3 September 2020
Client Market Services NZX Limited Level 1, NZX Centre 11 Cable Street WELLINGTON
Copy to: ASX Market Announcements Australian Stock Exchange Exchange Centre Level 6 20 Bridge Street Sydney NSW 2000 AUSTRALIA
Dear Sir/Madam
RE : SKYCITY ENTERTAINMENT GROUP LIMITED (SKC) ANNUAL RESULT FOR THE YEAR ENDED 30 JUNE 2020
Please find attached the following information relating to SkyCity Entertainment Group Limited’s (SkyCity) result for the financial year ended 30 June 2020:
1. a Results Announcement (as required by NZX Listing Rule 3.5.1 and released in reliance on a class waiver issued by NZX Regulation dated 3 April 2020 extending the deadline for release of an issuer’s full year result announcement (with a balance date of 30 June 2020) to 28 September 2020);
2. the FY20 Result - Investor Presentation; and
3. the Annual Report, including the audited financial statements and notes.
For the purposes of ASX Listing Rule 1.15.3, SkyCity confirms that it continues to comply with the listing rules of its home exchange, the NZX Listing Rules.
SkyCity is hosting a conference call for investors and analysts today at 12.00 noon (NZ time) to discuss the FY20 result. Details for this call were released on the NZX and ASX on 27 July 2020.
Authorised by: For personal use only use personal For
Rob Hamilton Chief Financial Officer
Results Announcement
Results for Announcement to the Market
Name of issuer SkyCity Entertainment Group Limited
Reporting Period 12 months to 30 June 2020
Previous Reporting Period 12 months to 30 June 2019
Currency New Zealand dollars
Reported Amount (million) Percentage change
Reported revenue from $1,125.0 36.8% continuing operations 1, 2
Total reported revenue 1 $1,125.0 24.2%
Reported profit (loss) from $235.3 46.3% continuing operations 2
Reported total net profit $235.4 62.8% (loss)
Normalised 2 Amount (million) Percentage change
Normalised revenue $779.5 -24.3% including gaming GST
Normalised total net profit $66.3 -59.7% (loss)
Notes: - ‘Reported’ information is per the financial statements; - ‘Normalised’ results set International Business win to a theoretical win rate of 1.35% and adjust for certain revenue and expense items. A reconciliation between reported and normalised financial information is provided at the end of this document; - ‘EBITDA’ = earnings before interest, tax, depreciation and amortisation; - ‘EBIT’ = earnings before interest and tax; - ‘NPAT’ = net profit after tax; and - Certain totals, subtotals and percentages may not agree due to rounding.
For personal use only use personal For
1 On the Income Statement, this is the total of revenue, other income, the net gain on the Auckland car park concession transaction, Government grants, share of losses from associates and NZICC fire related income. 2 Excludes Darwin operations treated as discontinued operations (sold in April 2019).
Results Announcement
Final Dividend
Amount per Quoted Equity nil Security
Imputed amount per n/a Quoted Equity Security
Record Date n/a
Dividend Payment Date n/a
Current period Prior comparable period
Net tangible assets per $1.0695 $0.5359 Quoted Equity Security
A brief explanation of any of SkyCity’s FY20 performance is set out in the company’s the figures above necessary Investor Presentation attached to this announcement, which to enable the figures to be provides detail and explanatory comment on operating and understood financial performance for each business unit and the SkyCity Group as a whole and various other relevant aspects of the financial performance for the year ended 30 June 2020.
The Investor Presentation will be available on the company’s website from 3 September 2020.
Authority for this announcement Name of person authorised to make this Jo Wong announcement Contact person for this Jo Wong announcement Contact phone number 09 363 6143
Contact email address [email protected] Date of release through 3 September 2020 MAP
Audited financial statements accompany this announcement.
