Analysts factor in A$50m fines for SkyCity Adelaide
SkyCity Adelaide where the company has built a huge new hotel. Photo / provided
Analysts are factoring in potential fines of A$50m ($54.5m) for SkyCity Adelaide after state and federal investigations – but say that could be conservative and more may have to be paid.
Adrian Allbon and Jason Cao said this was the amount they expected to be owed in 2024 by the Auckland-headquartered SkyCity Entertainment Group-owned business, according to the Australian Transaction Reports and Analysis Centre. [Austrac] and state investigations into the activities of the casino owner/operator.
Austrac is the federal agency responsible for detecting, deterring and disrupting criminal abuse of the financial system to protect the community from serious and organized crime.
Australia said it had identified SkyCity Adelaide’s potential non-compliance with Australia’s Anti-Money Laundering and Anti-Terrorist Financing Act 2006 and Anti-Money Laundering and Anti-Terrorist Financing Rules Instrument 2007 terrorism.
Allbon and Cao said SkyCity chairman Julian Cook cited the matter at last month’s annual meeting, “noting that SkyCity continues to respond to requests from state regulators in Austrac and South Australia , but also too early to say anything definitive about where they went. We considered A$50 million in fines in both reviews, paid over the estimated year 2024.”
In 2021, Austrac announced that SkyCity Adelaide and certain other casino operators in that country were being investigated for failing to comply with anti-money laundering and anti-terrorist financing legislation.
The following year, South Australian state authorities announced they were reviewing whether SkyCity was still a suitable operator to hold a casino license in Adelaide.
Allbon and Cao cited a worst-case scenario for the others – the potential A$300 million ($327 million) in fines that could be owed by ASX-listed casino operator and SkyCity rival Star EntertainmentGroup.
The AU$50 million was potentially conservative compared to the AU$300 million factored into Jarden’s Star Entertainment Group estimates for the New South Wales state fine of AU$100 million ($109 million), the estimated fine from the State of Queensland which Jardens estimated at a potential AU$100 million. and an estimated fine to Austrac of A$100 million, which in total equates to around 15% of Star Entertainment Group’s revenue, Kiwi analysts said.
Star Entertainment Group told the ASX last June that it takes its anti-money laundering obligations “very seriously and will cooperate fully with Austrac with respect to its requests for information and documents and the investigation”.
But there was good news for SkyCity Adelaide. Allbon and Cao wrote, “We also note mitigating features for SkyCity Adelaide separate from the Star Entertainment Group, as SkyCity has not received any enforcement notices to date, its Adelaide operations did not use China Union Pay and SkyCity Adelaide did not operate a hotel. at the time and had much more limited VIP play against Star Entertainment Group and Crown.
To cook Told At last month’s meeting, the company was fully cooperating with both investigations and said risk management – particularly regulatory compliance – was the biggest project its board was undertaking.
“We continue to operate with Austrac in its enforcement investigation which began in June 2021, into possible serious non-compliance by SkyCity Adelaide,” Cook told the AGM. “Engagement has included providing information and documents required by Austrac. We continue to respond to a significant number of questions and requests for information from Austrac which we treat very seriously.
But Cook also reminded shareholders that the 2022 annual report said Austrac had not brought legal action against the company or indicated whether enforcement action would be taken.
“However, as Austrac’s enforcement investigation is still ongoing and we have identified some areas where improvements to Adelaide’s anti-money laundering and counter-terrorist financing program are needed. or appropriate, it is possible that Austrac will take enforcement action and associated sanctions could have a significant financial and reputational impact on SkyCity,” Cook told shareholders.
The business was also continuing to work with Brian Martin KC on behalf of Consumer and Business Services in South Australia as part of the Adelaide Independent Business Review announced in July, Cook said.
On a happier note, analysts at Jarden noted that a Covid recovery phase is well underway, with the possibility of dividend payments resuming early next year. They noted the business update for the last quarter which they said could indicate that shareholders could once again get payouts.
“No mention of when dividends might resume, but we believe trading in the first quarter would support an interim dividend in February,” they said in a report titled “SkyCity ASM Update: Earnings Resumption on Plan.” “.
The company’s performance was driven by a strong recovery in hospitality venues, particularly in Auckland and Hamilton and in particular electronic gaming machines, they noted.
Management was cautious about extrapolating first quarter results to full-year 2023 due to global and local economic uncertainties, while positive trends such as the tourism recovery were expected to be offset by growing pressures on domestic discretionary spending, analysts said.
SkyCity shares are trading on the NZX at around $2.81, down 12%.