SkyCity: Another year, another apology

Thursday, 31 October 2024

Another year, another apology.

Casino operator SkyCity Entertainment Group’s annual general meetings have become caught in a similar apology loop to the NZX’s other serial underperformer Fletcher Building.

Speaking at the AGM at SkyCity theatre in Auckland on Thursday, SkyCity independent chair Julian Cook said: “We acknowledge the disappointing outcome for shareholders in terms of share price and suspension of dividends.”

Worth nearly $2.90 just 24 months ago, the company’s shareprice is languishing around $1.40 after failing to adhere to anti-money laundering and responsible gambling laws, posting a $143 million loss in the 2024 financial year, and suspending dividends to shareholders.

At the SkyCity AGM last year, Cook told shareholders: “We have not met the standard to which we need to hold ourselves,” and admitted finding directors who wanted to serve on the company had been a challenge.

But this year Cook sought to cast a positive light on the company’s future. He said the company’s transformation programme was well under way to ensure it did not repeat failures which earned it fines in New Zealand and Australia, where it owns a casino complex in Adelaide.

“The board’s perspective is that the company has made significant process this year,” Cook said.

However, the company was not out of the regulatory woods yet.

New chief executive Jason Walbridge warned it was possible South Australian regulators may take an unfavourable view on whether SkyCity was fit to keep its Adelaide casino licence.

Walbridge, who is a 20-year veteran of Las Vegas in the United States, sounded a second gloomy note to shareholders.

Challenging economics in New Zealand and Australia, including high inflation, had led to punters spending less, and the current financial year would remain tough, he said.

No dividend would be paid in the current year, he said, but the board and executive, wanted dividends to restart as soon as possible, though did not say when that might happen.

Many of the shareholders at the AGM were retired, and relied on SkyCity dividends to supplement their retirement incomes.

However, Walbridge said interest rates were trending down, which would help the business and its customers.

August saw the Horizon by SkyCity Hotel open in Auckland, a key milestone in the opening of the New Zealand International Convention Centre, which was set back by a fire in 2019 just as it was nearing completion.

SkyCity chief operating officer Callum Mallet said the convention centre would, after it opened next year, attract around 33,000 international visitors each year.

It’s conference floor was the size of Eden Park and would be able to hold the largest seated dinners in the country, with up to 3200 seated guests.

Cook hoped SkyCity’s 2025 AGM would be held in the completed convention centre.

Walbridge hoped there would also be long-term earnings growth through online gaming as the Government was moving to regulate online gambling by 2027.

New Zealand punters have been targeted by untaxed and unregulated online casinos based overseas.

SkyCity has been lobbying the Government to only issue between five to seven online gaming licences, including one for itself.

The company, which is held in many KiwiSaver portfolios, fell foul of regulators both in New Zealand and Australia.

In New Zealand it was ordered to pay a $4.16m penalty earlier this year for a breach in anti-money laundering obligations. It was also forced to close for five days in September for failing to responsibly host gamblers at its Auckland casino.

In Australia, failures to abide by money laundering laws led to it agree to pay $73m to settle a civil law suit from Australian regulator Austrac.

The company’s performance on meeting its regulatory obligations had not been acceptable, Cook told shareholders. The company had underinvested in the processes to ensure it abided by them, he said.

A multi-year transformation programme had now been put into place, and would take around three years to complete to close gaps in compliance.

Facial recognition technology had been installed across SkyCity’s casinos, and SkyCity was moving to mandatory “carded” play, allowing the casino operator to closely monitor gamblers to spot problem gambling more easily.

Cook, who was seeking re-election as independent chair, said SkyCity now had a lower risk tolerance, and the board would work to restore SkyCity’s standing, and protect its casino licences.

However, before the vote, one angry shareholder accused the board and executive of spouting propaganda and rhetoric.

“It’s like politicians,” he said. ”It’s a lot crap.“

He asked what punishment there had been for directors who presided over a casino operator that broke laws.

Cook said every current SkyCity director had joined the board after regulators in New Zealand and Australia began their investigations. Short-term incentives for the board and executives were cancelled in 2024, he said.