceeds was very technical in relation to that but that amount did reflect the insurance proceeds, understood to be a cumulative amount.

Ahearne’s pay rose from last year’s $2.8m to $2.9m this year, partly because he got a short-term incentive of $585,563.

The board considered his and the group’s achievement of the balanced scorecard objectives, being the company NPAT target, non-financial objectives based on the strategic priorities for the group, and goals specifically relating to anti-money laundering, host responsibility and health and safety, the annual report said.

Asked about the pay rise, he told the Herald today: “It reflects that I have short-term incentives that have a number of components to it. The board determines what’s appropriate, taking into account key performance indicators that I have.”

Across the Tasman, the business faces Federal Court action.

On August 14, the company said it had provided $49m in its accounts to cover the possible civil court penalty over its Adelaide casino’s alleged anti-money laundering failures.

That was an accounting provision in the case being brought by an Australian regulator that accused the casino giant of serious and systemic non-compliance with anti-money laundering and counter-terrorism rules.

SkyCity's property in Adelaide. Photo / Joe Nes

Each of the contraventions alleged by the centre attracted a maximum civil penalty of between A$18 million and A$22.2m.

The company said those proceedings were at a relatively early stage and SkyCity expected the proceedings to be resolved during the 2024 financial year.

“We have a significant amount of work going on in relation to anti-money laundering, a combination of resources and lots of new technology,” Ahearne said. “It’s a process of continuous improvement. Next year, we’ll be better than we were this year.”

Facial recognition technology has run in Auckland for years and is about to go into Hamilton.

Ahearne said today 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. In Adelaide, we have the first version and we’re looking forward to bringing in the more advanced system over time.”

SkyCity uses Guardian facial recognition technology from Hamilton’s Torutek “for recognising persons of interest as they enter and move around casinos and gaming locations”.

That’s aimed to detect those with gambling addictions.

“It’s been very helpful to us. We were excited to be able to partner with a local company,” Ahearne said.

Andy Bowley, Forsyth Barr analyst, had forecast a “solid” annual result, with strong electronic gaming machine revenue from New Zealand.

Shares have been trading on the NZX around $2.24, down 23 per cent annually, giving a market capitalisation of $1.7b.

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.