Annual Report Year Ended 30 June 2020 Contents
GENERAL CORPORATE GOVERNANCE STATEMENT 4 Chair’s Review AND OTHER DISCLOSURES 6 Chief Executive Officer’s Review 123 Corporate Governance Statement 9 About this Annual Report 134 Remuneration Report 10 Year in Review 145 Shareholder and Bondholder Information 12 Creating Value 148 Directors’ Disclosures 16 Performance 149 Company Disclosures 18 Diversity Snapshot 21 Group Strategy FINANCIAL STATEMENTS 29 About SkyCity 156 Independent Auditor’s Report 31 Auckland 164 Income Statement 34 Hamilton 165 Statement of Comprehensive Income 37 Adelaide 166 Balance Sheet 39 Queenstown 168 Statement of Changes in Equity 41 International Business 169 Statement of Cash Flows 43 Online 170 Notes to the Financial Statements 45 Risk Profile and Management
53 Our Board 224 RECONCILIATION OF NORMALISED RESULTS 56 Our Senior Leadership Team TO REPORTED RESULTS
SUSTAINABILITY 228 GRI CONTENT INDEX 63 Sustainability 69 Our Customers 232 GLOSSARY 79 Our People 233 DIRECTORY 93 Our Communities 101 Our Suppliers 111 Our Environment 120 Independent Limited Assurance Statement
ANNUAL MEETING
Due to the ongoing impacts of COVID-19, the 2020 SkyCity Annual Meeting will be held virtually via an online platform on 16 October 2020 commencing at 1.00pm (New Zealand time). Instructions and further details on how shareholders can participate in the virtual Annual Meeting will be included in the Notice of Meeting.
3 GENERAL
Chair’s Review
The 2020 financial year was a tough one for SkyCity • the importance of maintaining a strong balance responding supportively. Finally, to those vital and its stakeholders. The external events which sheet and operating the business to provide people who make it all work – our customers in impacted the year are well known and the financial sustainable returns to investors; the casinos in person or online, in our hotels and performance of the company reflects those events. meeting rooms, in our restaurants, bars, Sky Tower • to keep a strong focus on disciplined capital It also reflects a great deal of skill, energy and and other facilities – our warm appreciation and allocation and not to make allocations which do support from our stakeholders across the board ongoing welcome. not fully reflect an appropriate return adjusted to react to those events. We have maintained a for the risks involved; and strong asset, people, and capital base and barring further negative external events SkyCity will recover • to conduct the business holistically within the and grow. terms of the sustainability framework for SkyCity Rob Campbell which is detailed elsewhere in this annual report. The accounting and financial report on a year with Chair, SkyCity Entertainment Group these shock events is inevitably complex. In this A few comments on the outlook for the current report, and in our wider commentary on the financial year, comments which must reflect a high business, we endeavour to provide clear information degree of uncertainty given the global environment: and guidance to enable investors and other • SkyCity can operate under current trading stakeholders to genuinely understand the past, conditions, but at present we do not have current and future of SkyCity. • in the course of this, we have prudently an operating model which can optimise the The key events of the year, though well known to all restructured our funding, including raising new business to previous levels without a recovery readers of this annual report, may be summarised equity to manage ongoing commitments and in the economy and international tourism, for the record as: operating risk; including our International Business and convention travel. So, while on our current • the ongoing delay to completion of the • the important SkyCity Adelaide expansion outlook we can expect continuity and some New Zealand International Convention project has moved towards substantive growth, there is something of a holding position Centre and Horizon Hotel project was deeply completion effectively within the planned time across several aspects of our business; and exacerbated by the fire. The immediate impact and budget. While this is an impressive facility, its of the fire was effectively managed by our economic performance will not meet the original • this means that, in this period, the SkyCity Board people, as was the return to operations across expectations when it was launched in 2018. and management are fully directed towards the Auckland site. The reestablishment of work Accordingly, we have been required to impair the efficient completion of committed projects, and a path to completion have also been difficult investment to reflect a realistic current value; and improving the quality and efficiency of operating tasks with effective progress made; our existing facilities, and being well prepared • we have successfully launched an online casino equally to react to further adverse external events • COVID-19 halted our business at every location. business which is already a good contributor and to take any genuine opportunities which Our people have effectively managed operations to the Group financially and provides a good arise in the markets where we are present. during restrictive periods and with greater base for participation in this growing part of the operating freedom when pandemic regulations casino business globally. I wish to thank my fellow directors for their allowed. But our operations and results across assiduous attention to their duties over this difficult Obviously from such a momentous year there are the Group will continue to reflect a more difficult time, our management team for their skill and learnings. For the SkyCity Board, the important environment for some time; commitment in meeting some most unusual immediate learnings are: challenges with aplomb, our people working in the • we have had no option, despite much • to recognise the resilience of the core gaming business (including those who have had to leave in appreciated Government support for our people business in each area where we hold a licence the restructuring) for what they have contributed during the COVID-19 crisis, but to substantively and to ensure that we maintain our presence, to keeping us all going and able to continue with restructure our business to meet this more quality of service, financial control and host confidence, and to our external stakeholders for difficult environment; responsibility/harm management processes at the highest level;
4 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Chair's Review 5 Chief Executive Officer’s Review GENERAL
The year under review has been extremely complex additional debt facilities. We now have “buffer” SkyCity’s strategic plan is focused on managing and challenging for SkyCity. It commenced with facilities of liquidity available to draw down should the post COVID-19 recovery and completing good momentum with our operations trading at the COVID-19 situation worsen, but at present this its major projects in Adelaide and Auckland, record levels (at a revenue level) until October 2019, is not required. Dividends are currently suspended, which will underpin medium term earnings and when a significant fire broke out on the roof of but this will be reviewed against market and cash flow growth. the New Zealand International Convention Centre trading conditions during the financial year ending We are also able to continue with the many initiatives site. Fire and emergency crews battled over several 30 June 2021. that we have underway under our sustainability days to bring the fire under control with the fire A positive feature of the year has been the launch of pillars. Minimising harm to our customers remains causing significant disruption to the Auckland SkyCity Online Casino, which operates out of Malta our core focus and we have made a number of CBD, including an unprecedented three-day but provides an attractive online entertainment investments into technology over the past year, closure of the entire SkyCity Auckland precinct. offering to New Zealanders. This business ramped significantly improving the tools that we have. We The SkyCity Board and management team were up significantly from March 2020 and has now will be investing further into digital technology to still focused on dealing with the impacts of the fire grown into a profitable operation despite the improve our customer experience. We have the when the COVID-19 pandemic emerged in early very low key and conservative approach taken in challenge of rebuilding employee culture after the 2020, culminating in the mandated closure of comparison to other offshore online businesses significant restructure and we are very focused SkyCity’s properties in New Zealand and Adelaide targeting New Zealanders. We observed a slight on that as well as furthering initiatives relating to on 23 March 2020 following announcements by the reduction in online gaming revenue following workplace flexibility and diversity. We have made New Zealand and Australian Governments. been aided by Government responses in the form the reopening of the New Zealand properties in good progress in refocusing our SkyCity Community of wage subsidies and other assistance measures. We were able to reopen our New Zealand properties May 2020, but saw an increase in activity during Trusts in New Zealand on initiatives that will enhance Our core domestic gaming business is resilient and on 14 May 2020 (with the exception of Wharf Casino the recent closure in Auckland in August 2020 the employability, wellbeing and advancement of has returned to being cash positive and profitable. in Queenstown which currently remains closed), with customer registrations currently over 35,000. youth and we have upweighted strategies to ensure The other aspects of our business that are more albeit initially with reduced operating hours and We continue to prepare for a regulated online our supply chain is ethical and supports local business. reliant on international visitors (including VIP subject to restrictions on mass gatherings and industry in New Zealand and are supportive of We have followed through on our commitment to go gaming, hotels and restaurants) will clearly only fully physical distancing requirements. Our Adelaide Government initiatives in this regard. carbon neutral in Australia as planned (having gone recover when country borders reopen. Our domestic property was able to reopen on 29 June 2020 neutral in New Zealand last year) and we are well businesses have recovered more quickly than The result for the financial year ended 30 June 2020 as part of the South Australian Government’s advanced with solutions to reduce waste to landfill. anticipated when open and, if we can sustain this, is complicated by strategic actions taken in three-stage approach to easing the COVID-19 The COVID-19 crisis has reinforced how important the business is not under threat and can wait it out 2019 and 2020, the New Zealand International restrictions. Then, from 12–30 August 2020, business profitability is as an underpin to any until the world recovers. Convention Centre fire and COVID-19 related our Auckland casino and entertainment facilities sustainability initiatives – something that perhaps we issues. Comparability between the FY19 and FY20 were closed again and physical distancing and Fortunately, development work on the took for granted historically, but have now included periods is impacted by COVID-19 related property hygiene requirements were reinstated at our SkyCity Adelaide expansion and hotel projects as a critical element of being sustainable in the short closures and the sale of the long term concession Hamilton and Queenstown properties when the and associated master planning projects was and long term. over the SkyCity Auckland car parks (completed in COVID-19 Alert Level increased to Alert Level 3 able to continue over the period – these projects early FY20). In determining normalised earnings The past financial year has been incredibly in Auckland and to Alert Level 2 for the rest of continue to progress very well and remain relative to reported earnings, various adjustments challenging and stressful for the entire SkyCity family. New Zealand following a new outbreak in the on-budget and on-time, with the SkyCity Adelaide have been made, including the New Zealand We have had to make some significant, tough Auckland community. expansion and Eos by SkyCity, the new 120-room International Convention Centre fire impact, decisions to ensure that our business survives and luxury hotel, due to open before the end of 2020. An unprecedented number of significant strategic a number of COVID-19 related adjustments and a continues to provide a great place to work and Work recommenced in late May 2020 on the decisions and actions have had to be taken to A$150 million impairment of the SkyCity Adelaide precincts enjoyed by thousands of our customers. New Zealand International Convention Centre and mitigate the impacts of these events: casino licence. The Board has been intimately involved with the Horizon Hotel projects following the move to Alert executive team in making these decisions, but we • significant operational effort has gone into Level 3 of the COVID-19 Alert system in New Zealand Our domestic businesses have been performing would not be as well positioned were it not for the closing and reopening our properties with and we now expect Horizon Hotel to be delivered stronger than expectations when open in enormous amount of hard work and effort made by rigorous health and safety measures in place; during 2021 and the New Zealand International New Zealand and South Australia, although the the wider teams at corporate and property levels. Convention Centre to be completed during 2023. outlook remains unpredictable as we adjust to • we rapidly restructured our New Zealand The energy, selfless commitment and willingness new social and economic settings. We reasonably workforce, downsizing it by around 25% to The capital raising announced in June 2020 ensures to keep stepping up the effort to deal with multiple expect that, in the short to medium term, weaker ensure SkyCity is positioned to be sustainable as that our major construction projects remain fully challenges is a humbling reflection of the company economies, lower personal disposable income a smaller domestically focused business; and funded and that we are also able to continue with culture and I would like to thank everyone for their and changed entertainment habits, as well as smaller projects that will enhance operations. unwavering support in these unprecedented times. • we executed a capital raising and debt longer term travel restrictions, will result in SkyCity The $230 million equity raising was well supported restructure to ensure that SkyCity has sufficient being a smaller, domestically focused business. and underpinned the restructure of our debt liquidity and funding capacity. International Business should recover once travel facilities, enabling us to obtain covenant relief restrictions are lifted, but the parts of our business These actions mean that SkyCity is well positioned through to 30 June 2021, securing extensions to driven by corporate travel and by tourism, such Graeme Stephens to deal with the foreseeable future. We have also bank facilities due to mature in that period and as our hotels and the Sky Tower, will take longer Chief Executive Officer to recover.
6 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Chief Executive Officer's Review 7 GENERAL
About this Annual Report
This annual report is a review of SkyCity Reporting Standards. This annual report Entertainment Group Limited (SkyCity or the includes both reported and normalised financial company and, together with its subsidiaries, information. Our objective in providing normalised the Group) and its subsidiary companies’ financial information is to provide data that is useful performance for the financial year ended to the investment community in understanding 30 June 2020. Where appropriate, information the underlying operations of the SkyCity Group is also provided in relation to activities that – the intention being to provide information have occurred after 30 June 2020, but prior to which is representative of SkyCity’s underlying publication of this annual report. performance (as a potential indicator of future performance), can be compared across years and This annual report has been prepared in accordance can assist with comparison between publicly listed with the Listing Rules and Corporate Governance casino companies in New Zealand and Australia. Code of NZX Limited, the New Zealand Companies This objective is achieved by: Act 1993 and the New Zealand Financial Markets Conduct Act 2013 and (although SkyCity is not • eliminating the inherent volatility (or 'luck' factor) required to comply with ASX Listing Rule 4.10, from International Business, which has variable which requires entities to include certain prescribed turnover and actual win percentage period information in their annual reports, as it has a to period; ‘Foreign Exempt Listing’ status on ASX Limited) • eliminating structural differences in the business substantially reflects the Listing Rules of ASX between periods; and Limited and the Corporate Governance Principles and Recommendations (Fourth Edition) of the ASX • eliminating known different treatments with Corporate Governance Council. other New Zealand and Australian publicly listed casino companies. This annual report has also been prepared with due consideration of the International Integrated Normalised numbers are a non-GAAP financial Reporting Council’s International Integrated measure. A reconciliation of reported and Reporting Framework. Integrated reporting normalised earnings and a description of the applies principles and concepts that are focused differences are provided on pages 224–227 of this on bringing greater cohesion and efficiency to annual report. the reporting process and adopting ‘integrated Certain totals, subtotals and percentages stated in thinking’ as a way of breaking down internal silos this annual report may not agree throughout due and reducing duplication. to rounding. The non-financial information in this annual Unless otherwise stated, all dollar amounts in this report has been informed by the principles and annual report are expressed in New Zealand dollars. disclosures of the Global Reporting Initiative’s (GRI) Sustainability Reporting Standards. Ernst & Young An electronic copy of this annual report is available has undertaken limited assurance (in accordance in the Investor Centre section of the company’s with the International Standard on Assurance website at www.skycityentertainmentgroup.com. Engagements (New Zealand)) over disclosures This annual report is dated 3 September 2020 and associated with selected performance data is signed on behalf of the SkyCity Board by: included in the Sustainability section included in this annual report. A GRI reference index based on the GRI Sustainability Reporting Standards is included on pages 228–231 of this annual report.
The financial statements have been prepared Rob Campbell Bruce Carter in accordance with the International Financial Chair Deputy Chair
SkyCity is investing A$330 million to transform SkyCity Adelaide into a world-class entertainment hub – the new 12-storey building features a sweeping, curved golden façade, a luxury 120-room hotel, restaurants and bars, conference and event facilities, a spa and wellness centre and expanded gaming experiences. 9 10 2019 Year inReview • JULY Southern Hemisphere homage to thestarsof the business andpaying of many partsof SkyCity’s logo reflecting thesum properties –withthenew across theNew Zealand SkyCity brand andlogo Rollout of arefreshed • • • AUGUST in New Zealand Premier Rewards members, for customers and SkyCity websites, andnew apps Launched new customer parks completed over SkyCity Auckland car Sale of long term concession Innovation GroupInc iGaming company Gaming with international launched inpartnership SkyCity OnlineCasino
• SEPTEMBER in March2021 the 36thAmerica’s Cup New Zealanddefence of for theEmirates Team Entertainment Partner’ Hotelsthe ‘Official and SkyCity announced as OCTOBER • adjacent Horizon Hotel Convention Centre and New ZealandInternational completion dates for the and significant delay to the SkyCity Auckland precinct a three-day closureof the the Auckland CBD, significant disruption to construction) resultingin Convention Centre (under New ZealandInternational out ontheroof of the A significant firebroke • • • NOVEMBER Top 200Awards inthe2019Deloitte category Most Improved Performance Group namedafinalistinthe SkyCity Entertainment awarded onehat MASU by NicWatt were each Depot, Gusto attheGrand and was alsoawarded two hatsand for 2019inNew Zealand.The Grill Cuisine GoodFoodAwards list included intheprestigious Six SkyCity Auckland restaurants SkyCity Auckland the Federal Streetprecinctat and NgāiTahu Tourism, in between New ZealandRugby an exciting new venture on theAllBlacks Experience, Construction commenced
• • DECEMBER consumption lifestyle by lowering energy to live aclimate-friendly businesses andindividuals empowers New Zealand Gen Lessprogramme, which Conservation Authority’s and Energy Efficiency New ZealandGovernment’s SkyCity joinedthe by 10% from lightingtheSky Tower reduce carbon emissions change commitment to supporting SkyCity’s climate installed ontheSky Tower, New external LEDlightbulbs
2020 • JANUARY kitchen andacoffee front grand central bar,open heritage andfeatures a the Railway Station’srich venue pays homageto Dining Hall.The new Station’s former Great of theAdelaide Railway A$6 millionrestoration Adelaide following a opened atSkyCity bar andrestaurant, The Guardsman,anew • FEBRUARY Australian bushfires support thedevastating acknowledge and Foundationto Service Australia Fire Country $55,000 for theSouth properties raised over Adelaide andHamilton across theAuckland, Fundraising activities • • MARCH response to COVID-19 their immediate closurein Governments mandating Australian andNew Zealand announcements by the on 23March2020following All SkyCity propertiesclosed in Auckland 'Horizon' gamingsuites our International Business of $6 millionrefurbishment VIP tablegamearea,anda ofrefurbishment EIGHT, a Completed a$5.5million • • APRIL welcomed inlate 2020 first guests expected to be expansion project,withthe A$330 million SkyCity Adelaide developed aspartof the hotel being 120-room luxury as thenameof thenew Eos by SkyCity announced New Zealand salaried employee basein the managementteam and immediate restructureof costs, includingan and minimisingoperating reducing capital expenditure including significantly in responseto COVID-19, Changes implemented
• • MAY financial outlook operating environment and impact of COVID-19 onits to theexpected significant rostered (waged) due staff on aproposalto reduce its commenced consultation New Zealandworkforce and reduceto further its SkyCity moved forward Alert Level 2 decision to move to New ZealandGovernment’s 14 May 2020following the Wharf Casino) reopened on properties (excluding Hamilton andQueenstown The SkyCity Auckland,
• • • • • JUNE restrictions approach to easing theCOVID-19 Australian Government’s three-stage 29 June2020aspartof theSouth SkyCity Adelaide reopenedon SkyCity’s 2019annualreport Sustainability ReportingAwards for Silver Award inthe2020Australasian Australasian ReportingAwards anda Awarded aSilver Award inthe2020 workforce inNew Zealandcompleted Restructure of therostered (waged) ratings asBBB-(Negative Outlook) issuer creditrating anditsdebtissue Entertainment GroupLimited’s long term SkyCity S&P GlobalRatingsaffirmed additional debtfacilities maturities and$160millionin to $170millionof upcoming debt way of covenant waivers/relief, extensions secured thesupportof existing lendersby with theequityraising, SkyCity also the impactsof COVID-19. Inconjunction sheet inresponseto uncertainty around plan to strengthenSkyCity’s balance as partof acomprehensive funding Launched a$230millionequityraising
11
GENERAL Creating Value GENERAL Our Business FY20 Outputs & Financial Results
As at 30 June 2020 FY20 revenue and annual visitation
GAMING 3,817staff
$ million $ million* million including496.0 online including601.3 online 1.9visits from loyalty card members 5 properties across New Zealand and Australia 1 online casino (reported) (normalised) to our land-based casinos**
GAMING HOSPITALITY land-based casino5 licences table273 games $76.8 million 3.5 million restaurant/bar covers
electronic3,204 gaming automated307 table games machines HOTELS
HOSPITALITY $34.6million 158,377 rooms occupied
restaurants19 bars14
HOTELS SKY TOWER SKY TOWER
635 $ million visits hotel rooms metres328 tall 14.9 410,321
FY20 REVENUE BY BUSINESS ACTIVITY $ million $ million $ million 125.5 66.4 to 204.5 Reported Normalised in taxes to Governments of dividends declared in relation suppliers % % (including GST, gaming tax and to FY20 period for shareholders income tax) Local Gaming 71% 67% million International Business 6% 10% $ of capital347 invested $ million Hotel & Conventions 7% 6% 10.4 million in community contributions, Food & Beverage $ 12% 10% in remuneration295.8 and benefits levies and sponsorships Other 4% 7% to staff $ million in interest41.4 paid to lenders
*Includes gaming GST. **Calculated by reference to customers who used their SkyCity Premier Rewards cards to game, where one visit records 12 13 a customer's patronage on a day irrespective of how many times they used their card on that day. GENERAL
FY20 Outcomes & Impacts
Our sustainability vision recognises that, to be a sustainable business, we must OUR COMMUNITIES OUR ENVIRONMENT be a responsible business actively protecting and promoting the people we Contributed a total of $3.7 million to the SkyCity was among the first major serve and the places we share, whilst creating value for our shareholders. four New Zealand SkyCity Community New Zealand companies to go carbon SkyCity’s sustainability initiatives are therefore focused on doing good for our Trusts for distribution to communities in neutral and was certified carbonzero the Auckland, Waikato, and Queenstown by Toitū Envirocare in New Zealand in customers, our employees, our communities, our suppliers, our environment Lakes regions. In addition to company tax, October 2019 having paid $86,000 to offset and our shareholders. SkyCity paid over $33 million in gaming tax the equivalent of 12,866 tonnes of carbon and problem gaming levies derived from (measured in FY19). SkyCity's gaming operations. The carbon credits purchased through Toitū OUR CUSTOMERS OUR PEOPLE Envirocare are generated by international Significant investment in additional Establishment of a $1 million SkyCity projects, which will fund 48,000 solar host responsibility measures to improve Employee Hardship Fund, from funds $ million household cookers for rural communities in our ability to detect excluded persons contributed by the Senior Leadership Team paid3.7 to the SkyCity Community Trusts China and help build wind farm capacity in and continuous play, including the and other senior executives across the FY19 – $4 million India to replace fossil fuel alternatives. introduction of facial recognition business via voluntary salary reductions technology across all SkyCity land-based and voluntary contributions by other staff Certified carbonzero in New Zealand by casinos, which has led to a significant members, to assist employees impacted by $ million offsetting in FY20 the equivalent of increase in the detection of excluded COVID-19. paid33.1 in gaming taxes and persons returning to a SkyCity casino in problem gaming levies tonnes CO2e breach of their exclusion orders during Downsized our New Zealand workforce FY19 – $43.1 million 12,866 the period. by around
15,137 tonnes CO2e in25% response to COVID-19 total carbon footprint cameras OUR SUPPLIERS 43 FY19 – 19,093 tonnes CO2e installed across SkyCity casinos for SkyCity has approximately 800 key ongoing facial recognition during FY20 significant suppliers across the SkyCity Group, Sky Tower lighting upgraded with a substantial number of these being in to LED resulting in a ZEROfatalities or serious injuries the food and beverage sector. customers energy saving identified1,757 in breach of their exclusion Over 10% orders during FY20 reduction FY19 – 874 in8% Total Recordable Incident Frequency $ million Rate (TRIFR) from FY19 baseline paid530 to suppliers of goods and services As at 30 June 2020 during FY20 (including capital expenditure) OUR SHAREHOLDERS FY19 – over $450 million
customers increase 21,327 in72% hazard identification reports from have downloaded the new SkyCity app cents (launched in August 2019) FY19 baseline 10total dividend per share (fully imputed) FY19 – 20 cents per share
SkyCity’s sustainability strategy is linked to seven of the 17 United Nations Sustainable Development Goals FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) has (a set of goals to end poverty, protect the planet, and ensure prosperity for all as part of a new sustainable confirmed that SkyCity Entertainment Group has been independently assessed according to development agenda) – Good Health and Well-being (Goal 3), Quality Education (Goal 4), Gender Equality the FTSE4Good criteria, and has satisfied the requirements to become a constituent of the (Goal 5), Decent Work and Economic Growth (Goal 8), Responsible Consumption and Production (Goal 12), FTSE4Good Index Series. Climate Action (Goal 13) and Partnerships to Achieve the Goal (Goal 17). Created by the global index provider FTSE Russell, the FTSE4Good Index Series is designed A full description of the Sustainable Development Goals is available at www.un.org/sustainabledevelopment. to measure the performance of companies demonstrating strong Environmental, Social and SkyCity recognises that, for the Goals to be achieved, everyone needs to do their part and business and Governance (ESG) practices. The FTSE4Good indices are used by a wide variety of market industry play an important role. We are committed to playing our part in helping to achieve the Goals. participants to create and assess responsible investment funds and other products.
14 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Creating Value 15 Performance Our Performance History GENERAL
FY20 Highlights Group Revenue 1,119 1,125* 200 1,084 1,101 SkyCity’s financial result for the financial year ended 30 June 2020 has been significantly impacted by the 1,008 1,029 919 New Zealand International Convention Centre fire and COVID-19 pandemic that emerged in New Zealand 000 867 878 816 822 and Australia in early 2020, with normalised EBITDA and NPAT for the Group for the period to 30 June 2020 780 negatively impacted but at the top-end of the guidance range provided at the time of our equity raising in 00
June 2020. 00
Our reported results were up significantly over the prior year however due to accounting for the ll on 00 New Zealand International Convention Centre fire and the gain from the sale of the long term concession of Reported the SkyCity Auckland car park, partially offset by a A$150 million impairment of the Adelaide casino licence. 200 Normalised Pleasingly, our domestic business (which has historically accounted for over 85% of Group EBITDA) has 0 (Including gaming GST) demonstrated its resilience and traded well ahead of expectations when open and fully operational Y Y Y Y Y Y20 following the property closures in March 2020. Group EBITDA 338 343 348 The key features of the FY20 result are: 330 334 3 0 320 310 305 304 307 298 EBITDA 300 Normalised 2 0 Reported 201
200
$ $ ll on 348.3 million 200.7 million 0
00 NPAT 0 Reported Reported Normalised Normalised 0 0 $235.4 million $66.3 million Y Y Y Y Y Y20 Earnings Per Share (EPS) and Dividend Per Share (DPS) 35.4 3 0
DIVIDEND 30 0 25.5 25.4 25.3 25.6 24.3 23.4 Interim dividend* (fully imputed) of 22.9 2 0 22.0 21.0 21.4 20.0 20.0 20.0 20.0 10 cents per share 20 0 0 10.0 10.0
ent per are ent 0 0 6.8 EQUITY RAISING Reported EPS 0 Normalised EPS Declared DPS 0 0 $230 million Y Y Y Y Y Y20 equity raising launched in June 2020 and successfully completed during June and July 2020 Enterprise Value 3,357 3,196 3 00 3,110 3,072 3,036 SKYCITY ONLINE CASINO 348 3 000 447 349 643 488 Over 2,308 2 00
541 35,000 customer registrations 2 000
SkyCity Online Casino has grown rapidly since its launch in August 2019 despite operational constraints, ll on 00 3,009 2,723 2,749 with significant growth in its customer base over the period – with over 35,000 customer registrations as 2,467 2,548 000 at 31 August 2020 – and the business being profitable since April 2020 1,767
(1) 00 Equity Value Net Debt(2) 0 0 *A final dividend was not declared for FY20 due to restrictions in the covenant waivers/relief secured as part of the funding plan announced by Y Y Y Y Y Y20 the company in June 2020. (1) Based on the share price and number of shares on issue as at 30 June in each financial year. (2) Gross hedged debt less cash at bank as at 30 June in each financial year.
*This is a summation of the first six lines on the face of the Income Statement. 16 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Performance 17 Note: FY19 and prior year results include the Darwin operations. Diversity Snapshot GENERAL
SkyCity is a major employer with over 3,800 staff. We employ a diverse range of people The gender composition of SkyCity’s directors, officers, senior executives and total workforce as at 30 June 2020 and, comparatively as at 30 June 2019, is set out below: at all skill levels and aim to create an environment where people are at the centre, are motivated to work hard, progress in their careers and are empowered to grow Female Male Female Male and achieve. 2020 Number % Number % Total 2019 Number % Number % Total Directors 2 40% 3 60% 5 Directors 2 33% 4 67% 6 The following graphic shows the diverse makeup of our workforce as at 30 June 2020 and, where relevant, Officers 3 43% 4 57% 7 Officers 3 38% 5 62% 8 as a comparison against our workforce numbers as at 30 June 2019. Senior Executives 4 40% 6 60% 10 Senior Executives 4 36% 7 64% 11 Total Workforce 1,832 48% 1,980 52% 3,812 Total Workforce 2,456 49% 2,569 51% 5,025
In the above tables: • ‘officers’ are the Chief Executive Officer and those directly reporting to the Chief Executive Officer, other than the Executive Assistant; • ‘senior executives’ are, with the exception of the Chief Executive Officer, those who hold a strategic position (as determined by the People and Culture Committee from time to time) and are noted as a ’senior executive’ in the SkyCity Board Charter; and • the ‘total workforce’ number does not include those who identify as gender diverse and those who elected not to identify as being % female, male or gender diverse. % of58 our workforce identify1 as having a disability are 36 years old and under FY19 – 1% % FY19 – 59% gender1 diverse FY19 – 0.1% Staff speak/write in % % 57different 51men 48women languages STAFF 36 FY19 – 51.1% FY19 – 48.8% YEARS average age of % of39 leadership roles our workforce held by women Top 3 FY19 – 35 YEARS FY19 – 38% non-English 3,817(full-time, part-time languages: Mandarin and casual) Tagalog (Philippines) Hindi FY19 – 5,031 AGE Top 10 ethnicities* 79 staff identify with: Generation Z (<23 years) 19.2% Chinese 17% New Zealander 15% YEARS Millennials (24–36 years) age of our oldest 38.4% Indian 11% staff member Generation X (37–53 years) 31.4% Australian 11% Baby Boomers (54–75 years) 10.9% Māori 8% Other Asian 7% FY19 – 83 YEARS Veterans (76–93 years) 0.1% Filipino 6% % European 6% identify as being a 6 FY19 Samoan 3% member of the 18.8% 40.8% 28.8% Other 2% LGBTTI+ community 11.5% 0.1% European *Given as a percentage of those staff members who provided details FY19 – 6% about their ethnicity.
18 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Diversity Snapshot 19 GENERAL
Group Strategy
In 2018, we announced a refreshed entertainment to ensure our destinations remain relevant to customer demand. Where necessary, Group medium term strategy which we are prepared to acquire property to ensure has a clear focus on the creation of we are future-proofed; both sustainable shareholder returns • we have two major projects in progress which and enhanced social and sustainability still require significant investment to complete initiatives critical to the long term over the next few years. While we are very viability and success of SkyCity. comfortable with our ability to service and repay the debt funding for these projects, Key considerations when setting the strategy in we currently have limited debt capacity for 2018 were: other expansionary projects or initiatives in the • profitability of our business is roughly 80% short term. Any funding requirements for new from New Zealand and 20% from Australia. initiatives will be raised through sale of non-core Shareholders are comfortable with the relatively assets and/or partnering using a “capital lighter” low country risk and regulatory environments approach; and that these jurisdictions offer and we are likely • the relatively high dividend yield that SkyCity to remain focused on this region for the offers is valued by shareholders and should be foreseeable future; preserved and recognised when looking at any • our business is predominantly gaming-led, future funding requirements. with roughly 80% currently coming from the Despite the challenges presented by the COVID-19 casino component. The long term, exclusive global pandemic, SkyCity’s Group strategy nature of our land-based casino licences remains relevant today with an immediate focus provides a solid underpin to the risk profile of on managing the post COVID-19 recovery and the business. We have strategically evaluated completing the major projects in Adelaide and our existing casino licences to ensure we are Auckland which will underpin medium term maximising the potential within them and have earnings and cash flow growth. The investments identified further opportunity for growth; we make generate wide-ranging benefits for • there are unlikely to be many (if any) new our communities and through the New Zealand Communities land-based casino licence opportunities in our International Convention Centre and Horizon Hotel jurisdictions of operation, so growth (other than project in Auckland, plus the casino expansion and organic growth) will have to come from other ‘Eos by SkyCity’ hotel development in Adelaide, lines of business. The balance of our business we will support the economic and tourism need good essentially derives from hotels and restaurants. recoveries in both communities. Our restaurants are relatively low margin and Given the uncertainty still facing the business exist primarily to service our gaming, hotel however, it is unlikely that any large, new, and conventions customers and to ensure capital intensive developments will be advanced. that our destinations remain relevant in their The balance sheet capacity and liquidity buffers will businesses communities. Our hotels are higher margin be preserved to protect against possible trading businesses and there is an opportunity to scale downside scenarios and potential future COVID-19 up our portfolio and expertise; related closures. Consequently, hotel development • we are cognisant of a strategic need to and property master planning and development By creating value for others, remain abreast of developments in the online initiatives are currently on hold although still and digital space and, where appropriate, continue to be refined. we create value for SkyCity. to ensure that we take up opportunities that SkyCity has historically delivered a relatively will ensure we continue to offer a relevant form high dividend yield for shareholders – however, of entertainment; dividends are currently suspended due to covenant • a review of our existing precincts to ensure that waivers/relief secured as part of the funding plan we are maximising opportunities has highlighted announced in June 2020. SkyCity will be reviewing areas of potential investment into premium its dividend policy over the coming months with the gaming spaces, hotels (as highlighted above) and aim of resuming dividend payments later in 2021.
21 GENERAL Our Vision This section provides a summary of SkyCity’s SkyCity Adelaide business within the Railway Station To be the leader in gaming, entertainment performance and strategic positioning to create building remain on track to complete in time for and hospitality in our communities value during the financial year ended 30 June 2020 the expansion opening. We expect to open the and our priorities for the year ahead. facilities in a staged manner, reflecting customer demand, with a focus initially on local and interstate FY20 Performance – customers (given expected ongoing international border closures). Significant focus is being given to Our Business Goals preparing SkyCity Adelaide for operationalisation to ensure a smooth handover and ensure we can hit Improve our Operating Performance the ground running from opening. We are currently During the year in review, SkyCity faced significant in the process of hiring up to 700 new employees Our Business Goals challenges arising from the fire at the New Zealand who will be required when the expansion is fully International Convention Centre and the impacts operational and expect to implement new regulatory of COVID-19. We were able to move quickly to right reforms (banknote acceptors, ticket-in ticket-out size our operations for our expected future demand (TITO) technology on the main gaming floor and a environment and to stand up our operations multi-protocol gaming system) from October 2020, on reopening. Following implementation of the following completion of the South Australian labour restructure in New Zealand during the Government’s regulatory review. Walker Corporation, period, SkyCity expects to deliver $50 million in which is developing Festival Plaza and a 1,500-space annualised cost savings and a more flexible and car park (adjacent to SkyCity Adelaide), is progressing resilient operating model going forward to be able satisfactorily, but slightly behind schedule, and we to effectively manage an uncertain domestic and now expect the car park to be handed over towards international environment. the end of FY21. SkyCity still expects to deliver the project in-line with its A$330 million budget and The benefits of investment in new gaming Improve Optimise Grow and that the project will transform SkyCity Adelaide product, product management and changes into a world-class entertainment complex. As our operating our existing diversify our to floor layout continue to be realised across previously flagged, SkyCity has booked a A$150 the Group, particularly in Auckland, as is our performance portfolio business million impairment of SkyCity Adelaide’s carrying ongoing investment in premium/VIP gaming. value due to the revised timeframe to achieve long SkyCity continues to leverage complementary assets term potential earnings post expansion, exacerbated to drive gaming visitation (ie. hotels, car parking and by the impact of COVID-19 – this is a non-cash item casino food and beverage) and focus on targeted which reduces intangible asset value (casino licence) and tactical marketing as a cost-effective tool for and does not impact debt covenant calculations. driving profitable visitation. The strong performance of our gaming machine business when open post The fire at the New Zealand International property closures has been particularly pleasing Convention Centre (NZICC) site during Our Character & given its importance to Group earnings and value. October 2019, coupled with disruptions to construction activity as a consequence of COVID-19 We continue to make good progress on our ICT restrictions, has resulted in further significant investment and digital capability. We have delivered Culture Goals delays to the project. At this stage, we expect significant change to critical ICT infrastructure and Horizon Hotel to be completed during 2021 and the are now at a point where we can focus on initiatives NZICC during 2023, with the possibility of hosting to enhance the customer experience, centred conferences by late 2023 or early 2024. We expect around web and mobile, customer relationship the 600 car parks damaged by the fire to be management and data analytics. returned by the end of FY21 and the balance of the Optimise our Existing Portfolio car parks (650 spaces) alongside completion of the NZICC. Despite the impacts of the fire and COVID-19 We have progressed a number of key initiatives on the project timetable and delivery, we remain to optimise our existing portfolio over the year comfortable with our contractual position – in review. Fletcher Construction is required to complete Excellent progress has been made on the the project and, during May 2020, we secured SkyCity Adelaide expansion project during a two-year extension to the long stop date to Offer a great Always put Be responsible the year. The project is progressing well and is complete the NZICC (to 2 January 2025) with the and safe customers leaders in our due to open before the end of 2020. In addition, New Zealand Government. place to work first communities the significant master planning works for the existing
22 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Group Strategy 23 GENERAL
As previously reported, appropriate project (with an estimated fair value of $2 billion of land regime for operators and imposing taxes and and FY19, we have continued to invest in key insurance is responding to the NZICC and and buildings owned as at 30 June 2020) – with host responsibility requirements. Following a sustainability initiatives, particularly in the areas Horizon Hotel reinstatement, with the first tranche our intention to separately report our operations public consultation commenced during 2019, the of diversity and inclusion. We continue to actively of the insurance proceeds (totalling $105 million) and property assets once the internal restructure Department of Internal Affairs (the New Zealand promote women into leadership positions and received. We expect the total cost to reinstate the is complete. We continue to evaluate the potential gambling regulator) is developing a policy are proud of the gender and cultural diversity we NZICC and Horizon Hotel to be fully covered by sale of certain non-core assets, such as the framework for potential regulation. While ultimately have across the business. We are also committed to insurance and, accordingly, there are no changes AA Centre (SkyCity HQ) in Auckland once current a regulated online gaming market in New Zealand providing safe, fun and progressive environments to previous guidance for the total project costs to building works and leasing are completed. remains the preferred solution for SkyCity, the for our customers, suppliers and staff. We continue SkyCity (of around $750 million). Whilst the further launch of SkyCity Online Casino is an important to deliver on our Group health and safety strategy, SkyCity remains focused on effective capital delays on the project are regrettable, the long term step on the journey of pursuing opportunities to which is centred around preventing harm and discipline and, following announcement of our investment thesis for the project remains intact – grow and diversify our earnings, addressing a fast building awareness, particularly in response to funding plan which included a $230 million equity the NZICC will support long term growth in tourism growing industry which is highly complementary to the risks posed by COVID-19 in our communities. raising successfully executed during June and expenditure and be a significant demand driver our land-based activities and offering customers a We remain focused on youth development and July 2020, our balance sheet is in a strong position for our Auckland precinct, in addition to having multi-channel gaming experience. supporting our most vulnerable staff. We continue to deliver on our medium term strategic plan. secured an exclusive casino licence for our key to meaningfully reduce our gender pay gap Following the equity raising, we have sufficient SkyCity’s strategy for growing its hotel business property out to 2048. across the New Zealand businesses and the final liquidity to fund our major projects in Adelaide and remains focused on the successful delivery of instalment of our ‘$20 by 2020’ wage initiative is Beyond the major projects, master planning Auckland and to respond to a range of downside Eos by SkyCity and the Horizon Hotel in Auckland scheduled to be implemented in New Zealand by and development opportunities in Auckland, scenarios, including a longer and more protracted over the next 12–18 months. Longer term hotel the end of 2020. Hamilton and Queenstown continue to be refined recovery in New Zealand and Australia and/or development opportunities on existing precincts – however, major decisions are currently paused further COVID-19 disruptions. Our balance sheet continue to be refined, but major decisions are Being a responsible member of our community due to COVID-19, balance sheet constraints for the capacity for future growth projects and/or capital currently paused due to COVID-19. remains a key aspect of our sustainability foreseeable future and an uncertain outlook for management will be reviewed when we are no framework and Group strategic plan. In the year in As an entertainment and hospitality provider, our tourism-related businesses. Significant long longer in reliance on covenant waivers/relief secured review, we achieved carbon neutral status across our SkyCity is challenged to stay relevant in relation term option value remains embedded in our as part of the funding plan and the domestic and New Zealand operations, launched allocations for to new forms of entertainment. In addition to Auckland precinct (including 2,500sqm of land international environment becomes more certain. our employee-led SkyCity Green Fund (which will our foray into online gaming, by late 2020, the able to be developed) and a potential hotel We remain committed to our BBB- (negative invest in projects globally to offset emissions) and existing SkyCity Auckland Convention Centre will opportunity in Hamilton, whilst currently 'on hold', is outlook) credit rating which S&P Global Ratings implemented initiatives to reduce waste to landfill become home to the All Blacks Experience and a complementary asset which would support long re-affirmed following the equity raising and well and water usage. We have refocused the SkyCity Weta Workshop, both providing unique, interactive term growth of the property. We continue to evaluate positioned to raise further debt capital if required Community Trusts to ensure targeted allocations customer experiences. Federal Street will become future options for our Queenstown properties given in the future. and contributions go to those causes most worthy Auckland’s leading entertainment zone ensuring their reliance on VIP gaming and international within our communities. The establishment of the the long term relevance of our precinct and appeal tourists. A range of other smaller projects were Grow and Diversify our Business SkyCity Employee Hardship Fund in April 2020, to a broad range of demographics. completed during the year in review – most notably, We launched SkyCity Online Casino, an offshore totalling $1 million, has assisted staff facing financial the major refurbishment and expansion of premium online casino, in August 2019 with Gaming SkyCity also continues to monitor and evaluate difficulties as a consequence of the impacts of gaming facilities in Auckland and upgrades to Innovation Group (GiG) via a Malta-based regional merger and acquisition opportunities in its COVID-19. Marble Hall and associated facilities at SkyCity industry, noting that inorganic growth opportunities subsidiary. The site, which offers high quality host At SkyCity, we are proud of, and rely on, our Adelaide, which included the opening of The are likely to emerge as a consequence of the impact responsibility and a brand name New Zealanders culture of compliance, which encourages people Guardsman, a South Australian themed restaurant of COVID-19 on the casino industry and both the can trust, has seen strong growth during FY20 with to focus on doing the right thing by themselves, and bar in the historic Railway Station building. domestic and global economies. over 25,000 customer registrations by year-end their teammates, the company and stakeholders. We are continuing to progress further opportunities (over 35,000 as at the end of August 2020) and To ensure our future success across various financial, to release capital from property assets and the business trading profitably from April 2020. FY20 Performance – Our social and human capitals, it is important to restructure over the medium term, which includes GiG provides SkyCity with a full-suite online casino Character and Culture Goals continue conducting our business holistically within exploring an internal restructuring of our operations solution, which includes a technical platform, the terms of our sustainability framework. and property assets. A potential opportunity exists gaming content, managed services and front-end At SkyCity, we need to continually focus on to establish standalone funding structures and development. SkyCity supports future regulation protecting and enhancing our social licence to unlock unrecognised value in property assets of the New Zealand online casino market, operate. Following good progress during FY18 including introducing an appropriate licensing
24 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Group Strategy 25 GENERAL
Outlook for FY21 Our Business Goals FY21 Priorities Assuming there is no adverse change to the • Queenstown is expected to be adversely current COVID-19 outlook in New Zealand and impacted by continuing international Grow and diversify • Progress opportunity to address online casino market in New Zealand South Australia, we expect Group normalised border restrictions; our business • Monitor and evaluate regional merger and acquisition opportunities in EBITDA to be above FY20, but still below • the Adelaide expansion is expected to open in our industry pre-COVID-19 and FY19 levels. phases during FY21 (depending on the operating • Support opening of new entertainment attractions, All Blacks Experience and We expect the domestic businesses to continue to environment due to COVID-19) and we expect Weta Workshop, in Auckland perform well when open (although we remain well EBITDA to be broadly consistent with FY19 levels; prepared for the possibility of further closures), but • negligible International Business turnover Our Character and FY21 Priorities are planning for negligible International Business is expected, with fixed operating costs for Culture Goals and international tourism activity due to ongoing International Business of around $750,000 per international border closures. At a property/unit level: Offer a great and • Focus on maintaining staff resilience, morale and motivation month; and safe place to work • Auckland performance is expected to return to • Maintain a cohesive management team focused on strengthening the • SkyCity Online Casino is expected to deliver a trends observed prior to the second property SkyCity culture more meaningful contribution. closure in August 2020, driven by a resilient • Continuous improvement in health and safety performance domestic gaming performance and cost savings, SkyCity’s dividend policy is to be reviewed during offset by weaker performance from non-gaming 1H21. We are not currently able to pay an interim • Continue to promote awareness of mental health risks businesses; dividend due to reliance on covenant waiver/relief • Zero work-related fatalities on our sites and/or sites where SkyCity has primary (for the December 2020 testing period) secured as • Hamilton is expected to deliver good control or management responsibilities part of the funding plan announced in June 2020, performance versus the prior comparable period but are expecting to pay a final dividend for FY21 • Deliver employment opportunities for youth through our Project Nikau – predominantly domestic business underpinned in September or October 2021 if there are no programme by positive gaming machine activity and significant adverse changes to the current COVID-19 cost savings; • Maintain labour practices commensurate with an employer of choice status in New Zealand and South Australia. • Undertake safety engagement activities that promote active and visible safety leadership
Our Business Goals FY21 Priorities Always put • Maintain best practice host responsibility standards across all properties customers first Improve our • Manage COVID-19 recovery following reopening of properties • Enhance our facial recognition systems operating • Maintain a flexible operating model to respond to COVID-19 restrictions • Build foundations for a new customer data platform to provide more relevant performance insights and communications • Increased focus on customer experience management (CXM) and data analytics • Continue to improve the performance of the SkyCity Premier Rewards loyalty • Continue growth in core Auckland gaming business programme and customer experiences across each property • Implement new information and communications technology (ICT) systems, including data management, Internet Protocol television (IPTV) and Be responsible • Maintain leading position on diversity and inclusion through active engagement facial recognition leaders in our on issues and with stakeholder groups communities • Continue to pursue operating efficiencies and cost savings • Measure and reduce SkyCity’s carbon footprint and retain carbon neutral status • Successfully allocate funds from the SkyCity Employee Hardship Fund to support Optimise our • Complete SkyCity Adelaide expansion project by the end of 2020 and staff impacted by COVID-19 existing portfolio leverage benefits • Commence allocations to projects nominated by the employee-led SkyCity • Manage reinstatement of the New Zealand International Convention Centre and Green Fund Horizon Hotel project following the fire and impacts of COVID-19 • Implement initiatives to reduce waste to landfill and water usage • Enhance Auckland main gaming floor customer experience, including new bar and food court
• Enhance Auckland VIP gaming experience, including launching BLACK – a new gaming area for our VIP customers
• Refine development opportunities in Auckland, Hamilton and Queenstown
• Explore potential sale of non-core assets, such as the AA Centre (SkyCity HQ) in Auckland
26 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Group Strategy 27 GENERAL
About SkyCity
SkyCity is New Zealand’s largest tourism, leisure and entertainment company and is dual listed on the New Zealand and Australian stock exchanges. As one of three major publicly listed casino that broke out at the New Zealand International operators in Australasia, SkyCity operates integrated Convention Centre in October 2019 and the entertainment complexes in New Zealand COVID-19 pandemic). (in Auckland, Hamilton and Queenstown) and in In August 2019, SkyCity launched SkyCity Online Adelaide, Australia – each featuring casino gaming Casino, an offshore online gaming business for facilities and premium restaurants and bars, New Zealanders, as a logical extension of its which appeal to both domestic and international land-based casino operations. Whilst the business is visitors alike. still very much in its infancy, SkyCity is encouraged SkyCity also offers award-winning hotel by SkyCity Online Casino’s performance since accommodation in Auckland at The Grand launch. As at 31 August 2020, there were over by SkyCity and SkyCity Hotel. SkyCity’s hotel 35,000 registered SkyCity Online Casino customers. offering will shortly be complemented by Eos by SkyCity employs over 3,800 staff across its SkyCity, a new 120-room luxury hotel due to open operations in New Zealand and Australia across in Adelaide, South Australia, before the end of 2020 more than 180 job types, with around 2,500 staff and Horizon Hotel, a new 300-room 5-star hotel based at its flagship property in Auckland. now expected to be completed in Auckland during 2021 (having been impacted by the significant fire
SkyCity Online Casino Delivering Malta memorable
SkyCity Auckland & entertainment Group Head Office experiences SkyCity Hamilton
SkyCity Adelaide
SkyCity Queenstown and SkyCity Wharf
29 OUR HISTORY AT A GLANCE
2020 GENERAL • COVID-19 pandemic temporarily closes all SkyCity properties in New Zealand and Adelaide, South Australia 2019 • SkyCity sells SkyCity Darwin Auckland • SkyCity Online Casino launches offshore • SkyCity sells long term concession (licence to operate) over SkyCity Auckland car parks to Macquarie Principal Finance Group Property SkyCity Auckland, New Zealand • A significant fire broke out at the New Zealand International General Manager Convention Centre (under construction) 2018 • Construction commences on the SkyCity Adelaide expansion project 2016 • The first sod was turned on the New Zealand International Convention Centre/Horizon Hotel site
2013 Michael Ahearne, Chief Operating Officer • SkyCity acquires SkyCity Wharf in Queenstown Opened 1996 2012 • SkyCity acquires full ownership of SkyCity Queenstown Casino Venue Licence Runs until 2048* 2005 Facilities • Casino • Out-catering • SkyCity acquires full ownership of SkyCity Hamilton • Hotels • Car parking 2004 • Food and beverage • Sky Tower • SkyCity acquires SkyCity Darwin • Entertainment • Theatre 2002 • esports broadcasting studio • Telecommunications and • SkyCity Hamilton opens broadcasting facilities 2000 • SkyCity Queenstown opens Licensed Gaming Product • 1,877 electronic gaming machines • SkyCity acquires SkyCity Adelaide • 150 table games 1999 • 240 automated table games • SkyCity lists on the Australian stock exchange Workforce ~2,500 staff 1998 • Harrah’s management contract ends and SkyCity becomes FY20 Revenue $451.0 million** (reported) a New Zealand-managed operation $497.3 million (normalised)
1997 *The casino venue licence can be renewed for a further period of 15 years pursuant to sections 134–138 of the New Zealand Gambling Act 2003. • Sky Tower opens in Auckland **Excludes New Zealand International Convention Centre fire income and the sale of the Auckland car park concession. 1996 • SkyCity opens its flagship SkyCity Auckland complex with Harrah’s Located in the heart of Auckland’s CBD, AM and FM broadcasting and telecommunications Entertainment (now Caesars Entertainment), the largest casino SkyCity Auckland is the flagship property of the antennas provides telecommunications and entertainment operator in the United States, as the operator SkyCity Entertainment Group and features a casino, broadcasting facilities to the telecommunications • SkyCity lists on the New Zealand stock exchange two award-winning hotels – The Grand by SkyCity industry. The Sky Tower is also home to 1994 and SkyCity Hotel, bars and restaurants, a 700-seat New Zealand’s only esports broadcasting studio. • Construction of the SkyCity Auckland complex commences theatre and the iconic Sky Tower. SkyCity is currently investing more than Opened in 1997, the 328-metre tall Sky Tower $700 million within the SkyCity Auckland precinct has been an icon of Auckland’s skyline for over with the development of the New Zealand 20 years and attracts over 500,000 visitors each International Convention Centre, an adjacent year. As the tallest free-standing structure in laneway, over 1,250 additional car parking spaces the Southern Hemisphere, visitors can enjoy and the new 300-room, 5-star Horizon Hotel. breathtaking views right across Auckland from the This development was originally expected to be Sky Tower’s two observation decks or while dining in completed in 2019 – however, due to initial delays by one of three restaurants in the Sky Tower, including the contractor, the significant fire that broke out at Auckland’s only 360-degree revolving restaurant. the New Zealand International Convention Centre At the very top of the Sky Tower, a 93-metre in October 2019 and the subsequent impacts of the communications mast accommodating VHF, UHF, COVID-19 pandemic that emerged in early 2020,
30 About SkyCity 31 GENERAL
Horizon Hotel is now expected to be completed New Zealand’s rugby heritage, achievements and during 2021 and the New Zealand International culture – bringing together the stories of our rugby Convention Centre and adjacent laneway are legends, the drama and excitement of test match expected to be completed during 2023. rugby, and the mastery and legacy of the All Blacks. Academy Award-winning design and effects The New Zealand International Convention Centre company Weta Workshop will open an immersive will be New Zealand’s premier convention centre attraction to complement its behind-the-scenes enabling New Zealand to attract major international tours at their Miramar headquarters in Wellington. conferences as well as having capability for sporting events, theatre and musical performances. Over the last financial year, we have also continued The centre is designed to be a welcoming, open to evaluate our master plan for the SkyCity Auckland building complemented by a fresh new streetscape complex with ongoing concept development and for local, national and international visitors alike to feasibility analysis to explore opportunities for further enjoy. Two of the largest pieces of public art ever accommodation, food and beverage, new gaming created in New Zealand, commissioned by SkyCity spaces and entertainment offerings. Our vision is from New Zealand artists Sara Hughes and Peata for SkyCity Auckland to be a customer-centred Larkin, will adorn the exterior of the New Zealand destination with an ecosystem of mutually beneficial International Convention Centre and span a total places – buildings, experiences and public spaces. of 5,760sqm. As part of this broader master planning programme, SkyCity has acquired over $100 million of property The 5-star Horizon Hotel will bring 300 new around the SkyCity Auckland precinct over recent high-end rooms to the Auckland CBD and will years – with the SkyCity Auckland footprint now be uniquely connected via an air bridge over spanning the majority of three blocks in the Hobson Street to three city centre blocks across Auckland CBD (~3.5 hectares) with ~295,000sqm of the New Zealand International Convention Centre gross floor area. In light of the COVID-19 pandemic, it and SkyCity Auckland’s entertainment precinct. The new BLACK gaming machine area at SkyCity Auckland will cater for our domestic VIP customers. is unlikely that any significant commitments will be It will also be located directly above a new retail made in the short term until there is greater certainty and dining laneway that will connect Nelson and of the domestic and international economic Hobson Streets, and adjacent to Federal Street’s FY20 ACHIEVEMENTS environments. award-winning restaurants and bars. FY20 PERFORMANCE During the last financial year, SkyCity completed The Sugar Club and Huami were both named in Metro Magazine’s 2019 Top 50 Bars a $5.5 million refurbishment of EIGHT, a VIP SkyCity Auckland delivered a robust performance in (August 2019) table game area located on Level 8 of the FY20 despite significant external events impacting SkyCity Auckland main site. A new $22 million the business. Good momentum was achieved BLACK and Ultra VIP gaming machine area on prior to the fire at the New Zealand International Level 9 of the SkyCity Auckland main site was Convention Centre and impact of COVID-19, East Day Spa, located in The Grand by SkyCity, was named New Zealand’s Best Hotel scheduled to open in April 2020 but, due to including record local gaming activity for the eight Spa at the 2019 World Spa Awards (October 2019) COVID-19 related delays, will now open later months to 29 February 2020. this year. These new areas will provide an unrivalled The property achieved positive performance from VIP offering and experience to our domestic reopening in mid-May 2020 until the further VIP customers. Six SkyCity Auckland signature restaurants, The Grill, Gusto at the Grand, MASU by Nic Watt, mandated closure on 12 August 2020 (in response Depot, Federal Delicatessen and Huami, were named in the prestigious 2019 Cuisine Good Two new attractions are expected to open to an isolated COVID-19 outbreak in the greater Food Awards list, with The Grill receiving two hats and each of Depot, Gusto at the Grand at SkyCity Auckland before the end of 2020. Auckland area), particularly from gaming machines, and MASU by Nic Watt receiving one hat (November 2019) The All Blacks Experience is a joint venture between despite reduced capacity and limited marketing New Zealand Rugby and Ngāi Tahu Tourism and will and promotional activity. The non-gaming provide visitors with a state-of-the-art, interactive businesses performed satisfactorily, particularly experience showcasing the All Blacks. Through the the hotels. Local gaming activity during the The Sky Tower was named by TripAdvisor as #1 of 203 things to do in Auckland Central use of innovation and technology, it will provide a period from 1 June – 11 August 2020 returned to full sensory, interactive, and immersive experience pre-COVID-19 levels. for all New Zealanders and visitors to celebrate
32 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 About SkyCity 33 GENERAL
Hamilton
Property SkyCity Hamilton, New Zealand General Manager
Michelle Baillie
Opened 2002 Increased ownership from 70% to 100% in 2005
Casino Venue Licence Runs until 2027* Facilities • Casino • Conventions • Food and beverage • Car parking • Entertainment • Tenpin bowling
Licensed Gaming Product • 339 electronic gaming machines • 23 table games
Workforce ~300 staff FY20 Revenue $52.3 million (reported) $58.8 million (normalised)
*The casino venue licence can be renewed for a further period of 15 years pursuant to sections 134–138 of the New Zealand Gambling Act 2003. SkyCity Hamilton
Situated within Hamilton’s historic Chief Post to explore opportunities to optimise the product Office, in a building designed to maximise a superb mix at SkyCity Hamilton in response to customer and Christchurch Casino Limited. A public hearing FY20 PERFORMANCE riverside location on the banks of the Waikato demand for electronic gaming machines (which are took place in Hamilton from 19 – 26 November 2019 River, SkyCity Hamilton features a casino, bars and capacity constrained over weekends) in preference SkyCity Hamilton achieved a solid performance at which the Commission heard both factual and restaurants, a conference centre and Hamilton’s to tables, which are underutilised. The hotel during FY20 despite the impact of COVID-19 and expert evidence, and detailed legal submissions only tenpin bowling alley. feasibility also relies on hosting out of town gaming related property closure. EBITDA was only slightly from the seven parties authorised to appear and customers over the weekend, so the extra gaming down on the prior year on a like-for-like basis and The SkyCity Hamilton business has been on a be heard. In June 2020, the Commission released machine product is necessary to satisfy this record local gaming activity was achieved in the transformational journey over recent years with the its decision declining the application on the basis potential increase in demand. eight months to 29 February 2020, underpinned opening of a new food and beverage development that the proposed amendments to the licence by strong activity from gaming machines, despite in 2015, the addition of a modern tenpin bowling In December 2018, SkyCity applied to the conditions involved an opportunities substitution being capacity constrained during peak periods. alley, Bowl and Social, in 2016 and the addition New Zealand Gambling Commission to deploy which was not proportionate in terms of the of X-Golf, a virtual golf simulator, and a new café 60 additional electronic gaming machines at provisions in the New Zealand Gambling Act 2003. The property has achieved strong performance in 2019. A new Baccarat lounge was opened on the SkyCity Hamilton in substitution of three existing SkyCity is currently considering whether to make since reopening from mid-May 2020, with gaming casino floor in mid-July 2020. Blackjack table games. The Commission received another application to the Commission for a lesser machine revenue above pre-COVID-19 levels and a 242 separate submissions from the general number of electronic gaming machines. positive response from key customers to marketing Over the last financial year, we continued to public as well as submissions from Hamilton City and promotional activity. progress our master plan for the SkyCity Hamilton The hotel development and feasibility analysis Council, the Ministry of Health, Waikato District complex to explore further opportunities to leverage are currently on hold until there is greater Health Board, Problem Gambling Foundation, the property’s riverbank location, including a certainty of the domestic and international Mapu Maia, Salvation Army Oasis, the Department potential hotel development and additional food economic environments. of Internal Affairs, Anglican Action Mission Trust and beverage and entertainment offerings, and
34 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 About SkyCity 35 GENERAL
Adelaide
Property SkyCity Adelaide, Australia General Manager
David Christian
Acquired 2000
Licensing Agreement Runs until 2085* Facilities • Casino • Hotel (due to open before the end of 2020) • Food and beverage • Entertainment
Licensed Gaming Product • 828 electronic gaming machines (allowance for 1,500) • 82 table games (allowance for 200) • 67 automated table games (allowance for 300)
Workforce ~1,000 staff The Guardsman at SkyCity Adelaide. FY20 Revenue A$112.3 million (reported) A$121 million (normalised)
*The Approved Licensing Agreement between the Minister for Business Services and Consumers and SkyCity Adelaide Pty Limited provides SkyCity Adelaide with exclusive rights to provide casino gaming (except for interactive gambling) in South Australia until 30 June 2035.
