AUSTRAC PROVISION, ADL IMPAIRMENT, CONFIRMED FY23 GUIDANCE

SkyCity Entertainment Group Limited (SKC.NZX/SKC.AX)

14 August 2023

ACCOUNTING PROVISION IN RELATION TO AUSTRAC CIVIL PENALTY PROCEEDINGS,
IMPAIRMENT OF SKYCITY ADELAIDE CASINO LICENCE, FY23 GUIDANCE CONFIRMED
AUSTRAC CIVIL PENALTY PROCEEDINGS PROVISION
On 7 December 2022, the Australian Transaction Reports and Analysis Centre (AUSTRAC)
commenced civil penalty proceedings in the Federal Court of Australia (Court) against
SkyCity Adelaide Pty Limited (SkyCity Adelaide) for alleged serious and systemic non-
compliance with the Anti-money Laundering and Counter Terrorism Financing Act 2006
(Cth) (AML Act). Each of the contraventions alleged by AUSTRAC attracts a maximum
civil penalty of between A$18 million and A$22.2 million per contravention. As AUSTRAC
alleges that SkyCity Adelaide contravened the AML Act on an innumerable number of
occasions, it is not possible to determine a maximum penalty for the alleged breaches.
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In accordance with the requirements of accounting standard NZ IAS 37, SkyCity
Entertainment Group Limited (SkyCity) has determined that it will recognise a provision
of A$45 million (NZ$49 million) in relation to the civil penalty proceedings as at 30 June
2023. This provision is an estimate of the potential exposure to penalties and legal costs
associated with the proceedings, and considers a wide range of parameters that could
potentially be considered by AUSTRAC and the Court.
The proceedings remain at a relatively early stage with AUSTRAC and SkyCity Adelaide
currently working towards agreeing facts and potential admissions before the Court
identifies a process for any remaining disputed issues and any potential penalty to be
determined. Estimating the potential exposure to penalties with any degree of accuracy

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Please refer to Note 14(a)(i) “Contingent Liabilities” of SkyCity’s Interim Financial Results for the six-month
period ended 31 December 2022 for further detail in relation to the allegations made by AUSTRAC.
Key Points
 The AUSTRAC civil penalty proceedings may result in SkyCity Adelaide being ordered to pay a
penalty. However, AUSTRAC has not detailed the amount of any civil penalty it proposes to seek
and those proceedings are at an early stage.
 Pursuant to accounting standard NZ IAS 37 in connection with the preparation of SkyCity's FY23
financial statements, a A$45 million (NZ$49 million) provision has been booked as at 30 June 2023
for a potential AUSTRAC civil penalty and associated legal costs.
 Considerable uncertainty remains regarding the amount of any civil penalty SkyCity Adelaide may
be required to pay. Any eventual civil penalty may be significantly higher or lower than the
provision. The timing of any civil penalty to be paid by SkyCity Adelaide is also uncertain.
 In addition, pursuant to accounting standard NZ IAS 36, the Adelaide casino licence has been
impaired by A$45.6 million (NZ$49.7 million).
 The provision and impairment are non-cash, and do not impact normalised earnings for SkyCity’s
FY23 financial statements.

SkyCity’s FY23 Group normalised earnings remain in line with the
guidance range provided on 24 May 2023 of NZ$300 - $310 million normalised EBITDA.
 SkyCity’s FY23 financial statements remain subject to external audit.

at this stage of that ongoing process remains challenging, particularly given the outcome
is highly dependent on a range of factors which are not yet known. The size of any
penalty SkyCity Adelaide is exposed to could vary materially from the amount of the
provision and significant uncertainties remain. Any eventual civil penalty applied to
SkyCity Adelaide in relation to the proceedings may be significantly higher or lower than
the provision. The timing of any civil penalty to be paid by SkyCity Adelaide is also
uncertain.
Judgments in civil penalty proceedings brought by AUSTRAC to date
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demonstrate that
the Court’s determination of the appropriate penalty (where contraventions are admitted
or established) is very specific to the facts in each case and that the Court will have regard
to a broad range of factors in determining an appropriate civil penalty, including the
nature and extent of any contravention(s), loss and damage suffered as a result of any
contravention(s), steps taken to improve existing systems, and the relative size and
financial position of the business.
SkyCity Adelaide will continue to cooperate with AUSTRAC more generally, particularly in
relation to the ongoing implementation of enhancements to its Adelaide AML/CTF control
frameworks.
IMPAIRMENT OF SKYCITY ADELAIDE CASINO LICENCE
In addition, SkyCity has completed its annual impairment review and proposes to
recognise in its FY23 financial statements an impairment of the value of the SkyCity
Adelaide casino licence by A$45.6 million (NZ$49.7 million) pursuant to accounting
standard NZ IAS 36. This impairment considers both the value and the timing of future
discounted cashflows generated by the licence as assessed at 30 June 2023. Further
details will be included in SkyCity’s group financial statements for the year ended 30 June
2023.
GENERAL
The above-mentioned provision and impairment are non-cash, and do not impact
normalised earnings for SkyCity’s FY23 financial statements. SkyCity confirms that its
Group FY23 normalised earnings remain in line with the guidance provided on 24 May
2023

of NZ$300 - $310 million normalised EBITDA.
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The provision, impairment and SkyCity’s FY23 financial statements remain subject to
external audit and final review by the SkyCity Board.
SkyCity will release its group financial statements for the year ended 30 June 2023 on
23 August 2023.

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AUSTRAC has commenced civil penalty proceedings against other companies on five occasions, one of which
is yet to conclude. Notably, the four concluded AUSTRAC proceedings to date have led to the Federal Court
ordering the respondent to pay significant civil penalties of between A$45 million and A$1.3 billion (Crown A$450
million (2023); Tabcorp A$45 million (2017); CBA A$700 million (2018) and Westpac A$1.3 billion (2020)).

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Normalised EBITDA is EBITDA adjusted for International Business theoretical win rate, New Zealand
International Convention Centre fire impact, asset impairment and property valuation - refer to page 23 of
SkyCity’s 1H23 results investor presentation for further detail.

For more information, please contact:

Investors and analysts Media
Rodney Deacon
General Manager Group Strategy and
Capital Markets
Phone: +64 21 631 074
Email: rodney.deacon@skycity.co.nz

Graeme Muir
Communications Manager
Phone: +64 216 70 442
Email: graeme.muir@skycity.co.nz