For personal use only use personal For NZX Appendix 1 Results Announcement
Reconciliation between Reported and Normalised Financial Information
. 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 information which: • Is representative of SkyCity’s underlying performance (as a potential indicator of future performance); • Can be compared across years; and • Can assist with comparison between publicly listed casino companies in NZ and Australia
. This objective is achieved by: • Eliminating inherent volatility or “luck” factor from IB which has variable turnover and actual win % from period to period; • Eliminating structural differences in the business between periods; and • Eliminating known different treatments with other NZ and Australian publicly listed casino companies
. SkyCity believes that by making these adjustments the users of the financial information are able to understand the underlying performance of the Group and form a view on future performance
. For internal purposes, including budgeting and determination of staff incentives, normalised results are used
. Non-GAAP information is prepared in accordance with a Board-approved “Non-GAAP Financial Information Policy” and is reviewed by the Board at each reporting period
. Application of SkyCity’s non-GAAP financial information policy is consistent with the approach adopted in FY19
For personal use only use personal For NZX Appendix 1 Results Announcement
FY20 FY19
Revenue EBITDA EBIT NPAT Revenue EBITDA EBIT NPAT
$m $m $m $m $m $m $m $m
Reported 1,125.0 348.3 261.7 235.4 822.3 297.8 217.8 144.6
IB revenue adjustment 39.3 - - - 80.3 - - -
Gaming GST 73.4 - - - 95.2 - - -
IB at theoretical win rate (7.3) 0.1 0.1 0.2 49.9 38.7 38.7 27.8
Gain on sale – Auckland car parks (66.4) (66.4) (66.4) (66.4) (17.4) (17.4) (17.4) (17.7)
Revaluation of Auckland properties - 14.1 14.1 14.1 - 3.2 3.2 3.2
Significant tax events ------(9.5)
NZICC fire impacts(1) (384.5) (269.4) (269.4) (268.5) - - - -
Labour restructure - 13.5 13.5 9.7 - - - -
Funding plan costs - - - 5.4 - - - -
Deferred tax liability reversal - - - (24.1) - - - -
SkyCity Adelaide impairment - 160.6 160.6 160.6 - - - -
Sale of Darwin - - - - (0.4) - - 16.2
Normalised 779.5 200.7 114.2 66.3 1,029.8 322.2 242.4 164.6
For personal use only use personal For NZX Appendix 1 Results Announcement
Adjustment Discussion
Treat IB commissions as an expense rather than . This adjustment adds back IB commissions (treated as a reduction from revenue in the reported results) and increases both revenue and reduction in revenue which reduces both reported expenses. This adjustment does not impact EBITDA, EBIT or NPAT revenue and operating expenses within IB (by $39.3m in FY20 and $80.3m in FY19) . This adjustment has been made to maintain the relationship between turnover and the theoretical win rate of 1.35% when determining normalised revenue
Add gaming GST to reported revenue . Reported revenue included within the financial statements of the Group excludes GST (by $73.4m in FY20 and $95.2m in FY19) . This adjustment adds back GST associated with gaming so that normalised revenue equals the amount bet by gaming customers . All publicly listed NZ and Australian casino companies include GST associated with gaming within their revenue results. Including gaming GST within reported revenue is not consistent with GAAP and SkyCity therefore does not do so . However, SkyCity does include gaming GST within its normalised revenue . This adjustment does not impact EBITDA, EBIT or NPAT
Apply theoretical win rate of 1.35% for IB vs. actual . This adjustment recalculates gaming win from IB to the theoretical win rate. The vast majority of IB play is baccarat. Statistically, over the long- win rate of 1.47% (FY20) and 1.00% (FY19) term the casino expects to win 1.35% of all bets taken on baccarat. However, in any particular reporting period the actual results of play will vary depending on “luck” . The 1.35% win rate is used by all publicly listed NZ and Australian casino companies in addition to casino companies in Asia and the United States . In order to understand the long-term results within IB there is the need to eliminate the inherent volatility or “luck” factor
Eliminate gain ($66.4m) arising from Auckland car . The FY20 reported results include a significant gain relating to the Auckland car park concession sale which settled in August 2019 park concession sale (completed in August 2019) . The FY19 reported results include a significant gain relating to the sale of the Federal St car park which settled in April 2019 and the FY19 gain ($17.4m) on sale of Federal St car park (sold in April 2019) . The adjustment reverses these gains