Located in the historic Railway Station building on scheduled to open before the end of 2020 and will the banks of the Torrens River, SkyCity Adelaide is include a 120-room luxury hotel – Eos by SkyCity, South Australia’s only casino destination. wellness centre with a day spa, pool, sauna and gym, VIP gaming facilities, function and conference In January 2020, after being overlooked for more facility for up to 650 guests, two new bars (including than a decade, the former Overland Dining Hall in a rooftop bar) and four additional signature the Railway Station building was transformed into a restaurants. new, all-hours bar and restaurant 'The Guardsman' following a A$6 million restoration. The new venue Eos by SkyCity will be Adelaide’s most luxurious pays homage to the Railway Station’s rich heritage, hotel, with rooms ranging from 50sqm – 230sqm featuring a grand central bar, open kitchen and a and opulently appointed to meet the growing coffee front. demand for quality hotel rooms from both domestic and international visitors. SkyCity is currently investing A$330 million to transform SkyCity Adelaide into a world-class As part of the transformation, the existing integrated entertainment hub on the Festival Plaza SkyCity Adelaide business, housed in the iconic forecourt adjacent to the Adelaide Festival Centre Adelaide Railway Station building, is also being and Adelaide Convention Centre and near the revitalised and restored to improve the layout and Adelaide Oval. Designed by The Buchan Group in experience for customers, including: association with Hecker Guthrie Walter Brooke, and • 5,000sqm of new carpet throughout built by Hansen Yuncken, the new development is the building; Eos by SkyCity will be Adelaide's most luxurious hotel when it opens.
36 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 About SkyCity 37 GENERAL
Queenstown
SKYCITY ADELAIDE EXPANSION Property SkyCity Queenstown and SkyCity Wharf, New Zealand
Investment of General Manager A$330 million
Up to an additional
Jono Browne 700 new positions Opened/Acquired Opened Queenstown in 2000 and increased ownership required to operate the new development in full operation from 60% to 100% in 2012
Acquired Wharf in 2013
Casino Venue Licence Runs until 2025* for Queenstown
Runs until 2024* for Wharf
• repainting Marble Hall, the former grand domed reforms, SkyCity Adelaide will be permitted to Facilities • Casino waiting room in the Railway Station building, introduce ticket-in ticket-out (TITO) technology on • Food and beverage for the first time since SkyCity Adelaide opened the main gaming floor and banknote acceptors. • Entertainment in 1985; To implement the reforms, amendments will need • Conventions to be made to the regulations under each of the • restoration of heritage features and installation gambling acts, changes made to the Advertising of lighting features in Marble Hall; Licensed Gaming Product • 86 electronic gaming machines (Queenstown) and Responsible Gambling Codes of Practice, • 12 table games (Queenstown) • creation of The District at SkyCity – a new and new gambling administration guidelines live entertainment space on Level 1, which and community impact assessment guidelines • 74 electronic gaming machines (Wharf) will feature Australia’s first fully functional developed. Consumer and Business Services will • 6 table games (Wharf) microbrewery (operated by Pirate Life) within also need to update its systems and operations a casino; in support of these reforms and is aiming to Workforce ~60 staff commence all of the reforms by the end of 2020. • refurbishment and extension of the FY20 Revenue $9.9 million (reported) SkyCity Adelaide can commence operating TITO Baccarat Pavilion; $11.1 million (normalised) on the main gaming floor and banknote acceptors • a restoration of Chandelier Bar; and from October 2020. *The casino venue licence can be renewed for a further period of 15 years pursuant to sections 134–138 of the New Zealand Gambling Act 2003.
• construction of a new Central Café on the FY20 PERFORMANCE Ground Floor. SkyCity’s two Queenstown casinos, SkyCity next 48 hours) as the ongoing border restrictions SkyCity Adelaide achieved progressive improvement Queenstown and SkyCity Wharf, are located in continue to have a detrimental effect on the local A new three-storey glass atrium will connect the in performance during FY20 prior to the disruption central Queenstown, surrounded by the majestic Queenstown economy in particular, which is largely heritage and new buildings. from COVID-19, with stable local gaming activity to Southern Alps. dependent on tourism. Up to 700 additional ongoing roles, including front 29 February 2020, casino visitation up slightly from and back of house roles, will be required to operate the prior comparable period and a three-year high Whilst the larger SkyCity Queenstown property As Queenstown is an attractive destination for the new development. Recruitment for some roles in gaming machine market share (8%) achieved in reopened on 14 May 2020 following the SkyCity’s International Business customers, SkyCity has already commenced and will continue through December 2019. announcement by the New Zealand Government continues to explore options to create an improved that New Zealand would move to COVID-19 Alert VIP/premium facility in Queenstown. In June to mid-2021. SkyCity Adelaide was closed for the duration of Level 2 from 11.59pm on 13 May 2020, the smaller 2019, SkyCity purchased land on the shores of 4Q20 due to the South Australian Government’s The South Australian Government’s broader SkyCity Wharf property has remained closed Lake Wakatipu in Queenstown with the intention COVID-19 restrictions, with the majority of staff review of gambling regulation in South Australia since initially closing on 23 March 2020 (when the of using that land to develop a 5-star hotel to being stood-down over the period. The property was completed over the last financial year and, New Zealand Government announced that the complement its existing entertainment facilities experienced minimal International Business activity on 12 December 2019, State Parliament passed COVID-19 Alert Level had increased to Alert Level 3 in Queenstown and further attract international during 2H20 due to international travel restrictions. legislation to significantly reform the regulation and its intention to move to Level 4 within the visitors to Queenstown. of gambling in South Australia. As part of these
38 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 About SkyCity 39 GENERAL
International Business
General Manager
Stewart Neish Group General Manager – International Business
Facilities Premium gaming facilities at SkyCity Auckland, SkyCity Adelaide and SkyCity Queenstown
FY20 Revenue $38.0 million (reported) $78.9 million (normalised)
SkyCity’s International Business division caters for by SkyCity’ salons and upgraded as part of a high-net worth international players and junkets $6 million refurbishment in 2020 – featuring four who visit casinos as part of their leisure activities. luxurious gaming salons for exclusive use and four private accommodation suites. Each salon has The flagship SkyCity Auckland property features its own private dining facilities, bar and massage several premium gaming spaces, including VIP chairs, as well as its own lounge area and outdoor gaming salons in The Grand by SkyCity and balcony. Gaming dealers are available on request 1,800sqm of luxury high-end gaming space above for customers, who enjoy the full range of gaming the SkyCity Hotel. options offered at SkyCity Auckland in their own Located above the SkyCity Hotel, the Horizon Suites private salon. and salons were rebranded the ‘International
SkyCity Queenstown
However, the COVID-19 pandemic and its impacts gaming performance in 1H20. The property on the Queenstown economy in particular have experienced minimal International Business activity caused the company to review its strategy in during 2H20 due to international travel restrictions. Queenstown. SkyCity continues to explore its As noted above, SkyCity Wharf closed on options to create an improved VIP/premium facility, 23 March 2020 and remains closed pending review including investigating the regulatory framework to and consideration of all available options. achieve any proposed development. SkyCity Queenstown achieved positive gaming FY20 PERFORMANCE machine performance post reopening in The impact of COVID-19 on international visitors mid-May 2020. to Queenstown during 2H20 offset strong local
The refurbished International by SkyCity salons in Auckland.
40 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 About SkyCity 41 GENERAL
Online
General Manager
Steve Salmon, Online Director
Facilities Online casino FY20 Revenue $4.5 million (reported) $4.5 million (normalised)
Launched in August 2019, SkyCity Online Casino around 15,000 new customer registrations over the provides New Zealanders with an offshore online period. As at 30 June 2020, there were over 25,000 casino platform, featuring over 1,300 online games. customer registrations and, as at 31 August 2020, there were over 35,000 customer registrations. SkyCity Online Casino is operated out of Malta by international iGaming company Gaming Innovation SkyCity Online Casino has been profitable every Group Inc (GiG) on behalf of SkyCity Malta Limited, month from April 2020 with margins in-line with an independently operated subsidiary of the expectations. There has been a slight reduction SkyCity Entertainment Group, and managed by an in gaming revenue following the reopening of Online Director based in Europe. the New Zealand properties, but an increase in activity during the second closure in Auckland in The refurbished International by SkyCity salons in Auckland. GiG provides a full-suite online casino solution, August 2020. Overall, we expect SkyCity Online including a technical platform, gaming content, Casino to become a more meaningful part of Group managed services and front-end development. As part of the A$330 million SkyCity Adelaide growth, but due to its inherent volatility, is likely to earnings from FY21. expansion project due to open before the end of be maintained as a relatively small, but important, Whilst a regulated online gaming market remains 2020, SkyCity is constructing additional VIP luxury contributor to overall Group profit over the the preferred solution in New Zealand, the gaming facilities to complement the existing long term. launch of SkyCity Online Casino is another step premium gaming salon opened in Adelaide in 2015. on SkyCity’s journey of pursuing opportunities to Given expected ongoing international border FY20 PERFORMANCE grow and diversify its earnings, accessing a fast growing industry that is highly complementary to restrictions as a result of the COVID-19 pandemic, International Business achieved significantly its land-based activities and offering customers a the new facilities will initially cater for local and weaker volumes and normalised earnings in FY20 multi-channel gaming experience. SkyCity remains interstate customers. versus a record prior comparable period due to the supportive of regulating the New Zealand online impact of COVID-19 on visitation from Asia from Despite the impacts of COVID-19, there remains casino market, including introducing an appropriate January 2020, and the closure of international potential for further growth in International licensing regime for operators and imposing taxes borders from late March 2020. Business over the medium to long term due and mandatory host responsibility requirements. primarily to the attractiveness of New Zealand as a The ongoing fixed operating costs required tourist destination, good connectivity and the new to support the business, despite no revenue FY20 PERFORMANCE VIP luxury gaming facilities at SkyCity Adelaide. generation, in 4Q20 negatively impacted margins SkyCity Online Casino experienced strong growth SkyCity remains committed to International in addition to lower volumes in 1H20. FY20 reported in customer registrations, first-time depositors Business and expects it to recover once EBITDA was slightly above the prior comparable and gaming revenue during the period, despite international border restrictions are eased/lifted. period due to a higher win rate (1.47% vs 1.00%) operational constraints. SkyCity intends to continue to invest prudently offsetting lower turnover over the period. in International Business to enhance sustainable During the COVID-19 mandated closure of shareholder returns. Whilst SkyCity maintains a conservative approach SkyCity’s land-based New Zealand casinos from to credit, there was an increase in the provision for 23 March – 14 May 2020, SkyCity Online Casino The bulk of SkyCity’s business is stable and low bad and doubtful debts in International Business in saw significant growth in its customer base with risk, originating from local/domestic players. FY20 due to COVID-19 related payment issues. The International Business provides incremental
42 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 About SkyCity 43 GENERAL Risk Profile and Management
SkyCity operates in a dynamic and challenging environment with risks and opportunities both locally and internationally. The SkyCity Board is ultimately responsible for the summary of how those risks are being mitigated governance of the Group’s risk management, which or prepared for, and is a critical input to strategic includes formulating the Group’s risk appetite and planning, insurance renewal, investment and setting and monitoring risk tolerance. resource prioritisation, and assurance planning.
The company maintains a risk management Management reports to the Audit and Risk framework for the identification, assessment, Committee and SkyCity Board on the effectiveness of monitoring and management of risk to the the company’s management of its material business company’s business. As part of this framework, risks at least annually. SkyCity maintains an independent, centrally SkyCity’s ability to create and preserve value for its managed Group Risk function which evaluates shareholders requires the successful execution of and reports on risks and controls across the Group. its business strategy. Risks influencing its ability to The Group Risk team collates, assesses and monitors do this, including SkyCity’s material exposure to the risks the Group faces by way of a Top Risk Profile, economic, environmental and social sustainability which is updated regularly. The Top Risk Profile is risks, if any, and how it manages or intends to a current view of the most significant emerging manage those risks, are outlined below. or potential risks facing the Group, as well as a
Material Exposure Risk Management
Pandemic Preparedness and Business Continuity
As with any large, distributed business, To mitigate this risk, SkyCity maintains a comprehensive SkyCity must be prepared for a wide range business continuity framework, which supports of events that have the potential to cause preparedness and response to a wide range of critical significant disruption and/or temporary events, including a natural disaster, a fire, an emergency closure of one or more of its sites. incident and a pandemic. Protecting The COVID-19 pandemic and related actions The business continuity framework is subject to ongoing: taken in response by the New Zealand, • monitoring to ensure management readiness and Australian and other Governments capability, including undertaking simulated crisis (including national lockdowns and border response drills on a regular basis to test management controls/travel restrictions) and the effects readiness and capability; and the value of of the pandemic on global and domestic economies have had, and are likely to • improvement to enhance resilience. continue to have, a material adverse effect Due to the strength of the business continuity framework, on SkyCity, its financial performance and the SkyCity Board and management worked well in outlook, liquidity and/or share price. our business responding to and managing two significant challenges over the past financial year which materially impacted SkyCity’s business and operations – the fire that broke out at the New Zealand International Convention Centre Delivering strong and sustainable in October 2019 and the impacts of the global COVID-19 pandemic that emerged in early 2020. earnings across the SkyCity Group.
45 GENERAL
Material Exposure Risk Management Material Exposure Risk Management
Highly Regulated Industry Liquidity and Solvency Risk
SkyCity operates in the casino industry, The risk of regulatory change is mitigated by maintaining SkyCity’s ability to achieve its business SkyCity manages liquidity risk by continuously monitoring which is highly regulated. The regulatory frequent engagement with the governments and regulators objectives is dependent on it being forecast and actual cash flows and maintaining flexibility in framework is subject to change from in each jurisdiction in which SkyCity operates and with able to effectively manage its liquidity funding by keeping committed credit lines available with a time to time, which may impact the industry stakeholders. and solvency throughout a period of no variety of counterparties and maturities. environment in which SkyCity operates and/or significantly diminished revenue Targeted initiatives are undertaken as and when required SkyCity also maintains close and transparent relationships and the costs of operating its business. and earnings. based on the likelihood of the risk occurring and the impact with its lenders (including banks and United States private Potential examples of such changes include it would have on SkyCity’s business. There is significant complexity related to placement noteholders). unfavourable changes to gaming and/or managing those matters, including as SkyCity also maintains a robust compliance culture and In June 2020, SkyCity announced a comprehensive smoking legislation and regulations, licence a consequence of a number of matters framework to ensure compliance with licence conditions funding plan to strengthen its balance sheet and secure conditions and gaming taxes and levies. being outside of SkyCity's control. and applicable legislation and regulations. additional liquidity in response to the uncertainty around Such unexpected matters could result There may also be increased focus on the impacts of COVID-19. The funding plan was successfully The Audit and Risk Committee has responsibility for in SkyCity's financial position and future regulatory oversight of land-based casino implemented in June and July 2020 and ensures SkyCity ensuring compliance with anti-money laundering performance being adversely impacted. operators and on SkyCity’s social licence has an appropriate level of equity capital for the medium requirements in New Zealand and Australia and discusses, to operate following COVID-19 (including SkyCity’s ability to demonstrate fiscal to long term and sufficient liquidity to fund its committed as a standing agenda item at each scheduled Audit and in respect of host responsibility and resilience during these times is critical investment in its two major projects in Auckland Risk Committee meeting, matters relating to the Group’s anti-money laundering obligations). to maintaining long term investor and and Adelaide. anti-money laundering obligations. The Group General Any such additional focus may add regulatory confidence. Manager Regulatory Affairs and Anti-Money Laundering Given the cautious economic outlook and that significant increased complexity to the business and also attends each Audit and Risk Committee meeting risk and uncertainty still exists around COVID-19, adversely impact SkyCity’s operations to report to the Audit and Risk Committee on matters SkyCity continues to adopt a conservative approach to and the costs of operating its business. of interest. Within the business, a specialist Anti-Money capital management. In addition, there is ongoing pressure to Laundering team oversees the Group’s ongoing compliance keep improving SkyCity’s standards. with anti-money laundering requirements and, during Loss of Casino Licence the past financial year, a management-led Anti-Money Laundering Senior Management Group (chaired by the SkyCity’s Auckland property contributes SkyCity has mitigated this risk by securing an extension General Counsel and Company Secretary) was established a significant portion of SkyCity’s EBITDA. of the Auckland casino licence to 30 June 2048. This concentration of earnings means to provide enhanced governance for anti-money laundering The SkyCity Adelaide casino licence currently runs that the performance of SkyCity is heavily related matters across the Group. until 30 June 2085 and extensions to the Hamilton dependent upon the Auckland property. and Queenstown casino licences are intended to be The Sustainability Committee is responsible for overseeing A significant disruption to SkyCity’s Auckland sought in accordance with the renewal provisions of the and monitoring the company’s host responsibility and operations, which may arise through the Gambling Act 2003 (New Zealand) in due course. responsible gambling programme and initiatives and suspension, cancellation or expiry of the monitoring licensing and regulatory compliance in Auckland casino licence, would have a In addition, SkyCity mitigates the risk by maintaining respect of such matters. At each scheduled Sustainability significant negative impact on SkyCity. a robust compliance culture and framework to ensure Committee meeting, progress against host responsibility compliance with licence conditions and gaming legislation The suspension, cancellation or expiry of any and responsible gambling measures and targets is reported and regulations, and maintaining engagement with the of SkyCity’s other casino licences would also and discussed as a standing agenda item. Within the governments and regulators, in each jurisdiction in which have a negative impact on SkyCity. business, a Host Responsibility Governance Group (chaired SkyCity operates. by the Chief Operating Officer) meets monthly to discuss and review host responsibility matters that have arisen or SkyCity has an excellent history of compliance over 20 years may arise in the future across the SkyCity Group. and is committed to working cooperatively with its regulators on matters of concern.
46 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Risk Profile and Management 47 GENERAL
Material Exposure Risk Management Material Exposure Risk Management
Economic and Business Volatility Technology Risk
The general economic conditions in To mitigate these risks, SkyCity continually monitors its Technology represents a critical platform To mitigate technology risk, SkyCity has invested in a the markets that SkyCity operates in, external environment, including the geo-political and to SkyCity’s business – not only for significant programme over recent years to improve in addition to volatility in certain parts of global economic landscape, and has a robust liquidity facilitating/enabling its operations, technology systems, infrastructure, capability and the business, can significantly influence the management framework. but also mitigating cyber threats and data management, and to improve cyber resilience. financial performance of the company. ensuring compliance with regulatory SkyCity continues to invest in these areas as required. SkyCity also continually reviews the optimal mix for its and licence requirements. business activities to ensure it has a balanced portfolio In addition, there is also significant focus on technology reflecting its risk appetite. SkyCity’s operations are dependent on project governance, risk management and assurance. a number of key systems. There is a risk A management-led Privacy and Cybersecurity Steering that the security of critical systems may Customer and Innovation Risk Committee has been established to, amongst other things: be compromised and/or information is SkyCity recognises that it is important to To ensure SkyCity remains relevant to its customers, key accessed without authorisation, deleted or • govern the development of SkyCity’s privacy and consider evolving customer demographics strategic projects are currently being progressed, with a corrupted, which could impact SkyCity’s cybersecurity strategy and programme; and preferences in both its gaming and focus on emerging industry trends and opportunities for ability to operate critical systems and • prioritise mitigation initiatives against the cybersecurity non-gaming operations, including new leveraging new technology and demographic changes. result in costs to resolve or repair, potential offerings, technologies and innovation. risk matrix; In August 2019, SkyCity launched SkyCity Online Casino, downtime of operations, potential breaches an offshore online gaming business, via a Maltese subsidiary of privacy and/or reputational impacts. • prioritise the operational initiatives to lift SkyCity’s company as a logical extension of its land-based casino security posture; and operations. Whilst the business is still very much in its • review and respond to major cyber and privacy incidents infancy, SkyCity is encouraged by SkyCity Online Casino’s and oversee the proposed measures to prevent recurrence. performance over the past financial year. Penetration testing is undertaken regularly to test system In July 2019, SkyCity acquired full ownership of Let’s Play resilience and identify any security vulnerabilities that could Live Media Limited, New Zealand’s leading broadcaster and be exploited. Simulated phishing emails are also regularly operator of esports tournaments. sent within the organisation to raise security awareness New forms of entertainment are also set to open at amongst employees. SkyCity Auckland before the end of 2020, including: Development and Project Risk • the All Blacks Experience, a joint venture between (including Return from Major Projects) New Zealand Rugby and Ngāi Tahu Tourism, which will provide visitors with a state-of-the-art, interactive With two significant growth projects SkyCity has established strong governance and oversight experience that will showcase the All Blacks; and underway, the New Zealand International frameworks for both current and future major growth Convention Centre and Horizon Hotel projects, including the establishment of a dedicated Board • Academy Award-winning design and effects company development in Auckland and the sub-committee to oversee the New Zealand International Weta Workshop is developing an immersive attraction SkyCity Adelaide expansion project, as Convention Centre and Horizon Hotel development and a to complement its behind-the-scenes tours at their well as master planning across the Group, separate dedicated Board sub-committee to oversee the Miramar headquarters in Wellington. SkyCity recognises that robust project SkyCity Adelaide expansion project. Master planning also continues to be progressed for each management is critical to successful SkyCity also ensures robust governance over capital of the SkyCity sites to explore opportunities for further delivery of these projects. allocation and shareholder returns. accommodation, food and beverage, new gaming spaces and entertainment offerings. However, in light of the The COVID-19 pandemic has significant implications for COVID-19 pandemic, it is unlikely that any significant return on capital invested in major projects. For example, funding commitments will be made in the short term until the ongoing closure of international borders over the short there is greater certainty that the COVID-19 crisis no longer to medium term is expected to impact visitation and poses a threat. occupancy for the SkyCity Adelaide expansion project.
48 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Risk Profile and Management 49 Material Exposure Risk Management GENERAL Health and Safety Risk
SkyCity has Health and Safety Risk General Our COVID-19 Health Management Registers in place that classify risks into To mitigate critical risks (which include working at heights, two key categories – high consequence/low confined spaces, electrical, moving plant, fire and explosion), Framework frequency (being critical risks) and low SkyCity has in place extensive safe systems of work to consequence/high frequency risks. effectively control the potential for an incident. Ongoing The health of SkyCity’s employees, contractors, visitors and guests is paramount. Due to the hospitality and retail focus of safety assurance activities seek to test these controls and, Our COVID-19 Health Management Framework outlines a comprehensive strategy for SkyCity’s business, a high percentage of where appropriate, strengthen critical risk controls ensuring managing risks associated with COVID-19. the company’s health and safety risk falls SkyCity keeps its people and visitors safe. into the low consequence/high frequency SkyCity has harm prevention programmes in place which are category, which includes risks such as aimed at reducing minor injuries and promoting wellness Operational Control Standard slips and trips, cuts and manual task amongst SkyCity’s employees and contractors. related injuries. SkyCity’s New Zealand properties are tertiary accredited Our standard outlines our mandatory risk controls, which have been developed under the Accident Compensation Corporation (ACC) based on guidance from the relevant health authorities in Australia and New Zealand: Accredited Employers Programme and its Adelaide site is a registered self-insured employer. The company undertakes assurance activities to maintain certifications and continually improve its health and safety performance.
Significant Emergencies There were two significant emergencies during the financial Entry Guest and employee Hand hygiene Physical year ended 30 June 2020 which required a significant requirements screening distancing health and safety response and tested SkyCity’s emergency preparedness.
The fire at the New Zealand International Convention Centre development in October 2019 caused significant disruption to the Auckland CBD. Whilst the fire did not occur directly within the SkyCity Auckland main site, the smoke emitted from the fire entered SkyCity Auckland’s premises and Education and Cleaning Contact tracing systems and necessitated an extensive clean-up operation information across the SkyCity Auckland precinct. The SkyCity Health and Safety team partnered with occupational hygienists and professional maintenance and cleaning services to facilitate a safe reopening. COVID-19 Risk Register SkyCity is committed to delivering robust health and safety standards to manage the ongoing risks associated We have taken a risk based approach – analysing our business activities and putting in with COVID-19 and has developed and implemented a place controls that are reasonably practicable. We will continue to review and seek COVID-19 Health Management Framework for its business continuous improvement in our controls. operations. The framework has been shared with Government authorities across New Zealand and South Australia. SkyCity’s New Zealand properties were amongst the first casino operations in the world to reopen during the global pandemic with robust health management strategies in place.
Both New Zealand and Australia have achieved relative success in ensuring a low level of infection and mortality Operational COVID-19 Safety COVID-19 COVID-19 compared to many other countries around the world. Control Procedures Plans Resourcing Assurance However, the ongoing health and safety risks of COVID-19 have Focused on the Focused on Ensuring we Focused on workplace specific re-entry risks to have the right reviewing the significantly altered the commercial landscape for SkyCity's requirements ensure our people levels of health implemented land-based properties in both jurisdictions. for gaming are safe when and safety advice mandatory controls areas across our returning to work and equipment to ensure we have precincts. after periods of supported by a the best levels of absence. team of health implementation. Given the nature of SkyCity’s operations, SkyCity does not have a material exposure to environmental risks professionals. in its usual day-to-day operations. SkyCity nonetheless recognises the criticality of climate related risks to its operations. Further details on these risks and SkyCity's approach to climate change risk management and reporting are outlined on page 117 of this annual report.
50 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Risk Profile and Management 51 GENERAL
Our Board
ROB CAMPBELL BRUCE CARTER
Chair Deputy Chair
Member of the Audit and Risk Committee Chair of the Audit and Risk Committee Member of the People and Culture Committee Member of the Sustainability Committee Member of the Sustainability Committee Member of the Governance and Chair of the Governance and Nominations Committee Nominations Committee Appointed a director of SkyCity in October 2010 Appointed a director of SkyCity in June 2017 Sound and Chair of the SkyCity Board in January 2018 Based in Adelaide, Australia, Bruce is currently Chair of ASC Pty Limited (Australian Submarine Rob is currently the Chair of Summerset Group Corporation), Aventus Capital Limited, the COVID-19 Holdings Limited, Tourism Holdings Limited, governance Business Advisory Committee and Scissor Holdings Ultrafast Fibre Limited, New Zealand Rural Land Pty Ltd trading as One Rail Australia, and a director Company Limited, Ara Ake Limited and WEL of AIG Australia Limited, Bank of Queensland Networks Limited and a director of Precinct Limited as well as a number of private companies Properties New Zealand Limited. Rob has over and government bodies. and strong 30 years’ experience in capital markets and is a director of, or advisor to, a range of investment fund Bruce was one of the founding partners of and private equity groups in New Zealand, Australia, Ferrier Hodgson in Adelaide. He was formerly Hong Kong and the United States of America. a partner at Ernst & Young and has more than 30 years’ experience in corporate restructuring leadership Rob holds a Bachelor of Arts with First Class and insolvency. Honours in Economic History and Political Science and a Masters of Philosophy in Economics. Bruce is a Fellow of Chartered Accountants Australia and New Zealand.
53 GENERAL
SUE SUCKLING JENNIFER OWEN MURRAY JORDAN
Director Director Director Chair of the Sustainability Committee Member of the Audit and Risk Committee Chair of the People and Culture Committee Member of the Governance and Member of the People and Culture Committee Member of the Governance and Nominations Committee Member of the Governance and Nominations Committee Appointed a director of SkyCity in May 2011 Nominations Committee Appointed a director of SkyCity in December 2016 Appointed a director of SkyCity in December 2016
Sue Suckling is an independent director and Murray Jordan is currently a director of Chorus consultant with over 25 years in commercial Jennifer Owen has more than 30 years’ experience Limited, Metcash Limited, Stevenson Group Limited, corporate governance. She is recognised for her in the areas of accountancy, audit, finance, treasury Southern Cross Benefits Limited, Southern Cross leadership in the technology innovation space and equities research. She has specific specialist Hospitals Limited and the Southern Cross Medical and her deep governance experience. knowledge of the New Zealand and Australian Care Society. He is also a trustee of Southern Cross gaming and entertainment sectors through her Health Trust, Starship Foundation, Foodstuffs’ Sue is currently the Chair of the Insurance previous roles as Director of Equities Research at Members Protection Trust and The Foodstuffs & Financial Services Ombudsman Scheme Citigroup Global Markets, with a specialist focus Co-operative Perpetuation Trust. Commission, Jacobsen Holdings Limited, on the Australasian gaming sector, and as Equities Brannigans Consulting Limited, Rubix Limited, Prior to embarking on a governance career in Research Analyst at Macquarie Group focusing Soltians Limited, Jade Software Corporation Limited 2015, he held various senior management roles at on the tourism/leisure sector, and a wide network and Zag Limited. Previous governance roles include Foodstuffs Limited from 2004 to 2015, including within the gaming industry and has a strong chairing NIWA, the New Zealand Qualifications Managing Director of Foodstuffs North Island understanding of industry and investor issues. Authority and AgriQuality Limited, and as a director and Managing Director and General Manager of Restaurant Brands Limited, Westpac Investments Jennifer is currently a Principal of Owen Gaming Retail, Sales and Performance of Foodstuffs Limited and the New Zealand Dairy Board. Research, an independent research firm specialising Auckland Limited. In 2013, he led the merger of the She was awarded an OBE for her contribution to in the gaming and wagering markets, and a director Auckland and Wellington businesses of Foodstuffs New Zealand business. of Aspire Child Care (Mascot) Pty Limited. to create what is now known as Foodstuffs North Island and established and oversaw the Sue is a Chartered Fellow of the New Zealand Jennifer holds a Bachelor of Business from the integration programme. Institute of Directors and a Companion of the Queensland Institute of Technology and a Masters Royal Society of New Zealand. in Business Administration from the University of His early career was in the property sector, including Queensland, is a graduate of the Australian Institute as General Manager of Telecom NZ’s property of Company Directors’ Diploma course and is a business and General Manager of AMP Capital member of Chartered Accountants Australia and Investors NZ Limited’s property portfolio. Murray has New Zealand. a Masters degree in Property Administration from the University of Auckland.
54 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Board 55 Our Senior Leadership Team GENERAL
From left to right: From left to right: Simon Jamieson, Jo Wong, Rob Hamilton and Glen McLatchie Graeme Stephens, Liza McNally, Michael Ahearne and Claire Walker
56 57 GENERAL
GRAEME STEPHENS MICHAEL AHEARNE JO WONG LIZA MCNALLY
Chief Executive Officer Chief Operating Officer General Counsel and Company Secretary Chief Marketing Officer
Graeme joined SkyCity as Chief Executive Officer in Michael joined SkyCity in December 2017 as Jo joined SkyCity as Senior Legal Counsel Liza joined SkyCity in January 2018 as Chief May 2017, bringing with him significant expertise in Chief Operating Officer and is responsible for in January 2009 and was appointed as Marketing Officer and has 25 years of marketing the gaming, hospitality, and leisure industries. overseeing the operations and driving value across General Counsel and Company Secretary in expertise working in Australia and New Zealand. SkyCity’s five properties in New Zealand and September 2016. She is responsible for SkyCity’s In addition to managing Group Communications, Prior to joining SkyCity, Graeme was Chief Australia. He is also responsible for SkyCity’s online legal, company secretarial, regulatory affairs and Liza is responsible for championing the digital Executive Officer of Sun International, a casino, gaming strategy, including the establishment of anti-money laundering functions and is designated customer experience across the SkyCity Group. resorts and entertainment company listed on SkyCity Online Casino in 2019. as SkyCity’s Chief Privacy Officer. the Johannesburg Stock Exchange. Under his Liza’s background includes senior marketing leadership, the company rebalanced its portfolio, Michael has significant global experience in the Jo has more than 20 years’ experience in and sales positions within media, entertainment diversified into growth areas in both South Africa gaming industry across both land-based and online both private practice and in-house legal roles. and telecommunications organisations. Prior to and Latin America, redeveloped its flagship resort in casinos, as well as retail and online sports betting. Before joining SkyCity in 2009, she held General joining SkyCity, Liza was Chief Marketing Officer at Sun City and built a new casino resort near Pretoria. Prior to joining SkyCity, Michael held a number Counsel and Group Corporate Counsel roles in the New Zealand Media & Entertainment (NZME). of senior commercial, operational and product New Zealand financial services industry and was An accountant by profession and with more than Liza is currently a non-executive director of AFL leadership roles at Paddy Power Betfair, one of a Senior Solicitor at Russell McVeagh, one of the 10 years’ experience in banking and corporate New Zealand and a trustee of the Auckland Farmers the world’s leaders in sports betting and gaming. leading law firms in New Zealand. finance, Graeme was appointed Senior Vice Santa Parade. Liza holds a Bachelor of Commerce Prior to this, Michael enjoyed a 13-year career President of New Business Development at Kerzner Jo was a finalist in the In-House Lawyer of the Year (Hons Marketing) from Deakin University, Australia. in the Australasian gaming and entertainment International in 2003 and was responsible for a category in the 2019 New Zealand Law Awards and sector – 10 years of which were spent at The Star number of global hospitality projects before joining was recognised in New Zealand Lawyer’s inaugural Casino, Sydney, where he held a variety of senior GLEN MCLATCHIE Sun International in 2011. In-House Leaders 2019 list as one of 25 leading management positions and, following that, lawyers across New Zealand. Chief Information Officer three years as Chief Operating Officer for Aristocrat ROB HAMILTON in the Australia and New Zealand regions. Jo is a graduate of the 2017 Global Women Glen joined SkyCity in 2016 as Chief Information Breakthrough Leaders Programme, is a member of Officer and is responsible for lifting the digital Chief Financial Officer Michael is a qualified accountant and holds an MBA New Zealand Asian Leaders and holds a Bachelor capability of the organisation to be able to from the University of Technology, Sydney. Rob joined SkyCity as Chief Financial Officer in of Laws and a Bachelor of Arts (Criminology and respond to future innovation initiatives and October 2014 and is responsible for the financial Japanese) from Victoria University of Wellington. growth strategies. management of SkyCity, including reporting, CLAIRE WALKER Prior to joining SkyCity, Glen was General Manager treasury, risk management and corporate Chief People and Culture Officer SIMON JAMIESON ICT with Meridian Energy where he transformed development. He also oversees SkyCity’s and modernised their aging technology footprint International Business and Information and Claire was appointed in August 2016, bringing General Manager NZICC and digital capability. He has 25 years of technology Communications Technology function and helps to more than 20 years’ experience in human resource Since joining SkyCity in September 2007, Simon experience from across several industries globally, drive the strategic direction of the SkyCity Group. management gained across a number of different has held a number of roles, including General having worked in and out of the UK, France, USA, sectors, and holds the position of Chief People and Rob is a respected member of the finance Manager SkyCity Adelaide, General Manager Hotels Australia, Malaysia, India, China and the Middle East. Culture Officer. She is responsible for leading the community with more than 20 years’ experience SkyCity Auckland and Acting General Manager development and implementation of best practice Glen is a board member of Auckland charity at First NZ Capital (now Jarden), where he led SkyCity Auckland. people and culture strategy across the SkyCity Group Big Brothers Big Sisters and an advisory board the investment banking team. He is currently a and has executive responsibility for sustainability As General Manager NZICC, Simon oversees member of Cyber Research NZ. Glen holds a Master non-executive director of Tourism Holdings Limited, at SkyCity. the development of SkyCity’s New Zealand of Information Systems from Swinburne University on the Board of Trustees for Auckland Grammar International Convention Centre and Horizon Hotel of Technology, Australia, and a Bachelor of Business School and a trustee of the SkyCity Auckland Prior to joining SkyCity in 2016, Claire was Chief project in Auckland. He is also responsible for health Studies from Massey University, New Zealand. Community Trust. People Officer at Sanford Limited where she and safety at SkyCity. established the human resources function and led Rob was a finalist in the Chief Financial Officer the sustainability and integrated reporting activities With more than 30 years’ experience in large-scale of the Year category in the 2019 Deloitte Top 200 for the organisation and, prior to that, Claire led the hospitality businesses, Simon brings a wealth of Awards in New Zealand. human resources and employee relations function commercial experience and tourism know-how to Rob holds Bachelor degrees in Commerce for the SkyCity Auckland business. Claire has also the SkyCity business. and Science. held senior human resource roles with Carter Holt Harvey and Downer after several years working in the education sector.
Claire holds a governance role on the advisory board of the Sustainable Business Council in New Zealand.
58 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Senior Leadership Team 59 60 the company’s website atwww.skycityentertainmentgroup.com. report. SkyCity’s constitution andrelevant charters andpoliciesareavailable intheGovernance sectionof Further information onSkyCity’s corporate governance framework issetoutonpages123–133of thisannual with theday-to-day leadershipandmanagementof thecompany. achieved throughdelegationto theChief Executive Officer andSeniorLeadershipTeam whoarecharged The SkyCity Boardhasresponsibilityfor theaffairs andactivitiesof thecompany, whichinpractice is to theChief Executive Officer andSeniorLeadershipTeam. ensures Boardaccountability to shareholdersandprovides for anappropriate delegationof responsibilities has adopted governance policiesandprocedures reflecting this.Ourcorporate governance framework SkyCity iscommitted to maintainingthehighest standards of corporate behaviour andresponsibility BOARD ANDSENIORLEADERSHIPTEAMORGANISATIONAL CHART SkyCity Entertainment Group AnnualReportYear Ended30June2020 Responsibility Rob Hamilton Nominations Governance Governance Committee Financial Officer Chief Group Host and STANDING BOARD COMMITTEES Michael Ahearne Audit andRisk KEY MANAGEMENT-LED GOVERNANCE GROUPSANDCOMMITTEES Operating Committee Officer Management Chief Anti-Money Laundering Senior Group Chief People and Culture Claire Walker Committee People and Officer Culture CHIEF EXECUTIVEOFFICER Cybersecurity SENIOR LEADERSHIPTEAM Privacy and Committee Steering Graeme Stephens SKYCITY BOARD General Counsel and Company Secretary Sustainability Jo Wong Committee Committee Investment Project Simon Jamieson Manager General NZICC
Convention Centre AD-HOC BOARD SUB-COMMITTEES (established to oversee SkyCity’s majorprojects) Sub-Committee New Zealand International Committees Group and Site Crisis Liza McNally Marketing Officer Chief Expansion Project Sub-Committee Climate Change Adelaide Glen McLatchie Committee Information Officer Chief unrivalled VIPoffering andexperience to ourdomestic VIPcustomers. The BLACK gamingareaatSkyCity Auckland isdueto openlater this year andwillprovide an 61
GENERAL SUSTAINABILITY Sustainability
At SkyCity, we recognise that In early 2020, we commenced a review of our materiality matrix to prioritise the issues most sustainability is critical to all levels of our important to our business and stakeholders and business and operations. Part of being a to ensure the issues were appropriately weighted responsible business is understanding in our sustainability strategy. From a long list of the impacts arising from our operations. potentially material issues identified via a desktop review, the following issues (grouped under our The aim of this understanding is to existing sustainability pillars) were identified by enable positive impacts to be fostered internal and external stakeholders as material to and negative impacts to be at the very SkyCity’s business: least mitigated and ideally abated. This is particularly true when there is potential for harm to either people or OUR CUSTOMERS the environment. • Responsible hosting At SkyCity, we need to continually focus on our • Customer experience social licence to operate – as, in the casino industry, • Cybersecurity and data privacy we have to try harder than most to justify our place • Regulatory risk in society. SkyCity is committed to maintaining the highest levels of sustainability objectives and OUR PEOPLE practices, with priority given to minimising the • Employee engagement impacts associated with problem gambling as an • Health, safety and wellbeing Being a area of primary focus. • Organisational culture • Diversity, inclusion and belonging Our sustainability initiatives are focused on doing good for our customers, our employees, OUR COMMUNITIES our communities, our suppliers and our environment. Our objective is to ensure that our • Community investment responsible • Community and Iwi engagement strategic decisions strengthen the communities we operate in and provide environments and opportunities for our customers, suppliers and staff OUR SUPPLIERS corporate to enjoy, to be entertained and to be safe. • Ethical sourcing Setting Our Framework OUR ENVIRONMENT In 2016, after engaging with both internal and • Climate change external stakeholders on which sustainability citizen issues were most relevant to SkyCity’s business, ISSUES IMPACTING SkyCity adopted its first set of sustainability goals, MULTIPLE PILLARS priority actions and targets and developed a • Business continuity materiality matrix to identify a set of priority impact • Return on investment areas and issues for the business. These were • Theft and fraud We are committed to maintaining subsequently refined in 2018 to incorporate global • Operational efficiency trends and local market conditions in our approach • Sustainable portfolio the highest levels of sustainability to, and assessment of, risks and opportunities, culminating in a refreshed set of sustainability pillars. objectives and practices.
63 Despite the challenges presented by the COVID-19 minimising the impacts associated with problem global pandemic, SkyCity’s current sustainability gambling as an area of primary focus. strategy and strategic pillar goals, plans and The responsibilities of the Sustainability Committee Our priorities (as validated by the feedback from our SUSTAINABILITY include reviewing and recommending to the Board stakeholders as part of the materiality review the sustainability strategy, principles, policies and in 2020) remain relevant today. We have learnt Sustainability practices of the company to ensure alignment through the COVID-19 pandemic that we cannot with the company’s strategic objectives and take for granted that the core business will generate Vision performance, and reviewing and reporting to the profit. Recognising that to be a sustainable Board on the company’s impacts associated with business we must be a responsible business actively To be a sustainable business, we must be a responsible business SkyCity’s sustainability pillars. protecting and promoting the people we serve actively protecting and promoting the people we serve and the and the places we share whilst creating value for The guiding principles that underpin SkyCity’s places we share, whilst creating value for our shareholders. our shareholders, SkyCity’s sustainability strategy sustainability activities and the role, responsibilities, has this year been amended to also incorporate composition, structure and membership of financial performance alongside social and the Sustainability Committee are set out in the environmental performance. Sustainability Committee Charter (available in the Governance section of the company’s Our new 'Our Shareholders' pillar recognises that website at www.skycityentertainmentgroup.com), SkyCity must create value for its shareholders while which is reviewed and approved by the Board on maintaining its social licence to operate. The priority an annual basis. issues relevant to this pillar are business continuity, Suppliers improving SkyCity’s operating performance, The Board and Sustainability Committee maintain optimising SkyCity’s existing portfolio, and growing operational supervision of SkyCity’s sustainability E P and diversifying SkyCity’s business. The objectives activities through clearly defined policy and L R P ders in O e lea our c O ibl om F for this pillar are to: effective management. Claire Walker, SkyCity’s E s m on u I P y sp n T it e it Chief People and Culture Officer, has executive r ie • strengthen and maintain good relationships with n e s responsibility for SkyCity’s sustainability activities u B all stakeholders, including shareholders and debt m with key operational personnel within the business S providers; m h o a having day-to-day responsibility for the activities. C r
• grow gaming visitation and spend and develop e O h
o f
complementary activities that drive gaming; Our Pillars f e l
d
r
e t
• achieve operating efficiencies which protect and a
s r
The following pages outline our priorities, objectives g r s
r fi
grow margins; e and activities for each of the sustainability pillars – s a r t e
• develop digital businesses and leverage ‘Our Customers’, ‘Our People’, ‘Our Communities’, a n m d o t investment in technology; ‘Our Suppliers’ and ‘Our Environment’, outline s Customers s a u f the activities undertaken to support our e c • ensure capital allocation balances short term t p u l sustainability strategy, and provide a summary a p returns and long term sustainability; c s e y t a of our achievement against our priorities for the o lw • ensure ownership of assets balances strategic w A or t financial year ended 30 June 2020. Commentary k n control and return on capital; and e on the new ‘Our Shareholders’ pillar is provided in m P n • monitor and evaluate regional merger and e o an overarching way throughout the entirety of our o ir pl v acquisition opportunities in our industry. financial and non-financial disclosures. e En
We continue to focus on embedding our The areas identified as priority issues are those sustainability pillars into all levels of the considered highly material for SkyCity’s business organisation and in the way SkyCity operates. and for our stakeholders. Our objectives and PLACE The material issues identified have influenced activities set out what we intend to do both in our our focus on managing SkyCity’s risks and business and our communities. They are intended have informed our sustainability strategy and to challenge the business and staff and provide a priorities, which underpin our reporting on our dedicated framework for measuring progress over non-financial performance. the coming years. We are committed to measuring PEOPLE PLACE PROFIT Our Sustainability Committee performance on each goal, through specific key performance indicators, which will ensure the Inspire our people Protect our environments Create sustainable value The Sustainability Committee is a dedicated business strives to keep pace with internal and Board committee that assists the SkyCity Board to external expectations. contribute to SkyCity’s vision and strategic plan by Create a great place to work Respect and protect our Ensure business continuity through ensuring that the company’s sustainability strategy We Welcome Your Feedback where people are empowered physical environments for operational efficiency, sustainable is best practice and supports the highest level of If you have any feedback or questions in to grow and achieve future generations investment and customer focus sustainability objectives, with priority given to relation to SkyCity’s sustainability framework and/or reporting, please contact SkyCity at [email protected]. Great, safe place to work Sustainable success Reliable return on investment
64 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Sustainability 65 CUSTOMERS | Always put customers first | Be responsible leaders in our community COMMUNITY | Be responsible leaders in our communities Ensure safe and enjoyable experiences for our customers, employees and communities Serve a social purpose by investing in our local economies and communities SUSTAINABILITY Our Priorities Our Plan Material Issues Our Priorities Our Plan Material Issues
• Maintain industry-leading harm minimisation practices • Measure and evaluate SkyCity’s economic contribution Economic • Responsible hosting to the communities in which we operate, through local • Host Responsibility Programme performance and problem contribution procurement spend gambling indicators • Customer experience • Community investment Leading host • Industry benchmarking of SkyCity’s Host Responsibility • Cybersecurity and • In collaboration with the SkyCity Community Trusts, make • Community and Iwi responsibility Building communities Programmes a positive impact on youth development, employment and engagement data privacy by developing people career paths • Leverage technology to enhance the identification of actual • Regulatory risk or potential problem gamblers and act on that information Investing in our • Community based partnerships that achieve sustainable communities through the social change • Employee Host Responsibility training completion rates SkyCity Community Trusts • Report on community outcomes through narrative and case Sustainable Customer experience • Accelerate customer experience and engagement through in New Zealand studies accompanied by quantitative results Development Goals and engagement improved data, digital and loyalty capability Sustainable Developing deeper Development Goals • Build SkyCity’s confidence and capability to engage connections with Iwi and authentically with Māori and indigenous peoples Community awareness • Increase in community knowledge and understanding of indigenous peoples of harm minimisation SkyCity’s harm minimisation practices practices • Customer data security and privacy practices PEOPLE | Offer a great and safe place to work A great place to work where our people are empowered to grow and achieve SUPPLIERS | Be responsible leaders in our communities Source ethically and locally Our Priorities Our Plan Material Issues
Our Priorities Our Plan Material Issues Employee engagement • Employee engagement pulse checks • Employee engagement • Meaningful career and Low carbon • Encourage suppliers to set science-based targets and strive Meaningful career and development pathways • Internal promotions and development opportunities supply chain to achieve zero carbon by 2050 development pathways • Diversity, inclusion and belonging • Serve meals from a sustainable supply chain • Leverage the competitive advantage SkyCity’s diverse to employees and customers • Health, safety and wellbeing Diversity, inclusion workforce provides Sustainable • Source animal products responsibly (eg. free range eggs) and belonging Buy local • Ethnicity and gender reporting, including gender equality Development Goals • Track and report on local vs international • Ethical sourcing and seasonal of pay, and representation procurement spend Health, safety and • Support supplier diversity (indigenous economy) • Health, safety and wellbeing scorecards and working conditions wellbeing
Connect to the • Remove single-use plastics from our supply chain circular economy SHAREHOLDERS | Improve our operating performance | Optimise our Progress initiatives to • In accordance with the Modern Slavery Act 2019 (Cth), Sustainable existing portfolio | Grow and diversify our business | Always put customers first eliminate modern slavery develop a modern slavery statement by 31 December 2020 Development Goals Create value and maintain our social licence to operate • Progressively work towards an end-to-end understanding Ethical supply chain of our supply chain, ensuring that all suppliers meet the Our Priorities Our Plan Material Issues standards of our Ethical Sourcing Code
• Strengthen and maintain good relationships with all Business continuity stakeholders, including shareholders and debt providers ENVIRONMENT | Be responsible leaders in our communities Offer a great and safe place to work Improve operating • Grow gaming visitation and spend and develop Active commitment to reducing our environmental footprint performance complementary activities that drive gaming • Business continuity • Achieve operating efficiencies which protect and Our Priorities Our Plan Material Issues Optimise existing portfolio • Return on investment grow margins • Operational efficiency Climate change/ • Measure, report and offset SkyCity’s • Climate change • Develop digital businesses and leverage investment emissions reduction carbon emissions in technology • Sustainable portfolio
• Capital allocation balances short term returns and • Regulatory risk Reducing waste • Reduction of waste and diversion from landfill Sustainable Grow and diversify long term sustainability Development Goals our business • Ownership of assets balances strategic control and return Employee activation • Employee-led Green Fund on capital • Monitor and evaluate regional merger and acquisition Reduction in water use • Implement initiatives to reduce water use opportunities in our industry
66 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Sustainability 67 Our Customers
At our core, SkyCity is a provider of casino entertainment. The promotion of responsible gaming and safe consumption of alcohol are therefore topics at the heart of our business. We take our responsibilities to minimise risk and harm from problem gambling very seriously.
Priority Issues FY20 Performance Highlights • Leading host responsibility • Deployed facial recognition technology across all SkyCity’s land-based casinos to assist in identifying excluded customers • Customer experience and engagement • Commenced operation of a predictive algorithm risk model at the SkyCity Hamilton casino to assist in identifying players who • Community awareness of harm may be at risk from gambling harm by analysing loyalty data minimisation practices • Implemented ‘Live View’ system technology at the Key Stakeholders SkyCity Auckland and SkyCity Hamilton casinos to assist in identifying continuous play on electronic gaming machines • Customers (existing and potential) • Increased host responsibility training for SkyCity Auckland • Department of Internal Affairs Customer Service Ambassadors – a front line customer service team whose role is to engage and build rapport with customers • Gambling Commission with an emphasis on host responsibility • Office of Liquor and • The SkyCity Auckland and SkyCity Hamilton casinos Gambling Commissioner participated in Gambling Harm Awareness Week in • Consumer and Business Services New Zealand – with treatment and public health stakeholders stationed within the casino environs to create awareness of • Government Ministers, agencies problem gambling and access to support and treatment and officials, including the networks Ministry of Health • Treatment service providers and FY20 Key Challenges public health providers, including Be responsible Asian Family Services, Problem • Remains challenging to identify and prevent excluded persons Gambling Foundation, Salvation from re-entering and remaining within our land-based casinos Army, Raukura Hauora o Tainui • Maintaining effectiveness, relevancy and consistency in harm and Hāpai Te Hauora minimisation best practice is an ongoing challenge • Australasian Gaming Council hosts • Alignment of host responsibility and harm minimisation • Police practice and culture across the SkyCity Group remains challenging due to differences from site to site, such as size, • Local councils scale and staffing structure Ensure safe and enjoyable FY21 Focus Areas experiences for our customers, • Review and refresh the delivery of host responsibility training to staff, including development of a new coaching and education employees and communities. programme for front line staff to improve capability around identifying uncarded and excluded players
• Maintain leading and best practice host responsibility by leveraging available technology solutions
• Increase and upweight host responsibility team/resourcing
69 Our challenge is to ensure We are immensely proud of
that our business provides the culture of care we have SUSTAINABILITY entertaining and profitable, developed within our casinos yet safe and responsible, and continue to focus on ways experiences and environments to ensure that this culture of care is maintained
Leading and Best Practice strategy is best practice and supports the highest A robust Host Responsibility Programme is in place • upgrading the ‘Carpark Assist’ technology at level of sustainability objectives, with priority at each of our physical sites, and within SkyCity SkyCity Auckland casino to ensure alerts relating Host Responsibility given to minimising the impacts associated with Online Casino, to prevent and minimise harm from to vehicles of interest are sent to mobile devices When done responsibly, gambling can be a fun problem gambling as an area of primary focus. problem gambling. to improve response times; The Sustainability Committee is responsible for and enjoyable entertainment activity. However, it All SkyCity Board members and staff receive training • increased host responsibility training for overseeing and monitoring the company’s host can also have harmful effects on some individuals, in problem gambling awareness. A dedicated Customer Service Ambassadors; and responsibility and responsible gambling programme their families and their communities. Our challenge team of experienced host responsibility specialists and initiatives and monitoring licensing and • more regular and dedicated physical sweeps is therefore to ensure that our business provides is employed at each of SkyCity’s land-based regulatory compliance in respect of such matters. of gaming areas by SkyCity personnel. entertaining and profitable, yet safe and casinos and, through our partnership with At each scheduled Sustainability Committee responsible, experiences and environments. Gaming Innovation Group plc, an experienced In addition, we continued to undertake internal meeting, progress against host responsibility and harm minimisation team is in place for SkyCity mystery shopping training exercises to test the This section largely focuses on SkyCity’s approach responsible gambling measures and targets is Online Casino. Additionally, at our largest and robustness of our host responsibility practices. to host responsibility across its land-based casinos. reported and discussed as a standing agenda item. busiest Auckland site, a team of Customer Service Due to limitations in the New Zealand Gambling Prior to the introduction of facial recognition Within the business, a Host Responsibility Ambassadors is trained to interact with our Act 2003, SkyCity launched its online gaming site, technology in November 2019, SkyCity was Governance Group meets monthly to discuss and customers and report any concerns to our specialist SkyCity Online Casino, offshore in August 2019 via largely reliant on its casino staff and Security and review host responsibility matters that have arisen Host Responsibility team so preventative action can its Maltese subsidiary, SkyCity Malta Limited, in Surveillance teams using photographs to recognise or may arise in the future across the SkyCity Group. be taken, where required. partnership with international iGaming company excluded people. The introduction of facial Membership of the Governance Group includes Gaming Innovation Group Inc (GiG). GiG provides An outline of SkyCity’s commitment to host recognition technology and other technological the Chief Operating Officer, General Counsel and a full-suite online casino solution, which includes responsibility and detailed individual site-related solutions (such as ‘Live View’ system technology at Company Secretary, Group Regulatory Manager, a technical platform, gaming content, managed information, including the Host Responsibility the SkyCity Auckland and SkyCity Hamilton casinos) Group Risk Manager, the General Managers for services, front-end development and best-in-class Programme for each site and SkyCity Online Casino, significantly bolsters and assists SkyCity’s ongoing Auckland, Hamilton, Queenstown and Adelaide, and host responsibility procedures. SkyCity Malta is available at www.skycityentertainmentgroup.com/ efforts to detect and prevent excluded customers Host Responsibility representatives. The principal Limited has tailored the host responsibility tools our-commitment/responsible-gambling. from re-entering its casinos and to detect objectives of the Governance Group are to: available from its offshore platform to align continuous presence and play – however, despite wherever possible with SkyCity’s land-based • provide collective guidance to SkyCity Maintaining Leading and Best Practice our best efforts and host responsibility measures practices and, in some cases, has developed management on host responsibility matters Host Responsibility and initiatives, some individuals may nonetheless new processes specifically applicable to the of interest; We are immensely proud of the culture of care we find ways to elude staff. New Zealand market such as the casino age have developed within our casinos and continue to restriction and contact information for support • enable senior management to discuss any In a dynamic casino environment, maintaining focus on ways to ensure that this culture of care is services. Further details of SkyCity Online Casino’s relevant topics and to receive advice, support and effectiveness, relevancy and consistency in harm maintained and that we have the highest standard host responsibility practices are available at ongoing learnings in a confidential environment; minimisation best practice is an ongoing challenge. of host responsibility best practice. In response to that challenge, SkyCity continues to www.skycityentertainmentgroup.com/ • expose senior management personnel to host explore available technology solutions, seek expert our-commitment/responsible-gambling responsibility topics that may have bearing Over the past financial year, we implemented advice, consult stakeholder groups and source a for all customers and staff. or impact on SkyCity’s regulatory environs, additional host responsibility measures to improve range of research material. customers, their site/jurisdiction of operation or our ability to detect excluded persons and Commitment to Host Responsibility its employees; and continuous play, including: SkyCity has regular and robust dialogue with its At SkyCity, we place great importance on regulators, including the Department of Internal • develop initiatives that will collectively benefit • the introduction of facial recognition technology host responsibility throughout every part of Affairs in New Zealand, through which SkyCity is SkyCity customers and shareholders by way across all our land-based casinos in New Zealand the organisation. always challenged to do better in respect of its host of discussion, provision or endorsement and Adelaide, South Australia, in November 2019 responsibility practices and the effectiveness of its The Sustainability Committee is a dedicated of responsible gambling and/or harm to assist in identifying excluded customers; Host Responsibility Programmes. This dialogue has Board committee that assists the SkyCity Board prevention components. • the introduction of ‘Live View’ system technology driven some of the host responsibility measures to contribute to SkyCity’s vision and strategic plan at the SkyCity Auckland and SkyCity Hamilton outlined above and will continue to drive initiatives by ensuring that the company’s sustainability casinos to assist in identifying uncarded in the future. continuous play on electronic gaming machines;
70 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Customers 71 SUSTAINABILITY
Board Governance & Oversight Independent Evaluation • contribute towards the ongoing understanding SkyCity Board and Sustainability of gambling problems; Senior Management Committee governance and In connection with SkyCity’s application to the Host Responsibility Governance & Oversight oversight of performance of harm New Zealand Gambling Commission to replace • develop an amicable relationship with the Programmes a Host Responsibility minimisation framework three table games at the SkyCity Hamilton casino local community and other stakeholders site-specific programmes Governance Group meets with 60 electronic gaming machines, in 2019, (eg. treatment providers, educational outlining SkyCity’s host monthly to discuss host responsibility obligations we commissioned Dr Mark Griffiths to provide an programmes, research community, faith groups, responsibility matters (approved by the regulator) independent report in relation to the application, etc); and (chaired by the which, amongst other things, expressed his opinion Chief Operating Officer) • promote a positive reputation that accurately on the overall host responsibility regime in place at reflects the integrity of SkyCity as a responsible Host Responsibility the SkyCity Hamilton casino. gaming operator. Roles and Duties Dr Griffiths is a chartered psychologist specialising roles and activities Following his assessment (which included an Reports to the Regulator in the field of behavioural addictions, including annual reporting to focused on customer care onsite review in September 2019), Dr Griffiths gambling disorder and gaming addiction, the regulator on the and host responsibility found that all seven of these objectives were met monitoring a Distinguished Professor of Behavioural effectiveness of SkyCity’s by SkyCity and that he was “highly impressed Addiction at the School of Social Sciences at Host Responsibility with the measures that are in place for player Programmes Nottingham Trent University and the Director of the protection and harm minimisation, as well as the Software and Algorithms International Gaming Research Unit at Nottingham SkyCity measures implemented to promote responsible to Monitor Gaming Trent University. He is internationally known for his Group Harm Machine Play gambling among its clientele as outlined in the Communications work into gambling and gaming addictions, and Minimisation blended software for Host Responsibility Programme”. & Brand has been researching, teaching and writing in this analysis and insight into an internal brand Framework player behaviour and area for 32 years. Dr Griffiths commented that, based on all the communications spend/visitation traits, information that he had been provided with and on campaign to promote Dr Griffiths assessed SkyCity Hamilton casino’s including real time the basis of his onsite visit to the SkyCity Hamilton awareness of host responsible gaming policies and procedures against monitoring of continuous casino, SkyCity’s host responsibility regime was one responsibility a model best-in-class responsible gaming strategy use of gaming machines of the best that he had seen compared with casinos that he developed. It was envisaged that SkyCity’s he had been to in other jurisdictions including those responsible gaming strategy would achieve the he had personally visited in the UK, Australia, USA, Facial Recognition following objectives: Independent Assurance Canada, Macao, Singapore, Argentina, Uruguay, Technology • an independent audit is carried • minimise the likelihood of a ‘vulnerable player’ Holland, Austria, Switzerland, Greece, Hungary, use of facial recognition out every two years at each and alert technology to developing a gambling problem whilst playing Albania, Slovenia, Italy, Poland, Belgium, Finland, land-based casino to monitor detect excluded patrons games within SkyCity’s gaming environment; Sweden, and Malta. compliance with its Learning & iTrak Monitoring Host Responsibility Programme • encourage well-informed and rational gambling While Dr Griffiths’ report was provided in respect Development & Reporting • internal independent assurance behaviour among SkyCity’s clientele; of SkyCity Hamilton’s Host Responsibility Framework a record management programme (internal audit and Programme, that Programme is largely similar to a suite of host • provide support for clientele who develop tool for host continuous improvement) the Host Responsibility Programme in place at each responsibility modules • mystery shopping programme problems and/or who show distress as a result responsibility incidents of SkyCity’s other land-based casinos. for staff, including online and assessments, of playing on SkyCity games within their courses, in-person courses, including reports for gaming platforms; and annual refresher ongoing oversight courses • protect vulnerable groups from either gambling online within the gaming platform in the first place (for example, excluding underaged players), or minimise the harm to problem gamblers who continue to gamble;
72 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Customers 73 We continue to focus on
ways to ensure that we have SUSTAINABILITY the highest standard of host responsibility best practice
Embracing Technology Predicative Algorithm These differences mean that while SkyCity’s Host Responsibility Programmes have similarities, Since 2014, SkyCity has operated a predictive for extended periods. If the results of the trial they are often carried out quite differently. Facial Recognition algorithm risk model created by Focal Research at indicate that this initiative may be beneficial to However, problem gambling is an addiction and After trialling different available technology SkyCity’s largest and busiest casino in Auckland, SkyCity’s ability to detect continuous presence, the possibility of harm from this type of behaviour solutions from late 2018, SkyCity successfully which analyses loyalty data as a tool to identify SkyCity will evaluate its application at its other manifests itself in the same way regardless implemented a full facial recognition technology players who may be at risk from gambling harm. land-based casinos. of jurisdiction or location. That is why SkyCity The algorithm was upgraded in May 2019 and solution across all its land-based casinos in endeavours to lead in this area and employ best November 2019. This technology assists SkyCity again in June 2020 with the addition of Focal Number of Excluded Persons Identified practice prevention methods across the business. to recognise customers who have been excluded Research’s ‘ALeRT BETTOR Protection System’ Returning to a SkyCity Property in Breach from re-entering its casinos by notifying SkyCity software to enhance and improve SkyCity’s ability A key strategic focus across the SkyCity Group of an Exclusion Order personnel when an individual matching an image to identify potential at-risk gamblers. The ALeRT for minimising gambling harm is prevention. 00 00 00 00 BETTOR Protection System software uses routinely Robust prevention initiatives can be developed from SkyCity’s database of excluded patrons 1,410 1,410 1,410 1,410 re-enters a SkyCity gambling area. stored customer data to create complex models and implemented across the Group with few 00 00 00 00 for identifying and managing high-risk play (the or no regulatory or local procedural constraints. Prior to the introduction of facial recognition 300 300 300 300 algorithm) that otherwise may not be outwardly By adopting a prevention approach, we can technology in November 2019, staff recall was visible to operators or customers. increase our ability to identify and respond early 200 200 200 200 the primary mechanism for identifying excluded to new or emerging concerns that may lead to persons returning to the casino in breach of In June 2020, the algorithm (including the ALeRT 00 00 00 00 problem gambling related issues for our customers. their exclusion orders. Initial indications are that BETTOR Protection System software) was rolled out the new technology is proving 000 to be useful 000 in 000 000 and implemented at the SkyCity Hamilton casino. We are committed to carrying out regular reviews assisting SkyCity to identify excluded customers of each of our Host Responsibility Programmes to 00 00 00 00 from re-entering SkyCity’s casinos, with a marked Consistency of Responsible ensure alignment of our practices across our sites. increase in the number of 00excluded persons 00 774 00 774 00 774 774 identified returning to a SkyCity casino in breach 703 703 703 703 Gaming Culture and Practice 00 00 00 00 of their exclusion orders during the financial The alignment of excellent host responsibility and year ended 30 June 2020 in 00 comparison 00 to 00 00 harm minimisation practice and culture across preceding periods. the SkyCity Group remains challenging due to 00 00 00 00 differences from site to site, such as size, scale While there is no guarantee that facial recognition and staffing structure. There are also market and technology will be effective 00 in each and 00 every 00 00 customer differences that impact our approach to case, the technology nonetheless significantly 300 300 300 300 staff training and programme design, in addition bolsters SkyCity’s ongoing efforts to deter, detect 182 182 182 182 to unique cultural distinctions to consider. and prevent excluded customers200 from200 re-entering200 200 109 109 109 109 Furthermore, our sites across New Zealand and SkyCity’s casinos. 81 81 81 81 00 00 51 33 0039 51 0033 39 51 33 3933 5157 33 39 33 57 33 5756 33 57 56 56 56 in South Australia each have different regulatory In July 2020, we commenced a trial at the 0 0 0 0 environments in which to operate. SkyCity Hamilton casino using facial recognition Y Y Y Y Y Y Y Y20 Y Y20 Y20 Y20 technology in conjunction with up to 26 additional cameras within the casino as a further means Auckland Hamilton of identifying customers who remain onsite Queenstown Adelaide
74 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Customers 75 We offer extensive
information to customers SUSTAINABILITY about exclusion options and referral details to problem gambling support services
Customer Experience Community Knowledge During the past financial year, we continued to engage with community stakeholders, both at and Engagement Given that a material issue to our stakeholders, their request and through more formal bi-monthly internal and external, is responsible gambling, SkyCity promotes a range of tools in order to customer as a means to prevent risk of harm Host Responsibility Community Liaison Group we aim to foster good relationships with problem facilitate responsible gambling – however, exclusion occurring, or as a means to stop further harm meetings in Auckland attended by treatment gambling stakeholders. is an equally important host responsibility through a customer’s gambling at SkyCity’s casinos. service providers, public health providers and Government agencies. offering for those who may be vulnerable to As part of this approach, we provide tours of our In Adelaide, all exclusions are referred to problem gambling. facilities and literature to treatment providers Consumer Business Services (the South Australian In September 2019, SkyCity also participated to assist them in understanding our gaming Our casinos offer extensive information to Government’s regulator) who has overall in Gambling Harm Awareness Week in environments and Host Responsibility Programmes. customers about exclusion options and referral management of exclusions. New Zealand, partnering with treatment services details to problem gambling support services, We also partner with local experts and support and stakeholders to promote support and harm With the size of our customer base and premises, including gambling helplines and face-to-face agencies to ensure we have up-to-date resources in minimisation initiatives with customers within our it can be a challenge to identify individuals counselling organisations. place for harm minimisation and prevention. SkyCity Auckland and SkyCity Hamilton casinos. immediately and, despite our best efforts and The objective is to improve information sharing In New Zealand, customers can choose to exclude measures, some individuals may nonetheless find We also include treatment providers in our and collaboration between stakeholders in order themselves from all SkyCity casinos in New Zealand ways to elude staff and re-enter a SkyCity casino. internal host responsibility training programmes for a period of up to two years. In some cases, to advance SkyCity’s harm minimisation approach. wherever possible. SkyCity itself makes the decision to exclude a This collaborative approach ensures that knowledge about problem gambling is shared between SkyCity and the relevant stakeholders, who will work together to minimise harm. The following graph summarises the number of exclusions issued by each of the SkyCity properties over the 2016–2020 financial years: Exclusions at SkyCity Properties Would You Like a Helping Hand?
At SkyCity, we take our responsibilities as a host 00 806 766 very seriously - the safety and wellbeing of our you care about shows the signs and symptoms 00 696 customers is a top priority. of problem gambling, help is at hand. 644 00 620 Gambling can be fun for most people. However, The signs and symptoms of problem gambling for some, losing control of their gambling include: 00 can happen quickly (or over time) without • gambling makes home life unhappy; 00 recognising the early warning signs that there • feeling sad or unhappy after gambling; may be a problem developing and can cause • trying to win back losses; 00 harm, including financial problems, emotional • gambling to escape worry or trouble; distress and relationship difficulties. 300 • changing sleeping or eating habits due to 169 189 The negative consequences of problem gambling gambling; 200 120 131 138 112 can affect the gambler, their family or friends, 84 • borrowing to finance gambling; 59 66 61 61 their employer and/or the community at large. 00 37 29 25 44 • considering committing or actually committing It is important to recognise early warning signs, an illegal act to finance gambling; and/or 0 such as guilt or remorse after a gambling session Y Y Y Y Y20 • considering harming yourself as a result of or overspending money and/or time. gambling. Auckland Hamilton Queenstown Adelaide SkyCity is committed to promoting responsible Call the Gambling Helpline (free and gaming behaviour. But problems can arise for a confidential 24 hours) 0800 654 655 small percentage of players. If you or someone or text 8006.
76 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Customers 77 Our People
As a major employer with over 3,800 staff, we know that taking care of our people is the key to creating a great place to work. We are committed to providing our employees with sustainable career paths at SkyCity and want our staff to grow their careers with us.
Priority Issues FY20 Performance Highlights • Employee engagement • Launched ‘SkyCity FLEX’, a new flexible working framework
• Meaningful career and • Held the SkyCity Diversity and Inclusion Conference, attended development pathways by 170 people leaders from across the SkyCity business
• Diversity, inclusion and belonging • Sponsored the 2019 Rainbow Excellence Awards • Awarded the 2019 Rainbow Tick Training and Development • Health, safety and wellbeing Award for SkyCity’s Transition Support Framework, a transgender employee framework and tool kit Key Stakeholders • Finalist in the ‘Employer of Choice’ category at the 2019 • Employees (existing, former New Zealand Tourism Awards and potential) • Announced as a Platinum winner in the ‘Best Learning and • Union representatives Development Project – Leadership Capability’ category at the • Ministry of Business, Innovation 2019 LearnX Asia Pacific Awards for SkyCity’s Tahuna Te Ahi and Employment programme • Ministry of Social Development • Launched refreshed employee values • Ministry of Health • Developed and implemented employee pulse surveys Inspire • Department of Education, • Continued to focus on improving our health and safety Skills and Employment performance against our four health and safety goals set out in our Group Health and Safety Strategy for 2019-2021 • Accident Compensation Corporation FY20 Key Challenges our people • WorkSafe NZ • Better representation of women at more senior levels • SafeWork SA • Downsized our New Zealand workforce by around 25% in • ReturnToWorkSA response to the COVID-19 pandemic • Immigration New Zealand A great place to work where our people • The COVID-19 global pandemic created an emerging risk • Women’s Refuge relating to health and wellness requiring support for our are empowered to grow and achieve. • Women in Gaming and employees in dealing with anxiety and stress Hospitality Australasia • Gender Tick FY21 Focus Areas • Rainbow Tick • Continue the momentum on closing the gender pay gap • Southern Cross Healthcare • Implement the final stage of SkyCity’s ‘$20 by 2020’ wage initiative in New Zealand – a commitment to pay a $20-an-hour minimum wage (announced by SkyCity in March 2018) • Establish a new SkyCity Diversity and Inclusion Advisory Panel to provide a minority perspective on diversity and inclusion issues • Continue to promote awareness of mental health issues and to evaluate the impact on psychosocial risks
79 Our vision is to be a centre
of expertise that delivers SUSTAINABILITY high value learning and development solutions for staff
At SkyCity, we aim to create an environment where SkyCity was awarded the 2018 Deloitte Top 200 Health, Safety and Wellbeing mental and physical health. The programmes aim to our people are at the centre and ensure that our Diversity & Inclusion Leadership Award for the promote healthy lifestyles, increase physical activity, staff can work safely, are motivated to work hard, programme in November 2018 and was named At SkyCity, our people are paramount to the success reduce absenteeism and improve productivity. progress in their careers, and have the tools and as a Platinum winner in the ‘Best Learning & of our business. Ensuring we take care of our people We continue to evaluate the impact on psychosocial knowledge they need to look after both themselves Development Project – Leadership Capability’ at work allows them to provide our guests with a risks as part of our Group Health and Safety and our customers. category at the 2019 LearnX Asia Pacific Awards for safe and enjoyable experience. Our health and safety Strategy. During the last financial year, we promoted the programme in June 2019. mission is to prevent harm and build wellness. awareness of mental health risks aligning with Employee Engagement, 15 employees commenced the Tahuna Te Ahi Health and Safety Mental Health Awareness Week in New Zealand programme during the last financial year. and R U OK? Day in Australia. During Mental Health Meaningful Career and Each property within the SkyCity Group must Awareness Week, the Auckland Sky Tower was SkyCity Values Refresh demonstrate compliance with our Group Health Development Pathways lit purple and green, the colours of the Mental and Safety policy and standards for safety. We also Health Foundation, to show support to those with With a large and diverse workforce, SkyCity is Following the rollout of a refreshed company conduct internal audits annually and external audits experience of mental illness, as well as their family recognised for taking a lead in staff development vision and business, character and culture goals, as required for registration and certification. Findings and friends. and care. Our vision is to be a centre of expertise we commenced a process to refresh SkyCity’s from these audits are monitored and tracked for that delivers high value learning and development values, using a consultative process across all sites continuous improvement. In January 2020, the COVID-19 global pandemic solutions for staff which contribute to the which unearthed the core values shared by SkyCity created an emerging risk relating to health and achievement of our business priorities. employees when they operate at their best. In 2018, SkyCity adopted a new Group Health and wellness. In response, SkyCity established a specialist Safety Strategy for 2019–2021 which centres around Health and Hygiene team to provide staff with We have an advanced set of priorities and The refreshed values are people centric, simple and the mission “Prevent Harm and Build Wellness” and up-to-date information on the global pandemic, programmes in place across our sites to achieve tell the story of the behaviours and actions people four goals: our goal of being a great place to work where our need to practice to enable themselves, their teams support in dealing with anxiety and stress relating • Industry leading safety culture – we will create people are empowered to grow and to achieve. and SkyCity to succeed. We have integrated the to the pandemic, and training and awareness on a positive safety culture for our workers and To ensure that these programmes remain effective values into our performance and development health management relating to the pandemic. guests with a strong emphasis on genuine and and relevant, we regularly review the effectiveness framework, MyPATH. visible leadership and active engagement of Following periods of lockdown, we also focused of the programmes, in terms of both interest and our workers; on physical and mental health work conditioning. sustained impact, and make refinements as required. These programmes were aimed at creating physical New programmes are also trialled and introduced • Effective risk management – we will focus on and mental resilience of our operational workers where appropriate. We regularly seek advice from our critical risks, ensuring we have sufficient risk to minimise the risk of harm, resulting in low rates staff on how to remove barriers to participation mitigation strategies in place to prevent fatal or You bring your best to play of injury and illness following the reopening of (such as release time) and introduce better incentives serious harm; a unique role at SkyCity our properties. for participation. • Sustainable systems and processes – we will create a contemporary and resilient approach Additionally, during the last financial year, SkyCity Tahuna Te Ahi – Ignite the Fire to the management and improvement of health commenced a pilot programme to provide health Recognising the special standing of Māori as and safety; and services across our Auckland property. The pilot programme is focused on personal health checks tangata whenua and the indigenous people of • Health and wellbeing – we will adopt a You're part of a team and coaching of our frontline employees. Aotearoa, SkyCity launched Tahuna Te Ahi, a risk-based approach to health and wellbeing, tailored programme developed by New Zealand built on passion, including programmes to reduce physical and As part of SkyCity’s wellness programme, all SkyCity company Indigenous Growth Limited, for respect and equality psychosocial risks to our workers. employees across the Group are also invited to our New Zealand-based employees in 2018. receive their flu vaccinations for free. This service The programme provides accelerated leadership The strategy also addresses the New Zealand is offered annually to employees onsite at the development specifically for Māori employees in Government’s key goals of its New Zealand Health beginning of the flu season to ensure all staff have addition to implementing initiatives which elevate We're all about and Safety at Work Strategy 2018–2028. easy access to the vaccinations. This year, due to the the standing of Māori at SkyCity more broadly. entertainment and making Employee Wellbeing impact of COVID-19 and the resulting temporary The programme connects people to indigenous every experience the best closure of all SkyCity sites, employees were values and culture while at the same time giving for guests SkyCity has programmes in place to promote provided with flu vaccination vouchers which were them the tools to incorporate their culture into a healthy behaviours and personal responsibility for redeemable at local pharmacies. business environment.
80 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our People 81 FY20 Health and Safety Scorecard We established a $1 million Indicator Target FY20 Performance
SkyCity Employee Hardship SUSTAINABILITY Safety Success Zero fatalities or serious injuries Achieved – no fatalities or Fund in response to the Indicator 1 serious injuries impacts of the COVID-19 Safety Success Reduce Total Recordable Incident Not achieved – reduced by 8%* Indicator 2 Frequency Rate (TRIFR) by 10% from pandemic on our people the FY19 baseline
Safety Success Increase hazard identification reports Achieved – increased by 72% Indicator 3 by 20% from the FY19 baseline
*The final TRIFR result was significantly impacted by the COVID-19 closures, which significantly reduced the total number of hours worked. For the six months to 31 December 2019, there was a 17.6% reduction in TRIFR against the prior period. Staff Support Programmes As at 31 August 2020, a total of $209,142 had been granted (with no obligation for repayment) to GOAL 1 GOAL 2 GOAL 3 GOAL 4 SkyCity has a range of services designed to assist 95 affected employees. employees who may need a helping hand. SkyCity also provided support to departing staff At our Auckland and Hamilton sites, the Connect beyond financial assistance - collaborating with Centre offers confidential help and advice for SkyCity essential service providers in the healthcare and employees – for work issues and situations outside of grocery sectors (where employment demand work. They offer advice about practical and effective increased) to set up the Keep New Zealand Working ways to handle difficult or sensitive issues. Where job portal and providing free independent services, needed, they can also assist employees in working such as out-placement assistance, counselling with agencies outside of SkyCity who may be able support and budgeting advice. to help. Industry Leading Effective Risk Sustainable Systems Health and In a further step to support individuals displaced The Group-wide Employee Assistance Programme Safety Culture Management and Processes Wellbeing from employment in the tourism sector due to the (EAP) is a supportive and confidential programme COVID-19 pandemic, SkyCity partnered with Go with designed to assist SkyCity employees who may Tourism (an initiative launched by Auckland Tourism, have problems that affect them at work – advice Events and Economic Development with the aim and support is available 24 hours a day, seven days a of growing interest in careers in tourism through an week, from trained professional counsellors who can online portal connecting employers with potential help staff with their problems. employees) to support the 'We’re Here to Help' Highlights Highlights Highlights Highlights SkyCity also provides emergency financial assistance campaign. The 'We’re Here to Help' campaign was Carried out a safety Continued to invest in SkyCity Adelaide’s A significant increase in for employees suffering financial hardship. This launched in April 2020 and repurposed the online culture review within the strengthening our critical self-insurance licence the number of employees help can include budgeting advice, and last portal to provide support to displaced workers with SkyCity Auckland Logistics risk controls across the was successfully renewed electing to participate in resort financial help through a ‘SMILE’ loan to coaching, career guidance and connecting them department, which led to SkyCity Group, focusing for a further five-year our health vaccination New Zealand-based staff who qualify for support. with new employment opportunities. SkyCity saw an the rollout of a targeted on achieving zero fatalities period following programme with a focus on opportunity to provide urgent and vital support to a initiative to increase (Safety Success Indicator 1) ReturnToWorkSA’s (the influenza vaccinations Employee Hardship Fund safety engagement and organisation responsible key industry partner by seconding members of the leadership within the for providing work injury Like many other businesses, the COVID-19 pandemic SkyCity Auckland Human Resources team to join the Focused on safety in Commenced a Health department. This has insurance and regulating Go with Tourism team, delivering over 800 calls of design of new facilities to Check Programme aimed has adversely impacted SkyCity’s business and resulted in a significant the South Australian Return personalised support between May and July 2020. mitigate our risks in the at increasing awareness operations and necessitated significant changes increase in hazards to Work scheme) audit of design phase on personal health across the SkyCity business from March/April 2020, reported within the SkyCity Adelaide’s health Healthcare whilst providing including significantly reducing capital expenditure, department – thereby and safety systems practical strategies minimising operating costs and restructuring SkyCity understands that healthcare can be allowing mitigation Implemented new expensive and sometimes difficult to access for strategies to be developed emergency preparedness SkyCity’s workforce. Successfully implemented to lower workplace initiatives, including fire Significant focus on members of the workforce. We therefore offer a new hazard reporting In April 2020, the SkyCity Employee Hardship Fund incidents training simulations to the implementation permanent, full-time employees in our New Zealand system using technology was established to initially assist SkyCity’s departing increase preparedness in of infectious disease sites health insurance via our healthcare provider to drive a greater employees in New Zealand who found themselves the event of a fire prevention strategies for Southern Cross Healthcare. SkyCity fully subsidises Implementation of understanding of our risks, in financial difficulties that could not fully be employees, contractors the RegularCare plan, which provides shared cover Group standards for resulting in a significant addressed by their redundancy payments. The Fund and guests for surgical treatment, recovery, support, imaging leadership focusing on Continued implementation improvement in the was established using funds contributed by the individual objectives that quantity of and diagnostic tests and day-to-day treatment. of a Construction Safety Senior Leadership Team and other senior executives include participation and Assurance Programme hazards reported Employees are also able to add their family members across the business via voluntary reductions in engagement targets to ensure our contractors to the insurance plan at an additional cost. their salaries from 1 April – 30 June 2020 and from keep their people safe on construction projects voluntarily contributions by other staff members. at SkyCity
82 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our People 83 We value and respect the contributions, ideas and experiences of people from SUSTAINABILITY all backgrounds and are committed to an inclusive workplace that enhances and promotes workplace diversity across the business
Diversity, Inclusion and Belonging • maintain certification with specialist organisations who represent minority groups We have a strong representation of minority groups within the SkyCity workforce (for example at SkyCity who are often underrepresented at Rainbow Tick) to reiterate our commitment to leadership levels in the workforce. Encouraging and support of these minority groups’ interests; diversity of thought in our workforce, and in leadership roles in particular, allows us to strategically • build the capability of all leaders in reflect our diverse customer base and draw people understanding and leveraging diversity of with different backgrounds to our business. We thought through ensuring appropriate learning believe this diversity of thought offers an opportunity and development solutions are delivered; to enhance SkyCity’s competitive advantage and • identify and appoint an advisory panel to provide provide long term sustainable business success. informed perspectives and guidance to the We value and respect the contributions, ideas Chief Executive Officer and Inclusion Council on and experiences of people from all backgrounds diversity and inclusion matters; and A Winning Career at SkyCity and are committed to an inclusive workplace that • continue to provide support and education to Roiroi Paotama has been with SkyCity Auckland These courses helped me to understand my job as enhances and promotes workplace diversity across employees and managers to promote mental for over 16 years and began as a Wardrobe an Attendant and then as a Supervisor. the business. We are committed to providing health awareness and wellbeing. Attendant. Today Roiroi leads a team of 19 as opportunities and initiatives that assist all to reach However, two programmes have really helped me We downsized our workforce in New Zealand Wardrobe Supervisor, supporting our people their potential, and regularly benchmark and report and my development. The first was The University by around 25% in April/June 2020 due to the across the Auckland business with their garment on our diversity position, policy and objectives. of Auckland New Start programme in 2014. I never expected significant impact of COVID-19 on our requirements – from design and purchase to ever considered going to university (I hardly went SkyCity’s Diversity and Inclusion Policy (available in operating environment and financial outlook. internal customer service. to school!) so I felt very nervous and uncomfortable the Governance section of the company’s website When approaching the labour restructure, we were “When I applied for the Attendant job, there was in this environment, but I went so I could prove to at www.skycityentertainmentgroup.com) provides cognisant of our diversity and inclusion objectives one part-time vacancy and two of us applied for the myself that I could do it. I passed the course and a framework for the company’s current and future and initiatives and to ensure that the restructure position, so they hired both of us and offered us a was over the moon! diversity and inclusion initiatives. Each year, the did not adversely impact our commitment in day each. I ended up working four to five days on SkyCity Board sets measurable objectives to promote these areas. As part of the restructure process, The second programme was Growing Pasifika Niu the graveyard shift in my first three months. I was diversity and inclusion. The measurable objectives we ran a desktop analysis of the redundancies to Leaders which I completed in 2017/2018. Again, so happy! set by the Board for the financial year ending ensure no bias in the process with no significant I felt nervous and uncomfortable, but I attended 30 June 2021 are to: concerns identified. Post restructure, there has In 2011, an opportunity became available for the and enjoyed it. I learned so much about myself, been no significant impact on gender and/or ethnic Wardrobe Supervisor role and, though I didn’t my culture and how I can bring all of this to work • continue to ensure strong female candidates are representation in our workforce. have much confidence that I would get it, I put my as a leader in a business setting. One of the things identified in the recruitment process for all Board and senior executive roles; hand up and applied. I thought my interview didn’t I can happily do now with confidence is public Inclusion Council go well at all, but I knew I had experience in the speaking – something I wouldn’t have done without • maintain a gender balance across the population In 2019, a SkyCity Inclusion Council was established department and sound computer skills and enjoyed this course. of employees who make up the top four levels of working there. Fortunately, they saw something in to support the embedding of an authentic and SkyCity is a company that supports its people the organisation hierarchy; me, and I got the job and was promoted. inclusive culture within SkyCity Auckland. The to aim high and go for it no matter what your • continue to review gender pay equality and Council is made up of Employee Resource Groups In my time at SkyCity, I’ve had so many personal challenges are and I’m very grateful for deliver an organisation-wide programme that whose purpose is to bring to life SkyCity’s diversity opportunities to learn and grow. As a Wardrobe the opportunities I’ve had. I didn’t have much removes any risk of bias or inequality; and inclusion objectives. The Employee Resource Attendant, I completed a number of small courses confidence in myself when I first started, but I’ve Groups sit on a forum to discuss priorities and • leverage and grow diverse talent pools to develop from Excel Tips and Techniques to Creating made a career here. I’m thankful to the many proposed actions with senior leadership on a a more ethnically diverse leadership population; Winning Moments and Problem Solving for Team people who believed in me and supported quarterly basis. Members. When I was promoted, I completed me over the years. This is one of the things I further courses such as Recruitment and Selection, love about working at SkyCity, the people and Time Management, and Learning to Lead. the opportunities!”
84 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our People 85 86 rainbow community. Tick to findways we can supportourSkyCity further working withthefeedback received fromRainbow SkyCity iscommitted to continually improving and sexual orientation. – nomatter whattheirgenderidentityor without fear of discriminationordisadvantage employees can bringtheirwholeselves to work safe, supportive and welcoming workplace where means SkyCity hasbeenacknowledged asbeinga Pledge in2020.BeingaRainbow Tickemployer and ourQueenstown site was awarded thePride Auckland andHamilton propertiesfor year, afifth SkyCity hasmaintainedaRainbow Tickfor its Supporting OurRainbow Community for creatingmoreinclusive teams. their rolesasleaderswithinSkyCity andprovide tools engage peopleleadersondiversity andinclusionin inclusion, withtheintent of theconference to thought leaderswhospoke ondiversity and attendance. There were anumberof external with 170peopleleadersfromacrossSkyCity in Diversity andInclusionLeadershipConference, In October 2019,SkyCity heldtheSkyCity Diversity andInclusionLeadershipConference employees, friendsandfamily. the different Māoriinstruments,opento SkyCity a performance experience andstorytelling about a numberof activations, includingTaongaPūoro, Week) inSeptember 2019.The celebration included celebration of Te Wikiote Reo (MāoriLanguage initiatives, includingTe RoopuMāoriōSkyCity’s Groups have worked together acrossseveral In thelastfinancialyear, theEmployee Resource that impactthegroupsthey represent. their prioritiesandwork together to drive initiatives together theirrespective communities, confirming The leadersof theEmployee Resource Groupsbring Pasifika LeadersandTe RoopuMāoriōSkyCity. in Leadership,NZAsianLeaders,SkyCity Pride, The five core Employee Resource GroupsareWomen SkyCity Entertainment Group AnnualReportYear Ended30June2020
in additionto astrategy deployed over thepasttwo a genderbalanced talent pipeline.These initiatives, of women inseniorrolesacrossthebusiness through We remain focused onincreasingtherepresentation bias acrosssimilarpositions. identified thattherearenoindications of gender problem solvingandaccountability). This analysis (being positionswithsimilardegreesof know-how, gender pay equalityanalysis for like positions In thelastfinancialyear, SkyCity conducted pay equality. remuneration outcomes by genderto ensure SkyCity continues to monitor andreporton Pay Equality ensuring asafe workplace. leave, women inleadership,genderpay equalityand including genderinclusive culture,flexibility and assesses organisationsacrossfive key indicators, gender equalityintheworkplace. The programme for businessesto demonstrate theircommitment to Gender TickisaNew Zealand-basedaccreditation reconfirmed inJune2020. workplace for allemployees. The GenderTickwas in recognition of itscommitment to providing afair In April2019,SkyCity was awarded theGenderTick Gender Tick included. to seeany visiblesignsthatthey were welcome and forheart, itwas difficult therainbow very community realised that,althoughthetown hadaninclusive community after theWinter Pride festival organisers the visibilityof safe spaces withintheQueenstown The PridePledgewas started inQueenstown to raise and signedupto thePridePledgeinJune2018. Winter Prideevent inQueenstown for many years SkyCity Queenstown hasbeenasupporter of the trans-sexual andintersex Australian-based staff. our commitment to ourlesbian,gay, bi-sexual, programme membership,whichreiterates Our Adelaide site maintaineditsPrideinDiversity
pay gapasat30June2020: The following graph illustrates theSkyCity gender maintenance of alow genderpay gapinAustralia. to SkyCity’s genderpay gapinNew Zealandandthe hascontributedpaid staff, to reduction ameaningful years to thehourlywage lift rate of SkyCity’s lowest (August 2019). The New Zealandnationalgenderpay gap is 9.3% Includes permanentandtemporary employees. compared to themedianhourlyrate for menasat30June2020. Percentage difference between medianhourlyrate for women NEW ZEALAND 7.5 1.5 AUSTRALIA FY19 –8.2% FY19 –1.5% % %
SkyCity’s values. initiatives –allof whichalignsstronglywith or enhance theirgenderdiversity andinclusion and supportfor organisationswishingto develop and networking opportunitiesandproviding tools success of women througheducation, mentorship industries by encouraging thedevelopment and in thegaming,hospitalityandgamingrelated andpromote positive outcomesindustry for women workplace. Itspurposeisto achieve aninclusive promoting genderequitableoutcomes inthe dedicated to achieving and aninclusive industry Women inGamingandHospitalityAustralasia is New ZealandandAdelaide. body’sreachinto broadened theindustry and HospitalityAustralasia. SkyCity’s partnership SkyCity isaPlatinumPartnerof Women inGaming Women inGamingandHospitalityAustralasia teams andSkyCity. needs of allstakeholders -customers, employees, any flexible working arrangement mustmeetthe Flex’ and‘ScheduleFlex’, withtherequirementthat The framework provides guidance onboth‘Location work for bothouremployees andcustomers. encourages innovation inconsidering whatmay departments –however, thenew framework or achievable for allindividuals,teams and that flexible working may notbeappropriate As alargelycustomer facing business,we recognise flexible working arrangements. highlighted ademandfor employees to access COVID-19 pandemicandlockdown periodfurther Employee experiences andinputthroughoutthe and policiesinrelationto working flexibly. FLEX’ framework following areview of processes inclusion strategy, we launchedthe‘SkyCity In May 2020,aspartof SkyCity’s diversity and SkyCity Flexible Working Framework Our People 87
SUSTAINABILITY SUSTAINABILITY
Performance Against FY20 Board Diversity and Inclusion Objectives
SkyCity performed well against the measurable objectives set by the Board to promote diversity and inclusion for the financial year ended 30 June 2020.
Objective Progress Made Objective Progress Made
Continue to ensure strong female Recruitment briefs for the Board recruitment process during Leverage diverse talent pools to Several initiatives were delivered during the past financial year candidates are identified in the the past financial year explicitly specified that SkyCity required develop a more ethnically diverse with the objective of developing a more ethnically diverse recruitment process for all Board female candidates to be identified wherever possible. leadership population leadership population: and senior executive roles Recruitment briefs for the senior leadership recruitment process • SkyCity continued to offer its Māori leadership programme, explicitly specified that SkyCity require female candidates to be Tahuna te Ahi, in partnership with Indigenous Growth identified wherever possible. Limited;
The Chief Executive Officer personally approved all • SkyCity continued as a major partner of TupuToa, hosting appointments made at levels two to four of the organisational three summer interns for three months within our hierarchy (level one being the Chief Executive Officer), asking corporate business; and for an explanation as to why a female candidate had not been • SkyCity continued its sponsorship of the New Zealand identified where the preferred candidate was male. Asian Leaders Forum.
Maintain a gender balance across During the past financial year, gender balance has been In addition, of the participants in SkyCity’s Emerging Leadership the population of employees who maintained across the top four levels of the organisational Programme, 36% identified as Asian and 14% identified as either make up the top four levels of the hierarchy with 49% of employees being female and 51% being Māori or Pasifika. organisation hierarchy male, demonstrating an equal gender representation in our talent pipeline. Build the capability of all leaders SkyCity held a Diversity and Inclusion Leadership Conference in understanding and leveraging with 170 people leaders in attendance. The conference was Continue to review gender SkyCity continues to monitor and report on remuneration diversity of thought through intended to broadly educate SkyCity people leaders on diversity pay equality and deliver an outcomes by gender to ensure pay equality. The annual salary ensuring appropriate learning and inclusion, through a range of expert speakers who offered organisation-wide programme review resulted in an average increase for female salaried and development solutions are diverse perspectives and tools for creating more inclusive teams. that removes any risk of bias or employees of 2.41% and an average increase for male salaried delivered inequality employees of 2.21%. The SkyCity Inclusion Council continued to encourage employee led initiatives and provide strong executive visibility and SkyCity also conducted gender pay equality analysis for like sponsorship. Five core groups continue to be represented positions, positions with similar degrees of know-how, problem including Women in Leadership, NZ Asian Leaders, SkyCity Pride, solving and accountability. This analysis identified that there are Pasifika Leaders and Te Roopu Māori ō SkyCity. no indications of gender bias across like for like positions. The SkyCity Emerging Leaders Programme has a highly While our analysis has identified no evidence of a gender driven integrated approach to diversity and inclusion, from the pay gap for like positions, we remain focused on increasing the selection of participants to the collaborative and experiential representation of women in senior roles across the business modules which focus on exploring bias. through a gender balanced talent pipeline. Continue to provide support and SkyCity Adelaide became a Healthy Minds Accredited Workplace SkyCity’s overall gender pay gap in New Zealand decreased to education to employees and due to its continued work and dedication to building workplace 7.5% (at 30 June 2020) from 8.2% (at 30 June 2019). managers to promote mental practices which encourage strong employee wellbeing. All new SkyCity’s overall gender pay gap in Australia remained at 1.5% health awareness employees complete the Seven Secrets to a Healthy Mind (at 30 June 2020). Programme as part of their onboarding.
Maintain Rainbow Tick certification Rainbow Tick certification was achieved for our Auckland and An online Healthy Minds Seminar is available to all employees for our New Zealand sites and Hamilton sites, and our Queenstown site was awarded the across our Australian and New Zealand sites. partner with Pride in Diversity Pride Pledge. SkyCity partnered with the Smile Initiative to deliver online Australia to reiterate our Our Adelaide site maintained its Pride in Diversity membership learning to employees through the COVID-19 pandemic. commitment to our lesbian, gay, The Smile Initiative is a social enterprise started by a collective of bi-sexual, transgender, takatapui and participated in the Australian Workplace Equality Index survey. mental health clinicians who aim to empower businesses and and intersex staff employees to create a psychologically safe work environment.
88 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our People 89 SUSTAINABILITY
Our Staff Numbers Employment Contract Type by Gender
Worked Full-Time Equivalent (FTE)* by Site Contract type Female Gender Diverse Male Group Total FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 Site Number of Employees % Permanent 91% 94% 100% 100% 90% 91% 91% 92% FY20 FY19 FY20 FY19 Adelaide Temporary 9% 6% 0% 0% 10% 9% 9% 8% Adelaide 616 575 24% 18% Auckland Auckland 1,696 2,426 67% 73% FY20 Hamilton Hamilton 179 242 7% 7% Employment Contract Type by Site
Queenstown 38 75 2% 2% Queenstown Contract type Adelaide Auckland Hamilton Queenstown Total 2,529 3,318 100% 100% FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 *The FTE calculation is based on actual hours worked by staff, Permanent 72% 72% 98% 97% 99% 99% 100% 100% not contracted hours. This definition provides a more accurate assessment of full-time equivalent staff. Temporary 28% 28% 2% 3% 1% 1% 0% 0%
Total Headcount for Group Employment Type by Gender
Site Number of Staff % Contract type Female Gender Diverse Male Group Total
FY19 FY19 FY20 FY20 Adelaide FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 Adelaide 1,059 997 28% 20% Full-Time 54% 52% 25% 17% 62% 62% 58% 57% Auckland Auckland 2,414 3,625 63% 72% FY20 On Demand 20% 19% 50% 50% 17% 18% 19% 19% Hamilton Hamilton 290 320 8% 6% Part-Time 26% 29% 25% 33% 21% 20% 23% 24% Queenstown Queenstown 54 89 1% 2%
Group Total 3,817 5,031 100% 100% Employees in Collective Agreements by Site
Contract type Adelaide Auckland Hamilton Queenstown Group Total*
FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19
Yes 74% 75% 26% 25% 4% 7% 0% 0% 37% 33%
Employment Contract Type for Group No 26% 25% 74% 75% 96% 93% 100% 100% 63% 67%
*Group total percentages are weighted proportionately based on site Worked FTE. Contract Type Number of Employees %
FY20 FY19 FY20 FY19
Permanent 3,462 4,642 91% 92% Permanent Employee Absenteeism** FY20 Temporary 355 389 9% 8% Temporary Contract type Adelaide Auckland Hamilton Queenstown Group Total*** Group Total 3,817 5,031 100% 100% FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19 FY20 FY19
Absenteeism 3.08% 3.62% 3.95% 3.98% 3.09% 3.60% 1.83% 2.18% 3.70% 3.76%
**As a percentage of scheduled days. ***Group total percentages are weighted proportionately based on site Worked FTE.
90 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our People 91 Our Communities
Our aim is to create value in our business and in the communities in which we operate. We understand that to do this we need to engage meaningfully with our communities, listen to their critical needs and expectations, and respond through developing meaningful community partnerships and by taking action to address key issues in our operations.
Priority Issues FY20 Performance Highlights • Economic contribution • Helped to raise more than $325,000 for Leukaemia & Blood Cancer New Zealand through the Step Up Sky Tower Stair • Building communities by Challenge developing people • Contributed a total of $3.7 million to the four New Zealand • Investing in our communities SkyCity Community Trusts for distribution to communities in • Developing deeper connections the Auckland, Waikato, and Queenstown Lakes regions – of with Iwi and indigenous peoples which $1.9 million was distributed in the financial year ended 30 June 2020, including $1 million in an extraordinary grant Key Stakeholders round by the SkyCity Auckland Community Trust to four organisations focused on reducing the impact of the COVID-19 • Community groups pandemic in their communities
• Sponsorship partners, including • Welcomed the 50th young person into Project Nikau, Emirates Team New Zealand, SkyCity’s youth employment programme focused on offering Leukaemia & Blood Cancer employment, training and a career path to young people from New Zealand and Variety – The disadvantaged backgrounds Children’s Charity Grow our • Continued our sponsorship of First Foundation, the Gateways • Community partnerships Programme and TupuToa as part of SkyCity’s ongoing commitment to youth employment • Recipients of SkyCity Community Trust grants FY20 Key Challenges communities • Philanthropy New Zealand • Increase public perception of SkyCity as a good • Local Iwi corporate citizen • Ministry of Social Development Serve a social purpose by investing in • Te Puni Kōkiri FY21 Focus Areas • TupuToa • Support our Project Nikau rangatahi to develop their career our local economies and communities. paths at SkyCity • First Foundation • Further our collaboration with the SkyCity Community Trusts on youth development, wellbeing and advancement
93 We helped raise more than $325,000 for
Leukaemia & Blood Cancer New Zealand through SUSTAINABILITY the Step Up Sky Tower Stair Challenge
SkyCity is a cornerstone of each of the communities In the financial year ended 30 June 2020, SkyCity in which it operates. We understand that our scope spent approximately $150 million on operational for influence and change is huge, and SkyCity invests goods and services, the bulk of which was spent in and works to develop our communities in a variety with local suppliers – with over $35 million on of ways. food and beverage items across New Zealand and Australia. Engaging with our stakeholders helps us to understand community attitudes toward SkyCity, the communities’ expectations of us, and how Partnerships stakeholders believe SkyCity should create value. SkyCity engages with stakeholders in a variety of Emirates Team New Zealand ways, both formal and informal, in each of the In September 2019, SkyCity was announced as communities in which it operates. These actions the ‘Official Hotels and Entertainment Partner’ range from legally required engagement with for the Emirates Team New Zealand defence of regulators and problem gambling service providers the 36th America’s Cup in March 2021. Through for example, to less formal feedback mechanisms the partnership, Emirates Team New Zealand and such as social media, customer surveys and public their guests will have access to SkyCity’s range of perception monitoring. premium accommodation and world-class food Whilst it is easy for organisations to talk about inputs and beverage services and SkyCity will provide and outputs, such as how much money or ‘in-kind’ on-water and onshore hospitality for Emirates Team SkyCity is partnering with Emirates Team New Zealand for the 36th America's Cup. contributions are given to charity, the number of New Zealand at their waterfront base within the charities receiving support, or how many hours staff America’s Cup Village in Auckland. The SkyCity logo spend on volunteering for community projects, will be featured alongside the other major sponsors it is a more challenging exercise to determine the on the team’s AC75 race yacht when Emirates New Zealand (the national charity dedicated to all revenue generated from Sky Tower admissions outcomes and impacts of those activities. We want to Team New Zealand launch their new boat for the supporting patients and their families living with on 17 November 2019 ($31,317) was donated to ensure that there is genuine and measurable social first time. blood cancers and related blood conditions) in Leukaemia & Blood Cancer New Zealand. impact from our SkyCity Community Trusts and Come summer 2021, the festivities will continue the Firefighter Sky Tower Stair Challenge, with Variety – The Children’s Charity other charitable giving. We continue to review and from the Viaduct with a fan trail to Federal Street in each participant climbing the 1,103 steps of the assess our community investments and partnerships the SkyCity Auckland precinct, where SkyCity will Sky Tower wearing 25 kilograms of gear. Due to the SkyCity has continued its 20-year partnership in a more holistic and strategic way, to ensure that host an Emirates Team New Zealand Fan Zone and impact of COVID-19, the 16th Firefighter Sky Tower with Variety – The Children’s Charity through they are aligned to our unique business assets exclusive events at its popular food and beverage Stair Challenge is now scheduled to take place on delivering Variety Bingo in Auckland, Adelaide and are ultimately delivering both social and outlets. SkyCity’s precincts in Hamilton and 21 November 2020. and Hamilton. The eighth annual SkyCity Variety business value. Queenstown will also join in the celebration with SkyCity is proud to have Leukaemia & Blood Cancer of Chefs campaign scheduled for July 2020 was their own fan zones and race screenings. New Zealand as a charity partner and to have unfortunately postponed due to the impact of COVID-19. Economic Contribution SkyCity is thrilled to be partnering with Emirates worked together to raise more than $325,000 Team New Zealand for the 36th America's Cup, a during the last financial year through the Step Up We are really proud of the partnership we have with Sourcing Locally major event for Auckland and in the New Zealand Sky Tower Stair Challenge. Variety, and the support we can provide to continue SkyCity is committed to sourcing locally. events calendar. To acknowledge the considerable efforts of the the important work they do in our communities. fire and emergency services teams that assisted One of the intentions outlined in the SkyCity Group Leukaemia & Blood Cancer New Zealand Procurement Policy is to source and procure locally with the significant fire at the New Zealand made and supplied products from Australasian During May each year, firefighters from International Convention Centre in October 2019, owned and operated businesses as a preference communities across New Zealand join forces again wherever possible. to raise money for Leukaemia & Blood Cancer
94 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Communities 95 SUSTAINABILITY
Over $60 million awarded in grants to community groups and organisations in New Zealand since 1996
Community Outcomes, In addition, through collaboration with the Investing in our Communities Whānau Ora Auckland and SkyCity Auckland Community Trust, greater Strategy and Progress social impact has been achieved in the areas of SkyCity Community Trusts Northland COVID-19 Response youth advancement and development through The economic and social impacts of the COVID-19 Building Communities by Developing People Established to provide funds for community and the Trust's prioritisation of initiatives that support pandemic have directly affected communities, charitable purposes, the SkyCity Community During the 2018 financial year, after engaging youth development, wellbeing and employability. families and individuals in numerous ways. with employees from across the SkyCity Group Trusts are one of the vehicles SkyCity uses to SkyCity committed to our third First Foundation Our most vulnerable communities, including Māori and community representatives (including ‘put something back’ into the New Zealand Scholarship in 2020. Applications were open to and Pasifika, have been significantly impacted the youth development, family support and communities in which the company operates. dependents from the SkyCity employee network by unemployment, negative health outcomes, financial capability sectors), SkyCity developed a The SkyCity Auckland Community Trust, in New Zealand and were managed by the accessibility to health services and social inequities. new community development and investment SkyCity Hamilton Community Trust, SkyCity First Foundation, where strict criteria had to be strategy centred around a thematic approach of Queenstown Casino Community Trust and During the COVID-19 Alert Level 4 lockdown in met to ensure eligibility. The scholarship supports 'Building Communities by Developing People'. SkyCity Wharf Casino Community Trust aim to New Zealand in April 2020, the SkyCity Auckland an academically talented student, from a low This approach recognises that SkyCity can help local and regional organisations carry out Community Trust took a proactive approach to decile school and low-income family, through provide employment opportunities for unskilled, community assistance and development work, supporting our vulnerable communities and, tertiary study. unemployed youth at risk of poor employment focusing on supporting families to thrive and in line with good philanthropic practice, made communities to prosper, with a specific focus on outcomes within each of the communities within We continue as a major partner of TupuToa, the decision to provide a rapid response and youth development. which it operates – we can provide employment, an organisation focused on ensuring corporate ‘act with impact’ – running an extraordinary grant round which saw $1 million in funds granted to training and a career path. New Zealand is representative of the country, Over the last financial year, SkyCity contributed a four organisations in the Greater Auckland and by developing and empowering young Māori total of $3.7 million to the four SkyCity Community During the 2019 financial year, SkyCity finalised Northland region – Te Pou Matakana - Whānau and Pasifika peoples and building the cultural Trusts for distribution to community groups the operational strategy across the SkyCity Group Ora Commissioning Agency (Te Pae Herenga capability of their partners. In the last financial and organisations in the Auckland, Waikato and to deliver this new strategy with the launch of Auckland collective), Pasifika Futures Whānau year, SkyCity hosted three summer interns for Queenstown Lakes regions - of which $1.9 million Project Nikau, a youth employment programme Ora Commissioning Agency (Auckland collective), three months within its corporate teams. was distributed by the Trusts in the financial year with a focus on developing work-ready skills. Te Manawaroa o Ngāti Hine (Ngāti Hine and ended 30 June 2020. Included in the grants made community collective) and Te Kahu o Taonui SkyCity worked in collaboration with the Ministry Developing Deeper Connections with Māori during the last financial year, the SkyCity Auckland (Iwi collective). of Social Development and a community-based Iwi Māori relationships have been initiated to Community Trust ran an extraordinary grant round provider to design a work ready programme support and guide Project Nikau, SkyCity’s youth in April 2020 which saw $1 million in funds granted The four recipients and their partner organisations – with the first cohort of 15 cadets joining the employment programme. Our partnership with to four organisations, all of which had strong collectively covered the Greater Auckland and SkyCity Auckland pilot programme in June Te Puni Kōkiri has enabled young Māori to access COVID-19 response plans, focused on reducing the Northland regions delivering food packages, 2019. The second cohort of 15 cadets joined cadetships which support their transition into impact of the pandemic within their communities. hygiene parcels and providing wrap around in September 2019 and the third cohort of 20 social services to over 10,000 families. The grants employment with SkyCity. Since establishing the first SkyCity Auckland young people joined in February 2020. were used to support frontline services through Through SkyCity’s Inclusion Council, Te Roopu Community Trust in 1996, SkyCity has awarded the purchasing of hygiene items, food and SkyCity has designed and implemented a Māori ō SkyCity (an internal Employee Resource more than 4,880 grants totalling over $60 million supplementary items such as winter clothing, wraparound youth mentoring support for each Group) has been established to support authentic to various community groups and organisations blankets and heaters, which were then distributed cohort and, in partnership with Te Puni Kōkiri, engagement with Māori staff. In addition, SkyCity in New Zealand, large and small, through the four by the partner organisations. In the Far North, has co-designed individualised learning and formally engaged an experienced and licensed SkyCity Community Trusts. communities were also dealing with water development plans for each cadet. Māori translator to build our capability across our shortages, and the grants allowed for several water New Zealand sites. tanks to be refilled.
The grants enabled the partner organisations to connect and support whānau and communities. While the most at risk were identified as Māori and Pasifika, a ‘no letter box missed’ and whānau ora approach meant that all communities benefitted from the grants.
96 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Communities 97 98 our-commitment/community-trusts. website atwww.skycityentertainmentgroup.com/ on theCommunity Trusts sectionof thecompany’s respective qualifications andexperience, aresetout Biographical detailsof individualtrustees, andtheir Trustees to decisions. supportfunding assessments andproviding recommendations to to deliver ontheirdesiredoutcomes, undertaking applicationsfunding andsupportingrecipients relating to theTrusts’ includingprocessing funding, organisations andprovide advice andinformation was alsoestablishedto engagewithcommunity A new Programmes andRelationshipAdvisor role rounds acrossthefour SkyCity Community Trusts. recommendations of thereview for thefunding 2020 to commence theimplementationof the Cherrington, was also appointed inFebruary 2020.ATransitionalin February Chair,Kate Trusts, with16new trustees beingappointed implemented acrossthefour SkyCity Community A contestable process was subsequently the governance withtheoperations of theTrusts. oversight of theTrusts andassistinthealignmentof and establishingaTransitional Chairroleto have and experience withinthemakeup of theTrusts, gapsinknowledge,attributes skill matrixto identify Community Trusts, developing atrustee skillsand all trustee appointmentsacrossthefour SkyCity including establishingacontestable process for subsequent recommendations were suggested, the overarching recommendation, anumberof corporate socialresponsibilityobjectives. To achieve each other,theircommunities andto SkyCity’s alignment of theSkyCity Community Trusts to arising fromthereview was to create greater best practice. The overarching recommendation with governance, grant makingandphilanthropic Trusts was completed inJuly2019to aligntheTrusts An independentreview of theSkyCity Community SkyCity Entertainment Group AnnualReportYear Ended30June2020 Māori performing arts. ambassador andaperformer inthetraditional been ateacher inTe KōhangaReo,aMāoricultural for success andsolvingcomplex issues.Shehas community groupsacrosstheworld inplanning System™ (ILIS),astructureddialogue tool to assist facilitator intheIndigenous LeadersInteractive wānanga development inNew Zealand.Sheisa Māori languageprogramme development, and development, qualityassurance management, education management,programme andpolicy strategy andcommunity capacity support, Kate hasprofessional experience inphilanthropic across Aotearoa. Advancement of MāoriOpportunity(AMO)network provides supportto currentyoung Iwileadersinthe in Whangarei,trustee of Te Putea Whakatupu and member withNorthTec (NorthlandPolytechnic) for Te RunangaoNgātiHine.SheisaCouncil group for Te Maara aHineamaru,thegovernance onTeand serves Manawatoopu theworking Kate isalsoatrustee of Miriamarae inWaiomio and advancement projects. Māori focus ineducation andcommunity strategy, specialises inworking withgroupsakaupapa strategy andadvancement projectsinAotearoa and Auckland. Sheworks acrosseducation, community Impact basedalongsideFoundationNorthin Kate isanassociate withThe Centre for Social Ngāi Pākehā) (Ngāti Hine,NgātiWai, Kapotai,NgāPuhi, Chair of theSkyCity Community Trusts Kate Cherrington Absent –Kate Cherrington Amanda Hema,ManaakiNepia andKawena Jones to right)–MichelleBaillie, Front (fromleft Lehi Duncan and AishaRoss to right)–KenWilliamson, Back (fromleft Trustees of theSkyCity Hamilton Trust Absent –Kate Cherrington, SueSucklingandRobHamilton to right) –PruEtcheverry,Front (fromleft Marama Royal, Veisinia Maka andRosieNathan to right) –DonaldMann,TeBack (fromleft ArepaMorehuandWiPereMita Trustees of theSkyCity Auckland Community Trust Community Trustees Meet ourSkyCity Absent –Kate Cherrington andVickieHill Conroy andHettyVan Hale to right)–DarrenRewi,Front (fromleft Joanne to right)–JonoBrowneBack (fromleft andBillMoran Community Trusts Community andSkyCity WharfCasino Trustees of theSkyCity Queenstown Casino Our Communities 99
SUSTAINABILITY Our Suppliers
We can leverage our relationships with other organisations to promote positive outcomes in areas of impact such as anti-corruption, responsible political advocacy, fair competition and promoting social and environmental responsibility in our supply chain.
Priority Issues FY20 Performance Highlights • Ethical supply chain • Agreed and commenced delivery of a 24-month Ethical and Responsible Sourcing Strategy Roadmap • Low carbon supply chain • Presented SkyCity’s ethical sourcing strategy to the • Buy local and seasonal New Zealand Climate Leaders Collation in October 2019 • Connect to the circular economy • Finalist in the 2020 New Zealand CFO Awards for ‘Finance Sourcing • Progress initiatives to eliminate Team Contribution to ESG Initiatives’ modern slavery • Announced our commitment to only use cage free eggs across our New Zealand sites by September 2020 (delayed due to Key Stakeholders COVID-19) responsibly • Suppliers (existing and potential) • Focused on utilising local suppliers for the SkyCity Adelaide expansion project • EcoVadis • Developed a Modern Slavery Statement Source ethically and locally. • Implemented technology to enable greater analysis of procurement spend
FY20 Key Challenges • The scope and geographic spread of our supply chain, and also the wide variety of suppliers we engage with, creates challenges for embedding our Ethical Sourcing Code and ensuring our suppliers are doing more than acknowledging their commitments
• Delays to the EcoVadis assessment/audit for suppliers due to the impacts of COVID-19
FY21 Focus Areas • Focus on maximising our systems to track progress on increasing our local supply chain and obtaining a clearer picture of our suppliers’ supply chains
• Exclusive use of cage free eggs across all New Zealand sites
101 SUSTAINABILITY 800 key suppliers across the SkyCity Group
Over $530 million spent on goods and services (including capital expenditure)
SkyCity has approximately 800 key ongoing SkyCity engages local contractors wherever possible Ethical and Responsible Sourcing Strategy located within an ambition level which represents significant suppliers across the SkyCity Group, with a for its construction projects who, in turn, procure the level of positive impact that SkyCity seeks to In November 2018, SkyCity engaged sustainability substantial number of these being in the food and local products, materials and subcontractors achieve. consulting firm, Proxima, to help formulate a beverage sector. As a major purchaser of goods where feasible. Group-wide strategy. Their brief was to assist In ‘Basics’ focus areas, SkyCity aims to establish a and services (we spent over $530 million with a Many of the gaming products and equipment SkyCity, using their specialist knowledge of combination of minimum standards for the supply vast array of suppliers of goods and services in the required by SkyCity for its casino operations sustainable sourcing practices and understanding chain and pilot initiatives to gain knowledge. In financial year ended 30 June 2020), SkyCity has a are not able to be manufactured or sourced of global best practice, to establish a roadmap ‘Good Practice’ focus areas, SkyCity aims to focus on significant opportunity to use its purchasing power locally. In sourcing these items internationally, to improve the sustainability performance of all specific product and service categories where these to drive sustainability. SkyCity's focus is on procuring such items from SkyCity’s procurement activities (focusing initially on focus areas are most significant. Finally, ‘Signatory Our approach is to focus on the areas in which ethical suppliers. food and beverage), identify priority procurement Level’ focus areas are where SkyCity intends to we can have the biggest impact in terms of challenges to focus on in the short term and define implement initiatives broadly across the SkyCity minimising our carbon footprint and with respect Ethical and Sustainable strategic goals and associated metrics. Group, thereby helping to positively influence its to key vendors at high ongoing expenditure levels. entire supply chain. Following consultation with key internal These areas include food, beverage, property and Sourcing Practices stakeholders, a new ethical and responsible Whilst we have made good progress in both our marketing portfolios in particular. Ethical Sourcing Code sourcing strategy was adopted in February 2019. ethical sourcing objectives and local sourcing over Approximately $150 million of the total spend In 2016, we adopted an Ethical Sourcing Code This strategy seeks to minimise negative impacts the past financial year, we recognise that more (of over $530 million) relates to operational goods to improve our indirect impact on society and linked to our operational footprint and to make a focus and attention is required to achieve our and services – a breakdown of which is shown in the the environment by carefully selecting and positive contribution to the business, people and objectives. To this end, during the past financial graph below: working with our suppliers to ensure sustainable communities that make up our supply chain. As a year, we developed and embedded into the procurement. The Code outlines our alignment significant player in Australasia’s hospitality industry, business a 24-month Ethical and Responsible with the ten principles of the United Nations Global SkyCity has an opportunity to promote responsible Sourcing Strategy Roadmap. Pleasingly, SkyCity Compact, which are derived from the Universal sourcing practices. has set a target date of September 2020 for the Spend by Declaration of Human Rights, the International exclusive use of cage free eggs across all SkyCity’s SkyCity’s ethical sourcing strategy focus areas are Cost Area Labour Organization’s Declaration on Fundamental New Zealand sites. While this project was delayed outlined in the diagram below. Principles and Rights at Work, the Rio Declaration by several months due to the COVID-19 pandemic, on Environment and Development, and the United The focus areas represent the impact and activity we are committed to this important step. Nations Convention against Corruption. areas that SkyCity believes to be the most relevant We are committed to increasing the clarity around to the business and supply chain. Each focus area is our goals, priorities and metrics for this pillar. Whilst it is not a compliance measure in itself, SkyCity requests its suppliers to acknowledge our commitment to the principles of the Ethical Signatory Level Shift to Sourcing Code. Through distribution of our Ethical low carbon Leading the industry and Food, Beverage & Retail 33% Sourcing Code, we aim to encourage our suppliers shaping the supply chain Buy local to improve their practices and to assist them in and seasonal Marketing 12% doing so, hence improving the quality of life of the Repairs & Maintenance 5% people we touch indirectly and contributing to the Good Practice Connect to the circular economy Utilities, Rates & Rent 13% protection of the environment. Meeting customer expectations Serve meals from a sustainable Operating Consumables 6% beyond legal compliance supply chain In the last financial year, we have worked to embed Travel & Entertainment 4% the Ethical Sourcing Code into our stakeholder Professional Fees & Insurance 9% relationships as one of the key tools to drive Basics Support supplier delivery and working conditions ICT 9% change. In addition, we have strengthened our Compliance with minimum Source animal products responsibly understanding of the role SkyCity can play in standards and build knowledge Other Expenses 9% Processes and tools progressing initiatives to eliminate modern slavery and developed a new Modern Slavery Statement.