For personal use only use personal For NZX Appendix 1 Results Announcement
Adjustment Discussion
Reverse impact of revaluation (reduction of . SkyCity has a number of investment properties in Auckland. In accordance with the appropriate accounting standard, these investment $14.1m) of Auckland investment properties (FY19 properties will be revalued by an independent expert every year and the carrying value adjusted within the Group’s financial statements $3.2m) . This adjustment reverses the decline in value of these properties . 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 Eliminate net gain ($268.5m after tax) arising . On 22 October 2019, there was a significant fire at the construction site of the New Zealand International Convention Centre (“NZICC”) in Auckland from impacts of NZICC fire . This fire has caused extensive damage to the NZICC and relatively minor damage to the Horizon Hotel which is being constructed on the adjacent site . Both buildings are insured and all significant costs associated with the fire are expected to be fully covered. Any costs not covered by insurance are expected to be sought from Fletcher Construction . The fire has significant implications for the financial statements for the Group – these are explained further in note 6 in SkyCity’s financial statements which have been released to the NZX and ASX . At this point in time a full assessment of the damage is not available, nor is an agreed reconstruction timeline. As a result, the financial statements include a number of significant judgements and estimates to determine the appropriate accounting. These judgements and estimates will continue to be reviewed as new information becomes available . The NZICC fire (and associated accounting impact) is a significant, one-off event that has impacted the comparability of the FY20 result with the prior year
Labour restructure ($13.5m) and funding plan . As part of its response to Covid-19, SkyCity undertook a labour restructure and implemented a new funding plan costs ($5.4m after tax) . This adjustment eliminates the costs associated with those actions
Deferred tax liability reversal ($24.1m) . As part of its response to Covid-19, the NZ Government reinstated tax depreciation for commercial properties, this resulted in a non-cash accounting reduction in the FY20 tax expense . This adjustment eliminates this one-off reduction to tax expense
For personal use only use personal For NZX Appendix 1 Results Announcement
Adjustment Explanation
SkyCity Adelaide licence impairment (A$150m) . In the current year the Group has impaired the SkyCity Adelaide casino licence by A$150.0m ($160.6m) . The impairment has arisen due to revised expectations regarding the timeframe 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 IB activity may take some years to recover . This adjustment eliminates this non-cash expense
Eliminate significant tax events (net $9.5m During FY19, SkyCity had a number of significant tax events which have impacted the reported effective tax rate decrease to normalised NPAT) (FY19 only) ATO tax review As part of the Australian Tax Office’s (ATO) Streamlined Assurance Review of SkyCity’s Australian operations, SkyCity and the ATO agreed to settle differences of opinion on the treatment of certain financing arrangements. As a result of this settlement, SkyCity made a A$3.5m payment to the ATO. This payment relates to historical items only and does not change SkyCity’s future tax payments or tax expense
Auckland car park concession sale deferred tax The deferred tax consequences of the Auckland car park concession sale were recognised in FY19, this was a $11.5m reduction in tax expense
Share of partnership expenditure – tax election In the current year, SkyCity made a NZ tax election for the SkyCity Australian Limited Partnership. This resulted in a one-off benefit of $1.9m in the FY19 tax expense
Summary This adjustment eliminates the net reduction (from the above items) in tax expense for the purpose of the normalised results
Eliminate Darwin operations from normalised . During FY19, SkyCity sold its Darwin operations results (FY19 only) . Darwin has been fully excluded from FY19 normalised results to enable appropriatecomparisons with FY20
For personal use only use personal For SkyCity Entertainment Group Limited FY20 Result