102 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Suppliers 103 104 towards modernslavery SkyCity haszero tolerance slavery islow. However, we stillrecognise that we believe thatourexposure to therisks of modern Australia withlimited supplychainsand,assuch, SkyCity operates primarilyinNew Zealandand business orsupplychains. modern slavery isnottakingplace anywhere inour effective systems andcontrols to seekto ensurethat We arecommitted to implementing andenforcing SkyCity haszero tolerance towards modernslavery. Our Policy forcedservitude, marriageandforced labour. its forms, includingtrafficking inpersons,slavery, and itsintention to eliminate modernslavery inall SkyCity supportive isfully of theModernSlavery Act Our Position marriage andforced labour. forcedas trafficking inpersons,slavery, servitude, them of theirfreedom,andincludespractices such used to exploit victimsandundermineordeprive situations wherecoercion, threatsordeception are The term modernslavery isusedto describe than A$100million. having anannualconsolidated revenue of more being anentitybased,oroperating, inAustralia applies to SkyCity Entertainment GroupLimited, entity owns orcontrols. The ModernSlavery Act reporting entity,andany entitiesthatthereporting practices intheoperations andsupplychainsof the entities to disclosetherisks of modernslavery in Australia 2019andrequiresreporting on1January The came ModernSlavery Act into force 2018(Cth) Modern Slavery Act SkyCity Entertainment Group AnnualReportYear Ended30June2020 managing theserisks over time. with suchsuppliersaview to improving and modern slavery risks) andcan beginadialogue provision of (includingpotential goodsandservices criticalSkyCity isableto risks identify inasupplier’s By having itssupplierscomplete anassessment, be implemented for ourAdelaide property. governance criteria. FromFY21,theseprocesses will setof environmental, socialand industry-tailored improve. These ratings aremeasuredagainstan supply chainandareaswherethey may needto where they areachieving goodpractice intheir receive arating scorecard thatshows areas Once asuppliercompletes anassessment,they actions andpoliciesacrossspecificcriterion. chain andproviding evidence to supporttheir online questionnaireinrelationto theirsupply assessment involves thesupplierfillingoutan Assessment duringthereportingperiod.An undertaken) aSustainable SupplyChain New Zealandallundertook (orhadpreviously SkyCity’s existing significant suppliersin to mitigate therisks of modernslavery. in turn,enablesSkyCity to take significant measures in conducting supplychainduediligence which, policies, practices andprocedures inplace to assist becoming anapproved supplier.SkyCity hasseveral are asked abouttheirsupplypractices priorto ethical procurementpractices. Allnew suppliers will alignwithSkyCity’s highexpectations around potential supplier'ssupplychainto ensurethatit SkyCity always aimsto obtainaclearpictureof a have taken to minimisethisrisk. modern slavery statement setsoutthesteps we there isscope for modernslavery to occur andour EcoVadis assessment/audit process in New Zealandiscaptured by the food andbeverage procurementspend 76% ($21million)of SkyCity’s annual 2019 financialyear. the EcoVadis process –anincreasefrom70%inthe New Zealand,76%($21million)iscaptured under annual food andbeverage procurementspendin EcoVadis assessment/audit process. OfSkyCity’s annual procurementspendhadcompleted the suppliers representingover $46millionof ourtotal As at30June2020,79New Zealand-based improve theperformance of existing suppliers. actively usetheinformation collected to date to due to theimpactsof COVID-19, butcontinue to paused theEcoVadis assessment/audit for suppliers Unfortunately, duringthelastfinancialyear, we new suppliersduringthe2019financialyear. for SkyCity’s significant existing suppliersand EcoVadis assessment/audit was mademandatory chain andexecute itsstrategy for thispillar,the itsimpactonthesupply ability to quantify as supplierparticipationiscentral to SkyCity’s process was initiallyencouraged –however, Participation intheEcoVadis assessment/audit they may needto improve. they areachieving goodpractice andareaswhere receives arating scorecard thatshows areaswhere Each supplierwhocompletes theassessmentthen questionnaire andprovide supportingevidence. and oursupplierswere invited to complete a set of environmental, socialandgovernance criteria and rate oursuppliersagainstanindustry-tailored we engagedanexternal provider, EcoVadis, to audit our key suppliersinNew Zealand.Aspartof this, supply chainassessmentpilotinitiative with129of In September 2017,we commenced asustainable Sustainable SupplyChain and Traceability Supply ChainTransparency wherever possible. owned andoperated businessesasapreference made andsuppliedproductsfromAustralasian Procurement Policy-to source andprocurelocally support theintention outlinedinSkyCity’s Group procurement practicesmodify whererequiredto location of thesupplier.This enablesSkyCity to now categorises items inmoredetail,including upgrade implemented inApril 2019,SkyCity As partof amajorinformation technology Local Suppliers sustainability assessmentsandaudits. do thatinto isto thefuture undertake supplier the Ethical SourcingCode. Akey way thatwe will deepen ourengagementwithsupplierson more closely,we willhave theopportunityto sustainability issues.Aswe managetheseissues but have notengagedwiththembefore on have hadlong-standingagreementswithsuppliers, and governance approaches.Inothercases, we information abouttheirpoliciesandsustainability and they have few resources to provide detailed some cases, smalloperators oursuppliersarevery family businessesto globalmultinationals.In diverse,are very ranging fromsmalllocalised acknowledging theircommitments. Oursuppliers ensuring oursuppliersaredoingmorethan for embeddingtheEthical SourcingCode and suppliers we engage with,creates challenges our supplychain,andalsothewidevariety of However, thescope andgeographic spreadof becoming anapproved supplierof thecompany. are asked abouttheirsupplypractices priorto with ourEthical SourcingCode andnew suppliers of oursuppliers’supplychainsto ensurethey align We continue to focus onobtainingaclearerpicture Our Suppliers 105
SUSTAINABILITY 106 feature anew Pirate Life 500-litremicrobrewery area onLevel 1intheexisting heritagebuilding)will The DistrictatSkyCity (a new live entertainment In partnershipwithlocal craft brewery Pirate Life, to ensurethestyleisconsistent acrosstheprecinct. the new development andcurrentheritagebuilding venue. Uniforms willbeupdated for across allstaff fromeachSkyCitypersonality andsenseof fun best of SouthAustralia, blendedwiththeglamour, created morethan90uniquelooks inspiredby the uniforms for SkyCity Adelaide’s venues andhas Emanuele was commissioned to designnew Iconic SouthAustralian FashionDesignerLiza on locally sourced productsandlocal suppliers. provided anopportunityto demonstrate ourfocus The SkyCity Adelaide expansion projecthas Adelaide ExpansionProject where practical. products arebeingsourced to ensurealocal focus to gainmoreunderstandingasto whereour to work withourfood andbeverage suppliers capital construction projects.We willbecontinuing to over 23%of ourspendwhenexcluding major across New Zealand andAdelaide. This equates spent over $35milliononfood andbeverage items In thefinancialyear ended30June2020,SkyCity close to ourbusinesses. produce frombusinessesthataregeographically focussecondary isprocuringlocal productsand where, insomeinstances, goodsareimported. Our operates, thussupportinglocal economies even operating inthesamecountries inwhichSkyCity focus isprocuringfrombusinesses Our primary business requirements. choosing thebestmixof suppliersto meetits consolidation andethical sourcingwithSkyCity of new suppliersandhasanemphasisonsupplier The policydrives greater rigourintheonboarding SkyCity Entertainment Group AnnualReportYear Ended30June2020 New ZealandandAdelaide inFY20 spent onfood andbeverage items across $ Over 35 million luxury hotel. Inalignmentwithoursustainability luxury possible for Eosby SkyCity, thenew 120-room Local productshave beenselected wherever Guardsman’s take ontheFruChoc. food icons, includingthe‘Berliner’andThe oysters. Dessertsareinspiredby SouthAustralian prawns, PeninsulakingfishandCoffin Eyre Bay including FleurieuPeninsulasquid,Spencer Gulf including someof SouthAustralia’s finestseafood, suppliers andproduce, withsignature dishes The menuusesalmostentirelySouth Australian andAdelaide 23rd StreetDistillery HillsDistillery. entirely local winelistandlocal spiritsinclude world-renowned wineregionsfeature inthealmost Life, Prancing Pony andMismatch. SouthAustralia’s beers available ontap,includingCoopers, Pirate beers, withmorethan20local SouthAustralian features anexclusive offering of SouthAustralian well-known food andbeverage producers and open kitchen showcase someof SouthAustralia’s of Uppercase Studio.The grand central barand and signagedeveloped by Adelaide’s Tristan Kerr The Guardsman’sdesign,withthe typography and interior designersStudioGram spearheaded front. Award-winning SouthAustralian architects a grand central bar,openkitchen andacoffee to theRailway Station’srichheritage,featuring Station building.The new venue pays homage Dining HallintheSkyCity Adelaide Railway 2020intheformer Overlandopened inJanuary Following aA$6millionrestoration, The Guardsman in 2019. before expanding into abrewhouse inPortAdelaide Life joiningtheCUBfamily inNovember 2017, the attention of leadingbrewers CUB,withPirate The immediate success of thebusinessattracted Cameron, JackCameronandJaredProudfoot. Life was founded inAdelaide in2014by Michael microbreweryfunctional withinacasino. Pirate when itopenslater thisyear –Australia’s firstfully beverages includeproductsfromSouthAustralian natural Australian beautybrand. Minibarsnacks and will includeGrown Alchemistproducts,ahigh-end mobile phones.In-roomamenitiesatEosby SkyCity technology indevelopment for useonguests’ room keys to operate inparallel to thekeyless entry to introduce asustainablereplacement to plastic for items suchasin-roomslippers.We alsointend substituted withrecycled cardboard packaging commitments, allsingleuseplastichasbeen with SkyCity Adelaide General ManagerDavid Christian. Pirate Life’s JackCameron, MichaelCameron andJaredProudfoot Australian madeiKOU organicskincare products. Fotopoulos. The Eosby SkyCity spawillalsofeature Alice Blanch,MarkTipple,Peter Syndicas and Danny photography andsculptures,including works by feature anarray of local SouthAustralian artwork, and driedfruits.Hotel suites andpublicareaswill along withlocally grown orsourced almonds based Steven ter Horstand 23rdStreetDistillery Our Suppliers 107
SUSTAINABILITY 108 SkyCity contributes $1towards FortheLove of Bees, 'For theLove of Bees'dessert.Foreachdessertsold, uses thehoney fromthishive to create aspecial SkyCity Auckland's Orbit360°Diningrestaurant at Victoria Park,aninner-cityAuckland park. Love of Bees,sponsoringoneof thebeehives In Auckland, SkyCity haspartneredwithForthe Sourcing Locally " SkyCity Entertainment Group AnnualReportYear Ended30June2020 in thecity." -FortheLove of Bees for pollinator andecosystem health desserts asanawareness-raising tool Victoria Park,turningourhoney into SkyCity whosponsorourbeehives in We're soproudto bechampionedby which isusedto support thehives, beekeepers andtheflowers needed to supportthehives. For each'FortheLove of Bees'dessertsold,SkyCity contributes $1towards FortheLove of Bees, a collection of livingbeehives atVictoria Park. education, events andactivations –allbasedaround Auckland theworld's mostbee-friendlycitythrough collaborative citycentre projectseekingto make For theLove of Beesisacharitabletrustand the flowers neededto supportthehives. which isusedto supportthehives, beekeepers and Adelaide, SouthAustralia Auckland, New Zealand Here's aglimpseof thelocal produce SkyCity sourced andutilisedinFY20. sourcing throughthemwhenever possible. breakfast offering throughto largecorporate events andweddings. We supportourlocal businessesby We operate significant food andbeverage operations acrosstheSkyCity Group–fromcatering asimple Using Local Ingredients litres of tapbeer 86,500 litres of milk 5,786 of beef 122,473kg litres of milkandcream 193,610 whole eggs 745,140 of flour 42,200kg of beef 5,586kg oysters (6,498dozen) 77,976 of local butter 19,684kg Our Suppliers 109
SUSTAINABILITY Our Environment
We are dedicated to growing in a sustainable manner with a commitment to environmental sustainability as a foundation for successful economic, social and cultural development.
Priority Issues FY20 Performance Highlights • Climate change/emissions • Establishment of an employee-led Green Fund Committee, reduction which oversaw the selection of emissions reduction projects to be funded by the SkyCity Green Fund • Reducing waste • 138,000 single use plastic bottles removed from The Grand by • Reducing water use SkyCity and SkyCity Hotel in New Zealand, and replaced with • Employee activation glass alternatives
• 400,000 plastic straws and 100,000 single use plastic bottles Key Stakeholders removed from our Adelaide site • Kaivolution • Since 2018, 1,000,000 plastic straws have been removed from our New Zealand sites (equivalent to a two-tonne carbon • Auckland City Mission reduction) • Toitū Envirocare • Sky Tower lighting upgraded to LED resulting in a 10% energy • Sustainable Business Network saving on lighting circuits
• Climate Leaders Coalition • Achieved a saving of 96 tonnes of carbon at the Auckland site with assistance from the B-Tune programme • Energy Efficiency and Conservation Authority FY20 Key Challenges • SUEZ-ResourceCo • Unable to source a suitable model to satisfactorily calculate the impacts of the fire at the New Zealand International Convention Centre construction site in October 2019, which Protect the resulted in a spike in measurable particulates in the air quality indices for the Auckland Central City while the fire was active
• Increasing recycling rates and diverting more waste from landfill environment • Introducing food waste composting across all SkyCity properties
FY21 Focus Areas Active commitment to reducing • Achieve carbon zero status for the SkyCity Group our environmental footprint. (by way of offset through Toitū Envirocare) • Deliver a zero waste technology solution for the SkyCity Auckland site
• Continue our focus on reducing water use across our New Zealand sites
111 112 38% since 2016 waste sentto landfill by We have reduced our waste to becommercially composted -bringing our kitchen teams, SkyCity sent292tonnes of food During thepastfinancialyear, throughtheefforts of New Zealandsoilsto aidthehorticultureindustry. commercially composted offsite to beusedon SkyCity Auckland kitchens iscollected and Food thatcannot bedonated fromthe Composting food fromitsAuckland property. and theAuckland CityMissionwithdonationsof community agencies, groupsandsocialservice that redistributes excess food, freeof charge,to anationalfoodKiwiHarvest, rescuecharity In Auckland, SkyCity alsocontinued to support the COVID-19 AlertLevel to Level 3andthenLevel 4. the New ZealandGovernment’s decisionto increase Hamilton propertywas closedasaconsequence of half of whichwas donated inMarch2020whenthe an increasefromtheprioryear andapproximately donated around2,300kgs of food to Kaivolution – financial year, the SkyCity Hamilton property community groupsandcharities.Duringthepast landfill andredistributes itasfree kai to registered (food) thatwould have goneto waste otherwise or Hamilton thatrescuesedibleanduseablekai Kaivolution, aGoEco Climate Action Projectin Since March2015,SkyCity haspartneredwith Food Donations COVID-19 pandemic). property closuresduringFY20(inresponseto the SkyCity Entertainment Group AnnualReportYear Ended30June2020 to Since 2016,SkyCity hasreduced itswaste sent Reducing Waste andstakeholderimpacts onstaff wellbeing. believe resultsinbusinesscontinuity andpositive continual economic andsocialprosperity,whichwe generations to benefit fromitsresources to ensure environment willallow currentandfuture Working withinthelimitsof thenatural
landfill
by
38%,
in partdueto themandated
which can process nearlyallwaste materials (with waste converter isazero waste to landfilloption busiest propertywithintheSkyCity Group.The converter for SkyCity Auckland, thelargestand consider andprogressthefeasibility for awaste Over thelast financialyear, we have continued to Eliminate Waste to Landfill these withmoresustainablealternatives. developing acollaborative planto reduce orreplace are usedby suppliersof goodsto SkyCity, and all non-customer facingquantifying plastics,which SkyCity Auckland shop.The gift thirdstageinvolves of aplanto remove plasticpackaging from the and Styrofoam cups.Stagetwo isthedevelopment facing singleuseplastics,suchaswater bottles Stage oneinvolves theremoval of allcustomer of resource usethroughreduction andrecycling. waste sentto landfillandimprove theefficiency the SkyCity ZeroWaste Strategy areto eliminate will beprogressively implemented. The goalsof use plasticreductionstrategy was developed and During thelastfinancialyear, athree-stagesingle material andcan bedisposedof infood waste bins. is madefromrapidly replenishingplant-based straws, plates, containers The and cutlery. packaging packaging, suchastakeaway coffee cupsandlids, commercially compostable food andbeverage continues to transition fromtraditional plasticto composting to reduce singleuseplastics.SkyCity allowed SkyCity to alsobenefit fromcommercial Implementing afood waste composting system has Plastics SkyCity Hamilton property. commercially composting food waste fromour We arecurrentlyinvestigating thepossibilityof composted eachyear since theprogramme began. has resulted inareductionof food waste being Pleasingly, SkyCity’s focus onreducingfood wastage the programme beganinApril2017to 1,106tonnes. the total amountcollected andcomposted since combat climate change. initiatives to reduce emissionsandtakingactionto our impacts.We arecommitted to progressing recognise therolethatwe needto play in reducing operations, amajoremitter of greenhousegases,we Although SkyCity isnot,throughitsusual day-to-day Climate ChangeandEmissions carbon emissionsby 30%. annum into 180,000tonnes of PEF,andreducing convert upto 350,000tonnes of raw material per by 30%.SUEZ-ResourceCo hasthecapacity to to power cement kilns,reducingcarbon emissions instead of usingtraditional fossil PEFisused fuels. sourceused asafuel by Adelaide Brighton Cement Processed EngineeredFuel(PEF)whichisthen commercial, industrialandconstruction waste into The SUEZ-ResourceCo facility processes (a jointventure between SUEZandResourceCo). waste beingdiverted to SUEZ-ResourceCo general solutions withtheremainingdry recycling andcommercial food composting achieving zero waste to landfill.SUEZoffers supplier, SUEZ,to assistSkyCity Adelaide in In Adelaide, SkyCity hasengagednew service landfill status. casino intheworld to achieve azero waste to If achievable, SkyCity Auckland would bethefirst end productwillberecycled inNew Zealand. disposing waste to landfillandto ensurethatthe zero waste to landfill,reduce associated costs of The key objectives of theconverter areto achieve source orabuildingmaterial (similarto MDF). value thatissuitableto bemadeinto anenergy residual productfromtheconverter hascalorific avenues aswould glassandHDPEplastics.The would continue to berecycled throughexisting SkyCity receives arebate from(suchascardboard), although materials thatcan becomposted, orthat the exception of construction waste andbatteries) – • Over thelast financialyear: Achievements below 2°C. to helpkeep theriseinglobaltemperature to well business inOceania to setscience-based targets by theyear 2023.SkyCity was thefirsthospitality science-based scope oneandscope two targets andcapitalgoods andservices goods,willset of SkyCity’s suppliers,by spendcovering purchased by 2050(froma2014-2015baseyear) andthat67% emissionsby 38%by 2030andbyGas (GHG) 73% absolute scope oneandscope two GreenHouse As partof this,SkyCity hascommitted to reduce keep globaltemperature increasewell below 2°C. line withthelevel of decarbonisation requiredto base year. Targetsarescience-based whenin science-based reductiontargetsfromourFY15 Institute andtheWorld Wildlife Fund,to set Nations GlobalCompact, theWorld Resources (formerly CarbonDisclosureProject),theUnited Targets (SBT)initiative, apartnershipbetween CDP SkyCity hassubmitted to theScience Based body inNew Zealand. a Government-owned environmental certifications Scheme programme operated by Toitū Envirocare, Certified EmissionsMeasurementandReduction carbon footprint for FY15–FY20throughthe we have measured,audited andverified SkyCity’s As partof SkyCity’s commitment to climate action, solutions products,providers andservices; connecting organisationswithlow emissions in July2019,aone-day event dedicated to Business Network’s EMBARKconference SkyCity Auckland hosted theSustainable Our Environment 113
SUSTAINABILITY We were among the first major
New Zealand companies to go SUSTAINABILITY carbon neutral
• we placed copies of Paul Hawken’s renowned cumulatively generated significant reductions New Zealand sites become carbon neutral by and was certified carbonzero by Toitū Envirocare climate change book ‘Drawdown - The Most in SkyCity Auckland’s use of utilities reducing 30 September 2019, with SkyCity’s Adelaide site in New Zealand in October 2019. SkyCity paid Comprehensive Plan Ever Proposed to Reverse our overall carbon emissions and spend on achieving carbon neutrality by 30 September 2020. $86,000 to offset the equivalent of 12,866 tonnes Global Warming’ in all SkyCity hotel rooms electricity, gas and water. As part of this strategy, a SkyCity Green Fund was of carbon (measured in FY19). The carbon credits to raise awareness among customers of the established – funded by an internal carbon levy purchased through Toitū Envirocare are generated importance of climate change and the things Fire at the New Zealand International paid by each of SkyCity’s Auckland, Hamilton, by international projects, which will fund 48,000 people can do to reverse it. Paul Hawken is Convention Centre Queenstown and Adelaide sites relative to each solar household cookers for rural communities in an American environmentalist, entrepreneur, SkyCity acknowledges the impacts of the site’s emissions. The levy is an internal charge of $25 China and help build wind farm capacity in India to author and activist who has dedicated his life October 2019 fire at the under construction per tonne of carbon, in line with the New Zealand replace fossil fuel alternatives. to environmental sustainability and changing Government’s price of carbon under the Emissions New Zealand International Convention Centre on The New Zealand International Convention Centre, the relationship between business and the Trading Scheme. Funds from the levy are used the local environment. currently under development in Auckland, will environment, and the founder of Project to offset SkyCity’s carbon footprint to net zero by operate as a carbon neutral venue following Drawdown, a non-profit dedicated to researching In the months following the fire, SkyCity investing in emission reduction projects selected completion of construction and is expected to be when and how global warming can be reversed; investigated methods to measure the carbon by Toitū Envirocare. The SkyCity Green Fund the only one of its kind in the Asia Pacific region. The emissions originating from the fire, however also accrues and invests in projects identified • all the external lights on the Sky Tower were New Zealand International Convention Centre has no suitable model was found to be available to and developed by SkyCity employees to reduce switched to low wattage LED, supporting also adopted a sustainability management plan and satisfactorily complete the calculation. SkyCity’s carbon emissions in accordance with its SkyCity’s climate change commitment to reduce will participate in globally recognised, independent science-based targets set in 2019. carbon emissions from the Sky Tower lighting While there was an increase in measurable verification programmes, including the Leadership by 10%. Following the upgrade, the number of particulates in the air quality indices for the SkyCity employees have the opportunity to measure in Energy and Environmental Design’s (LEED) external lights on the Sky Tower has doubled, Auckland Central City while the fire was active, and offset their own household carbon footprints, Green Building Rating System. The New Zealand with 60 LED lights at the top of the Sky Tower these levels returned to normal once the fire with SkyCity matching their offset dollar-for-dollar International Convention Centre aims to achieve and 96 LED lights at the base – truly lighting up was extinguished. by payment into the SkyCity Green Fund. a certified status following the assessment of the Auckland’s skyline; sustainable nature by which the centre has been Watercare pumped approximately 8 million litres Pleasingly, SkyCity was among the first major designed, built and delivered. • at our Auckland site, the contracted limousine of water from the basement of the building into New Zealand companies to go carbon neutral fleet of diesel vehicles was replaced with more wastewater drains for treatment at its Māngere fuel-efficient vehicles, reducing running costs Wastewater Treatment Plant to reduce the by 35% and reducing emissions by 25% over the amount of water (used to fight the fire) from previous petrol solution; going into stormwater drains and directly into the Auckland Harbour. Auckland Council ecotoxicology • SkyCity joined the Energy Efficiency and testing 10 days after the fire showed no long Conservation Authority’s Gen Less programme, a term impacts for marine life and water quality in How does SkyCity become carbonzero? platform to inspire New Zealand businesses and Auckland City as a result of the water used to fight consumers to live a climate-friendly lifestyle. The the fire travelling through stormwater drains to Energy Efficiency and Conservation Authority is the Auckland Harbour. While there were concerns We work a New Zealand Government agency that works We work out Our emissions around contaminants in sediments in the Auckland with Toitū to improve the energy efficiency of New Zealand where our have been Harbour, SkyCity understands that the bulk of these Envirocare homes and businesses and encourage the emissions offset and sediments either have been, or will be, dredged and to confirm our uptake of renewable energy; and come from certified safely disposed of in connection with works being footprint • a number of initiatives led by the Property undertaken for the America’s Cup. Services team at our Auckland site, including Climate Change Strategy continuous commissioning and finetuning of the Building Management System (BMS) and In February 2019, SkyCity announced a climate the B-Tune programme (building tune), have change strategy that would see SkyCity’s
114 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Environment 115 116 to preparefor, andadaptto, theeffects of climate above pre-industriallevels andallow New Zealand the globalaverage temperature increase to 1.5°C the globaleffort undertheParisAgreement to limit stable climate changepoliciesthatcontribute to New Zealandcan develop andimplementclear (New Zealand)andprovides aframework by which amends theClimate ChangeResponseAct 2002 was passedandcame into force. The Act (Zero Carbon)AmendmentAct 2019(New Zealand) In November 2019,theClimate ChangeResponse management to execute thestrategy. is responsiblefor working withwideroperational A management-ledClimate Change Committee by theBoard’sSustainabilityCommittee. SkyCity’s climate change strategy isoverseen Climate ChangeGovernance andRisks reduction inwater use hasbeenachieved. As aconsequence of thesemeasures,agood • • • • • implemented atourAuckland site, including: 25 years), initiatives to reduce water usehave been Auckland Citysince May 2020(for thefirsttimein water resulted inmandatory userestrictionsin in theAuckland regionthisyear, whichhas In responseto thesevere droughtbeingexperienced Reduction inWater Use Envirocare inSeptember 2020. byoffset purchasingcarbon creditsthroughToitū ended 30June2020(5,518tonnes of carbon) are sites, whentheemissionsgenerated duringtheyear carbon neutral, alongsideSkyCity’s New Zealand As planned,theAdelaide site willalsobecome SkyCity Entertainment Group AnnualReportYear Ended30June2020 restrictions oncooling tower usage. restrictions; and andhotelmaking staff guestsaware of thewater taps inthekitchens; using dishwashers andturningoff onlywhenfull reusing water for otheroutdoor cleaningtasks; water rather than hoses; washing buildingsandwindows usingbuckets of
climate change. direction beingtaken by businessesontheissueof and demonstrates thesignificant leadership that businesscan play inbringingaboutchange The Climate Leaders Coalition recognises therole • • • • • committed to: statement, eachof thebusinessleadershave in theirdrive for positive change.Bysigningthe companies to actionandisthe group’sfirststep Climate ChangeStatement, whichcommits their Climate LeadersCoalition have signedajoint business andtheeconomy. Membersof the so, create apositive for future New Zealanders, transition to alow emissionseconomy and,indoing emissions. The group’sgoalisto helpNew Zealand contribute to nearlyhalfof New Zealand’s businesses fromdifferent industrieswhich Coalition, agrouprepresentingvariety of toSkyCity theClimate Leaders isalsoasignatory planning to thenext stage. SkyCity to take itsclimate changestrategy and These documentswillbeacritical resource for • • • 2021 to develop andimplement: change. The Act provides for atransitional periodto in law. commission andcarbon budgetsenshrined supporting theintroductionof aclimate New Zealand’scommitment to it;and supporting theParisAgreement and greenhouse gasemissions; working withtheirsuppliersto reduce their consistent withkeeping within2°Cof warming; setting apublicemissionsreductiontarget publicly reportingonthem; measuring theirgreenhousegasemissionsand mitigation. policies for climate changeadaptationand 2021–2025; and a provisional nationalemissionsbudgetfor Assessment for New Zealand; the firstNationalClimate ChangeRisk SkyCity Climate Related Risks Physical risks Nature of Risk opportunities Economic risks and Policy andlegalrisks and opportunities reputational risks Market and Rise insealevels surge, tornado events, includingcyclone, sea Increase inviolentweather Rise inglobaltemperatures Description andImpact • • • • • • • • • • • opportunities SkyCity will beconsidering carbon investment infuture and divestment technology) costs electricvehicles (greenstandards,energyefficiency, andothergreen Change ininfrastructure fixtures,andequipment(FFE) andfurniture, alternative greenconsumables Prohibition of non-greenconsumables, whichmay cost moreorlessthan insurance gas, transportation, taxes, waste disposal,certain and goodsandservices, scheme and/orvalue water, chainrisk), includingfuel, waste water, electricity, General increaseincost of doingbusiness(throughanemissionstrading and remedialwork to maintainbuildingwarrant of fitness) Change inpolicyandregulations(new buildingconstruction, buildingfitouts demonstrating andactioningnew requirements Increase incompliance andreportingcosts associated withmeasuring, for its“green”status Potential for New Zealandto become amoreattractive tourism destination increases theopportunityfor anindoor “proxy” experience Increased challengeswithtourism aroundNew Zealand(erratic weather) SkyCity’s shareprice Increasing longterm focus by investors whichcould ingreenfunds, impact Potential for banks to increasecost for of funds non-greenentities green economy andthestigmaof notparticipating inconsumerShift preferences, increasingsocietalpressureto participate in Salt intrusioninsoilsimpactingsupplychain infrastructure to bemoreresilient visitation/ tourism andtheneedfor new increased reliance ongenerators, reduced undrinkable water, gasleaks, power outages, Damage to property,businessinterruption, a reduced skiseasoninQueenstown generators, increasedfireriskinAdelaide and power outages,increasedreliance on Increased loadonairconditioning, increased Our Environment 117
SUSTAINABILITY 118 SkyCity Entertainment Group AnnualReportYear Ended30June2020 FY20 Carbon FootprintInventory Other Waste 4% Flights 10% Gas Electricity 53% 9% 24% FY20 (FY19 –6%) (FY19 –2%) (FY19 –54%) (FY19 –23%) (FY19 –15%) (Tonnes CO2e) Total Emissions(Scope 1,2and3) international borderrestrictions. economy classflightsanddueto COVID-19 related better utilisationof Skype for Businessand Group, whichSkyCity reduced inFY20through FY19 was dueto increased airtravel acrossthe The increaseinabsolute carbon fromFY18to (in responseto theCOVID-19 pandemic). property closuresandtravel restrictionsduringFY20 waste reducingby 56%,inpartdueto themandated reducing by 24.6%since FY16andemissionsfrom footprint –withScope 1and2emissionscombined SkyCity hascontinued efforts to reduce itscarbon environmental performance datafor FY16–FY20. The following tablessummariseSkyCity's key FY16–FY20 Performance 20 000 000 000 000 000 000 2 000 000 20,650 Y 19,272 Y 18,811 Y 19,093 Y 15,137 Y20 • • • Scope 3emissions(unlessdeemeddeminimis),where: Reduction Scheme)operated by Toitū Envirocare, SkyCity mustreportallScope 1,Scope 2and Through theToitū carbonreduce certification (formerly the Certified EmissionsMeasurementand Scope Definitions Scope 3Emissions(Tonnes CO2e) Scope 1and2Emissions(Tonnes CO2e) 0 000 000 3 000 2 000 2 00 00 2 00 000 000 00 2 00 00 00 waste sentto landfillandfreight/couriers (for items exceeding 2kg). resulting fromSkyCity's activities–for example, travel (including shortandlonghaulairtravel), Scope 3emissionsare indirectemissionsfromsources notowned orcontrolled by SkyCity but Scope 2emissionsareindirectfromelectricity purchasedby SkyCity; and fleet, andrefrigerant andairconditioning systems; example, gas (LPGandnatural), combustion fuel fromcompany vehicles, rentalcars andleased Scope 1emissionsaredirectfromsources owned orcontrolled by SkyCity –for 0 0 0 4,908 1,481 12,105 Y Y 2,044 17,013 4,615 1,410 Scope 1 11,075 Y Y 2,060 15,691 Waste 4,641 1,299 Scope 2 10,629 Y Y 2,137 15,270 Flights 4,762 Scope 1&2 1,132 10,270 Y Y 2,747 15,032 4,737 653 Y20 8,086 Y20 1,520 Our Environment 12,823 119
SUSTAINABILITY
Independent Limited Assurance Statement to the Management and Directors of SkyCity Entertainment Group Limited
Our Conclusion Ernst & Young (‘EY’, ‘we’) was engaged by SkyCity Entertainment Group Limited (“SkyCity”) to undertake limited assurance as defined by the International Standards on Assurance Engagements, over disclosures associated with selected sustainability performance data (‘sustainability performance data’) using criteria applied by SkyCity (‘criteria’) included in SkyCity’s Annual Report for the year ended 30 June 2020. Based on our procedures, nothing came to our attention that caused us to believe that the agreed sustainability performance data detailed in the table below has not been prepared and presented fairly, in all material respects, in accordance with the criteria defined below.
at ur re ie c ered We reviewed the sustainability performance data in SkyCity’s Annual report disclosures included in its Annual Report for the year ended 30 June 2020 as detailed in the table below. Report Subject matter page Customer exclusions issued at SkyCity casinos in FY20 76 Gender pay gap (%) for Australia and New Zealand staff 87 Workforce diversity statistics 91 Total Recordable In ury Fre uency Rate (TRIFR) % change FY19-20 82 % change in number of hazard identification reports FY19-20 82
Contributions by SkyCity casinos to the SkyCity Community Trusts 97
NZ food and beverage spend from Ecovadis programme suppliers 105 Total procurement spend on food and beverage from Australia and New Zealand-based suppliers and % of total FY20 spend 106 excluding construction % reduction in waste to landfill volume (tonnes) FY16-Fy20 112
riteria a ied it The criteria for our assurance engagement included the Global Reporting Initiative (GRI) Standards and SkyCity’s own published criteria, as detailed within the SkyCity Annual Report for the year ended 30 June 2020 available at: https://www.skycityentertainmentgroup.com. e res nsi i ities EY’s responsibility and independence ur responsibility was to express a limited assurance conclusion on SkyCity’s selected sustainability performance data metrics based on our procedures. We have complied with the relevant ethical re uirements relating to assurance engagements, which include Independent Limited independence and other re uirements founded on fundamental principles of integrity, ob ectivity, professional competence and due care, confidentiality and professional behaviour. In accordance with the rofessional and Ethical Standard 3 (Amended), Ernst & Young Limited maintains a Assurance Statement comprehensive system of uality control including documented policies and procedures regarding compliance with ethical re uirements, professional standards and applicable legal and regulatory re uirements. SkyCity’s responsibility SkyCity’s management (“management”) was responsible for selecting the Criteria, and preparing and fairly presenting the sustainability performance data metrics in accordance with that Criteria. This responsibility includes establishing and maintaining internal controls, ade uate records and making estimates that are reasonable in the circumstances. Independent Limited Assurance Statement to the ur a r ac t c nductin t e en a ement Management and Directors of SkyCity Entertainment We conducted this engagement in accordance with the International Standard on Assurance Engagements ISAE (NZ) Group Limited 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial Information and the terms of reference for this engagement as agreed with SkyCity on 5 July 2020. ummar ► Undertak ing r cedures analytical er rmed review procedures to support the reasonableness of the data Our Conclusion A► limitedIdentifying assurance and testing engagement assumptions consists supporting of making the en uiries, calculations primarily of persons responsible for preparing the Ernst & Young (‘EY’, ‘we’) was engaged by SkyCity Entertainment Group Limited (“SkyCity”) to undertake limited sustainability► Testing, on p erformancea sample basis, data underlying and related source information, information and toapplying check theanalytical accuracy and of other the data review procedures. assurance as defined by the International Standards on Assurance Engagements, over disclosures associated with selected sustainability performance data (‘sustainability performance data’) using criteria applied by SkyCity ur► Performing procedures recalculations included, but wereof performance not limited data to: metrics to confirm quantities stated were replicable (‘criteria’) included in SkyCity’s Annual Report for the year ended 30 June 2020. Based on our procedures, nothing ► ReviewingConducting the interviews appropriateness with personnel of presentation to understand of disclosures the business. and reporting process came to our attention that caused us to believe that the agreed sustainability performance data detailed in the table We► Conductbelieve thating interviews the evidence with obtained key personnel is sufficient to understand and appropriate the process to provide for collecting, a basis for collating our limited, and reportingassurance the below has not been prepared and presented fairly, in all material respects, in accordance with the criteria defined sustainability performance data during the reporting period below. conclusions. ► Undertaking analytical review procedures to support the reasonableness of the data LimitedA member Assurancefirm of Ernst & Young Global Limited ► Identifying and testing assumptions supporting the calculations at ur re ie c ered Procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, ► Testing, on a sample basis, underlying source information to check the accuracy of the data We reviewed the sustainability performance data in SkyCity’s Annual report disclosures included in its Annual Report for a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement the year ended 30 June 2020 as detailed in the table below. is► substantiallyPerforming recalculationslower than the of assurance performance that datawould metrics have been to confirm obtained quantities had a reasonable stated were assurance replicable engagement been performed. Report ► Reviewing the appropriateness of presentation of disclosures. Subject matter page WeWhile believe we considered that the evidence the effectiveness obtained isof sufficientmanagement’s and appropriate internal controls to provide when a determiningbasis for our the limited nature assurance and extent of our Customer exclusions issued at SkyCity casinos in FY20 76 conclusions.procedures, our assurance engagement was not designed to provide assurance on internal controls. Our procedures did Gender pay gap (%) for Australia and New Zealand staff 87 Limitednot include Assurance testing controls or performing procedures relating to checking aggregation or calculation of data within IT Workforce diversity statistics 91 systems. Procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, Total Recordable In ury Fre uency Rate (TRIFR) % change FY19-20 82 a se reasonable ur Assurance assurance tatement engagement. Consequently, the level of assurance obtained in a limited assurance engagement % change in number of hazard identification reports FY19-20 82 is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been We disclaim any assumption of responsibility for any reliance on this assurance report to any persons other than performed. management and the Directors of SkyCity or for any purpose other than that for which it was prepared. Contributions by SkyCity casinos to the SkyCity Community Trusts 97 NZ food and beverage spend from Ecovadis programme suppliers 105 While we considered the effectiveness of management’s internal controls when determining the nature and extent of our procedures, our assurance engagement was not designed to provide assurance on internal controls. Our procedures did Total procurement spend on food and beverage from Australia and New Zealand-based suppliers and % of total FY20 spend 106 Ernst & Young Limited excluding construction not include testing controls or performing procedures relating to checking aggregation or calculation of data within IT systems. % reduction in waste to landfill volume (tonnes) FY16-Fy20 112 se ur Assurance tatement riteria a ied it We disclaim any assumption of responsibility for any reliance on this assurance report to any persons other than The criteria for our assurance engagement included the Global Reporting Initiative (GRI) Standards and SkyCity’s own management and the Directors of SkyCity or for any purpose other than that for which it was prepared. published criteria, as detailed within the SkyCity Annual Report for the year ended 30 June 2020 available at: Graeme Bennett https://www.skycityentertainmentgroup.com. Partner - Assurance e res nsi i ities Ernst & Young Limited 01 September 2020 EY’s responsibility and independence ur responsibility was to express a limited assurance conclusion on SkyCity’s selected sustainability performance data metrics based on our procedures. We have complied with the relevant ethical re uirements relating to assurance engagements, which include
independence and other re uirements founded on fundamental principles of integrity, ob ectivity, professional Graeme Bennett competence and due care, confidentiality and professional behaviour. Partner - Assurance In accordance with the rofessional and Ethical Standard 3 (Amended), Ernst & Young Limited maintains a comprehensive system of uality control including documented policies and procedures regarding compliance with 01 September 2020 ethical re uirements, professional standards and applicable legal and regulatory re uirements. SkyCity’s responsibility SkyCity’s management (“management”) was responsible for selecting the Criteria, and preparing and fairly presenting the sustainability performance data metrics in accordance with that Criteria. This responsibility includes establishing and maintaining internal controls, ade uate records and making estimates that are reasonable in the circumstances. ur a r ac t c nductin t e en a ement We conducted this engagement in accordance with the International Standard on Assurance Engagements ISAE (NZ) 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial Information and the terms of reference for this engagement as agreed with SkyCity on 5 July 2020. ummar r cedures er rmed A limited assurance engagement consists of making en uiries, primarily of persons responsible for preparing the sustainability performance data and related information, and applying analytical and other review procedures. ur procedures included, but were not limited to: 120 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 121 ► Conducting interviews with personnel to understand the business and reporting process ► Conducting interviews with key personnel to understand the process for collecting, collating, and reporting the sustainability performance data during the reporting period
A member firm of Ernst & Young Global Limited Corporate Governance Statement and Other Disclosures
SkyCity Entertainment Group Limited is committed the corporate governance principles set out in to maintaining the highest standards of corporate the NZX’s Corporate Governance Code, during the behaviour and responsibility and has adopted financial year ended 30 June 2020. In addition, governance policies and procedures reflecting this. as mentioned above, the cornerstone principles set out in SkyCity’s Board Charter (available in the In establishing its governance policies and Governance section of the company’s website at procedures, the SkyCity Board has adopted www.skycityentertainmentgroup.com) continue to eleven governance parameters as the cornerstone reflect the principles in the Corporate Governance principles of its corporate governance charter as set Principles and Recommendations (Fourth Edition) out in the company’s Board Charter (available in the of the ASX Corporate Governance Council. Governance section of the company’s website at www.skycityentertainmentgroup.com). 1. Roles and Responsibilities of As a New Zealand company listed on the New Zealand and Australian stock exchanges, the Board and Management these cornerstone principles, detailed below SkyCity’s procedures are designed to: and on the following pages, reflect the Listing Rules and Corporate Governance Code • enable the Board to provide strategic guidance of NZX Limited (NZX), the Listing Rules of for the company and effective oversight ASX Limited (ASX), the Corporate Governance of management; Principles and Recommendations (Fourth Edition) • clarify the respective roles and responsibilities of of the ASX Corporate Governance Council, and Board members and senior executives in order to the New Zealand Financial Markets Authority’s facilitate Board and management accountability Corporate Governance Principles and Guidelines. to both the company and its shareholders; and
SkyCity is listed as a ‘Foreign Exempt Listing’ on • ensure a balance of authority so that no single the ASX. The ASX Foreign Exempt Listing category individual has unfettered powers. is based on a principle of substituted compliance recognising that, for secondary listings, the primary The Board Charter details the Board’s role regulatory role and oversight rest with the home and responsibilities. The Board establishes the exchange and the supervisory regulator in that company’s objectives, the major strategies jurisdiction. As a company with ASX Foreign for achieving those objectives and the overall Committed to policy framework within which the business Exempt Listing status, SkyCity is not required to comply with ASX Listing Rule 4.10, which requires of the company is conducted, and monitors entities to include certain prescribed information in management’s performance with respect to their annual reports, or the Corporate Governance these matters. maintaining Principles and Recommendations (Fourth Edition) The Board is also responsible for ensuring that the of the ASX Corporate Governance Council. company’s assets are maintained under effective Notwithstanding, SkyCity has taken into account stewardship, that decision-making authorities ASX Listing Rule 4.10 when preparing this annual within the organisation are clearly defined, that report and considers its corporate governance the letter and intent of all applicable company and the highest practices and principles have substantially casino laws and regulations are complied with, reflected the recommendations set by the ASX and that the company is well managed for the standards Corporate Governance Council, in addition to all benefit of its shareholders and other stakeholders.
123 CORPORATE GOVERNANCE CORPORATE
Specific responsibilities of the Board include: The Chief Executive Officer also has the The areas of expertise and experience determined • occupational health and safety; responsibility to manage and oversee the interfaces • oversight of the company, including its control by the Board as being the key competencies between the company and the public and to act as • marketing; and accountability procedures and systems; required to meet these objectives were most the principal representative of the company. recently agreed by the Board in May 2018 • digital capability and exposure; • appointment, performance, and removal of the Each director and senior executive has a written and include: Chief Executive Officer; • sustainability; and agreement with the company setting out their • gaming industry experience and understanding; • confirmation of the appointment and removal terms of appointment and responsibilities. • millennial understanding. • understanding of Asia and Asian consumers; of the senior executive group (being the direct In June 2019, Board members completed a reports to the Chief Executive Officer); 2. Structure the Board to • local market knowledge of Auckland; self-assessment survey to identify the Board’s overall competency in relation to the above areas • setting the remuneration of the Chief Executive Add Value • local market knowledge of Adelaide; Officer and approval of the remuneration of the of expertise and experience. The results of the senior executive group; Board effectiveness requires the efficient discharge • government relations; survey are set out in the table below – where of the duties imposed on the directors by law and 1 indicates lower competency and 5 indicates • public relations and communications; • approval of the corporate strategy and the addition of value to the company. higher competency. Details of individual expertise objectives and oversight of the adequacy of the • investment banking; and experience of the directors are set out on To achieve this, the SkyCity Board is structured to: company’s resources required to achieve the pages 53–55 of this annual report. • property and real estate acumen; strategic objectives; • have a sound understanding of, and competence Where there is an identified gap in expertise and/or to deal with, the current and emerging issues of • hospitality industry experience and • approval of, and monitoring of actual results experience, the Board seeks to address that gap the business; understanding; against, the annual business plan and budget through learning and personal development, the (including the capital expenditure plan); • effectively review and challenge the performance • law; use of independent expert advisors in specific of management and exercise independent areas of perceived need when necessary, or by the • review and ratification of the company’s systems • finance and accounting; of risk management and internal compliance judgement; and appointment of a director or directors with the • mathematical fluency; relevant expertise and experience. and control, codes of conduct and legal • assist in the selection of candidates to stand for compliance; and election by shareholders at annual meetings. • human resources; • approval and monitoring of the progress of Board Composition and Skills Matrix capital expenditures, capital management initiatives, acquisitions and divestments. The Board ensures that it is of an effective Director Competencies composition and size to adequately discharge its The Board has responsibility for the affairs and responsibilities and duties and to add value to the 0 4.20 4.20 4.20 activities of the company, which in practice is company’s decision-making. 4.00 4.00 4.00 achieved through delegation to the Chief Executive 3.80 3.80 00 Officer and others (including SkyCity appointed In order to meet these requirements, the 3.60 3.60 3.60 3.40 3.40 3.40 3.40 directors on subsidiary company boards) who Board membership comprises a range of skills 3 0 3.20 3.20 3.20 3.20 are charged with the day-to-day leadership and and experience to ensure that it has a proper 3.00
management of the company. The Board maintains understanding of and competence to deal 3 00 a formal set of delegated authorities that details with the current and emerging issues of the
the extent to which employees can commit the business, to effectively review and challenge the 2 0 company. These delegated authorities are approved performance of management, and to exercise by the Board and are subject to annual review by independent judgement. 2 00
the Board. Rat n A era e 0
00
0 0
0 00 Law Fluency Tourism Banking Acumen Adelaide Hamilton Auckland Marketing Millennials Real Estate Investment Hospitality/ Accounting Queenstown PR & Comms Sustainability Mathematical Govt Relations Govt Health & Safety Gaming Industry Digital Capability Asian Consumers Human Resources
124 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Corporate Governance Statement 125 CORPORATE GOVERNANCE CORPORATE
Appointment Subject to satisfaction of the probity requirements, At its June 2020 meeting, the Board reviewed the Indemnities and Insurance the Board may appoint directors to fill casual status of each director in accordance with the The Board has established the Governance and The company provides a deed of indemnity in vacancies that occur or to add persons to the definition of independence set out in the NZX Main Nominations Committee to: favour of each director and member of senior Board up to the maximum number (currently 10) Board Listing Rules and taking into account the ASX management and provides professional indemnity • identify and recommend to the Board suitable prescribed by the constitution. If the Board appoints Independence Guidelines and determined that all insurance cover for directors and executives persons for nomination as members of the Board a new director during the year, that person will current non-executive directors were independent acting in good faith in the conduct of the and its committees (taking into account such stand for election by shareholders at the next at the balance date having regard to the factors company’s affairs. factors as experience, qualifications, judgement, annual meeting. Shareholders are provided with described in the NZX Corporate Governance Code and the ability to work with other directors); relevant information on any candidate standing for and ASX Independence Guidelines that may impact Board Committees election in the company’s notice of meeting. • annually review the overall composition and director independence. The Board has four formally appointed structure of the Board and its committee Directors are appointed under the company’s Access to Information and Advice standing committees – the Audit and Risk memberships and, if appropriate, the removal of Terms of Appointment and Reference for Committee, Governance and Nominations a director from the Board and/or its committees; Directors and Board Charter (both available in New directors participate in an individual induction Committee, People and Culture Committee and the Governance section of the company’s website programme, tailored to meet their particular • monitor the succession and rotation of Board Sustainability Committee. at www.skycityentertainmentgroup.com) for a information requirements. and committee members; term of three years and subject to re-election The members of each of these committees are Directors receive regular reports and comprehensive • monitor the outside directorships and other by shareholders in accordance with the rotation non-executive directors and the non-executive information on the company’s operations before business interests of directors with a view to requirements of NZX and ASX and as prescribed in directors of the Board appoint the chair of each Board and committee meeting and have ensuring independence/no conflicts of interest, the company’s constitution. each committee. unrestricted access to any other information they and director capability and time availability to require. Senior management is also available at and Each of these committees operates under a effectively undertake the requirements of their Director Independence outside each meeting to address queries. formal charter document as agreed by the Board. SkyCity Board and committee positions; The Board Charter and the company’s constitution Each charter sets out the role and responsibilities Directors are expected to maintain an up-to-date • monitor related parties, conflicts of interest, and require that the Board contains a majority of of the relevant committee and is available in the knowledge of the company’s business operations independence issues; its number who are independent directors. Governance section of the company’s website at and of the industry sectors within which the SkyCity also supports the separation of the role www.skycityentertainmentgroup.com. • ensure that potential candidates understand of Board chair from the Chief Executive Officer company operates. Directors are provided with the role of the Board and the time commitment position. The Board Charter requires the Board updates on industry developments and undertake Each committee charter and the performance of involved when acting as a member of the Board; chair and (where appointed) deputy chair to be training and regular visits to the company’s key each committee are subject to formal review by the operations. The Board also undertakes periodic Board on an annual basis. • oversee the evaluation of the Board; and independent directors and prohibits the company’s educational trips (as a group and/or individually) to Chief Executive Officer from filling either of From time to time, the Board creates specific • review the Board’s succession planning. observe and receive briefings from other companies these roles. sub-committees to deal with a particular matter in the gaming and entertainment industries. External consultants are engaged to access a wide or matters and/or to have certain decision-making Directors are required to ensure all relationships The most recent group educational Board trip was base of potential candidates and to review the authority as the Board may elect to delegate to and appointments bearing on their independence to the United States and Canada in March 2019. suitability of candidates for appointment. are disclosed to the Governance and Nominations that sub-committee. As at 30 June 2020, the Board Directors are entitled to obtain independent had established a sub-committee to oversee the The procedures for the appointment and removal Committee on a timely basis. In determining professional advice (at the expense of the company) New Zealand International Convention Centre of directors are prescribed in the company’s the independence of directors, the Board has on any matter relating to their responsibilities and Horizon Hotel development and a separate constitution, which, amongst other things, requires adopted the definition of independence set as a director or with respect to any aspect of the sub-committee to oversee the SkyCity Adelaide all potential directors to have satisfied the extensive out in the NZX Main Board Listing Rules and company’s affairs, provided they have previously expansion project. probity requirements of each jurisdiction in which has taken into account the independence notified the Board chair of their intention to do so. the Group holds gaming licences. guidelines as recommended in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (Fourth Edition) (ASX Independence Guidelines).
126 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Corporate Governance Statement 127 Board and Committee Membership
The following table lists the members and chair of the SkyCity Board and each of its four formally appointed standing committees as at 30 June 2020 and as at the date of this annual report. CORPORATE GOVERNANCE CORPORATE Biographical details of individual directors, and their respective qualifications and experience, are set out on pages 53–55 of this annual report.
Code of Conduct BOARD Appointment to Office 3. Integrity and The Sustainability Committee is responsible for Chair Rob Campbell 25 June 2017 Ethical Behaviour monitoring the organisational integrity of business For SkyCity, it is important to be a good corporate Deputy Chair Bruce Carter 12 October 2010 operations to ensure the maintenance of a high citizen, whilst operating a sustainable and standard of ethical behaviour. This includes Members Sue Suckling 9 May 2011 successful business model. ensuring that SkyCity operates in compliance Jennifer Owen 5 December 2016 SkyCity expects its Board, management and with its Code of Conduct (available in the Murray Jordan 5 December 2016 employees to act in accordance with the company’s Governance section of the company’s website at values, policies and legal obligations and actively www.skycityentertainmentgroup.com), which sets promotes ethical and responsible behaviour and out the guiding principles of its relationships with decision-making by: stakeholder groups such as regulators, shareholders, AUDIT AND RISK COMMITTEE PEOPLE AND CULTURE COMMITTEE suppliers, customers, community groups • clarifying and promoting observance of its and employees. Chair Bruce Carter Chair Murray Jordan guiding values; and Compliance with the Code of Conduct is monitored Members Rob Campbell Members Rob Campbell • clarifying the standards of ethical behaviour through education and notification by individuals Jennifer Owen Jennifer Owen required of company directors and key who become aware of any breach. In addition, all executives (that is, officers and employees who senior managers are required annually to provide have the opportunity to materially influence the a confirmation to the company that to the best of integrity, strategy and operations of the business their knowledge all business matters undertaken SUSTAINABILITY COMMITTEE GOVERNANCE AND NOMINATIONS COMMITTEE and its financial performance) and encouraging within their areas of responsibility have been the observance of those standards. Chair Sue Suckling Chair Rob Campbell conducted in accordance with the Code of Conduct. Training and information on the company’s The most recent annual confirmations were Members Rob Campbell Members Bruce Carter values, policies and legal obligations are provided provided by senior managers in August 2020. Bruce Carter Sue Suckling to all employees on induction and periodically Trading in Securities Jennifer Owen throughout their time at SkyCity.
Murray Jordan The company maintains a Securities Sustainability Trading Policy (available in the Governance To help the company define its responsibilities and section of the company’s website at the effectiveness of its activities, SkyCity maintains www.skycityentertainmentgroup.com) for directors operational supervision of its sustainability activities and employees that sets out guidelines in respect of through management as well as governance-level trading in, or giving recommendations concerning, Board and Committee Meeting Attendance oversight through the Board’s Sustainability the company’s securities, including derivatives of The following table shows director attendance at Board meetings and committee member attendance at Committee. This Committee directs the company’s such listed securities. committee meetings (both scheduled and unscheduled) during the financial year ended 30 June 2020. commitment to care activities and is responsible Details of any securities trading by directors or for developing and maintaining SkyCity’s executives who are subject to the company’s PEOPLE AND GOVERNANCE AND sustainability policies. Securities Trading Policy are notified to the Board. BOARD AUDIT AND RISK CULTURE NOMINATIONS SUSTAINABILITY The Sustainability Committee focuses on the TOTAL NUMBER In addition, directors and officers of the company OF MEETINGS 20(1) 7 6 1 4 agreed pillars of the company’s sustainability must comply with the disclosure obligations strategy, which are described in further detail on Rob Campbell 20 7 6 1 4 under subpart 6 of the New Zealand Financial pages 63–119 of this annual report together with Markets Conduct Act 2013 and the NZX Main (2) Bruce Carter 20 7 – 1 3 details of SkyCity’s sustainability activities. Board Listing Rules and formally disclose their Sue Suckling 19 – – 1 4 SkyCity shareholdings and other securities holdings to the NZX and, consequently, ASX within Jennifer Owen 20 7 6 1 – prescribed timeframes. Murray Jordan 20 – 6 1 –
Richard Didsbury(3) 3 – – – 1
(1) The Board met weekly during the period from 17 March - 9 June 2020 in response to the COVID-19 pandemic. (2) Bruce Carter was appointed a member of the Sustainability Committee effective from 12 November 2019. (3) Richard Didsbury retired as a director effective from 11 November 2019.
128 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Corporate Governance Statement 129 CORPORATE GOVERNANCE CORPORATE
Conflicts of Interest The Audit and Risk Committee and the Board 5. Timely and The company is also committed to presenting its undertake sufficient inquiry of the company’s financial and key operational performance results SkyCity expects its directors and employees to management and the company’s internal and Balanced Disclosure in a clear, effective, balanced and timely manner avoid conflicts of interest in their decisions and to external auditors in order to enable them to be to the stock exchanges on which the company’s avoid any direct or indirect interest, investment, The Board is committed to ensuring timely satisfied as to the validity and accuracy of the securities are listed, and to its shareholders, association, or relationship which is likely to, and balanced disclosure of all material matters company’s financial reporting. The Chief Executive analysts and other market commentators, and or appears to, interfere with the exercise of their concerning the company to ensure compliance Officer and the Chief Financial Officer are required ensures that such information is available on the independent judgement. with the letter and intent of the NZX and to confirm in writing that the annual and interim ASX Listing Rules such that: company’s website. Where conflicts of interest may arise (or where financial statements present a true and fair The company’s annual report (including this potential conflicts of interest may arise), view of the company’s financial condition and • all investors have equal and timely access to annual report) is prepared by the General Counsel directors must formally advise the company or, results of operations, and comply with relevant material information concerning the company, for the SkyCity Entertainment Group with input in the case of an employee, their manager about accounting standards. including its financial situation, performance, from the Chief Executive Officer and other senior any matter relating to that conflict (or potential ownership and governance; and The Audit and Risk Committee oversees the management who bear responsibility for the topics conflict) of interest. independence of the company’s internal and • company announcements are factual covered in the annual report with a view to ensuring and comprehensive. Gaming Prohibition external auditors and monitors the scope and the contents are materially accurate, balanced quantum of work undertaken and fees paid to SkyCity believes high standards of reporting and and provide investors sufficient information about Directors and employees are not permitted to the auditors for non-audit services. disclosure are essential for proper accountability SkyCity and its performance over the relevant participate in any gaming or wagering activity at financial year. The Board also contributes to and The Committee has adopted an External Audit between SkyCity and its investors, employees any SkyCity land-based property. approves the contents of the annual report. Independence Policy that sets out the framework and stakeholders. for assessing and maintaining audit independence. Jo Wong, General Counsel, is Company Secretary 4. Safeguard the Integrity of The company is committed to promoting investor The Committee has formally reviewed the confidence by providing timely and balanced and the Disclosure Officer for SkyCity Entertainment the Company’s Financial independence status of PricewaterhouseCoopers disclosure of all material matters relating to SkyCity Group Limited and is responsible for bringing to Reporting and is satisfied that its objectivity and and its subsidiaries (SkyCity Group). The company the attention of the Board any matter relevant to independence is not compromised as a maintains a Market Disclosure Policy (available in the company’s disclosure obligations. The Company The Board is responsible for ensuring that effective consequence of non-audit work undertaken for the Governance section of the company’s website at Secretary is also accountable directly to the Board, policies and procedures are in place to provide the company. www.skycityentertainmentgroup.com) for directors through the chair of the Board, on all matters to do confidence in the integrity of the company’s with the proper functioning of the Board. PricewaterhouseCoopers has confirmed to the and employees that sets out guidelines in respect of financial reporting. Committee that it is not aware of any matters that the company’s continuous disclosure obligations. The Audit and Risk Committee has responsibility could affect its independence in performing its The Policy is designed to ensure that SkyCity: 6. Respect and Facilitate the for oversight of the quality, reliability, and duties as auditor of the company. Rights of Shareholders accuracy of the company’s internal and external • satisfies the requirements of the New Zealand Fees paid to PricewaterhouseCoopers during the financial statements, the quality of the company’s Financial Markets Conduct Act 2013, Australian The company’s shareholder communications financial year ended 30 June 2020 are set out in external result presentations, its internal control Corporations Act 2001, NZX Main Board Listing strategy is designed to facilitate the effective note 7 to the financial statements. Fees for audit environment and risk management programmes, Rules and ASX Listing Rules; exercise of shareholder rights by: and other assurance work for the financial year and for its relationships with its internal and ended 30 June 2020 represented 80% of total • meets its disclosure obligations in a way that • communicating effectively with shareholders; external auditors. allows all interested parties equal opportunity to PricewaterhouseCoopers fees. • providing shareholders with ready access to access information; balanced and understandable information about • meets stakeholders’ expectations for equal, the company and corporate proposals; and timely, balanced and meaningful disclosure; and • facilitating participation by shareholders in • provides guidance on the processes to general meetings of the company. ensure compliance.
130 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Corporate Governance Statement 131 132 • • • • • • • The company achieves thisby: SkyCity Entertainment Group AnnualReportYear Ended30June2020 the SkyCity Group. are understood andcomplied withthroughout ensuring thatcontinuous disclosureobligations and external auditreport;and shareholder questionsconcerning theiraudit the company’s annualmeetingto answer any external auditors arealsoinvited to attend meeting. Representatives of thecompany’s asked andrespondto themattheannual to aggregate themainthemesof thequestions to theannualmeetingto enablethecompany invited to submitquestionsto thecompany prior company’s notice of meeting,shareholdersare directors andmanagement.Eachyear, inthe meetings for shareholdersto askquestionsof making appropriate timeavailable atsuch attend general meetingsof thecompany; shareholders, by encouraging shareholdersto promoting two-way interaction with associations andproxy advisers; with institutionalinvestors, shareholder engaging inaprogramme of regularinteractions Computershare, electronically;registry, communications to, thecompany anditssecurity receive communications from,andsend giving shareholderstheoptionto the market; promptly after they have beendisclosedto Investor Centre sectionof thecompany’s website posting stock exchange announcements inthe www.skycityentertainmentgroup.com; sections of thecompany’s website at in theInvestor Centre andGovernance meeting) isavailable to allshareholders reports, dividendhistories andnotices of media releases,currentandpastannual (including itscorporate governance framework, ensuring thatinformation aboutthecompany this annualreport. manage thoserisks, areoutlinedonpages45–51of risks, ifany, andhow itmanagesorintends to economic, environmental andsocialsustainability do this,includingSkyCity’s material exposure to its businessstrategy. Risks influencing itsabilityto shareholders requiresthesuccessful execution of SkyCity’s abilityto value create andpreserve for its protected fromadverse circumstances. ensure thattheearningsof the businessarewell material damageandliabilityinsurance cover to The company maintainsbusinesscontinuity, Chief FinancialOfficer inSeptember 2020. were provided by theChief Executive Officer and all material respects.The mostrecent confirmations systems areoperating andeffectively efficiently in company’s riskmanagementandinternal control aligns to thepoliciesof theBoard,andthat of riskmanagementandinternal control which referred to above isfounded onasoundsystem integrity of thecompany’s financialstatements annually thatthestatement inrespect of the towriting theAudit andRisk Committee atleast Chief FinancialOfficer arerequiredto confirm in auditors. The Chief Executive Officer andthe reviewed by boththeCommittee andtheexternal of theorganisation’sriskandcontrols regularly assurance plan,withresultsandperformance The Audit andRiskCommittee approves the risks atleastannually. the company’s managementof itsmaterial business Risk Committee andBoardontheeffectiveness of Management isrequiredto reportto theAudit and and reportsonrisks andcontrols acrosstheGroup. whichevaluatesmanaged GroupRiskfunction SkyCity maintainsanindependent,centrally company’s business. monitoring andmanagementof riskto the framework for theidentification, assessment, The company maintainsariskmanagement 7. Recognise andManage Risk performance review procedures. to thatpositioninaccordance withthecompany’s performance outcomes of thosereportingdirectly of theChief Executive Officer andreviews the The Boardundertakes theperformance review Evaluation of SeniorManagement meeting withthefacilitator inattendance. then discussedattheBoard’sDecember 2019 enhanced performance anddevelopment were individual director strengthsandopportunitiesfor effectiveness. The facilitator’s insightsonBoardand contribution,assessment of Boarddynamics, and October 2019meetingto conduct astructured relevant seniormanagersandattended theBoard’s on aone-on-onebasiswitheachdirector and process, thefacilitator heldstructuredinterviews in boardevaluations. Aspartof theevaluation a specialistfacilitator withsignificant experience an independentlyfacilitated evaluation process by In June2019,theBoardagreedto participate in performance of theBoardanditscommittees. process, for thepurposeof evaluating the addition to orinsubstitutionof theself-evaluation facilitated evaluation process may becarried out,in management. Fromtimeto time, anindependently completed by eachof thedirectors andselect out intheform of aself-evaluation questionnaire committees’ performance isgenerally carried The annualevaluation of theBoard’sandits its committees. and membershiprequirementsof theBoardand performance, composition, structure,training assessment of theroleandresponsibilities, oversees theprocess for evaluation, whichincludes and NominationsCommittee determines and performance onanannualbasis.The Governance evaluation of theBoard’sanditscommittees’ The Boardandcommittee charters requirean Evaluation of theBoardanditsCommittees 8. Performance Evaluation Chief Executive Officer andeachseniorexecutive. a formal response/feedback process between the case of eachseniorexecutive, thereview involves process atboththehalfyear year. andfull Inthe generally involves aformal response/feedback In thecase of theChief Executive Officer, thereview shareholder value. “pay for performance” philosophy anddrive and/or policieswillcontinue to reflect SkyCity’s change to thecompany’s remuneration strategy the interests of shareholders.Any subsequent business strategy andfinancial performance in the leadershipandtalentrequiredto drive to enablethecompany to attract andretain to ensurethey arecompetitive andeffective the structureof SkyCity’s incentive schemes The PeopleandCultureCommittee hasreviewed based ona“pay for performance” philosophy. SkyCity’s remuneration strategy andpoliciesare • • • • • remuneration policiesareto: The guidingprinciplesthatunderpinSkyCity’s 9. interests of shareholders. align remuneration for seniormanagerswiththe andaffordability;efficiency and manage remuneration withinlevels of cost achieve company goalsandstrategy; remuneration whichdrives performance to provide asignificant at-riskcomponent of total performance andto avoid anentitlementculture; practices recognise andreward highlevels of be performance-oriented sothatremuneration available talent; the company can attract andretainthebest be market competitive atalllevels to ensure and Responsibly Remunerate Fairly Corporate Governance Statement 133
CORPORATE GOVERNANCE 134 year ended30June2020. made undereitherplaninrelationto thefinancial contributed year, difficult to avery noawards were taking into account anumberof factors thathave Term Incentive Planwas notmetthisyear, and Performance Incentive PlanandtheSkyCity Short As thefinancialgateway for theSkyCity Leaders Programme. Inclusion Council andtheSkyCity Emerging and InclusionLeadershipConference, theSkyCity leveraging diversity of thoughtthroughourDiversity capability of allleadersinunderstanding and continues to make investment inbuildingthe the organisationwith49%beingfemale. SkyCity remained consistent acrossthe top four levels of ‘$20 by 2020’,andSkyCity’s genderbalance has in partasaresultof ourtargeted wage programme New Zealandbusinessreduced to 7.5% from8.2%, inclusion programme. The genderpay gapfor the to make greatprogressacrossitsdiversity and Despite thechallengesinFY20,SkyCity continues annual meeting). 2018 annualmeetingand,priorto that,atthe2014 fee poolwas lastincreased by shareholdersatthe 16 October 2020(notingthenon-executive director director fee poolatthe2020annualmeetingon shareholder approval to increasethenon-executive In addition,thecompany willnotbeseeking frozen for thefinancialyear ending30June2021. pandemic, groupexecutives’ salarieswillbe In lightof theeconomic impactof theCOVID-19 for thefinancialyear ended30June2020. non-executive director remuneration andoutcomes detailed information ongroupexecutives and remuneration frameworks andplans,including This remuneration reportoutlinesSkyCity’s 30 June2020. remuneration reportfor the financialyear ended of theBoard,Iampleasedto presentour As Chairof thePeopleandCultureCommittee Remuneration Report SkyCity Entertainment Group AnnualReportYear Ended30June2020 People andCultureCommittee Chair Murray Jordan your feedback. and,asalways,report useful Iwelcome I hopeyou find thenew format of ourremuneration and Chief FinancialOfficer. remuneration paidto theChief Operating Officer has elected to provide detailsregardingtotal greater transparency anddisclosure, theBoard Inaddition,andwiththeaimof Secretary. can beobtainedby contacting theCompany at www.skycityentertainmentgroup.com or Governance sectionof thecompany’s website in theRemuneration PolicyStatement inthe employee incentive plansarenow available from previous years. Detailsof thevarious The format of thisremuneration reportdiffers The Boardchairdoesnotreceive separate fees for theBoardcommittees thathesitson. additional fees for thiscommittee. All non-executive directors aremembersof theGovernance andNominations Committee andreceive no and itscommittees asat30June 2020: The following tableoutlinestheapproved non-executive directors’ fees (exclusive of GST,ifany) for theBoard for non-executive directors of $1,440,000perannum(plusGST,ifany). At the2018annualmeeting,shareholdersapproved, effective from1July2018,atotal remuneration amount company’s non-executive directors. of thecompany. Shareholdersattheannualmeetingdetermine thetotal remuneration available to the Board andsubjectto themaximumremuneration amountwhichhasbeenapproved by theshareholders provided to thecompany outsideof theircapacities asdirectors of thecompany atthediscretionof the In additionto directors’ fees, non-executive directors may alsoreceive remuneration for additionalservices on behalfof shareholders. talent poolfor thepurposeof drivingvalue andmaintainingthehigheststandardsof corporate governance out aframework for SkyCity to attract andretainqualified,highlycapable directors fromapan-Australasian company’s website atwww.skycityentertainmentgroup.com orby contacting theCompany sets Secretary) The company’s PolicyonNon-Executive Director Remuneration (available intheGovernance sectionof the This sectiondetailsthefees paidto non-executive directors. Non-Executive Directors Fees Sustainability Committee People andCultureCommittee Audit andRiskCommittee Board Member Chair Member Chair Member Chair Non-Executive Director Deputy Chair Chair POSITION FEES (PERFINANCIALYEAR) Remuneration Report $280,000 $160,000 $128,500 $35,000 $35,000 $35,000 $15,000 $15,000 $15,000 135
CORPORATE GOVERNANCE 136 (7) (6) (5) (4) (3) (2) (1) The figuresshown aregrossamountsand exclude GSTwhereapplicable. as directors of thecompany duringthefinancialyear ended30June2020areaslisted below: Remuneration paidto, andotherbenefits received by, non-executive directors for intheircapacity services Non-Executive Director Feesfor theYear Ended30June2020 SkyCity Entertainment Group AnnualReportYear Ended30June2020 Richard Didsbury Murray Jordan Jennifer Owen Sue Suckling Bruce Carter Rob Campbell development, whichwere provided outsideof asadditionalservices hiscapacity asadirector of thecompany. Being fees payable for consultancy provided services inrelationto theNew by ZealandInternational RichardDidsbury Convention Centre insurance planthatSkyCity offers to allof itsemployees (eitheratnocost oratadiscounted rate). Being premiumspaidto SkyCity’s healthinsurance provider duringtheperiodfor therelevant director, whoreceived thebenefit of a health retiredasadirector effectiveRichard Didsbury from11November 2019. but paidinFY20. provided outsideof asadditional services hercapacity asadirector of thecompany. This includesfees for consultancy provided services inFY19 Being fees payable for consultancy provided services by Jennifer Owen inrelationto theSkyCity Adelaide expansion project,whichwere development, whichwere provided outsideof asadditionalservices hiscapacity asadirector of thecompany. Being fees payable for consultancy provided services by Murray Jordaninrelationto theNew ZealandInternational Convention Centre 30 June2020. Non-executive directors elected to waive 50%of theirBoardandcommittee fees for thefinalquarter of thefinancialyear ended the company. development andtheSkyCity Adelaide expansion project,whichwere provided outsideof asadditionalservices hiscapacity asadirector of Being fees payable for consultancy provided services by Murray Jordaninrelationto theNew ZealandInternational Convention Centre 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 (3)
COMMITTEE FEES $280,000.00 $245,000.00 $195,000.00 $163,500.00 $163,500.00 $143,600.00 $143,062.50 $143,062.50 $138,687.50 $178,333.40 $153,983.87 BOARD AND $51,819.45
(1) (1) (1) (1) (1) $14,850.00 $4,050.00 $11,700.00 $3,429.70 $2,586.37 $16,800 OTHER (5) (4) (2) (6) (2) (7)
for thefinancialyear ended30June2020 asthe although notnecessarily paidto, groupexecutives annual reportreflect thetotal rewards earnedby, The disclosuresonthefollowing pagesof this the ultimate discretionof theBoard. non-financial measuresandallSTIbonusesareat performance againstbothkey financialand Committee. The STIcomponent isbasedon recommendations fromthePeopleandCulture of fixed remuneration takinginto account The Boarddetermines appropriate levels incentive at-riskremuneration (LTI). incentive at-riskremuneration (STI)andlongterm and thevariable portioncomprises bothshortterm contribution andalimited numberof otherbenefits aKiwiSaver/superannuationa basesalary, remuneration wherethefixed portioncomprises executive comprise bothfixed andvariable The remuneration arrangements for eachgroup measured ona'total cost to thecompany' basis. the context of atotal remuneration package, Remuneration components areoffered in Group Executives Chief Executive Officer and Other financial year ended 30June2020. other groupexecutives andemployees for the performance of SkyCity’s Chief Executive Officer, to remuneration frameworks, outcomes and This sectiondetailsthecompany’s approach Remuneration of Employees their basedirector fees peryear. directors arethenencouraged to acquire 15%of Following thisinitialtwo-year period,non-executive year of theirbasenon-executive director fees. non-executive director) equivalent to atleastone in thecompany (purchasedonmarket by each from appointment,to buildupandretain shares director isencouraged, over aperiodof two years with thoseof shareholders,eachnon-executive To alignnon-executive further directors’ interests Share Ownership inSkyCity performance of theirduties,includingtravel. to company matters, whichareincidentalto the meets theexpenses incurredby directors inrelation their capacity asdirectors of thecompany, SkyCity In additionto remuneration paidfor in services to acquire restricted sharerightsof anamount performance conditions beingmet,theopportunity offers participants,subjectto therelevant STI The deferred STIschemeunderthePIP Deferred STIComponent of PIP of thetargetaward. where themaximumaward undertheSTIis150% external auditof thecompany’s year-end results, the financialyear following the completion of the STI awards willbedelivered incash attheendof STI SchemeComponent of PIP • • The PIP: other groupexecutives andseniormanagersin2018. Incentive Plan (PIP)for theChief Executive Officer, performance, SkyCity introduced thePerformance To drive outstandingcompany andindividual Short Term Incentive Remuneration increases for groupexecutives. and CultureCommittee approves remuneration group executive and,whenappropriate, thePeople Fixed remuneration isreviewed annuallyfor each the sector. positions, account istaken of salarieswithin broader Australasian market and,for casino-specific at levels thatarerelative to similarpositionsinthe The company endeavours to setfixed remuneration Fixed Remuneration in respectof thefinancialyear ended30June2020. STI andLTIcomponents earnedby groupexecutives Accordingly, the following disclosuresincludethe describes executive pay andperformance. Board believes thisapproachmoreappropriately STI scheme. acquire restricted sharerights under adeferred a cash payment underaSTIschemeand provides participantstheopportunityto earn restricted sharerightsinthecompany); and cash anddeferred equityawards (intheform of gateway, anincentive award whichisdelivered in company achieving itsfinancialperformance shareholders’ interests by earning,subjectto the an opportunityto alignedwith befurther term performance by providing participants recognises andrewards shortandlonger Remuneration Report
137
CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE
equivalent to between 10% and 50% of their base they have been employed by SkyCity for at least Long Term Incentive Remuneration In order to determine whether any shares will vest salary at no cost. Restricted share rights (if any) three years as at the date of cessation of his/her in a participant following the three-year restrictive Two LTI plans were in operation during the financial issued to a participant on a STI cash payment date employment, then he/she will continue to be period for those shares, each tranche is measured year ended 30 June 2020 for the company’s most (Declaration Date) will only vest if that participant eligible to have shares transferred to him/her on against the performance hurdle for that tranche senior employees, including the group executives. remains an employee up to and until: the first and second anniversaries (as applicable) on the performance testing date for those shares, These plans were the SkyCity Senior Executive of the Declaration Date as if their employment where the performance hurdle for each of the • the first anniversary of the Declaration Date in Long Term Incentive Scheme and the 2018 SkyCity had not ceased, at the discretion of the Board. tranches is: respect of 50% of the restricted share rights; and Executive Long Term Incentive Plan. Copies of the As a rule, a group executive will not be eligible to plan documents and rules are available on the • for the absolute TSR tranche, a comparison of • the second anniversary of the Declaration Date the extent they are terminated for cause, breach Governance section of the company’s website at SkyCity’s TSR over the restrictive period against in respect of the remaining 50% of the restricted the terms of their employment agreement or www.skycityentertainmentgroup.com. the cost of equity for the SkyCity Group over the share rights. for underperformance. restrictive period as determined by the Board; In the financial year ended 30 June 2020, grants However, if a participant’s deferred STI entitlement Participants do not have the right to receive any were made to the Chief Executive Officer and other • for the NZX comparator group tranche, a in any financial year is to restricted share rights dividends in respect of restricted share rights. group executives under the 2018 SkyCity Executive comparison of SkyCity’s TSR over the restrictive having a value of $10,000 or less (calculated using However, if any restricted share rights vest and Long Term Incentive Plan. period against the TSR of each of the constituent the volume-weighted average sale price of SkyCity shares are issued or transferred to a participant, entities of the NZX 50 index (as at the grant date, shares used to determine the number of restricted then that participant may receive (at the Board’s To further align the group executives’ interests other than SkyCity) over the same period; share rights to be issued to the participant), the sole discretion) a cash payment equivalent to the with those of shareholders, each group executive is restricted share rights will not be split out equally cash dividends declared and paid by the company encouraged, over a period of five years, to build up • for the ASX comparator group tranche, a into two separate tranches, but will instead in respect of SkyCity shares from the date of issue and retain shares in the company (acquired under comparison of SkyCity’s TSR over the restrictive comprise one tranche and (subject to the vesting of such restricted share rights to the date such the PIP and/or 2018 SkyCity Executive Long Term period against the TSR of each of the constituent criteria being satisfied) vest to the participant on shares are issued or transferred to that participant. Incentive Plan) equivalent to at least one year of entities of the ASX 200 index (as at the grant the first anniversary of the Declaration Date. The cash payment will not include any imputation their base salary. date, other than SkyCity) over the same period; credits, franking credits or similar benefits in respect and Upon vesting, a participant will be allocated one of such dividends. 2018 SkyCity Executive Long Term Incentive Plan ordinary share in the company for each restricted • for the competitor comparator group tranche, a share right that vests as soon as practicable after the In the event that a genuine error is made by, or on The 2018 SkyCity Executive Long Term Incentive comparison of SkyCity’s TSR over the restrictive relevant anniversary of the Declaration Date. Subject behalf of, the Board or the company in determining Plan provides participants with financial assistance period against the TSR of each of Crown Resorts to complying with the Company’s Securities Trading any entitlement under the PIP, including where the by way of an interest-free loan by a subsidiary of Limited and The Star Entertainment Group Policy and Code of Business Practice, participants company’s financial statements are subsequently the company to acquire shares in the company. Limited over the same period. are free to sell, transfer or otherwise deal with required to be restated, the Board may seek to A trustee holds legal title to the relevant shares on As at 30 June 2020, a total of 918,673 shares were shares issued to them under the PIP (subject to recover from a participant the value of any benefits behalf of those participants for a restrictive period issued under the 2018 SkyCity Executive Long minimum shareholding requirements for the Chief erroneously awarded to a participant under the PIP. of three years until the following performance Term Incentive Plan and held by the Public Trust Executive Officer and other group executives). hurdles are tested: Restricted share rights issued under the PIP may on behalf of eight participants. The shares vest in a The intention of the deferred STI component not be transferred, assigned or disposed of and • 50% of the shares are allocated to an absolute participant only when performance hurdles set by under the PIP is to act both as a retention and an participants may not create any interest in favour total shareholder return (TSR) tranche which the Board of directors are met. engagement tool. The maximum award under the of any third party over the restricted share rights includes a cost of equity premium; The maximum award under the 2018 SkyCity deferred STI scheme is 150% of the target award. (except with Board approval). • the remaining 50% of the shares are allocated Executive Long Term Incentive Plan is 100% of the Any unvested restricted share rights will be forfeited For the financial year ended 30 June 2020, no cash equally to each of an NZX comparator group relevant grant allocation. if a participant ceases to be employed by SkyCity (or or restricted share rights will be granted under the tranche, an ASX comparator group tranche and a The transfer of shares to participants at the end a company in the SkyCity Group) before the relevant PIP as the financial gateway was not achieved. competitor comparator group tranche; and of the three-year restrictive period is dependent Declaration Date, although the Board has discretion For the financial year ending 30 June 2021, • performance is assessed three years after the on satisfaction of the performance conditions to determine otherwise such as where a participant 424 employees will be invited in October 2020 to issue of the shares, with no retesting dates in the and continued employment with SkyCity. If a ceases to be an employee due to injury, permanent participate in the PIP for the opportunity to earn a event the performance hurdles are not satisfied participant resigns or is dismissed for misconduct or disability, ill health or redundancy or dies. In the cash payment under the STI scheme – 94 of whom as at that date. poor performance before the end of the restrictive case of selective group executives however, if he/she also have the opportunity to acquire restricted share ceases employment for any reason (other than as rights under the deferred STI scheme. a result of the termination of their employment by SkyCity for cause, including for serious misconduct) prior to vesting of any restricted share rights, and
138 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Remuneration Report 139 CORPORATE GOVERNANCE CORPORATE
The total remuneration earned by Mr Stephens for duties relating to the Chief Executive Officer position for period, any unvested shares will be forfeited, unless Fixed Remuneration of Salaried Employees the financial years ended 30 June 2018, 30 June 2019 and 30 June 2020 is outlined in the following table: SkyCity terminates the employment of a group All salaried roles within SkyCity are sized using a executive without cause, a group executive ceases recognised methodology to measure the impact, FIXED ANNUAL REMUNERATION PIP OUTCOME employment as a result of a material change to the SALARY accountability and complexity of each role as it AND terms and conditions of his/her employment which ANNUAL contributes to the organisation. Remuneration BASE LEAVE OTHER TOTAL results in a diminution of that group executive’s (1) data is obtained from several sources to determine SALARY SACRIFICE KIWISAVER BENEFITS SUBTOTAL CASH STI DEFERRED STI LTI GRANT SUBTOTAL REMUNERATION role, status and responsibility in the period of remuneration ranges by job band or level to ensure (2) 12 months immediately preceding a performance 2020 $1,519,673 $151,967 $42,363 $10,592 $1,420,661 $0 $0 $1,063,771 $1,063,771 $2,484,432 competitiveness at both base salary and total (3) (4) testing date or a group executive dies or ceases 2019 $1,489,875 $0 $44,374 $4,433 $1,538,682 $595,950 $744,938 $1,042,912 $2,383,800 $3,922,482 remuneration levels. (5) (6) to be an employee due to medical incapacity or 2018 $1,450,000 $0 $43,500 $5,302 $1,498,802 $0 $1,015,000 $1,250,000 $2,265,000 $3,763,802 permanent disability. Individual remuneration is set within the (1) These funds were sacrificed to the SkyCity Employee Hardship Fund as detailed on page 83 of this annual report. appropriate range considering such matters as However, to support long term decision-making, (2) Calculated on the basis of 273,112 SkyCity shares allocated to Mr Stephens under the 2018 SkyCity Executive Long Term Incentive Plan in individual performance, scarcity/availability of execution of strategy and to encourage strong August 2019. resource/skill, internal relativities and specific (3) Calculated on the basis of 195,872 restricted share rights granted to Mr Stephens under the PIP in August 2019. The restricted share rights will succession planning by the Chief Executive Officer, business needs. This process ensures internal equity vest in two tranches, with the first tranche vesting in September 2020 and the second tranche vesting in September 2021. the Chief Executive Officer will continue to be (4) Calculated on the basis of 246,726 SkyCity shares allocated to Mr Stephens under the 2018 SkyCity Executive Long Term Incentive Plan in between roles and allows comparison with the eligible to have shares transferred to him, at the August 2018. overall market. Remuneration ranges are reviewed Board’s discretion, if he ceases employment with (5) Calculated on the basis of 251,238 restricted share rights granted to Mr Stephens under the Restricted Share Rights Plan in September 2018, annually to reflect market movements. which vested in July 2020. SkyCity for any reason (other than as a result of (6) Calculated on the basis of 320,883 SkyCity shares allocated to Mr Stephens under the SkyCity Senior Executive Long Term Incentive Plan in the termination of employment by SkyCity for Chief Executive Officer's Remuneration August 2017. cause, including for serious misconduct) during the restrictive period and the performance conditions Graeme Stephens’ employment agreement Equity Based Incentives Vested in FY20 are satisfied – in this situation, the performance (a copy of which is available in the Governance None of Mr Stephens’ equity-based incentives vested in the financial year ended 30 June 2020. conditions will be tested on the performance section of the company’s website at testing date as if his employment had not ceased. www.skycityentertainmentgroup.com) is dated 251,238 SkyCity shares were issued to Mr Stephens on 1 July 2020 pursuant to the terms of the Restricted 4 November 2016 and reflects standard conditions Share Rights Plan. In the event that a genuine error is made by, that are appropriate for a senior executive of a listed or on behalf of, the Board or the company in Australasian company. Subsequent amendments The first testing date relating to shares allocated to Mr Stephens under the Senior Executive Long Term determining a participant’s entitlement under the are also available online. Incentive Scheme on 23 August 2017 was on 23 August 2020, with no shares vesting to Mr Stephens. 2018 SkyCity Executive Long Term Incentive Plan, The graph below shows the mix of remuneration that was earned by Mr Stephens for his performance including where the company’s or a third party’s Mr Stephens’ employment agreement may be over the financial year ended 30 June 2020, alongside graphs illustrating the target and maximum financial statements are subsequently required to terminated by: remuneration mixes: be restated, the Board may seek to recover from • either Mr Stephens or the company by giving a participant the value of any shares erroneously six months' notice in writing; determined to have vested to that participant. • the company without notice in the case of Until the restrictive period for the relevant shares serious misconduct, serious breach (including has ended and the relevant loan on those shares substantial non-performance) or other cause 23% 2 % is repaid, a participant may not sell those shares or justifying summary dismissal; or 33% Base Salary (excludes the value of KiwiSaver use them as security for another loan. 41% 38% • the company immediately if the SkyCity Board FY20 FY20 FY20 and other benefits) From time to time as directed by SkyCity, the Public forms the view that substantial incompatibility Actual 59% Target Maximum STI Target Trust acquires shares in the company on-market and/or irreconcilable differences have developed LTI Target for the purposes of the company’s long term with Mr Stephens or the Board otherwise wishes 35% incentive employee plans, including the SkyCity to terminate his employment when he is not 44% Senior Executive Long Term Incentive Plan and the at fault (including a redundancy situation or 2018 SkyCity Executive Long Term Incentive Plan. medical incapacity). As at 30 June 2020, the Public Trust held a total of Pay Gap 5,155,841 shares – 2,149,556 of which were allocated All entitlements payable to Mr Stephens on Mr Stephens’ base salary remuneration ratio to the median annualised employee base salary is 28. and held on behalf of eligible participants and termination of his employment are outlined in his employment agreement. 3,006,285 of which were unallocated and held on STI Outcome behalf of future participants. For the financial year ended 30 June 2020, no cash or restricted share rights will be granted to Mr Stephens under the PIP as the financial gateway was not achieved.
LTI Grant
Mr Stephens was granted an allocation of 273,112 shares in the company equal to $1,063,771 under the 2018 SkyCity Executive Long Term Incentive Plan in August 2019.
140 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Remuneration Report 141 142 Executive LongTerm Incentive Plan. All unvested shareswillaccordingly be forfeited inaccordance withtheterms of theSkyCity Senior Incentive Schemeon24August 2016was on24August 2020,withnosharesvesting to MrHamilton. The finaltesting date relatingto sharesallocated to MrHamilton undertheSeniorExecutive LongTerm Incentive Schemeon23August 2017was on23August 2020,withnosharesvesting to MrHamilton. The firsttesting date relatingto sharesallocated to MrHamilton undertheSeniorExecutive LongTerm Share RightsPlan. 80,614 SkyCity shareswere issuedto MrHamilton on1July2020pursuantto theterms of theRestricted Long Term Incentive Plan. All unvested shares were accordingly forfeited inaccordance withtheterms of theSkyCity SeniorExecutive Incentive Scheme on26August 2015was on26August 2019,withnosharesvesting to MrHamilton. The finaltesting date relatingto sharesallocated to MrHamilton undertheSeniorExecutive Long Term Equity BasedIncentives Vested inFY20for theChief FinancialOfficer Share RightsPlan. 49,066 SkyCity shareswere issuedto MrAhearneon1July2020pursuantto theterms of theRestricted employment agreementdated 18November 2017. 35,000 SkyCity shareswere issuedto MrAhearneon27November 2019pursuantto theterms of his Equity BasedIncentives Vested inFY20for theChief Operating Officer (3) (2) (1) 2020 30 June2020isoutlinedinthefollowing table: The total remuneration earnedby theChief FinancialOfficer, RobHamilton, for thefinancialyear ended 2020 30 June2020isoutlinedinthefollowing table: The total remuneration earnedby theChief Operating Officer, MichaelAhearne,for thefinancialyear ended Other GroupExecutives’ Remuneration SkyCity Entertainment Group AnnualReportYear Ended30June2020 August 2019. Calculated onthebasisof 52,619SkyCity sharesallocated to Mr Ahearneunderthe2018SkyCity Executive LongTerm Incentive Planin August 2019. Calculated onthebasisof 42,694SkyCity sharesallocated to Mr Hamilton underthe2018SkyCity Executive LongTerm Incentive Planin These were funds sacrificed to theSkyCity Employee HardshipFundasdetailedonpage83of thisannualreport. $1,024,750 $831,470 SALARY SALARY BASE BASE
AND ANNUAL AND ANNUAL SACRIFICE SACRIFICE $102,475 FIXED ANNUAL REMUNERATION FIXED ANNUAL REMUNERATION $83,147 SALARY SALARY LEAVE LEAVE (1) (1)
KIWISAVER KIWISAVER $26,057 $21,316 BENEFITS $10,803 BENEFITS $10,417 OTHER OTHER $780,442 $958,749 SUBTOTAL SUBTOTAL CASH CASH $0 $0 STI STI
DEFERRED DEFERRED PIP OUTCOME PIP OUTCOME $0 $0 STI STI
$166,293 $204,951 LTI GRANT LTI GRANT (3) (2) $166,294 $204,951 SUBTOTAL SUBTOTAL REMUNERATION REMUNERATION $1,163,700 $946,735 TOTAL TOTAL and relevant interests inSkyCity sharesasat30June2020: Officer’s acquisitions anddisposalsof relevant interests inSkyCity sharesduringtheperiodto 30June2020 The following tablesummarisestheChief Executive Officer, Chief Operating Officer andChief Financial Group Executive Shareholdings • • During thefinancialyear ended30June2020,thefollowing LTIvesting calculations were completed: LTI Vesting Calculations (3) (2) Nilinaccordance withtheterms of theChief Operating Officer’s employment agreement. (1) Sharesheldby thePublicTrust. Officer Chief Executive Graeme Stephens GROUP EXECUTIVE Officer Chief Operating Michael Ahearne Officer Chief Financial Rob Hamilton The balance of shareshasbeenforfeited inaccordance withtheterms of the 2009SkyCity Executive LongTerm Incentive Plan. No sharesvested to executives inrespectof the2016allocation. be forfeited inaccordance withtheterms of theSkyCity SeniorExecutive LongTerm Incentive Plan. test was completed duringAugust 2020withnosharesvesting. Allunvested shareswillaccordingly August 2016LTI:thefirstandsecond tests were completed withnosharesvesting. The third(and final) Incentive Plan.Nosharesvested to executives inrespectof the2015allocation; and were accordingly forfeited inaccordance withthe terms of theSkyCity SeniorExecutive LongTerm August 2015LTI:thethird(and final)test was completed with nosharesvesting. Allunvested shares owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially owned Beneficially RELEVANT INTEREST (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) NATURE OF NATURE OFSECURITY Shares (LTI2016) Shares (LTI2018) Shares (LTI2018) Shares (LTI2018) Shares (LTI2019) Shares (LTI2019) Shares (LTI2019) Shares (LTI2015) Shares (LTI2017) Shares (LTI2017) Shares Shares Shares DURING PERIOD TRANSACTION 30/08/2019 30/08/2019 30/08/2019 24/09/2019 23/08/2019 27/11/2019 DATE OF N/A N/A N/A N/A N/A N/A N/A
CONSIDERATION (PER SECURITY) $3.8950 $3.8950 $3.8950 Nil Nil 3.94 (3) (2) (325,000) (DISPOSED) ACQUIRED/ (70,000) 35,000 273,112 42,694 52,619 Remuneration Report TOTAL SECURITIES 30 JUNE2020 HELD AS AT 284,638 320,883 246,726 840,721 70,000 70,000 35,000 131,373 38,570 273,112 42,694 63,374 43,754 52,619 0 0 143
CORPORATE GOVERNANCE 144 upon theirdeparturefromthecompany. payments; and(h)settlementpayments andpayments inlieuof notice withrespectto certain employees Long Term Incentive Plan;(f)thevalue of commencement sharesexpensed duringtheyear; (g)sign-oncash share rights)undertheSkyCity SeniorExecutive LongTerm Incentive Planandthe2018SkyCity Executive year (includingPAYE andPAYG onvested sharerights,butexcluding accrued PAYE andPAYG onunvested vest underthe2019SkyCity Performance Incentive Plan;(e)thevalue of sharerightsexpensed duringthe cash bonuses;(c)healthinsurance premiumsandotherhealthbenefits; (d)thevalue of sharesexpected to For thepurposesof thetable,remuneration includes,whereapplicable (ifany): (b)shortterm (a) salary; 30 June2020,arelisted inthetablebelow. of whichwas inexcess of $100,000andwas paidto thoseemployees duringthefinancialyear ended of thecompany, whoreceived remuneration andotherbenefits intheircapacity asemployees, thevalue The numbersof employees orformer employees of thecompany anditssubsidiaries,notbeingdirectors Employee Remuneration SkyCity Entertainment Group AnnualReportYear Ended30June2020 $350,000–$359,999 $330,000–$339,999 $320,000–$329,999 $310,000–$319,999 $300,000–$309,999 $270,000–$279,999 $260,000–$269,999 $250,000–$259,999 $240,000–$249,999 $230,000–$239,999 $220,000–$229,999 $210,000–$219,999 $200,000–$209,999 $190,000–$199,999 $180,000–$189,999 $170,000–$179,999 $160,000–$169,999 $150,000–$159,999 $140,000–$149,999 $130,000–$139,999 $120,000–$129,999 $110,000–$119,999 $100,000–$109,999 REMUNERATION NUMBER OFEMPLOYEES 30 89 64 57 10 16 18 19 14 13 31 12 12 11 5 4 4 4 3 2 1 1 1 $3,180,000–$3,189,999 $1,690,000–$1,699,999 $1,410,000–$1,419,999 $1,050,000–$1,059,999 $1,030,000–$1,039,999 $840,000–$849,999 $810,000–$819,999 $770,000–$779,999 $760,000–$769,999 $730,000–$739,999 $720,000–$729,999 $690,000–$699,999 $660,000–$669,999 $650,000–$659,999 $600,000–$609,999 $570,000–$579,999 $450,000–$459,999 $440,000–$449,999 $430,000–$439,999 $410,000–$419,999 $390,000–$399,999 $370,000–$379,999 $360,000–$369,999 REMUNERATION TOTAL NUMBER OFEMPLOYEES 449 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Twenty LargestRegistered Shareholdersasat1August 2020 No shareswere heldby thecompany stock. directlyastreasury The sharesarequoted onboththeNZXMainBoardandASX undertheticker ordinary code ‘SKC’. Executive LongTerm Incentive Planand2018SkyCity Executive LongTerm Incentive Plan. aggregate by PublicTrust participantspursuantto onbehalfof eligibleandfuture theSkyCity Senior Total sharesonissueasat1August ordinary 2020were 760,205,209of which1,178,582were heldin Total 20. UBSNomineesPtyLimited 19. Masfen SecuritiesLimited 18. ANZWholesaleAustralasian ShareFund–NZCSD 17. NationalNomineesLimited 16. BNPParibasNominees(NZ)Limited –NZCSD 15. HSBCNomineesA/C NZSuperannuation FundNomineesLimited –NZCSD 14. Citicorp NomineesPtyLimited 13. New Zealand Depository NomineeLimited13. New ZealandDepository 12. BNPParibasNominees(NZ)Limited –NZCSD 11. ANZCustodial New Services ZealandLimited –NZCSD 10. BNPParibasNomineesPtyLtd 9. BNPParibasNomsPtyLtd 8. JPMorganChaseBankNANZBranch –Segregated ClientsAcct –NZCSD 7. HSBCNominees(New Zealand)Limited A/C State Street–NZCSD 6. CitibankNominees(New Zealand)Limited –NZCSD 5. Citicorp NomineesPtyLimited 4. Accident Compensation Corporation –NZCSD 3. HSBCNominees(New Zealand)Limited –NZCSD 2. JPMorganNomineesAustralia Limited 1. HSBCCustody Nominees (Australia) Limited NUMBER OFSHARES Shareholder andBondholder Information 581,533,957 137,576,780 44,365,094 23,470,685 43,885,498 13,408,250 79,722,766 14,686,488 19,954,863 10,017,024 31,474,586 42,817,823 8,905,204 40,841,912 5,750,986 8,346,807 8,216,900 5,629,253 21,405,119 11,616,795 9,441,124 % OFSHARES 76.496% 18.097% 10.487% 3.087% 0.757% 5.836% 5.632% 2.625% 1.098% 5.372% 5.773% 2.816% 1.528% 1.932% 1.764% 1.242% 1.081% 1.318% 0.74% 1.171% 4.14% 145
CORPORATE GOVERNANCE CORPORATE GOVERNANCE CORPORATE
Distribution of Ordinary Shares and Registered Shareholdings as Bonds at 1 August 2020 On 28 September 2015, the company issued 125 million unsubordinated, unsecured, redeemable, fixed rate, seven year bonds at an issue price of $1 per bond. The bonds pay a fixed rate of interest of 4.65% per annum PERCENTAGE OF until the maturity date and are quoted on the NZX Debt Market under the ticker code ‘SKC040’. NUMBER OF NUMBER OF TOTAL ORDINARY SHAREHOLDERS SHARES SHARES IN THE COMPANY On 17 June 2020, SkyCity announced its intention to redeem all the bonds on 28 September 2020 (before the 28 September 2022 maturity date) as part of a comprehensive funding plan to strengthen the 1–1,000 4,895 1,932,108 0.25% company’s balance sheet and secure additional liquidity in response to uncertainty around the impacts of 1,001–5,000 6,851 18,720,463 2.46% COVID-19. The redemption payment of $1.0280 per bond will be paid on 28 September 2020 to registered 5,001–10,000 2,774 19,749,257 2.6% holders of the bonds on the record date of 18 September 2020. The final day of trading for the bonds will be 16 September 2020 (prior to the bonds being suspended at the close of business on that date) and the final 10,001–100,000 2,870 69,855,822 9.19% quotation date for the bonds will be 28 September 2020. > 100,000 153 649,947,559 85.5% Total 17,543 760,205,209 100% Twenty Largest Registered Bondholders as at 1 August 2020
As at 1 August 2020, there were 1,855 shareholders (with a total of 166,234 shares) holding less than a NUMBER OF BONDS % OF BONDS marketable parcel of shares under the ASX Listing Rules, based on the closing share price of A$2.28. 1. FNZ Custodians Limited 14,798,000 11.838%
The ASX Listing Rules define a marketable parcel of shares as a parcel of shares of not less than A$500. 2. Forsyth Barr Custodians Limited 14,666,000 11.733% 3. Custodial Services Limited 9,374,000 7.499% Substantial Security Holders 4. Investment Custodial Services Limited 8,502,000 6.802% The following persons had given notice as at 30 June 2020, in accordance with subpart 5 of Part 5 of 5. Custodial Services Limited 7,274,000 5.819% the New Zealand Financial Markets Conduct Act 2013, that they were substantial security holders in the 6. ANZ Custodial Services New Zealand Limited – NZCSD 5,931,000 4.745% company and held a relevant interest in the number of ordinary shares shown below. 7. Custodial Services Limited 5,686,000 4.549%
DATE OF SUBSTANTIAL RELEVANT INTEREST IN % OF SHARES HELD 8. Citibank Nominees (New Zealand) Limited – NZCSD 5,235,000 4.188% SECURITY NOTICE NUMBER OF SHARES AT DATE OF NOTICE 9. Custodial Services Limited 2,718,000 2.174% The Vanguard Group, Inc 19/12/2018 36,018,413 5.278% 10. Forsyth Barr Custodians Limited 2,417,000 1.934% Investors Mutual Limited 07/02/2020 47,644,678 7.14% 11. Custodial Services Limited 2,323,000 1.858% Commonwealth Bank of Australia 11/02/2020 54,447,148 8.161% 12. JBWere (NZ) Nominees Limited 2,320,000 1.856% Lazard Asset Management Pacific Co 05/05/2020 48,914,000 7.331% 13. Tappenden Holdings Limited 2,000,000 1.6% Sumitomo Mitsui Trust Holdings, Inc 14/05/2020 59,079,433 8.85% 14. Tea Custodians Limited Client Property Trust Account – NZCSD 1,916,000 1.533% BlackRock, Inc 23/06/2020 34,282,378 5.138% 15. Custodial Services Limited 1,412,000 1.13% Accident Compensation Corporation 30/06/2020 45,188,797 6.113% 16. BNP Paribas Nominees (NZ) Limited – NZCSD 1,363,000 1.09%
17. FNZ Custodians Limited 1,287,000 1.03% Substantial security holder notices received since 30 June 2020 can be viewed at www.nzx.com/companies/SKC/announcements. 18. ANZ Bank New Zealand Limited – NZCSD 1,271,000 1.017%
The total number of listed voting securities of SkyCity Entertainment Group Limited as at 30 June 2020 19. Investment Custodial Services Limited 750,000 0.6% was 739,196,806. 20. Liang Zhang & Yingrui Li 500,000 0.4%
Total 91,743,000 73.395%
Distribution of Bonds and Registered Holdings as at 1 August 2020
PERCENTAGE OF NUMBER OF BONDHOLDERS NUMBER OF BONDS TOTAL BONDS ISSUED
1,000–5,000 69 345,000 0.28%
5,001–10,000 189 1,827,000 1.46%
10,001–100,000 640 21,910,000 17.53%
> 100,000 65 100,918,000 80.73%
Total 963 125,000,000 100%
146 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Shareholder and Bondholder Information 147 148 • • • • year ended30June2020,have been removed duringthefinancialyear ended30 June2020: The following detailsincludedintheInterests Register asat30June2019,orentered duringthefinancial by directors duringthefinancialyear ended30June2020aremarked withanasterisk): The following areparticularsincludedinthecompany’s Interests Register asat30June2020(notices given company of apositionheldby adirector inanothernamedcompany orentity. interests. Undersubsection(2),adirector can make disclosureby givingageneral notice to inwriting the Section 140(1)of theNew ZealandCompanies Act 1993requiresadirector of acompany to disclosecertain Disclosure of Directors’ Interests Directors' Disclosures SkyCity Entertainment Group AnnualReportYear Ended30June2020 One RailAustralia Scissor HoldingsPtyLimited T/A Sage GroupHoldingsLtd Sage Automation PtyLtd RSC NomineesPtyLimited Eudunda FarmersLimited Committee C Cobbadah PtyLtd Pty Limited Chapman CapitalPartners Burnside VillagePtyLimited Bank of QueenslandLimited Badge ManagementPtyLimited Aventus Capital Limited ASC PtyLimited AIG Australia Limited Bruce Carter (DeputyChair) WEL Networks Limited Ultrafast FibreLimited Tutanekai Investments Limited Tourism HoldingsLimited Summerset GroupHoldingsLimited RC Custodian Limited Limited Precinct PropertiesNew Zealand Paua Wealth ManagementLimited NZ EquityPartners Company Limited New ZealandRural Land Rob Campbell (Chair) OVID-19 BusinessAdvisory Sue SucklingisnolongerChair of BlincInnovation Limited. Australia HoldingsLimited Partnership oradirector of GeneseeandWyoming Inc;and Bruce Carter isnolongerarepresentative of theManagement Committee of Genesee&Wyoming Rob Campbellbecame Chairof Ultrafast FibreLimited (previously adirector); Rob Campbellisnolongeradirector of KingTideAssetManagementLimited; Investment Committee Chair andShareholder Chair andShareholder Advisory Board Director and Director and Shareholder Shareholder Member* Member* Director* Director* Director* Director* Director* Director Director Director Director Director Director Chair* Chair* Chair* Chair* Chair Chair Chair Owen GamingResearch Aspire ChildCare(Mascot) PtyLtd Jennifer Owen Sue SucklingHoldingsLimited Soltians Group(includingZagLimited) Rubix Limited Jade Software Corporation Limited Jacobsen HoldingsLimited Ombudsman SchemeCommission Insurance &FinancialServices Brannigans Consulting Limited Sue Suckling Perpetuation Trust The Co-operative Foodstuffs Stevenson GroupLimited Starship Foundation Society Southern CrossMedical Care Southern CrossHospitalsLimited Southern CrossHealthTrust Southern CrossBenefits Limited Real ClarityLimited Metcash Limited Protection Trust Members Foodstuffs’ Chorus Limited Murray Jordan Managing Director Director and Shareholder Principal Director* Director* Director* Director Director Director Director Trustee* Trustee Trustee Trustee Chair* Chair* Chair Chair Chair Chair the ASX. SkyCity is listed asa‘ForeignExempt Listing’on annual report. particularly describedonpages 151–152of this sold iftheserestrictionsarebreached,asmore to sharesmay bedisregardedandsharesmay be and provides thatvotes and otherrightsattached of sharesinthecompany incertain circumstances the constitution places restrictionsonthetransfer nature of thecompany’s constitution. Inparticular, designated as‘Non-Standard’by theNZXdueto the SkyCity Entertainment GroupLimited hasbeen Market (undertheticker code ‘SKC040’). code ‘SKC’) andbondsquoted ontheNZXDebt Main BoardandASX (ineachcase, undertheticker sharesquoted onboththeNZX issuer withordinary SkyCity Entertainment GroupLimited isalisted STOCK EXCHANGE LISTINGS Company Disclosures acquisitions anddisposalsof relevant interests inSkyCity sharesduringtheperiodto 30June2020: Directors disclosed,pursuantto section148of theNew ZealandCompanies Act 1993,thefollowing Disclosure of Directors’ Interests inShareTransactions senior managers. cover actsoromissionsof outtheirdutiesandresponsibilitiesasdirectors thosepersonsincarrying and Indemnities have beengiven to directors andseniormanagersof thecompany anditssubsidiariesto Directors’ andSeniorManagers’Indemnities (5) Sharesheldby thetrustees of Endeavour Trust. (4) Sharesheldby thetrustee of theOwen &PaullRetirementFund. (3) Sharesheldby thetrustees of The SueSucklingFamilyTrust. (2) Sharesheldby Tarquay PtyLimited ontrustfor Tarquay Superannuation Fund. (1) Sharesheldby FNZCustodians Limited onbehalfof Tutanekai Investments Limited. Directors disclosedthefollowing relevant interests inSkyCity sharesasat30June2020: Disclosure of Directors’ Interests inShares (2) Sharesheldby thetrustees of Endeavour Trust. (1) Sharesheldby FNZCustodians Limited onbehalfof Tutanekai Investments Limited. Murray Jordan Jennifer Owen Sue Suckling Bruce Carter Murray Jordan Rob Campbell Rob Campbell DISPOSAL DURINGPERIOD DATE OFACQUISITION/ 02/09/2019 23/08/2019 from 11November 2019. of SkyCity Entertainment GroupLimited effective ceased toRichard Didsbury holdoffice asadirector Murray Jordan Jennifer Owen Sue Suckling Bruce Carter (DeputyChair) Rob Campbell(Chair) 30 June2020: of SkyCity Entertainment GroupLimited asat The following personsheldoffice asdirectors SKYCITY ENTERTAINMENT GROUPLIMITED $3.8448 pershare $3.9573 pershare CONSIDERATION ACQUIRED/(DISPOSED) BENEFICIALLY HELD Directors' Disclosures SHARES SHARES 35,000 70,928 73,698 17,200 39,014 64,618 39,941 (5) (4) (3) (2) (1) (2) (1) 149
CORPORATE GOVERNANCE 150 Limited asat30June2020: of subsidiariesof SkyCity Entertainment Group The following personsheldoffice asdirectors Companies Subsidiary SUBSIDIARIES SkyCity Entertainment Group AnnualReportYear Ended30June2020 Company Directors Company Directors Company Directors Companies Directors Companies Directors Subsidiaries Overseas Companies Directors Subsidiaries New Zealand SkyCity Management(UK)Limited Steve Salmon,MichaelAhearne SkyCity MaltaHoldingsLimited Steve Salmon,WHManagementLimited SkyCity MaltaLimited Steve Salmon,JoeBorg SkyCity Treasury Australia PtyLimited SkyCity Australia PtyLimited SkyCity Australia Finance PtyLimited SkyCity Adelaide PtyLimited LPL MediaPtyLimited Bruce Carter, David Christian Graeme Stephens, JoWong, SkyCity Investment HoldingsLimited Horizon Tourism Limited Graeme Stephens, JoWong TNZ EsportsLimited SkyCity Ventures Limited SkyCity PropertiesVictoria StLimited SkyCity PropertiesAlbertStLimited SkyCity PropertiesLimited SkyCity ProjectsLimited SkyCity PrecinctLimited SkyCity ManagementLimited SkyCity Investments Queenstown Limited SkyCity Investments Australia Limited SkyCity International HoldingsLimited SkyCity HoldingsLimited SkyCity Hamilton Limited SkyCity Enterprises Limited SkyCity Development Limited SkyCity CasinoManagementLimited SkyCity Auckland Limited SkyCity Auckland HoldingsLimited SkyCity Action ManagementLimited Sky Tower Limited Queenstown CasinosLimited Otago CasinosLimited Lets Play Live MediaLimited Horizon Tourism (New Zealand)Limited Centre Limited New ZealandInternational Convention Cashel AssetManagementLimited Graeme Stephens, JoWong in lightof thechallengesposedby COVID-19, NZX ListingRules3.5.1,3.5.3,3.6.1 and3.12.1,which, issued by NZXdated 3April2020 in relationto SkyCity hasalsoreliedonaclasswaiver andruling the period. to have effect orwere notrelieduponduring period preceding thebalance date hadceased All otherwaivers granted priorto the12-month • • preceding thebalance date: by thecompany during,the12-monthperiod or ASX (as thecase may be)within,orreliedupon Rules were either granted andpublishedby NZX The following waivers fromtheNZXandASX Listing Stock Exchanges Waivers fromtheNew ZealandandAustralian the financialyear ended30June2020. any company otherdirector of asubsidiary during No director’s fees were paidto, orreceived by, • • paid director’s fees of: For thefinancialyear ended30June2020,SkyCity equity securitiesof thatclassatthetimeof offer. to $50,000andthetotal cap from5%to 30%of issues underaSharePurchasePlanfrom$15,000 to increasethecap perregistered holderfor Share PurchasePlanundertheNZXListingRules basis until31October 2020,thedefinition of a 19 March2020,whichamended,onatemporary a classwaiver andrulingissuedby NZXdated in respectof thesamematters; and re-documents priordecisionsof NZXRegulation 2019andeffectively Rules on1January following theintroductionof new NZXListing of thisannualreport.The waiver was granted of thoseprovisions aresetoutonpages151–152 out inthecompany’s constitution. Furtherdetails of sharesinaccordance withtheprovisions set suspending voting rightsorrequiringatransfer preventthat rulewould otherwise SkyCity from quoted financialproduct)to theextent that or varied by reasononlyof atransfer of that a quoted financialproductmay becancelled provides thatnobenefit orrightattachingto a waiver fromNZXListingRule8.1.5(which on 17September 2019,NZXgranted SkyCity directorship of SkyCity MaltaHoldingsLimited. for professional provided services inrelationto its €6,000 (plusVAT) to WHManagementLimited SkyCity MaltaLimited; and Borg inrelationto hisdirectorship of professional provided services by Joe €12,000 (plusVAT) to WHPartnersfor • • gaming activitiesthat: SkyCity needsto ensure whenitparticipates in • • • the application of the: provisions whichareincludedto take into account The company’s constitution contains various Limitations onAcquisitions Shares of Ordinary 2020 annualmeetingon16October 2020. be nobondholdersasatthedate of thecompany’s impacts of COVID-19 and,accordingly, therewill liquidity inresponseto uncertainty aroundthe the company’s balance sheetandsecureadditional part of acomprehensive planto funding strengthen (before the28September 2022maturitydate) as to redeemallthebondson28September 2020 on 17June2020,SkyCity announced itsintention However, asnoted onpage147of thisannualreport, to attend theannualmeetingof shareholders. debt securitiesalthoughbondholdersarewelcome There arenovoting rightsattachedto SkyCity’s resolution putto theshareholders. the rightto cast onevote pershareonapollof any vote atameetingof shareholders.Holdershave Each sharegives theholderarightto attend and Voting RightsAttached to Securities financial statements). interim year andfull (including preliminary to prepareandreleaseresultsannouncements provides issuerswithupto anadditional30days jurisdictions. approvals orregulatory inthose statutory activities withoutobtainingany necessary influence orcontrol over SkyCity oritsbusiness that personsdonotgainpositionsof significant there areappropriate protections to ensure share dealings)of ashareholder;and not affected by theidentityoractions(including its suitabilityto dosoinaparticularjurisdictionis such actionasmay to benecessary ensurethat it hasthepower underitsconstitution to take subsidiaries may holdacasino licence. other jurisdictioninwhichSkyCity orany of its operation andregulationof casinos inany legislation providing for theestablishment, Casino Act 1997(SouthAustralia); and Gambling Act 2003(New Zealand); licence holder. transferee beinganassociated personof thatcasino transferee andthepersonsassociated withthat shareholding to alevel thatwillnotresultinthe as may to benecessary reduce theircombined by any personsassociated withthattransferee, number of thesharesheldby thetransferee and to theproposedtransfer, SkyCity may sellsuch authoritydoesnotgrantIf aregulatory itsapproval • • • • transferee aresuspendedunlessanduntileither: transferee andthepersonsassociated withthat then thevotes attachingto allsharesheldby the – • • persons associated withthattransferee: transfer of sharesresultsinthetransferee, andthe Clause 11.12of theconstitution provides thatifa company to achieve this. provisions restrictingtheacquisition of sharesinthe Accordingly, the constitution contains thefollowing approved authorities. by theregulatory a higherpercentage, thelowest suchpercentage and thepersonsassociated with that transferee authorities approve inrespectof thetransferee holding falling below 5%or,iftheregulatory SkyCity sharesaswillresultintheircombined that transferee disposeof suchnumberof the transferee andthepersonsassociated with prejudice any casino licence; or registration of theproposed transfer willnot the Boardof thecompany issatisfiedthat applicable casino licence holder;or transferee, asanassociated casino personof any together withthepersonsassociated withthat its approval isrequiredapproves thetransferee, authoritywhichdeterminesany that regulatory not needed;or authorityadvisesthatapprovaleach regulatory is inSkyCity; and – they alreadyholdmorethan5%of theshares beyond 5%if: increasing theircombined holdingfurther holding morethan5%of thesharesinSkyCity; or casino personof any casino licence holder, relevant authorityasanassociated regulatory the transferee hasnotbeenapproved by the Company Disclosures 151
CORPORATE GOVERNANCE The power of sale can only be exercised if SkyCity The New Zealand Overseas Investment Act 2005 has given one month’s notice to the transferee of its and the Overseas Investment Regulations 2005 intention to exercise that power and the transferee regulate certain investments in New Zealand by has not, during that one-month period, transferred overseas persons. In general terms, the consent the requisite number of shares in SkyCity to a of the New Zealand Overseas Investment Office person who is not associated with the transferees. is likely to be required when an ‘overseas person’ acquires shares or an interest in shares in SkyCity During the financial year ended 30 June 2020, Entertainment Group Limited that amount to 25% the Board considered all such transfers and was or more of the shares issued by the company or, if satisfied in each case that the registration of the overseas person already holds 25% or more, the the relevant transfer would not prejudice any acquisition increases that holding. casino licence. The New Zealand Commerce Act 1986 is likely Donations to prevent a person from acquiring shares in Donations of $104,244 were made by the SkyCity if the acquisition would have, or would be company during the financial year ended likely to have, the effect of substantially lessening 30 June 2020 ($57,421 during the financial year competition in a market. ended 30 June 2019). Escrow and Buy Back Arrangements
Other Legislation and Requirements SkyCity Entertainment Group Limited has no General limitations on the acquisition of securities securities subject to an escrow arrangement. imposed by the jurisdiction in which SkyCity is From time to time, the Public Trust acquires shares incorporated (ie. New Zealand law) are outlined in in the company on-market for the purposes of the following paragraphs. the company's long term incentive employee Other than the provisions included in the plans as detailed in the Director and Employee company's constitution, the only significant Remuneration section in this annual report. restrictions or limitations in relation to the In addition, SkyCity (or a nominee or agent of acquisition of securities are those imposed by SkyCity) may, from time to time, acquire existing New Zealand laws relating to takeover, overseas shares in the company to satisfy its obligations to investment and competition. participating shareholders under the company’s Dividend Reinvestment Plan established in The New Zealand Takeovers Code creates a general February 2011. rule under which the acquisition of more than 20% of the voting rights in SkyCity, or the increase of an Credit Rating existing holding of 20% or more of the voting rights As at the date of this annual report, SkyCity in SkyCity, can only occur in certain permitted ways. Entertainment Group Limited has a Standard & These include a full takeover offer in accordance Poor’s BBB– rating (negative outlook). with the Takeovers Code, a partial takeover offer in accordance with the Takeovers Code, an acquisition approved by an ordinary resolution, an allotment approved by an ordinary resolution, a creeping acquisition (in certain circumstances), or compulsory acquisition if a shareholder holds 90% or more of the shares in the company.