Investor Presentation
3 September 2020 For personal use only use personal For Important . Average NZ$ vs. A$ cross-rate for FY20 = 0.9483 and FY19 = 0.9398 . Weighted average number of shares (excl treasury stock) for FY20 = 664,946,279 and Information FY19 = 675,772,802
. Normalised revenue (incl gaming GST), calculated as gaming win (incl GST) plus non-gaming revenue (excl GST), is shown to facilitate Australasian comparisons
. Normalised revenue and earnings adjusted for IB at the theoretical win rate of 1.35% versus an actual win rate of 1.47% in FY20 (FY19: 1.00%)
. EBITDA margin is calculated as a % of revenue (incl gaming GST) to facilitate Australasian comparisons
. Certain totals, subtotals and percentages may not agree due to rounding
. Refer to the FY20 Annual Report for a glossary of terms referenced in this presentation For personal use only use personal For
2 Contents
FY20 Key Features 4 FY20 Results 5 Trading Update and FY21 Outlook 17
Group Strategy Update 25
Appendices 36 For personal use only use personal For
3 FY20 Key Features
Challenging year due to NZICC fire and Covid-19, with Trading well ahead of expectations when properties significant operational and financial impacts open − resilient domestic businesses
Group normalised EBITDA and NPAT negatively Strong balance sheet following implementation of impacted but at top end of guidance range provided at funding plan – able to withstand further downside time of equity raising shocks and/or Covid-19 disruptions
Online casino grown rapidly despite operational Adelaide expansion project on-track with opening constraints – over 35k customer registrations and expected in late 2020 and NZICC/Horizon Hotel
EBITDA positive since April 2020 reinstatement progressing satisfactorily For personal use only use personal For
4
FY20 Results For personal use only use personal For Presentation of FY20 Results
. Complex set of financial results
. Reported results significantly impacted by NZICC fire, gain from Auckland car park concession sale and impairment of SkyCity Adelaide casino licence
. Normalised results adjust for impacts of NZICC fire, Auckland car park concession sale, impairment of SkyCity Adelaide casino licence and certain other items (see pages 37-38 for more details)
• Adjustments from reported to normalised results consistent with SkyCity’s “Non-GAAP Financial Information Policy”
• Normalised results not adjusted for impact of Covid-19 and related property closures, other than redundancy costs relating to the labour restructure
. Comparability of underlying (or “like-for-like”) normalised earnings of the Group in FY20 vs. pcp significantly impacted by:
• Auckland car park concession sale (settled August 2019)
• Temporary closure of SkyCity Auckland during NZICC fire (late October 2019)
• Closure of NZ properties and SkyCity Adelaide during Covid-19 lockdowns (from late March 2020)
• Related operational and financial impacts on business from Covid-19 (i.e. NZ wage subsidy and Australian JobKeeper scheme) For personal use only use personal For
6 FY20 Results Overview
FY20 FY19 Movement
$m $m $m %
Reported Revenue 1,125.0 822.3 302.7 36.8%
Reported EBITDA 348.3 297.8 50.5 16.9%
Reported NPAT 235.4 144.6 90.8 62.8%
Reported EPS 35.4cps 21.4cps 14.0ps 65.5%
FY20 FY19 Movement
$m $m $m %
Normalised Revenue (incl Gaming GST)(1)(2) 779.5 1,029.8 (250.3) (24.3%)
Normalised EBITDA(1)(2) 200.7 322.2 (121.5) (37.7%)
Normalised NPAT(1)(2) 66.3 164.6 (98.3) (59.7%)
Normalised EPS 10.0cps 24.4cps (14.4cps) (59.0%) For personal use only use personal For Final Dividend DPS 0.0cps 10.0cps (10.0cps) NA
(1) Darwin has been excluded from normalised results to aid comparability vs. pcp , but there has been no change to FY19 reported NPAT (2) See pages 37-38 for more details 7 FY20 Revenue by Business
FY20 FY19 Movement
$m $m %
Properties (excl IB)(1)
Auckland 497.3 606.7 (18.0%)
Hamilton 58.8 61.8 (4.8%)
Queenstown/other 12.3 13.1 (6.6%)
Adelaide (A$) 121.0 148.7 (18.7%)
Total Property Revenue (excl IB)(1) 695.7 840.0 (17.2%)
Normalised IB Revenue 78.9 190.5 (58.6%)
Online/E-sports 4.9 (0.7) NA
Normalised Revenue(1)(2) 779.5 1,029.8 (24.3%)
IB revenue adjustment(3) 7.3 (49.9) NA
For personal use only use personal For Non-GAAP adjustments(3) 338.2 (157.6) NA
Reported Revenue 1,125.0 822.3 36.8%
(1) Including gaming GST (2) Darwin has been excluded from normalised results to aid comparability vs. pcp 8 (3) See pages 37-38 for more details FY20 EBITDA by Business
FY20 FY19 Movement