152 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 The Federal Street dining precinct at SkyCity Auckland. Financial Statements for the Year Ended 30 June 2020
These financial statements were signed on 2 September 2020 on behalf of the Board of directors of SkyCity Entertainment Group Limited by:
Our financial Rob Campbell Bruce Carter Chair Deputy Chair and Chair of the performance Audit and Risk Committee
155
FINANCIAL STATEMENTS
Independent auditor’s report e uditIndependent tters auditor’s report Independent auditor’s report ey audit matters are those matters that, in our pro essional judgement, were o most signi icance in our o the shareholders o the shareholders o y ity o ntertainment y ity ntertainment roup imited roup imited audit o the o inancial the shareholders statements o o the y ity current year. ntertainment hese matters roup were addressed imited in the context o our audit o the inancial statements as a whole, and in orming our opinion thereon, and we do not provide a We have auditedWe have the audited inancial the statements inancial statements on pages on pagesto which to comprise which comprise separate opinionWe have on audited these matters. the inancial statements on pages to which comprise ● the balance● the sheet balance as at sheet une as at une ● the balance sheet as at une ● the income● the statement income statement or the year or then the yearended then ended Description● ofthe the income key audit statement matter or the year thenHow ended our audit addressed the key audit matter ● the statement● the statemento comprehensive o comprehensive income or income the year or then the yearended then ended A ountin ● forthe t e statement fire o comprehensive income or the year then ended s disclosed in notes a , h and to the inancial We have per ormed a detailed assessment o the ● the statement● the statemento changes o in changes e uity or in e uitythe year or then the yearended then ended ● the statement o changes in e uity or the year then ended statements, on ctober , there was a accounting implications o the ire, with the ● the statement● the statemento cash lows o cash or the lows year or then the yearended then and ended and signi icant● ire theat the statement construction o cash site o lows the ew or the yearinvolvement then ended o our and technical accounting specialists, by ● the notes● tothe the notes inancial to the statements, inancial statements, which include which a summincludeary a summo signi icantary o signi icant accounting accounting policies. policies. ealand International● the notes onvention to the inancial entre I . statements, ●which Reviewing include the a summ ew ealandary o signi icant International accounting policies. he ire caused extensive damage to the I and onvention entre roject and icensing relatively minor damage to the ori on otel. greement, uilding Wor s Insurance contract ur opinionOur opinion everal accountingOur opinion implications have arisen as a and roject peci ic ontract Wor s olicy to In our opinion,In our the opinion, accompanying the accompanying inancial statements inancial statements o y ity o ntertainment y ity ntertainment roup imited roup the imited the result andIn the our roup opinion, also re erredthe accompanying to throughout inancial as statementsassess all theo y ityrelevant ntertainment acts and circumstances roup imited the ompany , ompany , including itsincluding subsidiaries its subsidiaries the roup , the present roup , airly, present in all airly, material in all respects, material therespects, inancial the inancial y ity , aided ompany , by their including independent its subsidiariestechnical the roup ,relevant present to the airly, technical in all accounting material implications respects, the inancial position o the roup as at une , its inancial per ormance and its cash lows or the year then accountingposition experts, o have the had roup to exercise as at une ,● its inanReviewingcial per ormance management’s and analysis its cash and lows the or the year then position o the roup as at une , its inancial per ormance and its cash lows or the year then considerable pro essional judgement in determining ended in accordanceended in accordance with ew with ealand ew uivalents ealand uivalents to International to International inancial inancialReporting Reporting tandards tandards ended in accordance with ew ealand uivalentsindependent to International technical accounting inancial advice Reporting they tandards I R and International inancial Reporting tandards I R . the appropriateI R accounting and International treatment. inancial he most Reporting tandardsreceived I R . I R and International inancial Reporting tandards I R . signi icant judgements and estimates have been disclosed within note a o the inancial ● Reviewing legal advice which supports the statements. assessment that y ity is the principal in the sis forBasis opinion for opinion Basis for opinion insurance relationship and We conducted our audit in accordance with International tandards on uditing ew ealand I s he accountingWe conducted treatment ouro the audit insurance in accordance recovery with International tandards on uditing ew ealand I s We conducted our audit in accordance with International tandards on uditing ew ealand I s or the damage is dependent on the relationship ● ssessing the resulting accounting treatment and International and International tandards tandards on uditing on I s . uditing ur I s . responsibilities ur responsibilities under those under standards those standards are are and International tandards on uditingagainst I s . the ur relevant responsibilities accounting standard,under those standards are urther described in the Auditor’s responsibilities for the audit of the financial statements section o our between y ity, urther thedescribed insurers in and the letcher Auditor’s responsibilities for the audit of the financial statements section o our urther described in the Auditor’s responsibilities for t e udit of t e fin n i l st te ents section o our onstruction ompany imited . It is the considering any counter actual in ormation and report. report. roup s viewreport. that y ity is the principal in the scenarios. We believe that the audit evidence we have obtained is su icient and appropriate to provide a basis or insuranceWe relationship believe that and there orethe audit receiv evidencees, and we haveWe obtained obtained is management’s su icient and expert’s appropriate independent to provide a basis or We believe that the audit evidence we have obtained is su icient and appropriate to provide a basis or has control over, all insurance proceeds. he roup assessment o the extent o damage and insurance our opinion. our opinion. our opinion. has considered the credit standing o the insurers recovery. We engaged our own in house real estate We are independent o the roup in accordance with ro essional and thical tandard International and concludedWe are that independent the insurance o receivable the roup in accordanceexperts withto assist ro essional in our assessment and thical and challenge tandard o the International We are independent o the roup in accordance with ro essional and thical tandard ntern tion l valuation methodologies and assumptions used by Code of Ethics for Assurance Practitioners (including International Independence Standards) (New recognisedCode is ully of recoverable.Ethics for Assurance Practitioners (including International Independence Standards) (New ode of t i s for Assur n e r titioners in ludin ntern tion l ndependen e t nd rds e management’s expert. In conjunction with our experts, Zealand) issued by the ew ealand uditing and ssurance tandards oard and the he extentZealand) o damage and insurance issued recoveryby the ew has ealand uditing and ssurance tandards oard and the e l nd issued by the ew ealand uditing and ssurance tandards oard and the we International Code of Ethics for Professional Accountants (including International Independence been estimatedInternational by an independent Code of Ethicsexternal for expert Professiona l Accountants (including International Independence ntern tion l ode of t i s for rofession l A ount nts in ludin ntern tion l ndependen e engaged by the roup. s a result, an insurance ● onsidered whether the reports on a whole, and Standards) issued by the International thics tandards oard or ccountants I ode , and we Standards) issued by the International thics tandards oard or ccountants I ode , and we t nd rds issued by the International thics tandards oard or ccountants I ode , and we recovery o . million has been recognised as the ey components included within, are have ul illed our other ethical responsibilities in accordance with these re uirements. have ul illed our other ethical responsibilities in accordance with these re uirements. have ul illed our other ethical responsibilities in accordance with these re uirements. I ire related income and . million o consistent with what we would expect capitalised wor in progress has been derecognised, ur irm carries out other non audit services or the roup in the areas o tax compliance, tax advisory, ur irm carries out other non audit services● or oted the the roup act thatin the the areas baseline o tax igures compliance, upon which tax advisory, ur irm carries out other non audit services or the roup in the areas o tax compliance, tax advisory, o set by the release rom the de erred licence value the extent o damage and insurance recovery have and the licensing o a so tware tool or subsidiary statutory inancial statement preparation. ur irm and the licensing o a so tware tool or subsidiary statutory inancial statement preparation. ur irm and the licensing o a so tware tool or subsidiary statutory inancial statement preparation. ur irm liability o . million. been estimated remain subject to a material level also carries out other assurance and agreed upon procedure services in relation to compliance with also carries out other assurance and agreed upon procedure services in relation to compliance with also carries out other assurance and agreed upon procedure services in relation to compliance with xpert investigation in respect o the damage o uncertainty given the limited in ormation ban ing and covenants the allocation o ommunity rust revenue the roup s application or the ban ing and covenants the allocation o ommunity rust revenue the roup s application or the ban ing and covenants the allocation o ommunity rust revenue the roup s application or the sustained and remediation wor s re uired remains available and I wage subsidy extension scheme and the reconciliation o normalised results to reported ongoing and I as a result, wage the subsidyestimates extension are highly scheme and the reconciliation o normalised results to reported I wage subsidy extension scheme and the reconciliation o normalised results to reported ● oted that i the integrity o the structural steel is results. he provision o these other services has not impaired our independence as auditor o the roup. sensitive andresults are .based he onprovision limited in ormation.o these other he services hascompromised not impaired this wouldour independence result in a material as auditor o the roup. results. he provision o these other services has not impaired our independence as auditor o the roup. most signi icant assumptions, and associated ris to di erence to the resulting write o o capitalised the overall damage assessment and related wor in progress, release rom the de erred licence insurance recovery, relate to the extent o damage value liability and insurance recovery income and to the structural steel which is still under validation receivable. the percentage o contingency included in the estimates and the timeline or remediation.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand ri e ter ouse oopers T: +64 (9) 355 8000, usto s F: +64 treet (9) 355 est 8001, ri te www.pwc.com/nz Au l nd e e l nd T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz p o n PwC
156 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Independent Auditor's Report 157 FINANCIAL STATEMENTS
DescriptionIndependent of the key audit matter auditor’s How report our audit addressed the key audit matter DescriptionIndependent of the key audit matter auditor’sHow report our audit addressed the key audit matter here is signi icant o the shareholders estimation uncertainty o y ity inherent ntertainment dditionally, e roup have imited ● ntered o into the a newshareholders million o re ol ing y ity ntertainment roup imited in the balances recorded, and the amounts ● ssessed the pro essional competence, credit facilit maturing on ecember recognised in the income statement pertaining to We have audited the inancial statements on pagesindependence to and which ob ectivity comprise o the Group s Gi en the Weimpact have of audited the and inancial the significant statements on pages to which comprise the accounting implications o the ire damage and insurance recovery estimate expert changes to the capital and funding structure, both During the● year, the the balance Cro n agreedsheet as to atan extension une and technical accounting expert prior and subse uent● the balance to unesheet , as at we une o the Completion● the oincomeng top statement Date included or the in the year then● ended Checked the mathematical accuracy o the considered● this the to be income a ke audit statement matter or the year then ended e ealand nternational Convention Centre ● the statement o comprehensive income orunderlying the year calculations then ended o the ire related ● the statement o comprehensive income or the year then ended ro ect and icensing greement he revised date ad ustments is no anuary● the statement and completion o changes is expected in e uity or the year then ended p ir ent● onsider tionsthe statement in o respe t changes of ood ill in e uity or the year then ended ● ssessed the recoverability o the insurance be ore this date nd ot er int n ible ssets in ludin t e i p t of ● the statement o cash lows or the year thenrecoveries ended recognised and giving consideration to the ● the statement o cash lows or the year then ended and credit risk o the respective insurers ● the notes to the inancial statements, which include a summary o signi icant accounting policies. t une● , the the notes carr ing to the amount inancial of goodwill statements, or which the ucklandinclude a and summ amiltonary o G s,signi icant we performed accounting policies. ● evie ed the extension agreement or the long and casino licences totalled million une the following audit procedures stop date included in the e ealand Our opinion Our million opinion his is after an impairment ● ompared the forecast cash flows used for to nternational Convention Centre ro ect and charge of million that has been recorded the oard appro ed business plan In our opinion, the accompanying inancial statements icensing greo y ityement ntertainmentand roup imited the against theIn delaide our opinion, casino the licence accompanying une inancial statements o y ity ntertainment roup imited the ● nderstood the process undertaken b nil impairment ompany , including its subsidiaries the roup ,● Considered present the airly, ade uacy in all o material the related respects, inancial the inancial ompany , including its subsidiaries the roup ,management present airly,to prepare in all the material forecast respects, the inancial position o the roup as at une , its inanstatementcial per ormance disclosures and its cash lows or the year then efer to noteposition of theo the financial roup statements as at une , its inancial per ormance and its cash lows or the year then ● onsidered and challenged ke assumptions, in ended in accordance with ew ealand uivalents to International inancial Reporting tandards ccountingended standards in accordance re uire an withentit ew to assess ealand at uivalentsparticular to International those underpinning inancial the earnings Reporting before tandards pit l stru tureI R and nd International fundin li uidit inancial in ludin Reporting tandards I R . the end ofI R each reporting and International period whether inancial there is Reporting tandardsinterest, ta , I R . depreciation and amortisation t e i p t of an indication that an asset ma be impaired here margin and the potential impacts of is also a re uirement to perform an annual s at uneBasis for the opinion Group s net debt as e have per ormed the ollo ing audit procedures impairmentBasis assessment for opinion of goodwill and other ● Engaged our auditor’s valuation expert to assess million ( We une conducted our auditmillion) in accordance he Group s with International tandards on uditing ew ealand I s indefinite Welife intangibleconducted assets our audit in accordance with International tandards on uditing ew ealand I s ● evie ed agreements with the Group’s banking management’s valuation conclusion and key borro ings comprise and Internationala syndicated bank tandards acility, on uditingand I s . U ur partners responsibilities to understand under the revised those standards are and International tandards on uditing I s . ur responsibilities under those standards are United tates rivate lacements (U ) and a he Group performed an impairment assessment assumptions, including the pre ta discount rates urther described in the Auditor’s responsibilitiesarrangements for the audit and actionsof the financial the Group statements has taken, section o our for the uckland urther and described amilton in cash the Auditor’sgenerating responsibilities and terminalfor the audit growth of rates, the financial based on statementstheir section o our retail bond s disclosed in the inancial statements, including renegotiation o existing debt acilities, certain acilitiesreport. expire ithin months a ter units G s ,report. both of which include indefinite life e perience and e ternal e idence establishment o ne debt acilities and agreeing intangible assets une We believe that the audit evidence we have obtained aivers is rom su icient meeting and inanc appropriateial loan covenants to provide in a basis or We believe that the audit evidence we have● obtained ompared is su icient historical andperformance appropriate against to budget,provide a basis or n assessment of the alue in use using discounted in estigated material differences and considered e er to notesour opinion. (a), (h) , , and o the uture periods our opinion. inancial statements cash flow forecast models was made for each the impact on future cash flow forecasts and ● evie ed documentation relating to the e uity of these G s anagement sWe are updated independent orecast scenarioso the roup, to in accordanceraise with hich ro essional occurred prior and and thical subse uent tandard to International We are independent o the roup in accordance● erformed with ro essional a sensiti it and anal sis thical on the tandard forecast International n addition, an impairment assessment was also account orCode the impactsof Ethics o forC D Assurance on the Practitioners (includingbalance date International and tested the Independence receipt o unds Standards) and (New Code of Ethics for Assurance Practitioners (includingcash flows International to determine whether Independence a reasonabl Standards) (New prepared in relation to the delaide G which business, indicatedZealand) that it as issued reasonably by the possible ew ealand uditingissue o shares and ssurance tandards oard and the Zealand) issued by the ew ealand uditingpossible changeand ssurance in assumptions tandards could oardlead to andan the that breaches in inancial covenants in respect o the includes a finite life intangible asset, the delaide impairment International Code of Ethics for Professiona● l Accountants eper ormed the(including Group s calculationInternational o orecast Independence casino licence International his was prepared Code of as Ethics the Group for Professiona l Accountants (including International Independence debt acilities could occur on the test date o or the delaide G , we performed the following Standards) issued by the International thics compliance tandards ith oard inancial or ccountants covenants at I each ode , and we consideredStandards) there to be indicationsissued by thethat International the G ma thics tandards oard or ccountants I ode , and we December he Group has subse uently compliance date ithin the next months ( audit procedures received covenanthave ul illed aivers our or other the ethical December responsibilities in accordance with these re uirements. be impaired,have including ul illed the our impact other of ethical the responsibilities in accordance with these re uirements. December and une ) global pandemic on the business he Group ● ompared the forecast cash flows used for to test urperiod irm rom carries their bankingout other and non U audit services or the roup in the areas o tax compliance, tax advisory, ur irm carries out other non audit services orthe the oard roup appro ed in the business areas o plan tax compliance, tax advisory, partners ● ssessed and challenged the reasonableness o the prepared a model under the air alue less and the licensing o a so tware tool or subsidiary orecast statutory cash lo s inancial to assess statement the level preparation. o ur irm osts of isposaland the licensing methodo a so tware and engaged tool or subsidiary● onsidered statutory the inancial fi e ear forecaststatement included preparation. in ur irm o addressalso undin carriesg li uidity out other concerns, assurance the Group and agreed uponforecasting procedure risk, services including in management’s relation to compliance with Deloitte (management’salso carries out valuation other assurance expert) to and agreed uponmanagement’s procedure expert’s services valuation, in relation as adoptedto compliance by with announced and executed a million e uity ban ing and covenants the allocation o consideration ommunity o rust the impact revenue o C D the roup s on the application or the perform anban ing independent and aluation covenants of the delaide the allocation o the ommunity oard rust revenue the roup s application or the raise, comprising a million institutional business G placement I (executed inwage une subsidy ) and extension a scheme and the reconciliation o normalised results to reported I wage subsidy extension scheme ● and nderstood the reconciliation the process o undertaken normalised b results to reported million shareresults purchase. he planprovision (executed o these in uly other services● has er ormed not impaired additional our sensitivities independence on the as orecast auditor o the roup. n preparingresults the s. he, managementprovision o madethese a other services hasmanagement not impaired to prepa ourre independence the forecast as auditor o the roup. ) ubse uent to year end, the Group also has cash lo s and considered possible alternate number of ke assumptions that impact the CGUs’ ● ompared historical performance against budget, scenarios, taking into consideration the reco erable alue his is a ke focus of our audit ● btained an mendment and aiver rom its in estigated material differences and considered uncertainty o the current environment, including due to the inherent udgement in assessing the impact on future cash flow forecasts banking partners to extend the maturity o t o the impact o C D and impairments, including the impact of on tranches, add an additional tranche o the assumptions that the Group s assessment is ● onsidered and challenged ke assumptions million and provide urther covenant relie or ● Considered the appropriateness o the Group s including the impacts of , and the ke disclosures based on he most significant of these udgements testing periods up to and including une are disclosed in note dri ers of growth and o erall business performance, with reference to e ternal e idence n relation to the uckland and amilton G s, the where possible ● btained aiver etters rom its U partners reco erable amount e ceeds the carr ing amount to provide covenant relie or testing periods up and no impairment has been recorded to and including une and
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
PwC PwC
158 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Independent Auditor's Report 159 FINANCIAL STATEMENTS
DescriptionIndependent of the key audit matter auditor’s How report our audit addressed the key audit matter DescriptionIndependent of the key audit matter auditor’sHow report our audit addressed the key audit matter n relation o to thethe delaide shareholders G , an impairment o y ity of ntertainment● Engaged our roup auditor’s imited valuation expert to: teri l un ert int o the shareholders in in est ent propert o y ity ntertainment roup imited lu tions rel tin to $ . million as recorded hich roadl − evie and challenge e assumptions, represents the difference et een the mid point of Given the subjectivity involved in determining We have audited the inancial statements on pagesincluding to the whichdiscount comprise and terminal gro th s disclosedWe in have note audited o the the inancial inancial statements, statements on pages to which comprise the valuation range (determined by management’s rates ased on their experience and external the Group’s investment properties total $72.4 valuations or individual properties, including valuation expert● the under balance the sheet as method at une and mar et evidence million, o ●which the balance million sheet is measured as at uneat air alternative assumptions and valuation methods, there adopted by the Directors) and the CGU’s carrying value as at une ( une : is a range o values that could be considered reasonable ● the income statement or the year then ended − ● the income statement or the year then ended value at une 2 2 . ssess the reasona leness of the 2 cost of million) he remaining million o investment he impact o C ID at une has resulted ● the statement o comprehensive income or thedisposal year then assumption ended applied under the property relating● the to statement the ICC o car comprehensive par is held at incomein material or the valuation year then uncertainty ended and a wider range o method ased on their experience and cost as disclosed in note (d) o the inancial possible values than at past valuation points ● the statement o changes in e uity or the yearindustr then ended no ledge and ● the statement o changes in e uity or the year then ended statements We considered the ade uacy o the disclosures made in ● the statement o cash lows or the year then ended and ● the statement o cash lows or the year then ended and − valuate the final conclusions reached ith The valuation of the Group’s investment properties note (h) and note to the inancial statements, which ● the notes to the inancial statements, which includereference a summ to externalary o mar et signi icant evidence. accounting policies. held at air● value the is notesinherently to the subjective inancial and statements, the sets which out includethe signi icant a summ assumptions ary o signi icant hese notes accounting policies. ● In conjunction with our auditor’s valuation expert, explain that there is material estimation uncertainty valuations were per ormed by an independent e assessed the valuation report prepared registered valuer he Group has adopted the and there has been a material impact on the valuation Our opinion management s valuation expert and considered e assessed valuesOur determinedopinion by the valuer o investment properties We discussed with In our opinion, the accompanying inancial statementssensitivities o over y ity the model. ntertainment n doing so, roup e met imited the he valuerIn ta es our intoopinion, account the property accompanying speci ic inancialmanagement statements and o obtained y ity ntertainmentsu icient appropriate roup audit imited the ompany , including its subsidiaries the roup ,with presentmanagement’s airly, valuationin all material expert respects, to understand the inancial in ormation ompany , such as the including contracted its tenancy subsidiaries the evidence roup , topresent demonstrate airly, thatin all management’s material respects, the inancial position o the roup as at une , its inanand challengecial per ormance their approach and itsand cash assumptions lows or andthe year then agreementsposition and rental o the income roup earned as at by the une asset , assessment its inancial o the per ormance suitability o and the itsinclusion cash lows o the or the year then ended in accordance with ew ealand uivalents● nderstood to International the impacts of inancial the delaide Reporting expansion tandards he valuerended has used in accordancethe income capitalisation with ew ealand uivalentsvaluation in to the International balance sheet inancialand disclosures Reporting made in tandards the inancial statements was appropriate I R and International inancial Reporting tandardscurrentl in I R . progress on future performance and approach I R and has and applied International assumptions inancial in relation Reporting to tandards I R . cash flo s. capitalisation rates and mar et rent, based on In assessing the valuation o investment properties, we or all G s, e assessed the appropriateness of mar et data and transactional evidence, where per ormed the audit procedures outlined below: Basis for opinion disclosures made in the financial statements including available Basis hese assumptions for opinion were adjusted at ● eviewed the valuation reports rom the We conducted our audit in accordance withthose International for e assumptions tandards and on sensitivities. uditing ew ealand I s une We to recogniseconducted the our estimated audit in impact accordance o with Internationalindependent tandardsvaluation expert on uditing or investment ew ealand I s C ID and International tandards on uditing I s . ur responsibilities under those standards are and International tandards on uditingproperties I s . ur held responsibilities at air value under those standards are urther described in the Auditor’s responsibilities for the audit of the financial statements section o our s at the urther une described valuation in the date, Auditor’s the responsibilities● Engaged for t ourhe audit own in of house the financial real estate statements valuation section o our A ountin for t e s le of t e Au l nd r p r report. independentreport. registered valuer included a teri l expert to assess the methodologies and criti ue on ession lu tion un ert int clause in their report as a and challenge the ey assumptions used by the n ugustWe 2 ,believe the that uc land the audit ar evidence ar we have e obtained read the isfinal su icient agreement and et een appropriate it to a providend a basis or result o theWe C ID believe that pandemic the audit his evidence clause we have obtainedvaluer to is mar et su icient evidence and appropriate and current mar etto provide a basis or oncessionour transaction opinion. as completed. acquarie acquarie and independentl assessed and challenged highlightsour the di icultiesopinion. in underta ing valuations conditions, including the appropriateness o the rincipal inance Group acquarie too over the the accounting for the transaction, ith the involvement due to the absence o relevant transactional assumptions made or C ID impacts and evidence that demonstrates current mar et pricing operation Weand aremanagement independent of the o main the roup site car in par accordance of our technical with ro essional accounting andspecialists. thical tandard International We are independent o the roup in accordance● or with all properties ro essional held andat air thical value, tandardthe carrying International here ore, less certainty and a higher degree o and an initialCode of restrictedEthics for use Assurance car Practitioners par s at We (including read management’s International paper Independenceand the independent Standards) (New Code of Ethics for Assurance Practitioners (includingvalue was International agreed to the external Independence valuation Standards) reports, (New caution should be attached to the point estimate that time. Zealand) pproximatel issued further by the ew car ealandtechnical uditing accounting and ssurance advice the tandards received, outlining oard and the the Zealand) issued by the ew ealand uditingand we correspon and ssuranceded with tandards the independent oard valuer, and the valuation his represents an increase in the par s ereInternational to e provided Code at a date of Ethics no later for than Professiona considerationsl Accountants for the (including appropriate International grouping of theIndependence International Code of Ethics for Professional inAccountants conjunction (includingwith our auditor s International expert, on Independence the estimation uncertainty in the valuation o ecem er 2 2 , other ise penalt pa ments ould carpar s under the leasing criteria and the reports his correspondence included the impact Standards) issued by the International thics tandards oard or ccountants I ode , and we investmentStandards) properties issued ecause by o the the Internationalmaterial thics tandards oard or ccountants I ode , and we e incurred under the concession agreement. counterfactual scenarios. that C ID has had on mar et activity and have ul illed our other ethical responsibilities in accordance with these re uirements. valuation uncertaintyhave ul illed we ourhave other considered ethical the responsibilities in accordance with these re uirements. s a result of the fire, acquarie no longer how the valuer had actored this into their ey e o tained management s calculation of the allocation valuation o investment properties held at air value has access to the initial car par s and assumptions ur irm carries out other non audit servicesof the or carr ing the roup value in and the the areas fair valueo tax of compliance, the unnested tax advisory, to be a ey ur audit irm matter carries out other non audit services or the roup in the areas o tax compliance, tax advisory, deliver ofand the theremaining licensing approximatel o a so tware tool or subsidiarycar par s statutory et een the inancial main site statement and the initial preparation. ur irm and the licensing o a so tware tool or subsidiary he independent statutory valuer inancial and auditor’s statement expert preparation. confirmed ur irm
car par s isalso li el carries to e outdela ed other e ond assurance and agreed upon carpar s procedure and servicesthe remaining in relation to compliance carpar s. with also carries out other assurance and agreedthat upon the valuation procedure approach services or in each relation property to compliancewas in with ecem er 2 2 . s there is significant udgement e specificall considered ho management have accordance with accounting standards and suitable or in determiningban ing ho and the car par s covenants should e thegrouped allocation o ommunity rust revenue the roup s application or the ban ing and covenants the allocation o ommunity rust revenue the roup s application or the I wage subsidy extension scheme treated and thethe penalt reconciliation pa ments o andnormalis factoreded inresults udgement to reported I wage subsidy extension scheme use and in determining the reconciliation the carrying o normalis value o edinvestment results to reported for the assessment of the impact of the fire on the ith regards to the expected lease commencement date. properties at une accountingresults treatment. he of provision the sale, this o asthese a e other servicesThe resultinghas not impaired values ere our used independence to determine as hether auditor the o the roup. results. he provision o these other services has not impaired our independence as auditor o the roup. audit matter. We assessed the independent valuer’s qualifications, finance lease accounting criteria has een met for the expertise and their objectivity and we ound no it used independent technical accounting remaining car par s. evidence to suggest that their objectivity was experts to assist in determining the accounting e tested the receipt of the concession pa ment and the compromised in their per ormance o the valuations treatment. calculation of the recognised gain, corro orating the We carried out audit procedures, on a sample basis, to efer to notes 4 and of the financial statements. amounts recognised in the financial statements to test whether property speci ic in ormation supplied to net gain of $ .4 million has een recognised in management s anal sis, supported the valuation of the valuer by the Group re lected the underlying the income statement hich is the excess of the the carr ing value of the car par s as previousl property records held by the Group determined and audited hen the transaction as concession pa ment allocated to the unnested main site and initial carpar s over their entered into during the ear ended une 2 . determined carr ing value.
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz
PwC PwC
160 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Independent Auditor's Report 161
FINANCIAL STATEMENTS
ur uditIndependent ppro auditor’s report InformationIndependent other than the financial auditor’s statements report and auditor’s report O er iew he Directors are responsible or the annual report ur opinion on the inancial statements does not o the shareholders n audit is designedo y ity to obtain ntertainment reasonable assurance roup imited whether the financial cover the other o the in ormation shareholders included o y ityin the annual ntertainment report and we roupdo not express imited any orm o assurance statements are free from material misstatement. conclusion on the other in ormation We have audited the inancial statements on pages to which comprise We have audited the inancial statements on pages to which comprise O erall Group materiality: million, which represents approximately of In connection with our audit o the inancial statements, our responsibility is to read the other ● the balance sheet as at une ● the balance sheet as at une a erage profit before tax from continuing operations o er the past three years, in ormation and, in doing so, consider whether the other in ormation is materially inconsistent with ● the incomeexcluding statement the ornet the gain year on thenthe uckland ended car park concession transaction, the inancial● statementsthe income or statement our nowledge or the obtained year then in ended the audit, or otherwise appears to be materially ● the statement CC o fire comprehensive related income, income CC or firethe yearrelated then expenses ended and impairment of misstated ●I , basedthe statement on the wor o comprehensive we have per ormed income on orthe the other year in ormation then ended that we obtained prior to ● the statementthe delaide o changes casino in e uitylicence. or the year then ended the date of ●this the auditor’s statement report, o changes we conclude in e uity that orthere the is year a material then ended misstatement of this other in ormation, we are re uired to report that act We have nothing to report in this regard ● the statement e chose o cash profit lows before or the tax yearfrom then continuing ended andoperations, which is a generally ● the statement o cash lows or the year then ended and accepted benchmark, because in our iew, it is the benchmark against which ● the notes to the inancial statements, which include a summary o signi icant accounting policies. ● the notes to the inancial statements, which include a summary o signi icant accounting policies. the performance of the Group is most commonly measured by users. esponsibilities of the irectors for the financial statements e chose to use an a erage of the last three years and to normalise it as he Directors are responsible, on behal o the Company, or the preparation and air presentation o the Our opiniondescribed abo e because, in our iew, it pro ides a more stable measure of the inancial statemenOur opinionts in accordance with I and I , and or such internal control as the Directors In our opinion,Group’s the accompanying performance. inancial statements o y ity ntertainment roup imited the determineIn is ournecessary opinion, to theenable accompanying the preparation inancial o inancial statements statements o y ity that ntertainment are ree rom material roup imited the ompany , including its subsidiaries the roup , present airly, in all material respects, the inancial misstatement, ompany , whether including due to raud its subsidiaries or error the roup , present airly, in all material respects, the inancial position o the s roup reported as atabo e, une we ha e , fi e its key inan auditcial matters,per ormance being: and its cash lows or the year then position o the roup as at une , its inancial per ormance and its cash lows or the year then ended in accordance• ccounting with ew for ealand the CC uivalents fire to International inancial Reporting tandards In preparingended the in inan accordancecial statements, with ew the ealand Directors uivalents are responsible to International for assessing inancial the Group’s Reporting ability tandards to continue as a going concern, disclosing, as applicable, matters related to going concern and using the I R and International• Capital inancial structure Reporting and funding tandards liquidity, I R . including the impact of CO D I R and International inancial Reporting tandards I R . going concern basis o accounting unless the Directors either intend to li uidate the Group or to cease • mpairment considerations in respect of goodwill and other intangible operations, or have no realistic alternative but to do so Basis for opinionassets, including the impact of CO D Basis for opinion We conducted our audit in accordance with International tandards on uditing ew ealand I s We conducted our audit in accordance with International tandards on uditing ew ealand I s • ccounting for the sale of the uckland car park concession and International tandards on uditing I s . ur responsibilities under those standards are Auditor’s responsibilities and International for tandards the audit on of uditing the financial I s . ur statements responsibilities under those standards are urther described• in aterial the Auditor’s uncertainty responsibilities in in estment for tpropertyhe audit aluationsof the financial relating statements to section o our ur objectives urther are described to obtain inreasonable the Auditor’s assurance responsibilities about whether for the the audit inancial of the statements, financial statements as a whole, section are o our report. CO D . free from materialreport. misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion easonable assurance is a high level o assurance, but is not a guarantee that an aterialityWe believe that the audit evidence we have obtained is su icient and appropriate to provide a basis or audit conductedWe believe in accordance that the audit with evidence I s ( ) we and have I s obtained will always is su icient detect aand material appropriate misstatement to provide when a basis or The scopeour of our opinion. audit was influenced by our application of materiality. it exists isstatementsour opinion. can arise rom raud or error and are considered material i , individually or in the Based on ourWe professionalare independent udgement, o the roup we determined in accordance certain with quantitati e ro essional thresholds and thical for tandard materiality, International aggregate,We they are could independent reasonably o thebe expected roup in to accordance in luence thewith economic ro essional decisions and thical o users tandard ta en on Internationalthe including Codethe o erall of Ethics Group for materialityAssurance Practitionersfor the financial (including statements International as a whole Independenceas set out abo e. Standards) These, (New basis o theseCode inancial of Ethics statements for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the ew ealand uditing and ssurance tandards oard and the Zealand) issued by the ew ealand uditing and ssurance tandards oard and the together with qualitati e considerations, helped us to determine the scope of our audit, the nature, timing urther description o our responsibilities or the audit o the inancial statements is located at the International Code of Ethics for Professional Accountants (including International Independence International Code of Ethics for Professional Accountants (including International Independence and extent of our audit procedures and to e aluate the effect of misstatements, both indi idually and in External Reporting Board’s website at: aggregate Standards)on the financial issued statements by the International as a whole. thics tandards oard or ccountants I ode , and we Standards) issued by the International thics tandards oard or ccountants I ode , and we have ul illed our other ethical responsibilities in accordance with these re uirements. https: www xrb govt n standardshave ul illed our other ethical or assuranceresponsibilities practitioners auditors in accordance with responsibilities audit these re uirements. report udit scope e designed ur our irm audit carries by assessingout other thenon risks audit of services material or misstatement the roup in in the the areas financial o tax statements compliance, and tax our advisory, This description ur irm forms carries part out of ourother auditor’s non audit report. services or the roup in the areas o tax compliance, tax advisory, applicationand of themateriality. licensing s o ina so twareall of our tool audits, or subsidiarywe also addressed statutory the inancial risk of statementmanagement preparation. o erride of ur irm and the licensing o a so tware tool or subsidiary statutory inancial statement preparation. ur irm internal controlsalso carries including out other among assurance other matters, and agreed consideration upon procedure of whether services there in relationwas e idence to compliance of bias that with ho e alsoreport carries to out other assurance and agreed upon procedure services in relation to compliance with representedban ing a risk ofand material c misstatementovenants the allocationdue to fraud. o ommunity rust revenue the roup s application or the his reportban ing is made and solely to thecovenants Company’s the allocationshareholders, o ommunity as a body. Our rust audit revenue work the has roup s been undertaken application or the I wage subsidy extension scheme and the reconciliation o normalised results to reported so that we I might state wage those subsidy matters extension which we scheme are required and the to reconciliationstate to them ino annormalis auditor’sed resultsreport toand reported for e tailored the scope of our audit in order to perform sufficient work to enable us to pro ide an opinion results. he provision o these other services has not impaired our independence as auditor o the roup. no other purpose results. he o the provision ullest extento these permitted other services by law, has we not do impaired not accept our or independence assume responsibility as auditor to o the roup. on the financial statements as a whole, taking into account the structure of the Group, the accounting anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this processes and controls, and the industries in which the Group operates. report or or the opinions we have ormed The structure of the Group means the ma ority of the audit work for the Group is performed by the ew
ealand Group audit team. Our Group audit team also included people based in ustralia who supported The engagement partner on the audit resulting in this independent auditor’s report is ichard Day us in executing our audit procedures and brought knowledge of the trading en ironment and legal and regulatory framework in delaide. or and on behal o :
PricewaterhouseCoopers, 15 Customs Street West, Private Bag 92162, Auckland 1142, New Zealand Chartered PricewaterhouseCoopers, ccountants 15 Customs Street West, Private Bag 92162, Auckland 1142, New uc landZealand T: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz eptemberT: +64 (9) 355 8000, F: +64 (9) 355 8001, www.pwc.com/nz PwC PwC
162 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Independent Auditor's Report 163 Income Statement Statement of Comprehensive Income
For the year ended 30 June 2020 For the year ended 30 June 2020 FINANCIAL STATEMENTS
NOTES 2020 2019 NOTES 2020 2019
Continuing Operations $'000 $'000 $'000 $'000
Revenue 3 641,653 802,265 Profit for the Year 235,388 144,581
Other income 5 3,310 20,799 Other comprehensive income Items that will not be reclassified to profit or loss Net gain on the Auckland car park concession transaction 4 66,431 – Asset Revaluation Reserve Government grants 5 29,183 – Asset revaluation reserve – revaluation on transfer to investment property 15, 31 5,936 – Share of losses from associates (83) (737) 5,936 – NZICC fire related income 6(a) 384,500 – Items that may be subsequently reclassified to profit or loss NZICC fire related expenses 6(b) (108,090) – Foreign Currency Translation Reserve 31 Employee benefits expense (284,867) (289,896) Exchange differences on translation of overseas subsidiaries 6,285 (11,498) Impairment of Adelaide casino licence 24 (160,600) – Transfer to Income Statement on disposal of discontinued operation – 27,864 Other expenses 7 (97,134) (91,799) Cash flow Hedge Reserve 31 Directors' fees (900) (1,143) Cash flow hedges – revaluations 9,154 3,986 Gaming taxes (30,254) (38,117) Cash flow hedges – transfer to finance costs (5,143) (5,459) Direct consumables (54,376) (59,862) Cash flow hedges – income tax (1,239) 279 Marketing and communications (16,045) (26,170) Cost of Hedging Reserve 31 Community contributions, levies and sponsorships (10,382) (14,330) Cost of hedging reserve – costs incurred/revaluations (113) (195) Fair value loss on investment property 15 (14,055) (3,204) Cost of hedging reserve – transfer to finance costs 462 462
Cost of hedging reserve – income tax (98) (75) Earnings Before Interest, Tax, Depreciation 348,291 297,806 and Amortisation Expenses (EBITDA) 9,308 15,364
Depreciation and amortisation expense 7 (85,446) (79,988) Other Comprehensive Income for the Year, Net of Tax 15,244 15,364
Depreciation on right‑of‑use assets 10 (1,114) – Total Comprehensive Income for the Year 250,632 159,945 Earnings Before Interest and Tax (EBIT) 261,731 217,818 The above statement of comprehensive income should be read in conjunction with the accompanying notes. Net finance costs 11 (28,613) (10,240)
Profit Before Income Tax 233,118 207,578
Income tax benefit/(expense) 18 2,152 (46,753)
Profit from continuing operations 235,270 160,825
Profit/(loss) from discontinued operations 30 118 (16,244)
Profit for the Year Attributable to Shareholders of the Company 235,388 144,581
Earnings per share for Profit Attributable to the Shareholders of the Company CENTS CENTS
Basic and diluted earnings per share attributable 8 35.4 23.8 to continuing operations
Basic and diluted earnings per share attributable 8 – (2.4) to discontinued operations
Basic and diluted earnings per share 8 35.4 21.4
The above Income Statement should be read in conjunction with the accompanying notes.
164 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 165 Balance Sheet Balance Sheet (continued)
As at 30 June 2020 As at 30 June 2020 FINANCIAL STATEMENTS
NOTES 2020 2019 NOTES 2020 2019
$'000 $'000 $'000 $'000
ASSETS LIABILITIES
Current Assets Current Liabilities
Cash and bank balances 14, 26 54,224 41,574 Payables and provisions 28 221,842 228,112
Receivables and prepayments 25 42,252 49,293 Interest bearing liabilities 13, 14 302,509 49,127
Derivative financial instruments 32 53,288 85 Current tax liabilities 776 14,653
Inventories 6,628 6,459 Derivative financial instruments 32 6,113 784
Current tax receivables 1,989 930 Lease liabilities 10 485 –
NZICC fire recoveries 6(c) 49,571 – Deferred licence value 16 153,165 –
PP&E classified as held for sale 27 11,019 115,687 Total Current Liabilities 684,890 292,676
Total Current Assets 218,971 214,028 Non‑current Liabilities
Non‑current Assets Interest bearing liabilities 12, 14 282,731 495,913
Property, plant and equipment 23 1,528,902 1,436,257 Non‑current payables 10,569 1,512
Intangible assets 24 649,531 798,408 Lease income in advance 22 39,815 –
Investment in associate – 1,553 Derivative financial instruments 32 24,375 30,913
Finance lease receivable 4 10,574 – Deferred tax liabilities 20 45,175 70,160 Derivative financial instruments 32 23,100 56,201 Lease liabilities 10 52,188 – Investment properties 15 72,400 40,660 Deferred licence value 17 214,972 504,804 Deferred tax assets 19 6,877 4,843 Total Non‑current Liabilities 669,825 1,103,302 Right‑of‑use asset 10 51,967 – Total Liabilities 1,354,715 1,395,978 NZICC fire recoveries 6(d) 227,000 – Net Assets 1,434,607 1,155,972 Total Non‑current Assets 2,570,351 2,337,922 EQUITY Total Assets 2,789,322 2,551,950 Share capital 29 1,288,287 1,126,996
Reserves 31 (33,321) (48,565)
Retained earnings 179,641 77,541
Total Equity 1,434,607 1,155,972
The above balance sheet should be read in conjunction with the accompanying notes.
166 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 167 Statement of Changes in Equity Statement of Cash Flows
For the year ended 30 June 2020 For the year ended 30 June 2020 FINANCIAL STATEMENTS
SHARE RETAINED NOTES CAPITAL RESERVES EARNINGS TOTAL EQUITY NOTES 2020 2019
$'000 $'000 $'000 $'000 $'000 $'000
Balance as at 1 July 2018 1,152,260 (63,929) 69,695 1,158,026 Cash Flows from Operating Activities
Adjustment on adoption of IFRS15 – – (1,046) (1,046) Receipts from customers 655,470 860,352
Restated balance at the beginning of the year 1,152,260 (63,929) 68,649 1,156,980 Payments to suppliers and employees (480,613) (498,602)
Total comprehensive income – 15,364 144,581 159,945 Government grants 27,354 –
Dividends paid 9 – – (135,689) (135,689) 202,211 361,750
Shares issued under Dividend Reinvestment Plan 29 8,591 – – 8,591 Gaming taxes and levies paid (40,988) (58,800)
Share rights issued for employee service 29 4,540 – – 4,540 Income taxes paid (41,057) (50,626)
Net movement in treasury shares 29 397 – – 397 Net Cash Inflow from Operating Activities 39 120,166 252,324
Buy back and cancellation of shares 29 (38,792) – – (38,792) Cash Flows from Investing Activities
Balance as at 30 June 2019 1,126,996 (48,565) 77,541 1,155,972 Disposal of business – 197,065
Balance as at 1 July 2019 1,126,996 (48,565) 77,541 1,155,972 Cash and bank balances disposed as part of discontinued operations – (12,204)
Total comprehensive income – 15,244 235,388 250,632 Disposal of Federal Street car park – 40,000
Dividends paid 9 – – (133,288) (133,288) Net purchase of property, plant and equipment (324,625) (303,651)
Equity raising 29 177,160 – – 177,160 Payments for investment property (2,252) (8,564)
Share rights issued for employee service 29 3,698 – – 3,698 Auckland car park concession disposal 128,946 –
Net movement in treasury shares 29 436 – – 436 Payments for intangible assets (20,515) (29,129)
Buy back and cancellation of shares 29 (20,003) – – (20,003) NZICC fire related income 106,000 –
Balance as at 30 June 2020 1,288,287 (33,321) 179,641 1,434,607 NZICC fire related costs (26,638) –
Lease income received in advance 39,815 – The above statement of changes in equity should be read in conjunction with the accompanying notes. Net Cash Outflow from Investing Activities (99,269) (116,483)
Cash Flows from Financing Activities
Issue of new share capital 177,160 –
Cash flows associated with derivatives (2,327) 3,540
New borrowings 45,814 28,000
Repayment of borrowings (34,127) –
Net issue of treasury shares – 397
Dividends paid to company shareholders 9 (133,288) (127,098)
Interest paid (41,444) (37,787)
Buy back of shares (19,566) (37,274)
Repayment of lease liabilities (469) –
Net Cash Outflow from Financing Activities (8,247) (170,222)
Net Increase/(Decrease) in Cash and Bank Balances 12,650 (34,381)
Cash and bank balances at the beginning of the year 41,574 75,955
Cash and Bank Balances at the End of the Year 14, 26 54,224 41,574
The above statement of cash flows should be read in conjunction with the accompanying notes.
168 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 169 1 Summary of Significant • cancelled or deferred some capital and Practice (GAAP) is profit for the year, or net profit New Zealand International Convention Centre operating spend; after tax. The Group also uses non‑GAAP financial Matters Accounting Policies information which is not prepared in accordance FINANCIAL STATEMENTS • applied for and received the New Zealand Judgement has been used in determining with New Zealand International Financial Reporting SkyCity Entertainment Group Limited (SkyCity or Government wage subsidy and the Australian the appropriate accounting consequences Standards (NZ IFRS) when discussing financial the company and its subsidiaries or the Group) JobKeeper payment; of the New Zealand International performance. The directors and management operates in the gaming, entertainment, hotel, Convention Centre (NZICC) fire, including • raised $230 million of additional equity in June believe that this non‑GAAP financial information convention, hospitality and tourism sectors. the following: The Group has operations in New Zealand and July 2020; provides useful information to readers of the financial statements to assist in the understanding • the nature of the contractual relationships and Australia. • restructured bank debt to increase available of the Group’s financial performance and is between the Group, Fletcher Construction facilities and extend maturities; SkyCity is a limited liability company incorporated consistent with the information used internally to Company Limited (FCC) and the insurers; and domiciled in New Zealand. The address of • obtained covenant waivers and amendments evaluate the performance of business units. • the extent of the damage resulting from the fire, its registered office is 99 Albert Street, Auckland. from banks and USPP noteholders; and The company is dual‑listed on the New Zealand and Definitions of non‑GAAP financial information used including an initial assessment of the extent of Australian stock exchanges. • announced the early redemption of the in these financial statements are: damage to the structural steel; New Zealand bonds in September 2020 to • EBITDA: earnings before interest, tax, • the estimated cost of rebuilding the damaged These consolidated financial statements were avoid the risk of breaching financial covenants depreciation and amortisation; and portion of the impacted buildings; approved for issue by the Board of Directors on associated with the bonds. 2 September 2020. • EBIT: earnings before interest and tax. • timing of the remediation work; and Notwithstanding the uncertainties around (a) Basis of Preparation forecasting earnings in the COVID‑19 environment, Critical Accounting Estimates and Judgements • likelihood of recovery by the Group for the costs The financial statements of the Group have been the directors have concluded there are no associated with the fire. The preparation of financial statements requires prepared in accordance with Generally Accepted material uncertainties related to SkyCity being the use of certain critical accounting estimates. These are discussed further in note 6. Accounting Practice (GAAP). They comply with a going concern. Accordingly, the directors have It also requires the company to exercise its New Zealand Equivalents to International Financial concluded that it is appropriate that these financial Judgement has been used in determining the judgement in the process of applying the Group’s Reporting Standards (NZ IFRS) and other applicable statements continue to be prepared on a going appropriate accounting for liquidated damages accounting policies. Financial Reporting Standards, as applicable to concern basis. arising from delays in the construction of the NZICC and Horizon Hotel (note 37) and the closure of the for‑profit entities. The financial statements also The Group has a negative working capital balance of Impairment Tests Nelson Street car park access tunnel (note 6). comply with International Financial Reporting $466 million, largely as a result of the classification Judgement is used in the determination of the Standards (IFRS). of some debt as current liabilities and transfer of recoverable amount of goodwill and indefinite Auckland Car Park Concession Transaction The Group is designated as a for‑profit entity for Adelaide's deferred licence value from non‑current useful life casino licences. Judgement has been used in determining financial reporting purposes. to current liabilities. The Group has significant available undrawn committed banking facilities The Group tests annually whether goodwill and the accounting treatment as a finance lease The consolidated financial statements incorporate totalling $405 million as at 30 June 2020 (refer to indefinite useful life licences have suffered any of a significant part of the Auckland car park the assets and liabilities of all subsidiaries of the note 12) and has the ability to fully pay all debts as impairment, in accordance with the accounting concession (which was sold during the period). Group as at 30 June 2020 and the results of all they fall due. policy stated in note 24. The recoverable amounts of The determination of the finance lease accounting subsidiaries for the year then ended. cash‑generating units have been determined based required the use of estimates including determining Statutory Base on value in use calculations. These calculations the fair value of the car parks immediately before Going Concern the transaction, the fair value of exclusive use car SkyCity Entertainment Group Limited is a company require the use of estimates. There are inherent uncertainties in both parks and the calculation of the carrying value registered under the Companies Act 1993 and is a There is sufficient headroom between the value New Zealand and Australia relating to COVID‑19, of the existing car park assets. Further details are FMC reporting entity under Part 7 of the Financial in use calculations and the carrying value of the the impact of continued border closures and the provided in note 4. Markets Conduct Act 2013. The financial statements related cash generating units' assets that significant extent of the deterioration in general economic of the Group have been prepared in accordance changes in the assumptions used would not require Investment Properties – Valuations conditions. Accordingly, the Directors consider with the requirements of Part 7 of the Financial an impairment. it appropriate to take a cautious outlook for the Markets Conduct Act 2013 and the NZX Main Board The Group carries its investment properties at fair prospects of SkyCity's businesses. The Directors are Listing Rules. Professional judgement has been made to treat value, with changes in fair value being recognised in of the view that these factors will continue to have a the entire Auckland precinct as a single cash profit or loss. The Group engaged an independent negative impact on the Group’s earnings in the near Measurement Basis generating unit given the close and interconnected valuation expert to assess fair values as at 30 June term compared to previous expectations. relationship of the cash flows across all of 2020 for the investment properties. The valuer notes These financial statements have been prepared SkyCity’s Auckland businesses. in their valuations of investment property that there In response, the Group has taken the following under the historical cost convention, as modified by is currently material valuation uncertainty as a result measures to ensure the business has adequate the revaluation of financial assets and liabilities and Impairment testing has also been completed on of COVID‑19. Further details are provided in note 15. liquidity available and to ensure SkyCity continues investment properties at fair value through profit the Adelaide casino licence (an amortising asset). to be a going concern: or loss. Judgement was used to determine the valuation COVID‑19 Impacts and resulting impairment charge. The assessment • introduced cost control measures such as Non‑GAAP Financial Information was prepared using a fair value less costs of disposal Judgement has been used in determining the reducing the New Zealand workforce by appropriate accounting consequences of the The Group’s standard profit measure prepared approach and is discussed further in note 24. approximately 25% to right‑size the business to impacts of COVID‑19 on a number of account under New Zealand Generally Accepted Accounting the expected new level of customer demand; balances. These impacts are discussed further in note 1(h).
170 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 171 (b) Principles of Consolidation (iii) Foreign Operations NZ IFRS 16, Leases
(i) Subsidiaries The results and financial position of foreign With effect from 1 July 2019, the Group adopted • reduce Net Profit After Taxation by FINANCIAL STATEMENTS entities (none of which has the currency of a NZ IFRS 16 Leases. The effect of this was to create as approximately $0.5m; and Subsidiaries are all entities (including structured hyperinflationary economy) that have a functional at 1 July 2019 Right‑Of‑Use Assets of $50.8 million • lease payments are no longer part of operating entities) over which the Group has control. currency different from the presentation currency and recognise Lease Liabilities of $50.8 million cash flows but are included within financing The Group controls an entity when the Group is are translated into the presentation currency as (calculated based on a weighted average cash flows. exposed to, or has rights to, variable returns from outlined below: incremental borrowing rate of 5.87%). its involvement with the entity and has the ability The above has no cash effect to the Group and the • assets and liabilities for each balance sheet The impact on the FY20 Income Statement was to: to affect those returns through its power over the change is for financial reporting purposes only. presented are translated at the closing rate at entity. Subsidiaries are fully consolidated from • reduce operating expenses by approximately the date of that balance sheet; The Group adopted the simplified transition the date on which control is transferred to the $3.6 million; approach under NZ IFRS 16 in the year ended Group. They are deconsolidated from the date that • income and expenses for each income statement • increase depreciation by approximately $1.1 million; 30 June 2020 and did not restate comparative control ceases. are translated at average exchange rates; and amounts for 2019. • increase finance costs by approximately Inter‑company transactions, balances and • all resulting exchange differences are recognised $3.1 million; unrealised gains on transactions between Group in other comprehensive income. companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported Exchange differences arising from the translation by subsidiaries have been adjusted to conform with of any net investment in foreign entities, and
the Group's accounting policies. of borrowings and other currency instruments designated as hedges of such investments, are $'000 (c) Foreign Currency Translation taken to shareholders' equity. Measurement of Lease Liabilities (i) Functional and Presentation Currency (d) Goods and Services Tax (GST) Operating lease commitments disclosed as at 30 June 2019 358,263
Items included in the financial statements of The Income Statement, Statement of Cash Discounted using the incremental borrowing rates 50,821 each Group Company's operations are measured Flows, Statement of Comprehensive Income Lease liability recognised as at 1 July 2019 50,821
using the currency that best reflects the and Statement of Changes in Equity have been Of which are: economic substance of the underlying events prepared so that all components are stated Current lease liabilities 707 and circumstances relevant to that operation exclusive of GST. All items in the Balance Sheet are (functional currency). The consolidated financial stated net of GST, with the exception of receivables Non‑current lease liabilities 50,114 statements are presented in New Zealand dollars and payables, which include GST invoiced. 50,821 which is the Group's presentation currency. (e) Statement of Cash Flows
(ii) Transactions and Balances Cash flows associated with derivatives that are part (g) Standards, Amendments and Interpretations (h) Significant Transactions During the Year Foreign currency transactions are translated of a hedging relationship are off‑set against cash to Existing Standards that are not New Zealand International Convention Centre Fire into the functional currency using the exchange flows associated with the hedged item. yet Effective rates prevailing at the dates of the transactions. (f) New Accounting Standards Adopted There are no new standards, amendments and On 22 October 2019, there was a significant fire Foreign exchange gains and losses resulting from in the Year interpretations to existing standards that have at the construction site of the New Zealand the settlement of such transactions and from the been published that are mandatory for the International Convention Centre (NZICC) Other than the adoption of NZ IFRS 16 Leases, translation at year end exchange rates of monetary Group’s accounting periods beginning on or after in Auckland. This fire has caused extensive damage the accounting policies that materially affect assets and liabilities denominated in foreign 1 July 2020 or later periods that would have a to the NZICC and relatively minor damage to the measurement of the Income Statement, currencies are recognised in the Income Statement, material impact. Horizon Hotel which is being constructed on the except when deferred in other comprehensive Statement of Comprehensive Income, Balance adjacent site. To date, it has not been possible to income as qualifying cash flow hedges and Sheet, Statement of Changes in Equity and the complete a full assessment of the extent of damage qualifying net investment hedges. Statement of Cash Flows have been applied on a caused by the fire. The Group has engaged an basis consistent with prior year. independent expert to estimate the likely extent Translation differences on financial assets and of damage. The expert does not yet have sufficient liabilities carried at fair value through profit and loss information to complete a full assessment. are recognised in the Income Statement as part of the fair value gain or loss. Translation differences on non‑monetary financial assets such as equity classified at fair value through other comprehensive income are included in the Statement of Comprehensive Income.
172 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 173 The following table summarises the impact of the NZICC fire: Partial Lease of the Existing Auckland COVID‑19 Convention Centre
On 11 March 2020, the World Health FINANCIAL STATEMENTS ITEM NZICC IMPACT NOTE With effect from 31 October 2019, portions of the Organization declared a global pandemic NZICC Fire Related Income Estimated insurance proceeds to cover the full 6 existing Auckland convention centre have been as a result of the outbreak and spread of reinstatement to the pre‑fire condition have been leased to All Blacks Experience Limited and Weta COVID‑19. On 23 March 2020, SkyCity closed recognised as income. Workshop Limited. As a result, this portion of the all its New Zealand and Adelaide properties. existing convention centre has been reclassified The New Zealand properties reopened on Insurance proceeds for other costs incurred (business as Investment Property. Immediately before 14 May 2020, with the exception of Wharf Casino interruption costs, site preparation and clearing costs, reclassification, this portion of the building in Queenstown which currently remains closed. payments under the Auckland car park concession was revalued. SkyCity Adelaide reopened on 29 June 2020 as part agreement and other ongoing costs as a result of the fire) of the South Australian Government’s three‑stage are recognised as income when the costs are incurred. This has resulted in the following adjustments as at approach to easing the COVID‑19 restrictions. NZICC Fire Related Expenses Damaged/destroyed components have been recognised as 6 31 October 2019: A number of decisions and actions have had to be an expense, partially offset by a transfer from the deferred • a reduction in Property, Plant and Equipment of taken to mitigate the impacts of these events: licence value. $10.5 million (refer note 23); • significant operational effort has gone into Other costs as a result of the fire are expensed as incurred. • an increase in Investment Properties of closing and reopening SkyCity's properties with $16.4 million (refer note 15); and Cost Capitalisation Capitalisation of borrowing costs and some internal costs 6 rigorous health and safety measures in place; associated with the NZICC and Horizon Hotel has been • an increase in the Asset Revaluation Reserve of • SkyCity rapidly restructured its New Zealand suspended. $5.9 million (refer note 31). workforce, downsizing it by around 25% to Property, Plant and Equipment Damaged/destroyed components of both buildings have 23 A further revaluation was completed as at ensure SkyCity continued to be sustainable as a been derecognised. 30 June 2020 which resulted in a fair value loss of smaller domestically focused business; Deferred Licence Value Partial release of the deferred licence value for the NZICC 17 $5.3 million. • SkyCity implemented other cost and capital based on the percentage of the building damaged. Auckland Car Park Concession Transaction saving initiatives; and Insurance Proceeds Estimated insurance proceeds to cover the full 6 • SkyCity undertook an equity raising, arranged reinstatement to the pre‑fire condition have been On 4 April 2019, the Group announced it had new bank facilities and secured covenant waivers recognised as a receivable on the Balance Sheet. entered into a binding, conditional agreement to sell a long term concession to 2048 over the to ensure that it has sufficient liquidity and Insurance proceeds to cover the cost of site clean‑up and Auckland car parks to Macquarie Principal Finance funding capacity. preparation have been recognised as the underlying costs Group (Macquarie) for $220.0 million, to be paid These actions mean that SkyCity is now well are incurred. upfront in a lump sum on completion. positioned to manage ongoing future risks Liquidated Damages Recognition of liquidated damages for the closure of the 6 The Auckland car park concession transaction was associated with COVID‑19. SkyCity has also been Nelson Street car park access tunnel. completed on 19 August 2019 and is discussed in aided by government responses in the form of Auckland Car Park Concession Accounting treatment for the previously announced sale 4 note 4. wage subsidies and other assistance measures. of the Auckland car park concession has been updated to SkyCity's core domestic gaming business is resilient reflect the delays to completion of the NZICC car park. Share Buy Back and has rapidly returned to being cash positive and profitable. Other businesses that are more reliant In February 2019, the Group announced an NZICC Long Stop Date The Crown has agreed to an extension of the Completion on international visitors (including international on market share buy back of up to 5.0% of its Long Stop date included in the New Zealand International VIP gaming, hotels and restaurants) are likely to fully total shares during 2019. During the year ended Convention Centre Project and Licensing Agreement. recover only when international borders reopen. 30 June 2020, the Group purchased and cancelled The revised date is now 2 January 2025 (previously $20.0 million of shares. Since the announcement Development work on the SkyCity Adelaide 1 January 2023). in February 2019, a total amount of $58.7 million expansion and hotel projects and associated master SkyCity expects to complete the NZICC before this date. of shares have been purchased and cancelled. planning projects was able to continue over the The effect of this is shown in note 29. period due to construction being deemed as an The accounting impact of the NZICC fire is discussed in detail in note 6. essential service in Australia. Work recommenced Liquidated Damages in late May 2020 on the NZICC and Horizon Hotel Included within the FCC construction contracts projects following the move to Alert Level 3 for the NZICC and Horizon Hotel is the right to of the COVID‑19 Alert system in New Zealand. liquidated damages if certain milestones are The Horizon Hotel is now expected to be delivered not met. during 2021 and the NZICC is now expected to be completed during 2023. As at 30 June 2020, SkyCity had withheld $39.5 million from payments to FCC for liquidated damages. This is treated as a contingent asset and further details are provided in note 37.
174 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 175 The equity raising completed in July 2020 ensures that the major projects under construction remain ITEM COVID‑19 IMPACTS NOTE fully funded and that SkyCity is also able to continue with smaller projects that will enhance operations. Following the equity raising and the arrangement of new bank facilities, SkyCity now has significant liquidity Property, Plant and Equipment Various capital projects have been delayed, placed on hold 23 available should the COVID‑19 situation worsen. Dividends are currently suspended as a requirement of the or terminated. Costs of delays have been included in the carrying value of Property, Plant and Equipment. covenant waivers and amendments. FINANCIAL STATEMENTS
A summary of the accounting impacts of COVID‑19 on the Group is set out below: Costs incurred to date on terminated projects have been written off in the current year. ITEM COVID‑19 IMPACTS NOTE Intangible Assets An impairment of the Adelaide casino licence has been 24 Closure of SkyCity's New Zealand casinos closed on 23 March 2020 and, recognised in the current year. In the absence of COVID‑19 Land-based Casinos with the exception of Wharf Casino, reopened on it was very likely that an impairment of the Adelaide casino 14 May 2020. SkyCity Adelaide closed on 23 March 2020 licence would still have been required. However, COVID‑19 and reopened on 29 June 2020. has increased the size of the impairment recognised. Reduction in Revenues The closure of SkyCity's casinos has significantly 3 The impacts of COVID‑19 have also reduced the valuation reduced revenues. surpluses associated with the Auckland and Hamilton intangible assets (although these continue to be strongly To highlight the extent of the reduced revenues, positive). total revenues in the relevant comparative periods (New Zealand properties: 23 March 2019 to 13 May 2019; Tax Expense and Deferred Tax During the year, the New Zealand Government 18, 20 SkyCity Adelaide: 23 March 2019 to 28 June 2019; and Liabilities reintroduced depreciation on industrial and commercial International Business 1 March 2019 to 30 June 2019 buildings for tax purposes. The change applies from (reflecting the period of international travel restrictions)) 1 July 2020 and the Group has elected to use the 2% are estimated at approximately $170 million. diminishing value basis depreciation rate. Government Grants The Group has applied for, and received, the New Zealand 5 As a result, the tax base of the Group’s buildings as at Government wage subsidy and the Australian JobKeeper 30 June 2020 increased by $86.1 million. The resulting payment. difference between the accounting carrying value and the reinstated tax base gave rise to a reduction in deferred tax Total payments relating to the year ended 30 June 2020 liabilities and a reduction in tax expense of $24.1 million. were $29.2 million. Funding Plan A comprehensive funding plan was announced on 12, 29 Employment Costs Over the period of closure, New Zealand salaried staff 17 June 2020 to strengthen the Group's balance sheet who continued to work received their full salary (less and secure additional liquidity in response to uncertainty any voluntary contribution to a staff hardship fund). around future impacts of COVID‑19: Salaried staff were requested to take annual leave over the lockdown period if they were not able to work. • raised $230 million of additional equity in June and New Zealand waged and casual employees who were July 2020; unable to work received 80% of their average earnings. • restructured bank debt to increase available facilities They were able to top this up to 100% of their average and extend maturities; earnings by taking paid leave. New Zealand waged employees who were able to work received their • obtained covenant waivers and amendments from normal pay. banks and USPP noteholders;
Over the period of closure, around 90% of Australian • announced the early redemption of the New Zealand staff were fully stood down and the remaining 10% bonds in September 2020 to avoid the risk of breaching of employees were partially stood down on reduced financial covenants associated with the bonds; and hours. 80% of Australian staff were eligible for the • suspended dividends for the period of covenant JobKeeper payment. waivers/relief. Receivables As a result of payment difficulties for a small number 25 of customers, a provision against International Business debtors of $5.7 million has been included within the Income Statement. Investment Properties There has been a decline in the fair value of investment 15 properties due to the expected reaction of the property market to COVID‑19.
The valuer has also noted material valuation uncertainty in determining the fair value of the Group's investment properties given the potentially material and unknown impact of COVID‑19. The valuer has recommended frequent reviews of the valuations for changes in the underlying assumptions.
176 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 177 2 Segment Information SKYCITY OTHER NZ SKYCITY SKYCITY INTERNATIONAL CORPORATE Operating segments are reported in a manner consistent with the internal reporting provided to AUCKLAND OPERATIONS ADELAIDE DARWIN BUSINESS /GROUP TOTAL FINANCIAL STATEMENTS the chief operating decision maker. The chief operating decision maker has been identified as the $'000 $'000 $'000 $'000 $'000 $'000 $'000
Chief Executive Officer (CEO). 2019
Prior period disclosures have been adjusted to treat the NZICC as part of the Auckland segment to align Gaming revenue 378,061 56,533 124,801 60,699 122,580 – 742,674
with the current period. Non‑gaming revenue 189,862 9,922 21,101 22,402 36 – 243,323
(a) Primary Reporting Format – Business Segments Total revenue 567,923 66,455 145,902 83,101 122,616 – 985,997
Shares of net profits/(losses) – (737) – – – – (737) of associates SKYCITY OTHER NZ SKYCITY SKYCITY INTERNATIONAL CORPORATE AUCKLAND OPERATIONS ADELAIDE DARWIN BUSINESS /GROUP TOTAL Expenses (290,153) (37,160) (123,566) (62,679) (119,610) (33,848) (667,016) $'000 $'000 $'000 $'000 $'000 $'000 $'000 Depreciation and amortisation (47,436) (5,390) (17,687) (4,711) – (9,474) (84,698) 2020 Segment profit/(loss) (EBIT) 230,334 23,168 4,649 15,711 3,006 (43,322) 233,546 Gaming revenue 312,282 51,554 90,995 – 75,948* – 530,779 Net finance costs (including (10,212) Online revenue – 4,521 – – – – 4,521 discontinued operations)
Non‑gaming revenue 138,680 11,166 27,151 – 8 1,144 178,149 Profit before income tax 223,334 Less: Discontinued operations NZICC fire income 384,500 – – – – – 384,500 (15,756) before tax (note 30) Sale of Auckland car park 66,431 – – – – – 66,431 Profit before income tax from concession 207,578 continuing operations Total revenue 901,893 67,241 118,146 – 75,956 1,144 1,164,380 Segment assets 1,647,453 101,584 548,778 – – 254,135 2,551,950 Shares of net profits/(losses) – (83) – – – – (83) of associates Net additions to non‑current assets (other than financial 261,636 20,490 73,075 3,933 – 30,183 389,317 Expenses (292,198) (41,625) (107,126) – (72,184) (34,183) (547,316) assets and deferred tax)
Adelaide casino licence – – (160,600)** – – – (160,600)** impairment (b) Secondary Reporting Format – Geographical Segments NZICC fire expenses (108,090) – – – – – (108,090)
Depreciation and amortisation (46,073) (6,159) (19,090) – – (15,238) (86,560) NON‑CURRENT ASSETS EXCLUDING FINANCIAL Segment profit/(loss) (EBIT) 455,532 19,374 (168,670) – 3,772 (48,277) 261,731 INSTRUMENTS AND TOTAL REVENUE DEFERRED TAX ASSETS Net finance costs (including (28,613) discontinued operations) 2020 2019 2020 2019 $'000 $'000 $'000 $'000 Profit before income tax 233,118
Plus: Discontinued operations 118 New Zealand 1,021,158 749,699 1,951,348 1,736,037 before tax (note 30) Australia 143,222 236,298 589,026 540,841 Profit before income tax from 233,236 continuing operations 1,164,380 985,997 2,540,374 2,276,878
Segment assets 1,738,081 100,891 617,139 – – 333,211 2,789,322
Net additions to non‑current assets (other than financial 147,380 9,573 229,369 – – 19,692 406,014 assets and deferred tax)
*Includes rebates and complimentary play. **Equivalent to A$150 million.
178 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 179 (c) Description of Segments SkyCity Darwin NOTES 2020 2019
Management has determined the operating In 2019, SkyCity Darwin has been treated as a FINANCIAL STATEMENTS segments based on the reports reviewed by the discontinued operation within the financial $'000 $'000 Chief Executive Officer (CEO) that are used to assess statements. For internal management reporting Reconciliation to the segment note performance and allocate resources. purposes, SkyCity Darwin continued to be reported Total revenue 3 641,653 802,265 to the CEO on the same basis as previously and The Group is organised into the following main therefore the segment information note has been Other income 5 3,310 20,799 operating segments: prepared on a consistent basis with prior periods. Government grants 5 29,183 – SkyCity Auckland International Business rebates 39,303 80,269 International Business SkyCity Auckland includes casino operations, hotels Darwin – discontinued operations – 82,664 The International Business segment is made up and convention, food and beverage, car parking, Gain on sale of Auckland car park concession 4 66,431 – of gaming operations for international customers Sky Tower, investment properties and a number of sourced mainly from Asia. The revenue is generated NZICC fire income 6 384,500 – other related activities, and excludes International at SkyCity's Auckland, Darwin (2019 only), Total revenue as per segment note 985,997 Business operations. 1,164,380 Adelaide, Queenstown and Hamilton properties. The Group's interest in the NZICC is also The results of the segment includes rebates and included here. complimentary play. No assets are allocated to this segment. 4 Auckland Car Park Concession Transaction Other New Zealand Operations Corporate/Group Other operations include SkyCity Hamilton, 2020 2019 SkyCity Queenstown, SkyCity Wharf, Lets Play Live Includes head office functions and funding entities $'000 $'000 Media, SkyCity Online Casino and associates. and is not considered an operating segment. Net gain on sale of the Auckland car park concession transaction 66,431 –
SkyCity Adelaide 66,431 – SkyCity Adelaide includes casino operations and food and beverage, and excludes On 4 April 2019, the Group announced it had On 19 August 2019, the Auckland car park International Business operations. entered into a binding, conditional agreement concession transaction was completed and SkyCity to sell a long term concession to 2048 over the received $220.0 million. Macquarie took over the Auckland car parks to Macquarie for $220.0 million, main site car park and the initial 600 NZICC car to be paid upfront in a lump sum on completion. parks and was to be provided with approximately 3 Revenue 650 further NZICC car parks no later than The agreement: 31 December 2020. Accounting Policy • gives Macquarie the right to undertake Gaming revenue represents the net win to the casino from gaming activities, being the difference between the operations and management of the Nested Car Parks amounts wagered and amounts won by casino patrons. International Business rebates are treated as a approximately 3,200 car parks under the existing The Group has determined that it retains the reduction in revenue. Auckland casino/hotel complex and the NZICC significant risks and rewards of ownership of currently under construction, with all economic Non‑gaming revenue includes hotel and convention, food and beverage, Sky Tower, car parking and other these car parks and therefore this part of the benefit of ownership passed to Macquarie for the revenues. These are recognised when the goods are provided or services are rendered. concession payment should be accounted for as a concession period; financial liability.
• provides SkyCity with exclusive access to 450 car As a result of this determination, on settlement 2020 2019 parks, which will be used for VIP customers, to be of the transaction, $45.8 million of the $220.0 $'000 $'000 paid for by SkyCity irrespective of use (these are million concession payment was treated as a Gaming 491,477 601,696 known as the “nested car parks”); and financial liability. Non‑gaming 145,655 200,569 • provides SkyCity with non exclusive access to Online 4,521 – further car parks at agreed rates on a pay per use basis (these are known as the “unnested car Total revenue 641,653 802,265 parks”), which will also be available to the public. The Group also provides complimentary hotel accommodation, food and beverage and other promotions to certain groups of customers and it is not practical to separate the related revenues from gaming revenues. Retail values of such complimentary items amounted to $19.5 million (2019: $30.9 million).
180 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 181 Main Site and Initial 600 NZICC Unnested Car Remaining Approximately 650 Further NZICC 5 Other Income Parks Unnested Car Parks FINANCIAL STATEMENTS The Group has determined, based on an evaluation As detailed in the NZICC fire note 6, the Group is 2020 2019 of the terms and conditions of the arrangement, unable to determine when these car parks will be including the proportion of the $220.0 million provided to Macquarie. $'000 $'000 concession payment relating to these car parks Net gain on disposal of property, plant and equipment 348 18,453 A final determination as to whether the lease amounting to substantially all of the fair value relating to the approximately 650 car parks is an Dividend income 9 8 of these car parks, that substantially all the operating lease or finance lease will be made when Rental income from investment properties 2,338 significant risks and rewards of ownership of these 2,953 the car parks are finally provided to Macquarie. unnested car parks passed to the concession Government grants 29,183 – If this date is after 31 December 2020 (as expected), holder on 19 August 2019. Therefore, this part of the delay payments to Macquarie that are required to 32,493 20,799 concession payment has been accounted for as a be made from that date will be deducted from the finance lease (note 13). Government Grants $39.8 million allocation of the concession payment As a result of this determination, as at for the purposes of making the lease determination. New Zealand 19 August 2019: As a result, the Group is treating $39.8 million of the As part of its COVID‑19 response, the New Zealand Government introduced a wage subsidy covering an • the current carrying value of these car parks of $220.0 million concession payment as lease income initial 12‑week period from application for companies with a greater than 30% reduction in revenue as a $96.6 million was derecognised; received in advance. result of COVID‑19.
• a finance lease receivable of $133.2 million for Given the delay in providing these car parks to SkyCity made two claims for this subsidy in the year ended 30 June 2020: these car parks was recognised and immediately Macquarie, this part of the concession is likely to settled in cash by the upfront payment; be treated as an operating lease and these car • $15.4 million primarily relating to waged staff covering the period 30 March to 19 June 2020; and parks will be treated as an investment property. • a finance lease receivable of $9.9 million was • $6.4 million primarily relating to salaried staff covering the period 20 April to 10 July 2020 (this has been In the current year $27.1 million of costs associated recognised for the residual value of these car allocated between this financial year and the year ending 30 June 2021). with these car parks have been transferred from parks (the value beyond the period of the Property, Plant and Equipment (note 23) to The New Zealand Government extended the wage subsidy for a further 8 weeks, after the initial 12 weeks, for concession term); investment properties (note 15). companies with a greater than 40% reduction in revenue in the 30 days preceding the second application. • an adjustment to the Deferred Licence In July 2020, SkyCity made an application for the extended wage subsidy, which will be accounted for in the Value liability associated with the NZICC of Comparison to 30 June 2019 Financial Statements 2021 financial statements. $24.2 million was recognised in the Income The accounting outlined above for the Auckland Adelaide Statement (note 17); and car park concession transaction differs from that The Australian Government introduced the JobKeeper Payment plan which is effective until • a resulting gain of $66.4 million was recognised disclosed in the 30 June 2019 financial statements 30 September 2020. Under this plan, eligible companies receive A$1,500 per fortnight per eligible employee in the Income Statement. as a result of the NZICC fire. Refer to note 6 for more details. provided the company has paid its employee at least this amount. In the current financial year, SkyCity has In determining the carrying value, judgement received or accrued $8.3 million (A$7.8 million). was required to distinguish the value of the unnested car parks from the value of the Auckland casino/hotel asset. Judgement was also required to determine the carrying value of the initial 600 NZICC car parks.
182 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 183 6 NZICC Fire Accounting Treatment for the Previously • remaining approximately 650 further NZICC For these car parks, the lease from SkyCity to Announced Auckland Car Park Concession car parks Macquarie has not yet started – this will happen on On 22 October 2019, there was a significant fire Transaction the date they are handed over to Macquarie. Prior to FINANCIAL STATEMENTS The status of these car parks has changed as a at the construction site of the NZICC in Auckland. this date, the portion of the car park concession The impact of the planned Auckland car park result of the fire and expected delays to handover This fire has caused extensive damage to the NZICC agreement payment relating to these car parks concession transaction was disclosed in note 2(a) of and these will now likely be accounted for as and relatively minor damage to Horizon Hotel ($39.8 million), is treated as lease income in advance the 30 June 2019 financial statements. a future operating lease when handed over to which is being constructed on the adjacent site. (refer note 22). Macquarie – this is discussed further below. To date, it has not been possible to complete a full On 19 August 2019, the Auckland car park Determination as to whether the lease is an assessment of the extent of damage caused by concession transaction was completed and SkyCity Professional judgement was required in operating lease or finance lease is made as at the the fire. The Group has engaged an independent received $220 million. Macquarie took possession determining the appropriate split of the car date the car parks are provided to Macquarie, being expert to estimate the likely extent of damage. of the main site car park and an initial 600 NZICC parks for assessment of the impacts of the fire. the lease commencement date. If this date is after The expert does not yet have sufficient information car parks at that time, and was to be provided with It is the Group’s view that the main site unnested 31 December 2020 (as expected), delay payments to complete a full assessment. approximately 650 further NZICC car parks no later and initial 600 NZICC car parks already passed to Macquarie from 31 December 2020 until the than 31 December 2020. The use of the 600 NZICC to Macquarie should be considered together. Both buildings are insured and all significant final handover date are deducted from the car park car parks was restricted to use by SkyCity staff and During the concession agreement negotiations all costs associated with the fire are expected to be concession agreement payment for the purposes of contractors while NZICC construction was ongoing, parts were considered together and were viewed as fully covered. Any costs not covered by insurance are making the lease determination. expected to be sought from Fletcher Construction as a condition of the NZICC Building Works Contract being inter‑related for pricing and other purposes. Company Limited (FCC or the Contractor) who is the with the Contractor, and this restriction was also These car parks were also considered together for As a result, the following adjustments to the contractor constructing both buildings. included in the car park concession agreement. demand management purposes, including how 30 June 2019 classifications have been recorded in SkyCity staff and contractors use and access the the 30 June 2020 financial statements: If the additional approximately 650 further NZICC As noted above, at this point in time a full available car parks across both sites. assessment of the damage is not available, nor is an car parks are not delivered by 31 December 2020, • reclassify $56.8 million of assets from PP&E agreed reconstruction timeline available. As a result, daily delay payments are required to be made by Accounting Treatment of the Remaining Classified as Held for Sale to Property, Plant these financial statements include a number of SkyCity to Macquarie. Approximately 650 NZICC Car Parks and Equipment (debit Property, Plant and significant judgements and estimates to determine Equipment, credit Assets Classified as Held for As a result of the fire, Macquarie no longer has In the Group’s 30 June 2019 financial statements the appropriate accounting. The estimated damage Sale); and access to the initial 600 NZICC car parks and (which did not envision the fire or a significant delay assessment and cost of remediation is particularly delivery of the remaining approximately 650 in the delivery of the car parks to Macquarie), it • reclassify $25.6 million of liabilities from PP&E sensitive to the assessment of the extent of NZICC car parks is likely to be delayed beyond was assumed that all parts of the car park, except Classified as Held for Sale to Deferred Licence damage to the structural steel. These judgements 31 December 2020. the nested car parks, would be a finance lease at Value liability, being the portion of Deferred and estimates will continue to be reviewed as their lease commencement date. As a result, the Licence Value liability expected to be allocated new information becomes available. It is possible For the purpose of analysing the impact of the fire Property, Plant and Equipment balances relating to to the car park assets on completion (debit that the actual financial impacts will differ from on the sale of the Auckland car park concession, it is the car parks were transferred to “PP&E classified as PP&E Classified as Held for Sale, credit Deferred those included in these financial statements and necessary to split the car parks up as follows: held for sale”. Licence Value liability). these differences may be material. Details of the • nested car parks, being 450 car parks that are judgements and estimates made are provided in available exclusively to SkyCity (referred to as the following parts of this note. "nested car parks") (a) Income The Group has engaged external expert advisers to There is no change to the accounting for the assist in determining the appropriate treatment of nested car parks and these continue to be the NZICC fire. A technical accounting expert has treated as a financing arrangement as set out in 2020 2019 been appointed to assist with accounting advice the Group’s 30 June 2019 financial statements. $'000 $'000 and Rider Levett Bucknall Auckland Limited (RLB) has been appointed to assist with assessing the • main site unnested and initial 600 NZICC Other income NZICC damage and cost of remediation. car parks Contract works insurance recovery 336,702 –
There is no change to the accounting for the Other insurance recoveries 37,456 – Cessation of Capitalisation of Borrowing Costs main site unnested and initial 600 NZICC and Some Internal Costs Liquidated damages (Nelson Street car park access) 10,342 – car parks and these continue to be treated 384,500 – With effect from 22 October 2019, interest as a finance lease as set out in the Group’s capitalisation on both the NZICC and Horizon Hotel 30 June 2019 financial statements. developments has ceased. From 1 July 2019 to 22 October 2019, $9.6 million of interest was capitalised. No decision has been made as to when interest capitalisation will recommence.
184 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 185 NZICC fire related income consists of: Other Insurance Recoveries ($37.5 million) (b) Expenses
Insurance Recovery for Damage to the NZICC and In addition to recovery of the expected FINANCIAL STATEMENTS Horizon Hotel ($336.7 million) reconstruction costs, the Group is able to seek 2020 2019 recovery of additional items, including the $'000 $'000 The accounting treatment of the insurance recovery following: for the damage is dependent on the relationship Write‑off of NZICC and Horizon Hotel capitalised work‑in‑progress 193,868 – • business interruption costs and lost gross profit between SkyCity, the insurers and the Contractor. Release from Deferred Licence Value liability (165,785) – It is the Group's view, supported by legal advice, while the Auckland precinct was closed or NZICC obligation 43,047 – that SkyCity is the principal in the insurance affected by the fire; Other recoverable costs 34,213 – relationship and therefore receives, and has control • payments required to be made by SkyCity under over, all insurance proceeds. As a result of this the Auckland car park concession agreement (for Non recoverable costs 2,747 – relationship, the Group recognises the expected lack of access to the NZICC car parks); 108,090 – insurance proceeds for the damage as a receivable and income at the time of the fire and separately • site preparation and clearing costs; NZICC fire related expenses consist of: this amount was to be accounted for as a reduction accounts for payments to the Contractor as the • costs of professional advisers assisting the Group development of the new assets occurs over time. in the carrying value of the NZICC upon completion. as a result of the fire; and Write‑off of NZICC and Horizon Hotel Capitalised The Deferred Licence Value would normally be While the insurers have acknowledged the fire event • additional ongoing operating costs (such as staff Work‑in‑Progress ($193.9 million) and confirmed the SkyCity's contracts works policy allocated against each component asset of the parking) as a result of the fire. Under the accounting standards, an insurance will respond in relation to damage to the NZICC and NZICC upon completion, and therefore when event, such as the NZICC fire, is treated as a Horizon Hotel, no complete reconstruction cost or The additional expenses are recognised when derecognising some components (as detailed disposal of the damaged asset and the purchase damage estimates are currently available from the incurred (debit Income Statement, credit above) there is also a requirement under the of a new replacement asset for fully replaced Contractor or the insurers. Accordingly, the Group Cash/Liabilities) and any recovery of these items is Group’s accounting policy to release a portion of the component parts. As a result the carrying value has engaged an independent expert to estimate the recognised when recovery is virtually certain (debit Deferred Licence Value liability. of the damaged/destroyed parts of the NZICC likely reconstruction costs to address the damage. Receivables, credit Income Statement). In the and Horizon Hotel are written off to the Income The amount of the release has been estimated These are based on limited information and are year ended 30 June 2020, the Group estimates Statement (debit Income Statement and credit at $165.8 million based on the latest estimated highly sensitive to the actual extent of damage that the additional costs incurred and lost gross Property, Plant and Equipment) percentage of damage to the NZICC. This represents profit totalled $46.4 million. An initial recovery of which has not yet been fully assessed. For the 43.5% of the remaining Deferred Licence Value $37.5 million has been accrued for these items and NZICC, reconstruction costs have been estimated Based on updated estimates provided by RLB, liability (the NZICC was estimated to be 83% the balance of $8.9 million has been included as a to be between $330.0 million and $375.0 million. the Group has estimated that approximately complete prior to the fire, so 43.5% is therefore contingent asset (refer note 37). For the Horizon Hotel, reconstruction costs have 52% of the NZICC and 5% of the Horizon Hotel 52% (being the estimated extent of damage noted construction work to date has been destroyed and been estimated at $6.0 million. Based on this Initial recovery for these additional items will be above) of 83%). will need to be replaced. As a result, approximately information, the Group has assumed an insurance sought from insurers where appropriate. To the $193.9 million of costs previously capitalised as a The ultimate transfer of the Deferred Licence Value recovery for both buildings of $336.0 million, extent recovery under the Group’s insurance policies work in progress in Property, Plant and Equipment liability is highly sensitive to the actual extent of being the lower end of the NZICC range and is not available, recovery will be sought from the have been written off (refer note 23). damage and may differ from this initial assessment Horizon Hotel estimate. The Group considers Contractor, including all insurance excesses. recovery of this amount to be virtually certain. once a detailed assessment of the actual extent of This initial estimate is highly sensitive to the actual Prior to 30 June 2020, the insurers made an initial damage to the NZICC is completed. As a result, it is Recovery of Liquidated Damages for Access extent of damage and the ultimate write‑off may payment of $105.0 million, meaning that the Group possible the amount of the Deferred Licence Value to the Nelson Street Car Park Access Tunnel differ once further assessment is completed on the has therefore recognised a further receivable of liability transferred may change materially. ($10.3 million) damage to both buildings. As a result, it is possible $231.0 million. Refer to note 17 for details of the Deferred Licence A further recovery from the Contractor for the write off of $193.9 million may increase or Value liability release. These initial estimates are highly sensitive to the liquidated damages for the closure of the decrease materially. actual extent of damage and the ultimate insurance Nelson Street car park entrance/exit tunnel Future costs (external and internal) related to the NZICC Obligation ($43.0 million) recovery for the damage may differ from this is available under the NZICC Building Works replacement of the derecognised asset components initial assessment once detailed assessment of the Contract. Based on the dates the tunnel was The Group has recognised a liability to reconstruct will be capitalised as incurred as a new asset actual damage and rebuild planning is completed closed (22 October 2019 to 20 December 2019), the assets associated with the initial 600 NZICC (debit Capital Work in Progress (part of Property, for both buildings. As a result, it is possible a recovery of $10.3 million is virtually certain and car parks. The Group has estimated this to be Plant and Equipment), credit Cash/Liabilities). the insurance recovery of $336.0 million may has been recognised as NZICC fire related income $43.0 million based on a proportionate allocation change materially. in the Income Statement and a receivable for the Release from Deferred Licence Value Liability of the expected total insurance proceeds relating to uncollected balance from FCC has been recognised ($165.8 million reduction in write‑off) the damage. in the Balance Sheet (debit Receivables, credit The ultimate cost for reconstructing these assets Income Statement). In 2016, SkyCity accounted for the granting of the NZICC Auckland casino licence enhancements may differ from this assessment once detailed and recognised a Deferred Licence Value liability of planning is completed and the actual extent of $405.0 million. Based on the Group’s accounting the damage is known. As a result, it is possible the policy adopted in 2014 (at the time of recognising $43.0 million liability may change materially. the Adelaide casino licence enhancements),
186 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 187 Other Recoverable Costs ($34.2 million) Non Recoverable Costs ($2.7 million) (d) Non‑current Assets FINANCIAL STATEMENTS The Group and Contractor have incurred costs These are additional costs incurred by the Group in relating to site preparation and cleaning. relation to the NZICC fire where recovery from the 2020 2019 These costs are recoverable from the insurers and a insurers or Contractor is not virtually certain. A claim $'000 $'000 matching amount is included in NZICC fire income. will be made for these costs against the Contractor and recovery of these costs is included within Insurance recoveries for damages to the NZICC and Horizon Hotel 227,000 – contingent assets (refer note 37). 227,000 –
Refer note 6(c). The split between current and non‑current is based on estimated cash flows associated with (c) Current Assets the anticipated timing of the reconstruction.
2020 2019 7 Expenses $'000 $'000
Insurance recoveries for damages to the NZICC and Horizon Hotel 336,702 – 2020 2019 Other insurance recoveries – 37,456 $'000 $'000 Recovery of liquidated damages – 8,413 Other Expenses Payments received from the Insurers – (106,000) Utilities, insurance and rates 21,949 21,863 Transfer to non‑current receivables (refer note below) – (227,000) Onerous contract expense (relating to the Wharf Casino lease (note 10)) 958 – – 49,571 Other property expenses 12,096 12,124
In addition to the $49.6 million of current NZICC recoveries, there are also non‑current recoveries of Other items 55,246 52,216
$227.0 million (refer below). NZICC recoveries (current plus non‑current) total $276.6 million. Expenses relating to short term leases and leases of low value assets 1,203 4,351
Provision for bad and doubtful debts 5,682 1,245
NZICC recoveries relate to: tunnel is closed. The tunnel was closed from 97,134 91,799 22 October 2019 to 20 December 2019 and, based Insurance Recovery for Damage to the NZICC and on the Building Works Contract, SkyCity is entitled Horizon Hotel ($336.7 million) to receive $10.3 million of liquidated damages Depreciation and Amortisation (excluding right of use assets) The Group has recognised insurance recoveries of from FCC. Depreciation 67,459 66,739 $336.7 million related to the damage to the NZICC To date, the Group has withheld $1.9 million for Casino licence amortisation (Adelaide) 5,507 5,556 ($330.0 million), Horizon Hotel ($6.0 million) and these liquidated damages from payments due to Computer software amortisation 12,480 7,693 various ICT equipment ($0.7 million). the Contractor. The remaining balance collectable is 85,446 79,988 The cost of remediating the NZICC was assessed $8.4 million. by SkyCity's experts at between $330.0 million and SkyCity believes recovery of this amount is virtually Provision for Bad and Doubtful Debts $375.0 million. Both amounts include a significant certain and has recognised $10.3 million within In the current year the Group has recognised an expense of $5.7 million (2019: $1.2 million) for bad and contingency given the uncertainty involved in NZICC fire related income (refer note 6(b)). doubtful debts primarily relating to a small number of International Business customers. The Group is making this assessment. The $330.0 million amount continuing to pursue recovery of these balances. includes a 20% contingency, while the higher Payments Received from the Insurers $375.0 million amount includes a 35% contingency. ($106.0 million)
Other Insurance Recoveries ($37.5 million) Prior to 30 June 2020, the Group received an initial $105.0 million payment from the insurers These recoveries relate to business interruption towards site preparation, cleaning costs and the following the fire and initial costs incurred relating cost of remediation. To 30 June 2020, $34.2 million to site clearance. SkyCity believes recovery of this of this prepayment has been spent on damage amount is virtually certain. assessment, site preparation and cleaning.
Recovery of Liquidated Damages for Access The Group has also received an initial $1.0 million to the Nelson Street Car Park Access Tunnel payment from insurers towards its business ($8.4 million) interruption claim.
The NZICC Building Works Contract with FCC includes the right for SkyCity to receive liquidated damages while the Nelson Street car park access
188 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 189 Auditor's Fees 8 Earnings Per Share
During the year the following fees were paid, or are payable, for services provided by the auditor of the FINANCIAL STATEMENTS Accounting Policy parent entity and its related practices.
The Group employs PricewaterhouseCoopers on assignments additional to their statutory audit duties (i) Basic Earnings per Share where PricewaterhouseCoopers’ expertise and experience with the Group are important and auditor Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by independence is not impaired. These assignments are principally tax advice and tax compliance. the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus For other work, the Group's External Audit Independence Policy requires that advisers other than elements in ordinary shares issued during the year. PricewaterhouseCoopers should be engaged wherever practicable. (ii) Diluted Earnings per Share Tax advisory services relates to ad‑hoc queries covering a range of tax related matters. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to Agreed upon procedures are in relation to the Group's Community Trust allocation of revenue, assessment take into account the after income tax effect of interest and other financing costs associated with dilutive of the application of revenue under the wage subsidy scheme and assessment of the normalisation of potential ordinary shares, and the weighted average number of shares assumed to have been issued for no revenue disclosed in the annual report. Other assurance services are in relation to compliance with banking consideration in relation to dilutive potential ordinary shares. and debt covenants. There are no dilutive potential ordinary shares and therefore basic and diluted earnings per share are the same. 2020 2019
$'000 $'000 2020 2019 (a) Assurance and Agreed upon Procedure Services Number Number Audit and review of financial statements Weighted average number of ordinary shares used as the denominator PwC New Zealand 755 684 in calculating basic and diluted earnings per share (including shares 664,946,279 675,772,802 issued on 9 July 2020 – refer note 29) PwC Australia 74 74
PwC Hong Kong 23 17 PwC Malta 42 – 9 Dividends Total audit and review fees 894 775 Accounting Policy Performed by PwC New Zealand Provision is made for the amount of any dividend declared on or before the end of the financial year but not Other assurance services 20 24 distributed at balance date. Agreed upon procedures 28 14
Total remuneration for other assurance services and agreed upon procedures 48 38 2020 2019 Total remuneration for assurance and agreed upon services 942 813 $'000 $'000
Prior year final dividend 66,867 67,751 (b) Other Services Current year interim dividend 66,421 67,938 Performed by PwC New Zealand Total dividends provided for or paid 133,288 135,689 Tax compliance services 1 –
Tax advisory services 78 266 Cents per share Executive remuneration – 142 Prior year final dividend (per share) 10.0 10.0 Provision of software tool for subsidiary statutory financial statement preparation 12 27 Current year interim dividend (per share) 10.0 10.0 Performed by PwC Australia
Tax compliance services 50 59 The directors have not declared a final dividend in respect of the year ended 30 June 2020.
Tax advisory services 63 226
Performed by PwC Hong Kong
Tax advisory services 26 8
Total remuneration for other services 230 728
Total fees expense 1,172 1,541
190 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 191 10 Leases – SkyCity as the Lessee (b) The Group's Leasing Activities and How These Lease payments are allocated between principal are Accounted for and finance cost. The finance cost is charged to the Accounting Policy Income Statement over the lease period so as to FINANCIAL STATEMENTS The Group has a small number of long term leases produce a constant periodic rate of interest on the Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities relating to airbridges, subsoil access rights and the remaining balance of the liability for each period. include the net present value of the following lease payments: Adelaide Railway Building. Right‑of‑use assets are depreciated over the shorter • fixed payments (including in‑substance fixed payments), less any lease incentives receivable; Lease terms are negotiated on an individual basis of the asset's useful life and the lease term on a and contain a wide range of different terms and • variable lease payments that are based on an index or a rate; and straight‑line basis. conditions. The lease agreements do not impose • payments to be made under reasonably certain extension options. any covenants other than the security interests Payments associated with short term or low in the leased assets that are held by the lessor. value leases that are not material are recognised The lease payments are discounted using the interest rate implicit in the lease, if that rate can be Leased assets may not be used as security for on a straight‑line basis as an expense in the determined, or the Group’s incremental borrowing rate. borrowing purposes. Income Statement. Right‑of‑use assets are measured at cost comprising the following: Until the current financial year, leases of Property, (c) Extension and Termination Options • the amount of the initial measurement of lease liability; Plant and Equipment were classified as operating leases. From 1 July 2019, leases are recognised as a Extension and termination options are included • any lease payments made at or before the commencement date; right‑of‑use asset and a corresponding liability at in a number of leases across the Group. These are • any initial direct costs; and the date at which the leased asset is available for used to maximise operational flexibility in terms of use by the Group. managing the assets used in the Group’s operations. • restoration costs. The majority of extension and termination options The lease payments are discounted using the A small number of immaterial, short term leases have not been included in the calculation of lease liabilities held are exercisable only by the Group and not by interest rate implicit in the lease. If that rate or right‑of‑use assets. the respective lessor. cannot be readily determined, which is generally The balance sheet shows the following amounts relating to leases: the case for leases in the Group, the Group's (d) SkyCity Wharf Lease incremental borrowing rate is used, being Given the financial performance of SkyCity Wharf, the rate that the Group would have to pay to 2020 the lease agreement has been treated as an borrow the funds necessary to obtain an asset of $'000 onerous contract. As a result, the future costs of similar value to the right‑of‑use asset in a similar the lease to termination (6 September 2021) of Right‑of‑use assets net book value economic environment with similar terms, security $1.0 million have been recognised in the year ended SkyCity Auckland subsoil 3,095 and conditions. 30 June 2020. SkyCity Auckland pedestrian airbridge 2,006 To determine the incremental borrowing rate, SkyCity Auckland services airbridge 312 the Group:
Stratton House – Queenstown 2,367 • where possible, uses recent third‑party Adelaide Railway Building and extension 44,187 financing received by the individual lessee as a starting point, adjusted to reflect changes in 51,967 financing conditions since third party financing Lease liabilities was received; Current 485 • uses a build‑up approach that starts with a Non‑current 52,188 risk‑free interest rate adjusted for credit risk; and 52,673 • makes adjustments specific to the lease In the previous year, under NZ IAS 17 Leases, the Group had operating leases which were not recognised on (eg. term, country, currency and security). the Balance Sheet. For the current year, opening balances of right‑of‑use assets and lease liabilities reflect accounting for the operating leases under NZ IFRS 16 Leases for the first time.
(a) Amounts Recognised in the Income Statement
2020
$'000
Depreciation charge of right‑of‑use assets
Right‑of‑use assets 1,114
1,114
Interest expense on lease liabilities
Interest expense on lease liabilities (part of net finance costs) 3,088
3,088
192 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 193 11 Net Finance Costs NZ$397.0 million. Fair value has been calculated incorporated waivers and amendments to the based on the present value of future principal and financial covenants for these periods. All financial interest cash flows, using market interest rates covenants were met at 30 June 2020. FINANCIAL STATEMENTS 2020 2019 and credit margins at balance date. Fair value is (c) New Zealand Bond $'000 $'000 calculated using inputs other than quoted prices that are observable for the liability, either directly Finance costs 45,419 41,598 $125 million of unsubordinated, unsecured, (that is, as prices) or indirectly (that is, derived from redeemable fixed rate bonds were issued on Foreign exchange gains (195) (316) prices). This is a level 2 valuation. 28 September 2015 with a maturity of seven years. Interest income (1,060) (723) Recognising the potential for breaches of financial In June 2020, SkyCity notified bond holders Debt restructuring costs (refer note 12) 7,506 – covenants at 31 December 2020 and 30 June 2021, of its intention to exercise its right to redeem Capitalised interest (refer Property, Plant and Equipment note 23) (23,057) (30,319) due to the impact of COVID‑19, amendments and the bonds early. The bonds will be redeemed waivers to the financial covenants as at these dates Net finance costs 28,613 10,240 on 28 September 2020 at $1.028 per bond, were agreed with USPP investors in June 2020. equating to a total redemption cost of All financial covenants were met at 30 June 2020. $128.5 million. Consequently, the bonds are classified as current liabilities at 30 June 2020 and (b) Syndicated Bank Facility 12 Non‑current Liabilities – Interest Bearing Liabilities carried at the redemption amount. Accounting Policy The unsecured syndicated banking facility is provided by ANZ (New Zealand and Australia), (d) Auckland Car Park Concession Interest bearing liabilities are recognised initially at fair value, net of transaction costs incurred. Commonwealth Bank of Australia, Bank of Interest bearing liabilities are subsequently carried at amortised cost and any difference between the Incorporated in the Auckland car park concession is New Zealand, National Australia Bank and Westpac an interest‑bearing liability of $46.2 million relating proceeds (net of transaction costs) and the redemption value is recognised in the Income Statement over (New Zealand and Australia). the period of the borrowings using the effective interest method, apart from: to the main site nested car parks. This liability will As at 30 June 2020, SkyCity had in place revolving be amortised to nil over the life of the contract with • the interest margin on US dollar denominated USPP notes maturing in March 2025 is accounted for credit facilities of: the movements recognised in interest income. under NZ IFRS 9 as a fair value hedge. The carrying values of the borrowings are adjusted for fair value changes attributable to the risk being hedged; and • NZ$120.0 million maturing 15 March 2021; and (e) Negative Pledge Deeds
• as at 30 June 2020, the New Zealand bonds are carried at the cost of early redemption (refer note 12(c)). • A$280.0 million maturing 31 March 2022. A negative pledge deed has been executed in relation to each of the funding facilities – bank Subsequent to Balance Date facilities, USPP notes and New Zealand bonds. 2020 2019 Consistent with the funding plan announced In each deed are requirements for minimum $'000 $'000 on 17 June 2020, in July 2020 the syndicated guarantee group participation as well as Unsecured Interest Bearing Liabilities bank facility was restructured and extended to financial covenants. All requirements of the negative pledge deeds have been met as at Car park concession (main site nested car parks) 42,802 – the following: 30 June 2020. United States private placement notes 241,420 373,091 • A$280.0 million maturing 31 March 2022; (f) CBA Revolving Credit Facility New Zealand bonds – 125,000 • NZ$60.0 million maturing 15 June 2022;
Deferred funding expenses (1,491) (2,178) • NZ$85.0 million maturing 15 June 2023; and Subsequent to Balance Date Total Non‑current Interest Bearing Liabilities 282,731 495,913 • NZ$85.0 million maturing 15 June 2024. Consistent with the funding plan announced on 17 June 2020, in July 2020 a Recognising the potential for breaches of financial NZ$100.0 million revolving credit facility was (a) United States Private Placement (USPP) Notes movements in exchange rates and interest rates. covenants at 31 December 2020 and 30 June 2021, established with the Commonwealth Bank of directly as a result of the impact of COVID‑19, the As at 30 June 2020 (and 30 June 2019), SkyCity The US dollar USPP notes have been hedged to Australia, maturing 31 December 2021. restructuring and extension of the bank facilities had outstanding: New Zealand dollars or Australian dollars by way of cross currency interest rate swaps to eliminate • US$100.0 million maturing 15 March 2021; foreign exchange exposure to the US dollar. • US$100.0 million maturing 17 March 2025; and The offsetting changes in the value of the cross (g) Weighted Average Interest Rate currency interest rate swaps are included within • A$65.4 million maturing 15 March 2028. derivative financial instruments in note 32. Movements in the carrying value of the outstanding 2020 2019 Fair value of USPP debt is estimated at balance in the current year relate to maturity of Weighted Weighted NZ$429.4 million compared to a carrying value of average Balance average Balance NZ$21.1 million of notes on 15 March 2020 plus interest rate interest rate
% $'000 % $'000
Interest bearing liabilities* 6.39% 586,731 6.56% 547,218
*The weighted average debt interest rate includes the impact of interest rate and foreign currency hedging.
194 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 195 13 Current Liabilities – Interest Bearing Liabilities 15 Non‑current Assets – Investment Properties
Accounting Policy Accounting Policy FINANCIAL STATEMENTS
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer Investment property, principally comprising freehold office buildings, is held for long term rental yields settlement of the liability for at least 12 months after the balance sheet date. and is not occupied by the Group. Investment property is carried at fair value, which is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent 2020 2019 prices in less active markets or discounted cash flow projections. Changes in fair values are recorded in the $'000 $'000 Income Statement. Unsecured Interest Bearing Liabilities
Syndicated bank facility 15,000 28,000 2020 2019
United States private placement notes 155,618 21,127 $'000 $'000
New Zealand bonds 128,500 – Balance at the beginning of the year 40,660 35,300
Car park concession (main site nested car parks) 3,391 – Acquisitions 2,252 8,564
Total current interest‑bearing borrowings 302,509 49,127 Net (loss) from fair value adjustment (14,055) (3,204) Refer note 12(a) for details concerning the US private placement notes, note 12(b) for details concerning the Transfer from property, plant and equipment – existing convention centre 16,420 – syndicated bank facility, note 12(c) for details concerning the New Zealand bonds and note 12(d) for details Transfer from property, plant and equipment – NZICC car parks 27,123 – concerning the car park concession. Closing balance at 30 June 72,400 40,660
14 Net Debt Reconciliation (a) Amounts Recognised in Profit and Loss for Investment Property
CASH AND BORROWINGS BORROWINGS BANK DUE WITHIN DUE AFTER 2020 2019 BALANCES 1 YEAR 1 YEAR TOTAL $'000 $'000 $'000 $'000 $'000 $'000 Rental income 2,953 2,338 Net debt as at 1 July 2018 (75,955) – 508,453 432,498 Direct operating expenses from property that generated rental income (1,594) (819) Movement in cash and cash equivalents 34,381 – – 34,381 Net (loss) from fair value adjustment (14,055) (3,204) Revaluation of USPP notes – – 7,560 7,560 (12,696) (1,685) Amortisation of deferred funding expenses – – 1,027 1,027 Net movement in bank drawings – 28,000 – 28,000 (b) Valuation Basis
Reclassification – 21,127 (21,127) – Investment properties were valued on 30 June 2020 by Bower Valuations Limited and Extensor Advisory Initial recognition of lease liabilities – – – – Limited, Registered Valuers and Members of the New Zealand Institute of Valuers and the Property
Net debt as at 30 June 2019 (41,574) 49,127 495,913 503,466 Institute of New Zealand, at a total value of $45.3 million (excluding the NZICC car parks). The valuer has recent experience in the location and category of the investment being valued. The basis of the valuation of investment properties is fair value being the amounts for which the properties could be exchanged Movement in cash and cash equivalents (12,650) – – (12,650) between willing parties in arm’s length transactions, based on current prices in an active market for similar Recognition of car park concession liability – 3,391 42,802 46,193 properties in the same locations and conditions and subject to similar leases.
Revaluation of NZ bonds – 3,500 – 3,500 The following were the significant assumptions used in the 30 June 2020 valuation of the existing
Revaluation of USPP notes – 6,230 17,716 23,946 convention centre:
Repayment of USPP notes – (21,127) – (21,127) • capitalisation rate of 9.73%; and
Amortisation of deferred funding expenses – – 687 687 • passing yield calculated as net rent divided by fair value of 7.00%. Net movement in bank drawings – (13,000) – (13,000)
Reclassification – 274,388 (274,388) –
Initial recognition of lease liabilities – 485 50,336 50,821
Increase in lease liabilities – – 1,852 1,852
Net debt as at 30 June 2020 (54,224) 302,994 334,918 583,688
196 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 197 The following were the significant assumptions used The valuer has recent experience in the location and 16 Current Liabilities – Deferred Licence Value in the 30 June 2020 valuation of other investment category of the investment being valued. The basis properties: of the valuation is fair value being the amounts for Accounting Policy FINANCIAL STATEMENTS which the property could be exchanged between Regulatory reforms granted which are specific to the Group are initially recognised at their fair value • capitalisation rate of 7.53% (2019: 5.0%); and willing parties in an arm’s length transaction, based where there is a reasonable assurance that the reforms will be received and the Group will comply with all • passing yield calculated as net rent divided by on current prices in an active market for similar conditions attached. properties in the same location and condition fair value of 5.82% (2019: 4.4%). Regulatory reforms are recognised as an intangible asset (note 24) and included within the value of and subject to similar leases. The valuation was The valuations are sensitive to movements in these casino licences in accordance with NZ IAS 20. Where a regulatory reform is related to Property, Plant and completed on the footing that the rental payments assumptions, adverse changes in the assumptions Equipment, once constructed the carrying value of that Property, Plant and Equipment is reduced by the have commenced and there is a hypothetical will result in a lower valuation. value of the regulatory reforms. Prior to completion of the related Property, Plant and Equipment, the value subdivision to create a separate legal title which of the regulatory reforms is accounted for as a deferred licence value. Due to the uncertainty related to COVID‑19 that could be sold. has led to a reduction in the number of real estate The following were the significant assumptions transactions and has impacted the availability of 2020 2019 used in the valuation: market data as at 30 June 2020, the independent $'000 $'000 valuations as at 30 June 2020 have been reported • capitalisation rate of 7.99%; and SkyCity Adelaide 153,165 – on the basis of ‘material valuation uncertainty’, • passing yield calculated as net rent divided by meaning less certainty and a higher degree of 153,165 – fair value of 5.48%. caution should be applied to the valuations. The SkyCity Adelaide deferred licence value liability was initially recognised in 2014 following an The opinion of value has been determined at (d) Transfer from Property, Plant and Equipment amendment to the Adelaide Approved Licensing Agreement (ALA). The agreement to amend the ALA the valuation date based on a certain set of – NZICC Car Park required SkyCity Adelaide to agree to undertake a A$350.0 million casino expansion and hotel development assumptions used by the valuers, however these project and the deferred licence value liability relates to this requirement. could change in a short period of time due to As detailed in note 4, approximately 650 car parks subsequent changes in the property market when are due to be provided to Macquarie as part of the This balance is now current as it will be transferred to Property, Plant and Equipment in the next 12 months. transactional activity resumes. Auckland car park concession transaction. Based on the expected delay in providing these car parks it (c) Transfer from Property, Plant and Equipment is expected that this will be an operating lease and 17 Non‑current Liabilities – Deferred Licence Value – Existing Convention Centre therefore those car parks will form an investment property. As a result $27.1 million has been With effect from 31 October 2019, portions of the AUCKLAND ADELAIDE TOTAL transferred from Property, Plant and Equipment existing Auckland convention centre have been 2020 $'000 $'000 $'000 (note 23) to Investment Properties. leased to All Blacks Experience Limited and Weta Opening balance 355,179 149,625 504,804 Workshop Limited. As a result, this portion of the It is the Group's policy to carry investment convention centre has been reclassified as an properties at fair value in accordance with NZ IAS Exchange rate movement – 3,540 3,540 Investment Property ($16.4 million). 40 Investment Property (NZ IAS 40). Transferred to current liabilities (note 16) – (153,165) (153,165)
Immediately before reclassification this portion NZ IAS 40 allows an investment property under Adjustment to PP&E classified as held for sale (note 6) 25,578 – 25,578 of the convention centre was revalued and the construction to be carried at cost if it is not possible Impact of NZICC Fire (note 6) (165,785) – (165,785) resulting uplift in value of $5.9 million has been to reliably measure fair value during construction Closing balance 214,972 – 214,972 transferred to the Asset Revaluation Reserve but will be possible on completion. Given the (note 31). impact of the NZICC fire, it is the directors' view 2019 that it is not currently possible to reliably measure The portion of the Auckland convention centre fair value. As a result, this investment property will Opening balance 405,000 155,835 560,835 was valued by Bower Valuations Limited and continue to be carried at cost until such time as fair Exchange rate movement – (6,210) (6,210) Extensor Advisory Limited, Registered Valuers and value can be reliably determined. Members of the New Zealand Institute of Valuers Transferred to PP&E classified as held for sale (note 27) (49,821) – (49,821) and the Property Institute of New Zealand, as at Closing balance 355,179 149,625 504,804 31 October 2019 at a total value of $16.4 million. SkyCity Auckland
On 5 July 2013, SkyCity and the Crown entered determined that approximately 650 of the NZICC into the New Zealand International Convention car parks were unlikely to be part of a finance lease. Centre Project and Licensing Agreement (the NZICC Therefore, in 2020, $25.6 million of the 2019 transfer Agreement). The NZICC Agreement modified the was reversed to give an ultimate net transfer of Auckland casino licence and required SkyCity to $24.2 million. develop the NZICC. The SkyCity Auckland Deferred Following the NZICC fire, the damaged portion of Licence Value liability relates to that requirement. the NZICC was disposed (refer note 6). As a result of As detailed in note 6, it was initially expected this disposal, $165.8 million of the SkyCity Auckland that all NZICC car parks included in the sale Deferred Licence Value liability has been released to of the Auckland car park concession would be the Income Statement. treated as part of a finance lease. As a result of this The $165.8 million release is based on an initial assumption, in 2019 $49.8 million of the deferred assessment of the damage from the NZICC fire licence value was transferred to PP&E classified as (refer note 6) and may materially change as further held for sale. Following the NZICC fire, it was information becomes available. 198 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 199 18 Income Tax (Benefit)/Expense 19 Deferred Tax Assets
Accounting Policy FINANCIAL STATEMENTS The income tax expense for the year is the tax payable on the current year’s taxable income, based on the 2020 2019 income tax rate for each jurisdiction. This is then adjusted by changes in deferred tax assets and liabilities $'000 $'000 attributable to temporary differences between the tax bases of assets and liabilities and their carrying The balance comprises temporary differences attributable to: amounts in the financial statements. Provisions and accruals 5,316 5,303 Deferred income tax is recognised, using the liability method, on temporary differences arising between the Depreciation (7,723) (4,365) tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax Foreign exchange variances 166 1,713 is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a Cash flow hedges 653 1,846 business combination that at the time of the transaction affects neither accounting nor taxable profit or Lease accounting 185 – loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively Tax losses 346 enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is 8,280 realised or the deferred income tax liability is settled. Net deferred tax assets 6,877 4,843 Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilised. Movements:
Balance at beginning of the year 4,843 –
2020 2019 Transferred from deferred tax liabilities – (1,097)
$'000 $'000 Foreign exchange differences 89 84
(a) Income Tax (Benefit)/Expense Transferred to discontinued operations – 5,088
Current tax 26,115 60,616 Charged to the Income Statement (note 18) 3,157 2,651
Deferred tax (28,267) (13,863) Tax credited directly to other comprehensive income (note 31) (1,212) (1,883)
Income tax (benefit)/expense (2,152) 46,753 Closing balance at 30 June 6,877 4,843
(b) Numerical Reconciliation of Income Tax (Benefit)/Expense to Prima Facie Tax Payable Deferred tax assets relate to the Australian operations.
Profit from continuing operations before income tax expense 233,118 207,578
Prima facie income tax @ 28% 65,273 58,122
Tax effects of: 20 Deferred Tax Liabilities
Expenses not deductible for tax purposes 2,210 2,361 2020 2019 Foreign exchange rate differences (53) (3) $'000 $'000 Share of partnership expenditure – (1,920) The balance comprises temporary differences attributable to: Differences in overseas tax rates (3,402) 1,116 Provisions and accruals (14,972) (11,664) Asset held for sale (411) (11,509) Depreciation 64,702 89,958 Capital gain ‑ Federal Street car park – (6,211) Lease accounting (28) – Prior period adjustments (including ATO settlement) 243 3,888 Cash flow hedges (7,355) (7,480) NZICC fire capital income/expenses (73,955) – Other 2,828 (654) Auckland car park concession proceeds (20,062) – Net deferred tax liabilities 45,175 70,160 Adelaide casino licence impairment 48,188 –
Fair value adjustments 3,955 897 Movements: Reinstatement of New Zealand tax building depreciation (24,145) – Balance at beginning of the year 70,160 84,547 Other 7 12 Transferred to deferred tax assets – (1,097) Income tax (benefit)/expense (2,152) 46,753 (Credited)/charged to the Income Statement (note 18) (25,110) (11,212)
The weighted average applicable tax rate was ‑0.9% (2019: 22.5%). The weighted average tax rate has been Tax debited/(credited) directly to other comprehensive income (note 31) 125 (2,101) significantly impacted by: Foreign exchange differences – 23 • NZICC fire capital income/expense; Closing balance at 30 June 45,175 70,160 • Auckland car park concession proceeds; • Adelaide casino licence impairment; Deferred tax liabilities relate to the New Zealand operations. • fair value adjustments; and • reinstatement of New Zealand tax building depreciation. Excluding these items the weighted average tax rate would have been 27.4% (2019: 22.1%).
200 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 201 21 Imputation and Franking Credits PLANT, BUILDINGS EQUIPMENT FIXTURES CAPITAL
AND AND MOTOR AND WORK IN FINANCIAL STATEMENTS LAND FITOUT VEHICLES FITTINGS PROGRESS TOTAL 2020 2019 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 July 2018 Balances available for use in subsequent reporting periods Cost 180,974 985,155 443,233 137,689 511,992 2,259,043 Imputation credit account (New Zealand) 21,347 46,926 Accumulated depreciation – (348,275) (319,153) (93,005) – (760,433) Franking credit account (Australia) (A$'000) 13,951 15,176 Net book amount 180,974 636,880 124,080 44,684 511,992 1,498,610
As required by relevant tax legislation, the imputation credit account had a credit balance as at 31 March 2020. Year Ended 30 June 2019 Opening net book amount 180,974 636,880 124,080 44,684 511,992 1,498,610
Exchange differences (1,095) (6,864) (1,564) (435) (4,085) (14,043)
22 Non‑current Liabilities – Lease Income in Advance Net additions/transfers 56,828 12,000 31,704 5,925 244,836 351,293
Disposals (17,661) (122,977) (17,172) (4,916) (253) (162,979)
2020 2019 Assets classified as held for sale (8,729) (45,428) (710) – (110,641) (165,508) $'000 $'000 Depreciation charge* – (22,658) (37,551) (10,907) – (71,116) Lease income in advance 39,815 – Closing net book amount 210,317 450,953 98,787 34,351 641,849 1,436,257 39,815 – At 30 June 2019
As detailed in note 6, the approximately 650 further NZICC car parks to be delivered as part of the Auckland Cost 210,317 775,739 371,060 123,996 641,849 2,122,961 car park concession transaction have been determined to be an operating lease. Accumulated depreciation – (324,786) (272,273) (89,645) – (686,704)
The $220.0 million concession payment has been allocated between the 450 nested car parks and Net book amount 210,317 450,953 98,787 34,351 641,849 1,436,257 the unnested car parks based on their respective fair values. The payment for the unnested car parks Year Ended 30 June 2020 (refer note 6) was further allocated based on the number of car parks. At 19 August 2019, $39.8 million was Opening net book amount 210,317 450,953 98,787 34,351 641,849 1,436,257 allocated to these approximately 650 further NZICC car parks and was recognised as a lease payment in advance. Exchange differences – 959 421 90 4,123 5,593 Net additions/transfers 1,421 41,162 25,461 3,681 257,460 329,185
Transfer to investment properties – (10,484) – – – (10,484) 23 Property, Plant and Equipment – existing convention centre (note 15) Transfer to investment properties – – – – (27,123) (27,123) Accounting Policy – NZICC car parks (note 15)
Property, Plant and Equipment is stated at historical cost less depreciation. Historical cost includes Reversal of 2019 assets classified – – – – 56,801 56,801 expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from as held for sale (note 6) equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of Property, Plant NZICC fire disposal (note 6) – – – – (193,868) (193,868)
and Equipment. Depreciation charge – (25,126) (33,017) (9,316) – (67,459)
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate Closing net book amount 211,738 457,464 91,652 28,806 739,242 1,528,902 their cost, net of their residual values, over their estimated useful lives, as below: At 30 June 2020
Buildings and fitout 5–75 years Cost 211,738 783,956 391,221 126,345 739,242 2,252,502
Plant, equipment and motor vehicles 2–75 years Accumulated depreciation – (326,492) (299,569) (97,539) – (723,600)
Fixtures and fittings 3–20 years Net book amount 211,738 457,464 91,652 28,806 739,242 1,528,902
*FY19 depreciation charge above includes depreciation on both continuing and discontinued operations. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
202 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 203 (a) Capitalised Borrowing Costs Goodwill is allocated to cash generating units for (iv) Acquired Software the purpose of impairment testing.
Borrowing costs of $23.1 million have been Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring FINANCIAL STATEMENTS capitalised in the current year relating to capital Goodwill impairment reviews are undertaken to use the specific software. These costs are amortised over their estimated useful life (three to 15 years) on a projects (2019: $30.3 million) using the Group's annually or more frequently if events or changes straight line basis. weighted average cost of debt of 6.36% across the in circumstances indicate a potential impairment. year (2019: 6.11%). The carrying value of goodwill is compared to the (v) Amortisation recoverable amount, which is the higher of value FY19 amortisation charge below includes amortisation on both continuing and discontinued operations. (b) Encumbrances in use and the fair value less costs of disposal. A memorandum of encumbrance is registered Any impairment is recognised immediately as an CASINO COMPUTER against the title of land for the Auckland casino expense and is not subsequently reversed. GOODWILL LICENCES SOFTWARE TOTAL in favour of Auckland Council. Auckland Council $'000 $'000 $'000 $'000 (ii) Casino Licences requires prior written consent before any transfer, At 1 July 2018 assignment or disposition of the land. The intent of The Group's casino licences that have a Cost 35,786 821,364 102,842 959,992 the covenant is to protect the Council's rights under finite useful life are carried at cost less the resource consent, relating to the provision of the accumulated amortisation. Amortisation of these Accumulated amortisation – (57,705) (70,454) (128,159) bus terminus, public car park and public footpaths casino licences is calculated on a straight line basis Net book amount 35,786 763,659 32,388 831,833 around the complex. so as to expense the cost of the licences over their Movements in the Year Ended 30 June 2019 legal life. A further encumbrance records the Council's Exchange differences – (14,117) (138) (14,255) interest in relation to the sub soil areas under The casino licences that have been determined Additions – – 29,461 29,461 Federal and Hobson Streets used by SkyCity as car to have an indefinite useful life for amortisation parking and a vehicle tunnel. The encumbrance is purposes are not amortised but are reviewed for Transferred to disposal group classified as held for sale – (33,094) (1,955) (35,049) to notify any transferee of the Council's interest as impairment on an annual basis. The casino licences Amortisation charge – (5,556) (8,026) (13,582) lessor of the sub soil areas. that have been determined to have a finite life for Closing net book amount 35,786 710,892 51,730 798,408 amortisation purposes are reviewed for impairment There are four encumbrances relating to the NZICC if there are indicators of impairment. At 30 June 2019 site land. One encumbrance protects the rights of Cost 35,786 768,618 127,311 931,715 the Crown under the NZICC Project and Licensing Judgement is exercised in determining whether a Agreement, two relate to firewalls between casino licence has a finite or indefinite useful life. Accumulated amortisation – (57,726) (75,581) (133,307) buildings that have now been demolished and Consideration is given to the terms and conditions Net book amount 35,786 710,892 51,730 798,408 the final encumbrance protects the underground of the relevant licence and in particular the Movements in the Year Ended 30 June 2020 vehicle entrance to the car park on the main renewal terms. Auckland casino site. The NZICC site land is also Exchange differences – 7,052 68 7,120 subject to a covenant in favour of the Crown (iii) Regulatory Reforms Associated with Additions 1,908 – 20,682 22,590 Casino Licences which restricts the subdivision and use of the site Impairment of Adelaide casino licence – (160,600)* – (160,600)* to that permitted under the NZICC Project and Regulatory reforms granted which are specific to Amortisation charge – (5,507) (12,480) (17,987) Licensing Agreement. the Group are initially recognised at their fair value Closing net book amount 37,694 551,837 60,000 649,531 where there is a reasonable assurance that the 24 Intangible Assets reforms will be received and the Group will comply At 30 June 2020 with all conditions attached. Cost 37,694 777,118 147,798 962,610 Accounting Policy Regulatory reforms are recognised as an intangible Accumulated amortisation – (225,281) (87,798) (313,079)
(i) Goodwill asset and included within the value of casino Net book amount 37,694 551,837 60,000 649,531 licences in accordance with NZ IAS 20. Where a Goodwill represents the excess of the cost of an regulatory reform is related to Property, Plant and *Equivalent to A$150 million. acquisition over the fair value of the Group’s share of Equipment, once constructed the carrying value the net identifiable assets of the acquired business of that Property, Plant and Equipment is reduced at the date of acquisition. Goodwill on acquisitions by the value of the regulatory reforms. Prior to of businesses is included in Intangible Assets. completion of the related Property, Plant and Goodwill acquired in business combinations is Equipment, the value of the regulatory reforms is not amortised. Instead, goodwill is tested for accounted for as deferred licence value. impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
204 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 205 CASINO LICENCE CONTRACT TERM CASINO LICENCE CONTRACT TERM
SkyCity Auckland SkyCity Auckland Limited holds a casino premises licence for the SkyCity Wharf Casino Otago Casinos Limited holds a casino premises licence for the Queenstown FINANCIAL STATEMENTS Casino (indefinite Auckland premises. (Queenstown) Wharf premises. The casino premises licence is for an initial 25 year term from useful life) (indefinite useful life) 11 September 1999. The licence can be renewed for further periods of 15 years The initial licence was granted in 1996 for nil consideration, and hence there was no pursuant to section 138 of the Gambling Act 2003 (NZ). The carrying value of the associated initial carrying value. casino licence, which arose on SkyCity's acquisition of Otago Casinos Limited, is Pursuant to the terms of the New Zealand International Convention Centre Project $4.4 million (FY19: $4.4 million). and Licensing Agreement between Her Majesty the Queen in Right of New Zealand The asset is not amortised but is reviewed for impairment annually. and the Company dated 5 July 2013 (NZICC Agreement), the initial term of the licence was extended to 30 June 2048. (a) Impairment Tests for Intangibles with Indefinite Lives The licence can be renewed for further periods of 15 years pursuant to section 138 of the Gambling Act 2003 (NZ). OTAGO In addition to the licence extension, the casino premises licence was amended to SKYCITY CASINOS SKYCITY AUCKLAND LIMITED* HAMILTON* TOTAL (a) permit the implementation of account based cashless gaming and ticket in $'000 $'000 $'000 $'000 ticket out (TITO) gaming systems; (b) permit an increase in the number of gaming machines, gaming tables and automated table games; and (c) implement various 2020 other operational improvements. Under the NZICC Agreement, the Company has Goodwill – – 35,786 35,786 agreed to construct the NZICC for a total cost of at least $430.0 million. Casino Licence 405,000 4,391 – 409,391
The reforms (a to c above) are exclusive to the Group and were recorded at fair value Total 405,000 4,391 35,786 445,177 based on the estimated incremental benefit over the life of the reforms. The fair 2019 value was determined using a discounted cashflow model falling within level 3 of the fair value hierarchy over the life of the reforms. Goodwill – – 35,786 35,786
The asset is not amortised but is reviewed for impairment annually. Casino Licence 405,000 4,391 – 409,391 Total 405,000 4,391 35,786 445,177 The carrying amount of the casino licence is $405.0 million (FY19: $405.0 million). Other than Otago Casinos Limited, the recoverable amount of a cash generating unit is determined based SkyCity Adelaide The casino and associated operations are carried out by SkyCity Adelaide Pty on value in use calculations. These calculations use cash flow projections approved by directors which (finite useful life) Limited under a casino licence (the Approved Licensing Agreement (ALA)) dated include cash flows in relation to the International Business where those cash flows relate to the relevant October 1999 (as amended). Unless terminated earlier, the expiry date of the ALA cash generating unit. There is a significant surplus between the calculated value in use and the carrying is 30 June 2085. The term of the ALA can be renewed for a further fixed term value for each cash generating unit. The value of the Wharf (Otago Casinos Limited) casino licence is the pursuant to section 9 of the Casino Act 1997 (SA). The carrying value of the casino potential ability to utilise the licence to enhance the Group's gaming offering. licence is amortised over the life of the ALA. *SkyCity Hamilton and Otago Casinos Limited are included within the 'Other New Zealand Operations' segment in note 2. The casino licence and associated regulatory reforms asset is amortised over 20 years or 71 years depending on whether the incremental benefit is associated (b) Key Assumptions used for Value in Use Calculations of Cash Generating Units with the exclusivity period or the full licence period.
Due to the impairment of the Adelaide casino licence, the carrying value of the TERMINAL PRETAX casino licence is A$133.0 million (FY19: A$288.3 million) (NZ$142.4 million and EBITDA MARGIN GROWTH RATE DISCOUNT RATE NZ$301.5 million respectively). 2020 2019 2020 2019 2020 2019 $'000 $'000 $'000 $'000 $'000 $'000
SkyCity Hamilton SkyCity Hamilton Limited holds a casino premises licence for the Hamilton SkyCity Auckland 36.0% 40.0% 2.0% 2.0% 11.0% 11.6% Casino (indefinite premises. The casino premises licence is for an initial 25 year term from SkyCity Hamilton 41.4% 43.5% 2.0% 2.0% 11.0% 11.6% useful life) 19 September 2002. The licence can be renewed for further periods of 15 years pursuant to section 138 of the Gambling Act 2003 (NZ). As the licence was initially These assumptions are consistent with past experience adjusted for economic indicators. The discount rates granted for nil consideration, there is no associated carrying value. are pre-tax and reflect specific risks relating to the relevant operating segment. The estimated impacts of COVID‑19 have been factored into these assumptions. SkyCity Queenstown Queenstown Casinos Limited holds a casino premises licence for the Queenstown Casino (indefinite premises. The casino premises licence is for an initial 25 year term from There is sufficient headroom between the value in use calculations and the carrying value of the related useful life) 7 December 2000. The licence can be renewed for further periods of 15 years cash generating units' assets that significant changes in the assumptions used would not require an pursuant to section 138 of the Gambling Act 2003 (NZ). As the licence was initially impairment. granted for nil consideration, there is no associated carrying value.
206 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 207 (c) Adelaide Casino Licence Impairment Charge uplift is expected from the Adelaide expansion, Valuation Sensitivities The valuation assumes no repeat of the previous further growth is expected for the next few years COVID‑19 lockdown in Adelaide, which is a key
In the current year, the Group has impaired The impact of COVID‑19 on the Group has already FINANCIAL STATEMENTS before levelling off from FY26 onwards. Growth has judgement and assumption. For illustrative the Adelaide casino licence by A$150.0 million been wide‑ranging and significant. Given the been estimated factoring in the expected increase purposes only, directors have estimated the (NZ$160.6 million). The recoverable amount has pending opening of the Adelaide expansion and in gaming machine market share, the expected potential valuation impact of a three‑month been determined using the fair value less cost of the unknown future impact of COVID‑19, there is a increase in premium and VIP gaming activity, the lockdown of a similar nature to the previous disposal approach using Level 3 of the fair value heightened level of uncertainty at present which positive impact of the new hotel and restaurants lockdown, commencing 1 October 2020, to be measurement hierarchy. makes accurate forecasts of the future particularly attracting additional visitors, the positive impact an increase in the impairment of approximately challenging. The impairment has arisen due to revised of recent and current developments in the A$18 million. The actual valuation impact of a expectations regarding the time frame for surrounding precinct (including a new car park The sensitivities below illustrate the impact on renewed lockdown (if any) would depend on the SkyCity Adelaide to achieve its long term building) and other known factors. the impairment assessment of changes in the key length of the lockdown, the nature of the lockdown potential earnings following completion of the assumptions: restrictions and the Federal and State Government The impairment amount is sensitive to changes expansion project. The reduced earnings outlook responses. Therefore, the valuation impact of a in the EBITDA growth and information on this • (decrease)increase of 5% in the initial five‑year for SkyCity Adelaide has been exacerbated in lockdown (if any) may differ significantly from sensitivity is provided below. EBITDA = increase(decrease) to the impairment the short‑to‑medium term by the recent and this estimate. of around $27 million; expected ongoing impacts of COVID‑19, including Terminal Growth Rate an expectation that International Business activity • (decrease)increase of 0.5% in terminal growth Annual Impairment Review The directors and Deloitte have assessed the may take some years to recover. rate (1.5% to 2.5%) = increase(decrease) to the The Group will complete an annual impairment terminal growth rate at 2% based on long impairment of around $20 million; review of the Adelaide casino licence going forward. The Group engaged Deloitte to prepare an term inflation rates and a continued focus on Increases in the fair value less costs of disposal or independent valuation for the Adelaide cash cost efficiencies. • (increase)decrease of $2.5 million in terminal generating unit for the purposes of determining the capex = increase(decrease) to the impairment of reductions in the carrying value of the Adelaide impairment amount. A key input into the valuation The impairment amount is sensitive to changes in around $18 million; and business could result in a partial reversal of the was the five‑year forecast for SkyCity Adelaide which the terminal growth rate and information on this impairment charge. Decreases in the fair value • (increase)decrease of 0.5% in the discount rate had been adopted by the Board. Deloitte calculated sensitivity is provided below. less costs of disposal may result in an additional (10.3% to 11.3%) = increase(decrease) to the a valuation range which was used to assess impairment charge. Terminal Capex impairment of around $24 million. impairment and resulted in an impairment range of A$125.0 million to A$173.0 million. Directors have Terminal capex has been based on the adopted an impairment of A$150 million, which experience at SkyCity's other casino locations and is approximately the mid‑point of the benchmarking against other casino companies. impairment range. 25 Receivables and Prepayments The impairment amount is sensitive to changes in Accounting Policy The independent valuation was based on the the terminal capex amount and information on this following key assumptions: sensitivity is provided below. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for doubtful debts. • compound annual EBITDA growth rate from FY19 Discount Rate to FY25 = 21.1%; The discount rate has been independently 2020 2019 • terminal growth rate = 2%; calculated by Deloitte and reflects the valuation of $'000 $'000 • terminal capex amount = 75% of tangible asset SkyCity Adelaide on a standalone basis and future depreciation; and uncertainty regarding performance after opening Net trade receivables the expansion. Trade receivables (gross) 50,069 51,307 • discount rate = 10.8%. The discount rate represents the current market Provision for doubtful receivables (20,509) (15,147) The directors have reviewed and adopted these assessment of the risks specific to Adelaide, Trade receivables (net) 29,560 36,160 assumptions and the Deloitte valuation. taking into account the time value of money and Sundry receivables and prepayments 12,692 13,133 individual risks of the underlying assets that have EBITDA Growth not been incorporated in the cash flow estimates Total receivables and prepayments 42,252 49,293 Determining an appropriate growth rate is made including COVID‑19. Due to the short term nature of these receivables, their carrying value is assumed to be equal to their fair value. difficult by the impact of COVID‑19 on the FY20 The impairment amount is sensitive to changes in results and its expected impact on FY21 results the discount rate and information on this sensitivity and is further complicated by the opening of the is provided below. Adelaide expansion expected between October and December 2020. A significant initial EBITDA
208 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 209 26 Cash and Bank Balances 29 Share Capital FINANCIAL STATEMENTS
2020 2019 2020 2019 2020 2019
$'000 $'000 Shares Shares $'000 $'000
Cash at bank 26,047 7,256 Opening balance of ordinary shares issued 672,351,166 680,342,108 1,126,996 1,152,260
Cash in house 28,177 34,318 Share rights issued for employee services – – 3,698 4,540
Total cash and bank balances 54,224 41,574 Share buy back and cancellation (5,154,360) (10,095,373) (20,003) (38,792)
Net issue of treasury shares – – 436 397
Equity raising 72,000,000 – 177,160 –
27 PP&E Classified as Held for Sale Shares issued under dividend reinvestment plan – 2,104,431 – 8,591
Accounting Policy 739,196,806 672,351,166 1,288,287 1,126,996
Non‑current assets are classified as assets held for sale when their carrying amount is to be recovered principally All ordinary shares rank equally with one vote attached to each fully‑paid ordinary share. through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Included within the number of shares is 5,155,841 treasury shares (2019: 5,190,841) held by the Company. The movement in treasury shares during the year related to the issuance of shares under the employee Non‑current assets are not depreciated or amortised while they are classified as held for sale. Interest and other incentive plans and purchases of shares by an external trustee as part of the executive long term incentive expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. plan (refer note 34). Treasury shares may be used to issue shares under the Company's employee incentive plans or upon the exercise of share rights/options.
2020 2019 Equity Raising $'000 $'000 On 17 June 2020, the Company announced a $180.0 million institutional share placement and a Land 8,936 8,729 $50.0 million share purchase plan. Buildings 2,080 104,041 Institutional Share Placement Plant and equipment 3 2,917 The institutional share placement was completed on 24 June 2020 (before the balance date). Total 11,019 115,687 The institutional share placement involved the issue of 72,000,000 new shares at $2.50 per share raising Assets held for sale consist of the Darwin Little Mindil site ($11.0 million (30 June 2019: $10.8 million)). Prior $180.0 million. Costs associated with the placement of $2.8 million (including brokerage and legal and other period assets held for sale included the Auckland car park concession (30 June 2019: $104.9 million) (note 4). fees) were deducted from the share proceeds.
Share Purchase Plan 28 Payables and Provisions Subsequent to Balance Date Accounting Policy The share purchase plan was completed on 9 July 2020 (after the balance date) and is therefore not The carrying amounts of trade and other payables are considered to be the same as their fair values, due to included within the above table. The share purchase plan involved the issue of 21,008,403 new shares at their short term nature. $2.38 per share raising $50.0 million.
2020 2019
$'000 $'000 30 Discontinued Operations
Trade payables 19,364 26,489 Sale of Darwin Operations Deferred income 2,302 1,779 On 8 November 2018, SkyCity announced the sale of the Darwin business to Delaware North. A sale and Accrued expenses 76,366 117,448 purchase agreement for A$188.0 million was signed subject to regulatory approval and other minor matters. All conditions were satisfied and the disposal was completed on 4 April 2019. Employee benefits 40,427 42,896
NZICC payables (note 6) 43,047 –
Onerous contract provision 836 –
Liquidated damages (note 37) 39,500 39,500
Total payables and provisions 221,842 228,112
210 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 211 31 Reserves 32 Derivative Financial Instruments
Accounting Policy Cash Flow Hedge FINANCIAL STATEMENTS
2020 2019 Derivatives are initially recognised at fair value on The effective portion of changes in the fair value $'000 $'000 the date a derivative contract is entered into and of derivatives that are designated and qualify as Asset revaluation reserve 5,936 – are subsequently re‑measured at their fair value. cash flow hedges is recognised in equity in the The method of recognising the resulting gain or loss hedging reserve. The gain or loss relating to the Hedging reserve ‑ cash flow hedges (19,913) (22,685) depends on whether the derivative is designated as ineffective portion is recognised immediately in the Foreign currency translation reserve (17,802) (24,087) a hedging instrument, and if so, the nature of the Income Statement. Cost of hedging reserve (1,542) (1,793) item being hedged. The Group designates certain Amounts accumulated in equity are recognised derivatives as either: Total reserves (33,321) (48,565) in the Income Statement in the periods when the (1) hedges of the fair value of recognised assets hedged item will affect profit or loss (for instance or liabilities or a firm commitment (fair value when the forecast sale that is hedged takes place). Movements hedge); or When a hedging instrument expires or is sold or Asset Revaluation Reserve (2) hedges of exposures to variability in cash flows terminated, or when a hedge no longer meets the Opening balance – – associated with recognised assets or liabilities or criteria for hedge accounting, any cumulative gain Revaluation on transfer from property, plant and equipment 5,936 – highly probable forecast transactions (cash flow or loss existing in equity at that time remains in Closing balance 5,936 – hedges). equity and is recognised in the Income Statement when the forecast transaction is ultimately Hedging Reserve ‑ Cash Flow Hedges Fair Value Hedge recognised in the Income Statement. When a Opening balance (22,685) (21,491) Changes in the fair value of derivatives that are forecast transaction is no longer expected to occur, Revaluation 9,154 3,986 designated and qualify as fair value hedges are the cumulative gain or loss that was reported in equity is transferred to the Income Statement. Transfer to net profit ‑ finance costs (net) (5,143) (5,459) recognised in the Income Statement, together with any changes in the fair value of the hedged asset or Deferred tax (1,239) 279 Derivatives that do not Qualify for liability that are attributable to the hedged risk. Hedge Accounting Closing balance (19,913) (22,685) Changes in the fair value of any derivative instrument Foreign Currency Translation Reserve that does not qualify for hedge accounting are Opening balance (24,087) (40,453) recognised in the Income Statement. Exchange difference on translation of overseas subsidiaries 6,285 (11,498)
Transfer to Income Statement on disposal of discontinued operations – 27,864
Closing balance (17,802) (24,087) 2020 2019 2020 2019 $'000 $'000 Cost of Hedging Reserve $'000 $'000 Notional Notional Fair Value Fair Value Opening balance (1,793) (1,985) Value Value
Revaluations (113) 729 Current Assets
Transfer to finance costs 462 (462) Cross currency interest rate swaps – cash flow hedges 108,220 – 53,218 –
Deferred tax (98) (75) Forward foreign exchange contracts 2,152 6,798 70 85
Closing balance (1,542) (1,793) Total current derivative financial instrument assets 110,372 6,798 53,288 85
Non‑current Assets
Cross‑currency interest rate swaps ‑ cash flow hedges* 155,618 255,106 23,100 56,201
Total non‑current derivative financial instrument assets 155,618 255,106 23,100 56,201
Current Liabilities
Forward foreign currency contracts 133,932 75,459 192 784
Interest rate swaps – cash flow hedges 194,223 – 5,921 –
Total current derivative financial instrument liabilities 328,155 75,459 6,113 784
Non‑current Liabilities
Interest rate swaps ‑ cash flow hedges 210,000 401,721 24,375 30,913
Total non‑current derivative financial instrument liabilities 210,000 401,721 24,375 30,913
Total net derivative financial instruments 45,900 24,589
*A component of the interest margin in US$100.0 million of these CCIRS is treated as a fair value hedge.
212 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 213 33 Financial Risk Management (c) Liquidity Risk
The Group’s activities expose it to a variety of As the Group has no significant interest bearing Liquidity risk management implies maintaining sufficient cash and the availability of funding through FINANCIAL STATEMENTS financial risks: market risks (including currency assets, the Group’s revenue is substantially an adequate amount of unutilised committed credit facilities. The Group manages liquidity risk by and interest rate risk), liquidity risk, and credit risk. independent of changes in market interest rates. continuously monitoring forecast and actual cash flows and maintaining flexibility in funding by keeping The Group’s overall risk management programme committed credit lines available with a variety of counterparties and maturities. recognises the nature of these risks and seeks (iii) Summarised Sensitivity Analysis Maturities of Committed Funding Facilities to minimise potential adverse effects on the SkyCity manages its interest rate and foreign Group’s financial performance. The Group uses exchange rate exposure to minimise the impact of Debt maturities are detailed in note 12. derivative financial instruments to hedge certain fluctuations in the market. The residual exposure is risk exposures. LESS BETWEEN BETWEEN not considered material or significant. THAN 6 6–12 1 AND 2 2 AND 5 OVER MONTHS MONTHS YEARS YEARS 5 YEARS TOTAL Risk management is carried out by a central (b) Credit Risk treasury department under a formal Treasury Policy $'000 $'000 $'000 $'000 $'000 $'000 approved by the Board of Directors. The Treasury Credit risk is the risk of financial loss to the Group 30 June 2020 Policy sets out written principles for overall risk if a customer or counterparty to a financial Bank facility – 120,000 299,786 – 419,786 management, as well as policies covering specific instrument fails to meet its financial obligations. areas such as currency risk, interest rate risk, SkyCity is largely a cash based business and its US Private Placement – 155,618 – 171,414 70,005 397,037 credit risk, use of derivative financial instruments material credit risks arise mainly from financial NZ Bond 128,500 – – – – 128,500 instruments utilised in funding and from and non‑derivative financial instruments, and Car park concession liability – – – – 46,193 46,193 investment of excess funds. The Treasury Policy International Business activity. Lease liabilities 240 245 507 1,668 50,013 52,673 sets conservative limits for allowable risk exposures Financial instruments (other than International Total committed debt facilities 128,740 275,863 300,293 173,082 166,211 1,044,189 which are formally reviewed regularly. Business discussed below) that potentially create Total drawn debt 128,740 170,863 507 173,082 166,211 639,403 (a) Market Risk a credit exposure can only be entered into with counterparties that are explicitly approved by Future contracted interest on drawn debt 10,829 6,589 9,635 27,145 9,579 63,777 (i) Currency Risk the Board. Maximum credit limits for each of Future interest of lease liabilities 1,317 1,306 2,578 7,443 301,989 314,633 these parties are approved on the basis of long The Group operates internationally and is exposed term credit rating (Standard & Poor’s or Moody’s). Future contracted interest on CCIRS/IRS 3,620 2,162 4,088 7,644 1,093 18,607 to currency risk, primarily with respect to Australian A minimum long term rating of A+ (S&P) or Total drawn debt and derivatives 144,506 180,920 16,808 215,314 478,872 1,036,420 and US dollars. Exposure to the Australian dollar A1 (Moody’s) is required to approve individual arises from the Group’s investment in, and 30 June 2019 counterparties. intercompany loans to, its Australian operations. Bank facility – 200,000 120,000 292,856 – 612,856 Exposure to the US dollar arises from funding The maximum credit risk of any financial US Private Placement – 21,127 149,388 – 223,704 394,219 denominated in that currency. instrument at any time is the fair value where that NZ Bond – – – 125,000 – instrument is an asset. All derivatives are carried at 125,000 The Group utilises natural hedges wherever possible fair value in the balance sheet. Trade receivables Total committed debt facilities – 221,127 269,388 417,856 223,704 1,132,075 with forward foreign exchange contracts used are presented net of an allowance for estimated to manage any significant residual risk to the Total drawn debt – 49,127 149,388 125,000 223,704 547,219 doubtful receivables. Income Statement. Future contracted interest on drawn debt 12,012 11,816 21,183 35,200 16,951 97,162 International Business activity is managed in The Group’s exposure to the US dollar (refer to US Future contracted interest on CCIRS/IRS 3,839 3,797 4,478 8,819 1,907 22,840 accordance with accepted industry practice. private placement notes detailed in note 13) has Total drawn debt and derivatives 15,851 64,740 175,049 169,019 242,562 667,221 Settlement risk associated with International been fully hedged by way of cross currency interest Business customers is minimised through credit rate swaps (CCIRS), hedging US dollar exposure on checking and a formal review and approval process. both principal and interest. The CCIRS correspond in amount and maturity to the US dollar borrowings The Group has a significant receivable from the with no residual US dollar exposure. NZICC insurers (note 6). The lead insurer is a subsidiary of a leading global firm and has an (ii) Interest Rate Risk AA‑ insurer financial strength rating given by The Group's interest rate risk arises from S&P Global Ratings. long term borrowings. Other than the NZICC fire insurance receivable, Interest rate swaps (IRS) and CCIRS are utilised to there are no other significant concentrations of modify the interest repricing profile of the Group’s credit risk in the Group. debt to match the profile required by Treasury Policy. All IRS and CCIRS are in designated hedging relationships that are highly effective.
214 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 215 (d) Fair Value Estimation Investment Properties are valued using level 3 in 34 Share‑Based Payments continued employment during the period from his the above fair value measurement hierarchy. commencement date to November 2019) and no
The financial instruments are measured in the FINANCIAL STATEMENTS Accounting Policy right to dividends prior to the issuance of the shares. balance sheet at fair value by level of the fair value Specific valuation techniques used to value financial SkyCity operates an equity‑settled, share‑based measurement hierarchy: instruments include: 2018 SkyCity Restricted Share Rights Plan compensation plan. The fair value of the employee (2018 RSR Plan) • quoted prices (unadjusted) in active markets for • the fair value of interest rate swaps and cross services received in exchange for the grant of the identical assets or liabilities (level 1); currency interest rate swaps is calculated as the share rights is recognised as an expense. The total The 2018 Short Term Incentive Plan was replaced present value of the estimated future cash flows • inputs other than quoted prices included within amount to be expensed over the vesting period with the 2018 RSR Plan for 116 staff, with restricted based on observable yield curves; and level 1 that are observable for the asset or liability, is determined by reference to the fair value of share rights issued to staff after the finalisation of either directly (that is, as prices) or indirectly • the fair value of forward foreign exchange the share rights granted, excluding the impact of the Group's results. Each right conferred a right to (that is, derived from prices) (level 2); and contracts is determined using forward exchange any non‑market vesting conditions (for example, receive one ordinary SkyCity share, which, unless rates at the balance sheet date, with the profitability and sales growth targets). At each otherwise agreed by the SkyCity Board, would only • inputs for the asset or liability that are not based resulting value discounted back to present value. balance sheet date, the Company revises its vest if the relevant employee remained continuously on observable market data (that is unobservable estimates of the number of shares expected to employed by SkyCity (or a company within the inputs) (level 3). Further details on derivatives are provided in be distributed. It recognises the impact of the Group) from the date of issue until the vesting date note 32. Other than the New Zealand bonds, which are revision of original estimates, if any, in the Income on 1 July 2020. listed on the NZDX and therefore level 1, all (e) Capital Risk Management Statement, and a corresponding adjustment to Performance Incentive Plan (PIP) SkyCity financial instruments, which includes equity over the remaining vesting period. The Group’s objectives when managing capital cross‑currency interest rate swaps, interest rate The 2018 RSR Plan was replaced in 2019 with the are to safeguard its ability to continue as a going Current Plans swaps and forward foreign currency contracts, PIP which includes both cash (the short term concern and to maximise returns for shareholders are valued using level 2 in the above fair value Executive Long Term Incentive Plan (LTI Plan) incentive scheme component of the PIP) and and benefits for other stakeholders over the measurement hierarchy. deferred equity components (the deferred short long term. Under the LTI Plan, executives purchase ordinary term incentive component of the PIP). The fair value of financial instruments that are SkyCity shares funded by an interest‑free loan from In order to optimise its capital structure, the Group not traded in an active market (for example, over the Group. The shares purchased by the executives The deferred short term incentive scheme under manages actual and forecast operational cash flows, the counter derivatives) is determined by using are held by a trustee company with executives the PIP offers participants, subject to the relevant capital expenditure and equity distributions. valuation techniques. These valuation techniques entitled to exercise the voting rights attached to the performance conditions being met, the opportunity maximise the use of observable market data where The Group primarily manages capital on the shares and receive dividends, the proceeds of which to acquire restricted share rights of an amount it is available and rely as little as possible on entity basis of gearing measured as a ratio of net debt are used to repay the interest‑free loan. equivalent to between 10% and 50% of their base specific estimates. If all significant inputs required (debt at hedged exchange rates less cash at bank) salary. Restricted share rights (if any) issued to a At the end of the restricted period (three to to fair value an instrument are observable, the to normalised EBITDA and interest coverage participant on a short term incentive cash payment four years), the Group will pay a bonus to each instrument is included in level 2. (normalised EBITDA relative to net interest cost). date (Declaration Date) will only vest if that executive to the extent their performance targets participant remains an employee up to and until: The primary ratios were as follows at 30 June: have been met which is sufficient to repay the initial interest‑free loan associated with the shares • the first anniversary of the Declaration Date in which vest. The shares upon which performance respect of 50% of the restricted share rights; and 2020 2019 targets have been met will then fully vest to • the second anniversary of the Declaration Date Gearing ratio 2.7 x 1.5 x the executives. The loan owing on shares upon in respect of the remaining 50% of the restricted which performance targets have not been met Interest coverage 4.5 x 8.4 x share rights. (the forfeited shares) will be novated from the These ratios have been significantly distorted by the impact of the NZICC fire, sale of the Auckland car park executives to the trustee company and will be However, if a participant’s deferred short term concession and the COVID‑19 lockdown. fully repaid by the transfer of the forfeited shares. incentive entitlement in any financial year is to Performance targets relate to total shareholder restricted share rights having a value of $10,000 or return relative to other comparable companies. less (calculated using the volume‑weighted average sale price of SkyCity shares used to determine At 30 June 2020, the interest free loans relating to the number of restricted share rights to be issued the LTI Plan total $7,918,365 (2019: $7,760,214). to the participant), the restricted share rights will not be split out equally into two separate 2018 Chief Operating Officer Commencement tranches, but will instead comprise one tranche Shares (COO Plan) and (subject to the vesting criteria being satisfied) Under the terms of his employment agreement vest to the participant on the first anniversary of the dated 18 November 2017, the COO was Declaration Date. issued 35,000 ordinary SkyCity shares on 27 November 2019. There were no performance These restricted share rights will be issued to staff targets associated with these shares (other than after the finalisation of the Group’s results.
216 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 217 Outstanding Share Rights Fair Values
Movements in the number of share rights outstanding are as follows: Fair Value of Share Rights Granted The valuation inputs for the commencement shares FINANCIAL STATEMENTS on 18 November 2017 included: BALANCE The assessed fair value at grant date of the rights AT START GRANTED EXERCISED EXPIRED BALANCE granted on 28 August 2019 was $1.14 (22 August 2018 (a) no consideration; OF THE DURING THE DURING THE DURING AT END OF GRANT DATE EXPIRY DATE YEAR YEAR YEAR THE YEAR THE YEAR was $1.17). This was calculated using the single (b) exercise price: nil; index model by Ernst & Young Transaction Number Number Number Number Number Advisory Services Limited. (c) share price at grant date: $3.57; and 2020 The valuation inputs for the rights granted on (d) no right to dividends. LTI Plan 28 August 2019 included: The expected price volatility is derived by analysing 26/08/15 28/08/19 360,000 – – (360,000) – (a) rights are granted for no consideration; the historic volatility over a recent historical period 24/08/16 24/08/20 395,000 – – (15,000) 380,000 similar to the term of the commencement shares. 23/08/17 23/08/21 865,883 – – (15,000) 850,883 (b) exercise price: nil (2019: nil); and Fair Value of SkyCity Restricted Share Rights 22/08/18 22/08/21 434,035 – – – 434,035 (c) share price at grant date: $3.90 (2019: $4.34). The assessed fair value of each right was determined 28/08/19 28/08/22 – 508,207 – (23,569) 484,638 The expected price volatility is derived by analysing by Ernst & Young Transaction Advisory Services the historic volatility over a recent historical period COO Plan Limited at $3.02. similar to the term of the right. 18/11/17 18/11/19 35,000 – (35,000) – – Fair Value of SkyCity Deferred Share Rights 2018 RSR Plan Fair Value of Chief Operating Officer 11/09/18 01/07/20 1,859,641 – – (50,933) 1,808,708 Commencement Shares No rights will be issued in respect of the year ended 30 June 2020. The assessed fair value of each 2019 PIP The assessed fair value at grant date of the right was determined by Ernst & Young Transaction commencement shares at 18 November 2017 06/09/19 06/09/20 – 508,296 – (4,552) 503,744 Advisory Services Limited. Rights vesting one year was $2.68. This was calculated using the European 10/09/19 10/09/20 – 23,047 – – 23,047 after year end were valued at $3.68 and rights vesting call option model by Ernst & Young Transaction two years after year end were valued at $3.33. 06/09/19 06/09/21 – 498,004 – (25,713) 472,291 Advisory Services Limited. 10/09/19 10/09/21 – 8,720 – – 8,720
Total 3,949,559 1,546,274 (35,000) (494,767) 4,966,066 Expenses Arising from Share‑Based Payment Transactions 2019
LTI Plan Total expenses arising from share‑based payment transactions recognised during the period as part of employee benefit expense were as follows: 27/08/14 27/08/18 555,000 – – (555,000) –
26/08/15 28/08/19 380,000 – – (20,000) 360,000 2020 2019 24/08/16 24/08/20 415,000 – – (20,000) 395,000 $'000 $'000 23/08/17 23/08/21 910,883 – – (45,000) 865,883 Rights issued under Share Rights Plans 3,698 4,540 22/08/18 22/08/21 – 434,035 – – 434,035
CEO Plan
04/11/16 03/11/18 325,000 – (325,000) – –
COO Plan
18/11/17 18/11/19 35,000 – – – 35,000
2018 RSR Plan
11/09/18 01/07/20 – 1,898,564 – (38,923) 1,859,641
Total 2,620,883 2,332,599 (325,000) (678,923) 3,949,559
The weighted average remaining contractual life of rights outstanding at the end of the period was 0.65 years (2019: 1.42 years).
218 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 219 35 Related Party Transactions 36 Subsidiaries FINANCIAL STATEMENTS The consolidated financial statements incorporate the assets, liabilities and results of the following (a) Key Management Personnel Compensation significant subsidiaries in accordance with the accounting policy described in note 1(b): Key management personnel compensation is set out below. The key management personnel are all the directors of the company, the CEO and the Senior Leadership Team. PRINCIPAL PLACE OF CLASS OF NAME OF ENTITY BUSINESS SHARES EQUITY HOLDING SHORT TERM SHARE‑BASED BENEFITS PAYMENTS TOTAL 2020 2019 % % $'000 $'000 $'000 Cashel Asset Management Limited New Zealand Ordinary 100% 100% 2020 7,372 2,045 9,417 Horizon Tourism New Zealand Limited New Zealand Ordinary 100% 100% 2019 8,993 2,311 11,304 (formerly SkyCity Wellington Limited)
Lets Play Live Media Limited New Zealand Ordinary 100% – (b) Other Transactions with Key Management Personnel or Entities Related to Them New Zealand International Convention Centre Limited New Zealand Ordinary 100% 100%
Certain directors and management have relevant interests in a number of companies with which SkyCity Otago Casinos Limited New Zealand Ordinary 100% 100% has transactions in the normal course of business. A number of SkyCity directors are also non‑executive Queenstown Casinos Limited New Zealand Ordinary 100% 100% directors of other companies, and a register of directors' interests is maintained. Any transactions undertaken with these entities have been entered into in the normal course of business. Sky Tower Limited New Zealand Ordinary 100% 100%
Certain directors and management hold shares in SkyCity and receive dividends in the normal course SkyCity Action Management Limited New Zealand Ordinary 100% 100% of business. SkyCity Auckland Holdings Limited New Zealand Ordinary 100% 100%
Certain directors provided additional consultancy services to the Group outside of their capacity as directors. SkyCity Auckland Limited New Zealand Ordinary 100% 100% Consultancy fees paid to directors during the year amounted to $18,900 (FY19: $28,500). SkyCity Casino Management Limited New Zealand Ordinary 100% 100%
SkyCity Development Limited New Zealand Ordinary 100% – (c) Subsidiaries SkyCity Enterprises Limited New Zealand Ordinary 100% – Interests in subsidiaries are set out in note 36. SkyCity Hamilton Limited New Zealand Ordinary 100% 100%
SkyCity Holdings Limited New Zealand Ordinary 100% –
SkyCity International Holdings Limited New Zealand Ordinary 100% 100%
SkyCity Investments Australia Limited New Zealand Ordinary 100% 100%
SkyCity Investments Queenstown Limited New Zealand Ordinary 100% 100%
SkyCity Management Limited New Zealand Ordinary 100% 100%
SkyCity Precinct Limited New Zealand Ordinary 100% –
SkyCity Projects Limited New Zealand Ordinary 100% –
SkyCity Properties Limited New Zealand Ordinary 100% 100%
SkyCity Properties Albert St Limited New Zealand Ordinary 100% 100%
SkyCity Properties Victoria St Limited New Zealand Ordinary 100% 100%
SkyCity Ventures Limited New Zealand Ordinary 100% –
TNZ Esports Limited New Zealand Ordinary 100% –
LPL Media Pty Limited Australia Ordinary 100% –
SkyCity Adelaide Pty Limited Australia Ordinary 100% 100%
SkyCity Australia Finance Pty Limited Australia Ordinary 100% 100%
SkyCity Australian Limited Partnership Australia Ordinary 100% 100%
SkyCity Australia Pty Limited Australia Ordinary 100% 100%
SkyCity Treasury Australia Pty Limited Australia Ordinary 100% 100% Horizon Tourism Limited Hong Kong Ordinary 100% 100% SkyCity Investment Holdings Limited Hong Kong Ordinary 100% 100% SkyCity Malta Holdings Limited Malta Ordinary 100% 100% SkyCity Malta Limited Malta Ordinary 100% 100% SkyCity Management (UK) Limited United Kingdom Ordinary 100% 100%
All wholly‑owned subsidiary companies have balance dates of 30 June.
220 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Notes to the Financial Statements 221 37 Contingencies 39 Reconciliation of Profit After Income Tax to Net Cash Inflow
(a) Contingent Liabilities from Operating Activities FINANCIAL STATEMENTS
The possibility exists for the Group to receive third party claims in respect of the NZICC fire. However, only minor claims have been received to date. It is the Group’s expectation that any claims received will be 2020 2019
covered by either the insurers or the Contractor (30 June 2019: nil). $'000 $'000
(b) Contingent Assets Profit for the year 235,388 144,581
Depreciation and amortisation (including discontinued operations) 86,559 84,698 Included within the FCC construction contracts for the NZICC and Horizon Hotel is the right to liquidated damages if certain milestones are not met. To date SkyCity has withheld $39.5 million (2019: $39.5 million) Net finance costs 28,613 10,240 from payments to FCC for liquidated damages. The amounts withheld have been recognised as part of Current period employee share expense 3,697 4,540 current liabilities (refer note 28) as ultimate recovery is not able to be considered virtually certain due to the Gain on sale of fixed assets (66,779) (18,453) fact that SkyCity’s right to retain these liquidated damages is disputed by FCC. Costs incurred by SkyCity due to the delays in the NZICC and Horizon Hotel project are expected to be partially covered by the Fair value adjustment to investment property 14,055 3,204 liquidated damages. NZICC fire related income (384,500) –
NZICC fire related costs 108,090 – As detailed in note 6, the Group intends to seek recovery from FCC for losses associated with the NZICC fire to the extent that they are not covered by the insurers. These losses may include insurance excesses, Adelaide casino licence impairment 160,600* – payments to Macquarie under the Auckland car park concession agreement and other items. To date, Share of profits/(losses) of associates 83 737 the Group has identified $8.9 million of costs that may not be covered by insurance. These have not yet been Transfer from Foreign Currency Translation Reserve – 27,864 recognised as income as recovery is not considered virtually certain at this time. Change in operating assets and liabilities
There are no other significant contingent assets at year end (2019: nil). Change in receivables and prepayments 7,041 (25,914)
Change in inventories (169) 1,111
Change in deferred tax asset (2,748) (4,843) 38 Commitments Change in payables (6,270) 34,387
(a) Capital Commitments Change in deferred tax liability (24,271) (9,299)
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as set out below. Change in tax receivable – current (1,059) 3,869 Change in non current payables 9,057 (1,776)
Change in tax payable – current (13,877) 7,277 2020 2019 Working capital relating to discontinued operations – 11,415 $'000 $'000 Investing and financing items included in working capital movements (33,344) (21,314) Property, plant and equipment 440,342 257,735 Net cash inflow from operating activities 120,166 252,324 The majority of the capital commitments relate to the construction of the NZICC, Horizon Hotel and the SkyCity Adelaide expansion. *Equivalent to A$150 million.
The above commitments include the estimated cost of reinstating the NZICC and Horizon Hotel. The cost of reinstating the damage to the NZICC and Horizon Hotel arising from the NZICC fire is currently estimated 40 Events Occurring after the Balance Sheet Date to be $330.0 million to $375.0 million for the NZICC and $6.0 million for the Horizon Hotel, all of which is expected to be paid for using insurance proceeds. The actual costs may be materially different to these (a) Funding plan estimates, however these costs are expected to be fully covered by insurance. Further information is On 17 June 2020, SkyCity announced a funding plan to provide additional financial flexibility in response to included in note 6. COVID‑19 (note 1(h)). That plan included a $230 million equity raising and additional debt facilities.
As detailed in note 12, in July 2020 the existing bank facility was restructured and extended, a new revolving credit facility was established and funding covenant waivers obtained.
As detailed in note 29, in July 2020 the second part of the equity raising (the share purchase plan) was completed and a further $50.0 million raised.
(b) COVID‑19
On 13 July 2020, SkyCity applied for the extended New Zealand wage subsidy and received $9.5 million.
On 12 August 2020, the New Zealand Government reinstated COVID-19 Alert Level 3 for the Auckland region and the rest of New Zealand moved to Alert Level 2. On 31 August 2020, the Auckland region moved to Alert Level 2, consistent with the rest of New Zealand. From 12 – 30 August 2020, the vast majority of SkyCity Auckland’s operations were closed, including all gaming areas. From 12 August 2020, SkyCity Hamilton and SkyCity Queenstown, and SkyCity Auckland from 31 August 2020, have operated in compliance with the New Zealand Government’s requirements for social gatherings, contact tracing and hygiene. Following the initial COVID-19 outbreak, SkyCity restructured its operations and funding arrangements to withstand a long recovery period and the latest closure and operating restrictions have 222 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 not required any further restructuring. 223 Reconciliation of Normalised Results to Reported Results
SkyCity’s objective of producing normalised financial information is to provide data that is useful to the investment community in understanding the underlying operations of the Group. The intention is to provide Adjustment Discussion information that: Treat International Business • This adjustment adds back International Business commissions • is representative of SkyCity’s underlying performance (as a potential indicator of future performance); commissions as an expense (treated as a reduction from revenue in the reported results) and rather than reduction in increases both revenue and expenses. This adjustment does not • can be compared across years; and revenue which reduces both impact EBITDA, EBIT or NPAT • can assist with comparison between publicly listed casino companies in New Zealand and Australia. reported revenue and operating • This adjustment has been made to maintain the relationship expenses within International This objective is achieved by: between turnover and the theoretical win rate of 1.35% when Business (by $39.3 million in determining normalised revenue • eliminating the inherent volatility (or “luck” factor) from International Business, which has variable FY20 and $80.3 million in FY19) turnover and actual win percentage from period to period; Add gaming GST to reported • Reported revenue included within the financial statements of the • eliminating structural differences in the business between periods; and revenue (by $73.4 million in Group excludes GST • eliminating known different treatments with other New Zealand and Australian publicly listed FY20 and $95.2 million in FY19) • This adjustment adds back GST associated with gaming so that casino companies. normalised revenue equals the amount bet by gaming customers SkyCity believes that, by making these adjustments, the users of the financial information will be able • All publicly listed New Zealand and Australian casino companies to understand the underlying performance of the Group and form a view on the future performance of include GST associated with gaming within their revenue results. the business. Including gaming GST within reported revenue is not consistent For internal purposes, including budgeting and determination of staff incentives, the normalised results with GAAP and SkyCity therefore does not do so are used. • However, SkyCity does include gaming GST within its Non-GAAP information is prepared in accordance with the company’s Non-GAAP Financial Information normalised revenue Policy, which is reviewed and approved by the SkyCity Board at each reporting period. The Non-GAAP • This adjustment does not impact EBITDA, EBIT or NPAT Financial Information Policy was applied consistently in respect of the financial statements for the financial years ended 30 June 2019 and 30 June 2020. Apply theoretical win rate of • This adjustment recalculates gaming win from International Business The differences between the company’s FY20 and FY19 reported and normalised information is summarised 1.35% for International Business to the theoretical win rate. The vast majority of International Business in the table below: vs. actual win rate of 1.47% play is Baccarat. Statistically, over the long term the casino expects (FY20) and 1.00% (FY19) to win 1.35% of all bets taken on Baccarat. However, in any particular reporting period the actual results of play will vary depending FY20 FY19 on “luck” Revenue EBITDA EBIT NPAT Revenue EBITDA EBIT NPAT $m $m $m $m $m $m $m $m • The 1.35% win rate is used by all publicly listed New Zealand and Australian casino companies in addition to casino companies in Asia Reported 1,125.0* 348.3 261.7 235.4 822.3 297.8 217.8 144.6 and the United States International Business 39.3 – – – 80.3 – – – revenue adjustment • In order to understand the long term results within International Business there is the need to eliminate the inherent volatility or Gaming GST 73.4 – – – 95.2 – – – “luck” factor International Business at (7.3) 0.1 0.1 0.2 49.9 38.7 38.7 27.8 theoretical win rate Eliminate gain ($66.4 million) • The FY20 reported results include a significant gain relating to the Gain on sale – Auckland car parks (66.4) (66.4) (66.4) (66.4) (17.4) (17.4) (17.4) (17.7) arising from Auckland car park Auckland car park concession sale which settled in August 2019 Revaluation of Auckland properties – 14.1 14.1 14.1 – 3.2 3.2 3.2 concession sale (completed • The FY19 reported results include a significant gain relating to the sale in August 2019) and the FY19 Significant tax events – – – – – – – (9.5) of the Federal Street car park which settled in April 2019 gain ($17.4 million) on sale of NZICC fire impacts (384.5) (269.4) (269.4) (268.5) – – – – Federal Street car park (sold in • The adjustment reverses these gains Labour restructure – 13.5 13.5 9.7 – – – – April 2019) Funding plan costs – – – 5.4 – – – – Reverse impact of revaluation • SkyCity has a number of investment properties in Auckland. Deferred tax liability reversal – – – (24.1) – – – – (reduction of $14.1 million) of In accordance with the appropriate accounting standard, these Adelaide casino licence impairment – 160.6** 160.6** 160.6** – – – – Auckland investment properties investment properties will be revalued by an independent expert Sale of Darwin – – – – (0.4) – – 16.2 (FY19 $3.2 million) every year and the carrying value adjusted within the Group’s financial statements Normalised 779.5 200.7 114.2 66.3 1,029.8 322.2 242.4 164.6 • This adjustment reverses the decline in value of these properties *This is a summation of the first six lines on the face of the Income Statement. **Equivalent to A$150 million. • The revaluation is non-cash and unrelated to the operations of the Group
• This adjustment will be made each year to determine the Group’s normalised results
224 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 225 Adjustment Discussion Adjustment Discussion
Eliminate net gain • On 22 October 2019, there was a significant fire at the construction FY19 only Adjustments ($268.5 million after tax) arising site of the New Zealand International Convention Centre (NZICC) from impacts of NZICC fire in Auckland Eliminate significant tax events During FY19, SkyCity had a number of significant tax events which have (net $9.5 million decrease to impacted the reported effective tax rate. • This fire has caused extensive damage to the NZICC and relatively normalised NPAT) minor damage to the Horizon Hotel which is being constructed on ATO Tax Review the adjacent site As part of the Australian Tax Office’s (ATO) Streamlined Assurance • Both buildings are insured and all significant costs associated with Review of SkyCity’s Australian operations, SkyCity and the ATO the fire are expected to be fully covered. Any costs not covered by agreed to settle differences of opinion on the treatment of certain insurance are expected to be sought from Fletcher Construction financing arrangements. As a result of this settlement, SkyCity made • The fire has significant implications for the financial statements for a A$3.5 million payment to the ATO. This payment relates to historical the Group – these are explained further on page 184 and in SkyCity’s items only and does not change SkyCity’s future tax payments or financial statements which have been released to the NZX and ASX tax expense.
• At this point in time, a full assessment of the damage is not Auckland Car Park Concession Sale Deferred Tax available, nor is an agreed reconstruction timeline available. As a The deferred tax consequences of the Auckland car park concession result, the financial statements include a number of significant sale were recognised in FY19 – this was a $11.5 million reduction in judgements and estimates to determine the appropriate accounting. tax expense. These judgements and estimates will continue to be reviewed as new information becomes available Share of Partnership Expenditure – Tax Election
• The NZICC fire (and associated accounting impact) is a significant, In the current year, SkyCity made a New Zealand tax election for the one-off event that has impacted the comparability of the FY20 result SkyCity Australian Limited Partnership. This resulted in a one-off benefit with the prior year of $1.9 million in the FY19 tax expense.
Labour restructure • As part of its response to COVID-19, SkyCity undertook a labour Summary (FY20 $9.7 million after restructure and implemented a new funding plan This adjustment eliminates the net reduction (from the above items) in tax) and funding plan costs • This adjustment eliminates the costs associated with those actions tax expense for the purpose of the normalised results. (FY20 $5.4 million after tax)
Eliminate Darwin operations • During FY19, SkyCity sold its Darwin operations Deferred tax liability reversal, • As part of its response to COVID-19, the New Zealand Government from normalised results $24.1 million reinstated tax depreciation for commercial properties, this resulted in • Darwin has been fully excluded from FY19 normalised results to a non-cash accounting reduction in the FY20 tax expense enable appropriate comparisons with FY20 • This adjustment eliminates this one-off reduction to tax expense
Adelaide casino licence • In the current year, the Group has impaired the Adelaide casino impairment $160.6 million licence by A$150.0 million (NZ$160.6 million) (A$150 million) • The impairment has arisen due to revised expectations regarding the time frame for SkyCity Adelaide to achieve its long term potential earnings following completion of the expansion project. The reduced earnings outlook for SkyCity Adelaide has been exacerbated in the short‑to‑medium term by the recent and expected ongoing impacts of COVID‑19, including an expectation that International Business activity may take some years to recover
• This adjustment eliminates this non-cash expense
226 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Reconciliation of Normalised Results to Reported Results 227 ASPECT / GRI EXTERNAL SECTION DISCLOSURE DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS ASSURANCE GRI Content Index Organisational 102-9 Supply chain Annual Report 2020: 101–109 Yes Profile Our Suppliers
102-10 Significant changes to the Annual Report 2020: 4–7, organisation and its Chair's Review, Chief 21–27 supply chain Executive Officer's General Standard Disclosures Review and Delivering Our Group Strategy ASPECT / GRI EXTERNAL SECTION DISCLOSURE DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS ASSURANCE 102-11 Precautionary principle SkyCity Ethical 102 or approach Sourcing Code Organisational 102-1 Name of organisation Annual Report 2020: 149 Profile Company Disclosures 102-12 External initiatives Annual Report 2020: 63–64 102-2 Activities, brands, products Annual Report 2020: 29–43 Our Sustainability and services About SkyCity Annual Report 2020: 79–89 Yes 102-3 Location of headquarters Annual Report 2020: 29 Our People About SkyCity Annual Report 2020: 111–119 Yes Annual Report 2020: 233 Our Environment Directory Strategy 102-14 Statement from senior Annual Report 2020: 4–7, 102-4 Location of operations Annual Report 2020: 29–43 decision-maker Chair's Review, Chief 21–27 About SkyCity Executive Officer's Review and Annual Report 2020: 233 Delivering Our Directory Group Strategy
102-5 Ownership and legal form Annual Report 2020: 170 Ethics and 102-16 Values, principles, standards SkyCity Code Notes to the Financial Integrity and norms of behaviour of Conduct www.skycityentertainmentgroup.com Statements
Annual Report 2020: 145–147 Governance 102-18 Governance structure Annual Report 2020: 60 Shareholder and Our Senior Bondholder Leadership Team Information Annual Report 2020: 123–133 102-6 Markets served Annual Report 2020: 29–43 Corporate Governance About SkyCity Statement and Other Disclosures 102-7 Scale of organisation
Stakeholder 102-40 List of stakeholder groups Annual Report 2020: 69, 79, 93, 101, 111 i. Total number of Annual Report 2020: 18–19 Yes Engagement Our Sustainability www.skycityentertainmentgroup.com employees Diversity Snapshot
Annual Report 2020: 90–91 102-41 Collective bargaining Annual Report 2020: 91 Our People agreements Our People
ii. Total number of Annual Report 2020: 12 102-42 Identifying and selecting SkyCity Code 129 operations Creating Value stakeholders of Conduct www.skycityentertainmentgroup.com
Annual Report 2020: 29–43 102-43 Approach to stakeholder SkyCity Code 129 About SkyCity engagement of Conduct www.skycityentertainmentgroup.com
iii. Net sales Annual Report 2020: 164 102-44 Key topics and Annual Report 2020: 63–67 Income Statement concerns raised Our Sustainability
iv. Total capitalisation Annual Report 2020: 166–167 Balance Sheet Reporting 102-45 Entities included in the Annual Report 2020: 172, 221 Practice consolidated financial Notes to the Financial statements Statements v. Quantity of products Annual Report 2020: 12–13 and services provided Creating Value 102-46 Defining report content and Annual Report 2020: 9
topic boundaries About this Annual Annual Report 2020: 29–43 Report About SkyCity
Annual Report 2020: 63–67 Additional information Annual Report 2020 12–19 Our Sustainability
102-8 Information on employees Annual Report 2020: 18–19 Note 1 Yes 102-47 List of material topics Annual Report 2020: 65–67 and other workers Our People 79–91 Our Sustainability
228 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 GRI Content Index 229 ASPECT / GRI EXTERNAL ASPECT / GRI EXTERNAL SECTION DISCLOSURE DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS ASSURANCE SECTION DISCLOSURE DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS ASSURANCE
Reporting 102-48 Restatements of Not applicable None Inspire Our GRI 103 Health and safety Annual Report 2020: 50–51 Practice information People management approach Our Risk Profile and Management 102-49 Changes in reporting Annual Report 2020: 172–173 Notes to the Financial Annual Report 2020: 81–82 Statements Health, Safety and Wellbeing 102-50 Reporting period Annual Report 2020 Cover Page GRI 403-2 Types and rates of injury Annual Report 2020: 50 Yes Our Risk Profile and 102-51 Date of most recent report Annual Report 2020: 9 Management About this Annual Report Annual Report 2020: 81–82 Health, Safety and 102-52 Reporting cycle Annual Report 2020 Cover page Wellbeing
GRI 103 Employee engagement Annual Report 2020: 79–89 management approach Our People 102-53 Contact point for questions Annual Report 2020: 64 regarding the report Our Sustainability GRI 404-2 Employee programmes Annual Report 2020: 79–89
Our People Annual Report 2020: 134 Remuneration Report GRI 103 Diversity, inclusion and Annual Report 2020: 85–89
belonging management Our People Annual Report 2020: 233 approach Directory
102-54 Claims of reporting in Annual Report 2020: 9 GRI 405-1 Governance and employee Annual Report 2020: 85–89 Yes accordance with the About this Annual diversity Our People GRI standards Report SkyCity Diversity and www.skycityentertainmentgroup.com Inclusion Policy Limitations: Host Responsibly GRI 103 Customer health and safety Annual Report 2020: 50–51 Note 1 – The reporting on GRI 102-8 on employees and other workers does not include ‘activities performed management approach Our Risk Profile and by workers who are not employees’ and ‘significant variations in numbers reported’. Management
Specific Standard Disclosures Annual Report 2020: 69–77 Our Customers
ASPECT / GRI EXTERNAL GRI 416-1 Assessment of health and Annual Report 2020: 50–51 SECTION DISCLOSURE DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS ASSURANCE safety of products and Our Risk Profile and services Management Conserve the GRI 103 Energy management Annual Report 2020: 111–117
Environment approach Our Environment Annual Report 2020: 69–77 Our Customers GRI 302-3 Energy intensity Annual Report 2020: 111–117 Our Environment GRI 416-2 Non-compliance incidents Annual Report 2020: 69–77 related to health and safety Our Customers GRI 103 Emissions management Annual Report 2020: 111–119 of products and services approach Our Environment GRI 103 Socio-economic Annual Report 2020: 69–77 GRI 305-4 GHG emissions intensity Annual Report 2020: 118–119 compliance management Our Customers Our Environment approach
Source Ethically GRI 103 Ethical and sustainable Annual Report 2020: 101–109 GRI 419-1 Non-compliance with Annual Report 2020: 69–77 Note 1 and Responsibly procurement management Our Suppliers socio-economic laws and Our Customers approach regulations
Limitations:
Note 1 – The reporting of GRI 419-1 on Non-compliance with Socio-Economic Laws and Regulations does not include economic laws and regulations.
230 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 GRI Content Index 231 Glossary Directory
Casino Win the amount lost or spent by players, calculated as Turnover minus amounts REGISTERED OFFICE SKYCITY LOCATIONS awarded to players SkyCity Entertainment Group Limited SKYCITY AUCKLAND EBIT earnings before interest and tax Corner Victoria and Federal Streets NEW ZEALAND EBITDA earnings before interest, tax, depreciation and amortisation Auckland 1010 Level 13 GAAP generally accepted accounting principles New Zealand 99 Albert Street Hold or Win Rate casino win expressed as a percentage of turnover Auckland Telephone: +64 9 363 6000 New Zealand Normalised EBITDA earnings before interest, tax, depreciation and amortisation adjusted to take into SKYCITY HAMILTON Telephone: +64 9 363 6000 account a theoretical win rate of 1.35% on International Business play and other 346 Victoria Street adjustments and calculated in accordance with SkyCity's Non-GAAP Financial AUSTRALIA Hamilton 3204 Information Policy Railway Building New Zealand Normalised NPAT net profit after tax adjusted to take into account a theoretical win rate of North Terrace Telephone: +64 7 834 4900 1.35% on International Business play and other adjustments and calculated in Adelaide accordance with SkyCity's Non-GAAP Financial Information Policy SA 5000 SKYCITY QUEENSTOWN Australia Level 2, Stratton House Normalised Revenue revenue adjusted to take into account a theoretical win rate of 1.35% on Telephone: +61 8 8212 2811 16-24 Beach Street International Business play and other adjustments and calculated in accordance Queenstown 9300 with SkyCity's Non-GAAP Financial Information Policy Email: [email protected] New Zealand www.skycityentertainmentgroup.com Normalised Win Rate the expected long term average hold Telephone: +64 3 441 0400 net profit after tax NPAT SKYCITY QUEENSTOWN WHARF Reported EBITDA earnings before interest, tax, depreciation and amortisation calculated in Steamer Wharf accordance with GAAP in New Zealand 88 Beach Street Queenstown 9300 Reported NPAT net profit after tax calculated in accordance with GAAP in New Zealand New Zealand Reported Revenue revenue calculated in accordance with GAAP in New Zealand Telephone: +64 3 441 1495
RevPar revenue per available room SKYCITY ADELAIDE Turnover total amount wagered by players Railway Building North Terrace Adelaide SA 5000 Australia Telephone: +61 8 8212 2811
232 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 233 Directory
AUDITOR REGISTRARS
PricewaterhouseCoopers NEW ZEALAND 188 Quay Street Computershare Private Bag 92162 Investor Services Limited Auckland Level 2 159 Hurstmere Road SUPERVISOR FOR BONDS Takapuna Private Bag 92119 The New Zealand Guardian Trust Auckland Company Limited Dimension House Telephone: 99–105 Customhouse Quay +64 9 488 8700 PO Box 3845 Facsimile: Wellington +64 9 488 8787 Email: [email protected]
AUSTRALIA
Computershare Investor Services Pty Limited Level 3 60 Carrington Street Sydney NSW 2000 GPO Box 7045 Sydney NSW 2000
Telephone: +61 2 8234 5000 Facsimile: +61 2 8234 5050 Email: [email protected]
234 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 skycityentertainmentgroup.com