$m $m %
Properties (excl IB)
Auckland 193.9 267.9 (27.6%)
Hamilton 24.4 26.9 (9.5%)
Queenstown 0.7 2.3 (71.8%)
Adelaide (A$) 11.2 20.9(1) (46.3%)
Total Property EBITDA (excl IB) 230.7 319.4 (27.8%)
Normalised IB EBITDA 4.5 41.7 (89.1%)
Corporate Costs (31.5) (33.8) 6.8%
Online/E-sports 1.1 (0.7) NA
NZICC/Horizon Hotel/Adelaide pre-opening costs (4.1) (4.4) 6.4%
Normalised EBITDA(2) 200.7 322.2 (37.7%)
Non-GAAP adjustments(3) 147.6 (24.4) NA For personal use only use personal For
Reported EBITDA 348.3 297.8 16.9%
(1) Includes $800k of intercompany costs required to be retained post sale of Darwin (2) Darwin has been excluded from normalised results to aid comparability vs. pcp 9 (3) See pages 37-38 for more details FY20 Result Commentary (1 of 3)
Group . Financial results significantly impacted by NZICC fire and Covid-19 . FY20 Group normalised EBITDA (of $200.7m) and NPAT (of $66.3m) at top end of guidance provided at time of equity raising (17 June 2020) . Reported results (EBITDA of $348.3m and NPAT of $235.4m) up significantly vs. pcp due to NZICC fire accounting and gain from Auckland car park concession sale, offset by A$150m impairment of SkyCity Adelaide casino licence . Local EBITDA(1) for 8 months to 29 February 2020 up around 5% vs. pcp on a like-for-like basis . NZ wage subsidy and JobKeeper scheme partially mitigated impact of property closures and ongoing negligible international customer activity . Domestic businesses (historically 85%+ of Group EBITDA) performing stronger than expectations when open
New Zealand Properties • Auckland: . Good momentum prior to NZICC fire and impact of Covid-19, particularly in EGMs (around 45% of revenue) − record local gaming activity for 8 months to 29 February 2020 . Strong local gaming performance post re-opening from mid-May 2020 prior to second closure . Non-gaming businesses significantly impacted by Covid-19 but momentum building post re-opening, particularly in hotels • Hamilton: . Record EBITDA achieved in 1H20 and robust 2H20 performance despite impact of Covid-19 . EGM revenue since re-opening from mid-May 2020 ahead of pre-Covid-19 levels(2) • Queenstown: Impact of Covid-19 on international visitors to Queenstown region offset strong local gaming performance in 1H20
NZ Online Casino (based in Malta) For personal use only use personal For • Trading ramped up significantly during 2H20 (particularly from March 2020) • Over 35k customer registrations (as at 31 August 2020) and EBITDA positive every month from April 2020
(1) Excludes IB EBITDA and corporate costs (2) Average daily revenue of 8 months to 29 February 2020 10 FY20 Result Commentary (2 of 3)
Australian Properties (SkyCity Adelaide) . Performance progressively improved prior to impact of Covid-19 (including 3-year high (7.8%) in EGM market share in December 2019) despite ongoing disruption from construction works . Property closed for duration of 4Q20 (with majority of staff stood-down)
International Business . Significantly weaker volumes due to impact of Covid-19 on visitation from Asia from January 2020 and international border closures . Turnover down 59% to $5.8bn and normalised EBITDA down 89% . Margins adversely impacted by negative operating leverage from lower volumes and property closures . Actual win rate of 1.47% above theoretical win rate of 1.35% − reported EBITDA slightly above pcp (win rate 1.00%)
Corporate Costs and Other Expenses
• Labour restructure implemented during 4Q20 across NZ properties – annualised cost savings of $50m (of which $40m operating costs) • Corporate costs well below previous guidance due to labour restructure in 4Q20, no bonuses awarded and reduction in other expenses • NZICC/Horizon Hotel and Adelaide expansion pre-opening costs around $4m below expectations due to impact of NZICC fire and Covid-19 • D&A broadly in-line with guidance with asset additions and impact of IFRS 16 (Leases) offsetting delays to completion of certain ICT projects
• Net interest expense significantly higher than pcp – unable to capitalise interest on NZICC/Horizon Hotel from the date of fire ($21m impact in FY20) For personal use only use personal For • Normalised effective tax rate of 28.8% (FY19: 29.0%)
11 FY20 Result Commentary (3 of 3)
Funding and Distributions . Funding plan successfully implemented during June and July 2020, including $230m equity raising . Pro-forma liquidity(1) of $559m which includes proceeds from share purchase plan and planned redemption of NZ bonds . Covenant waivers/relief for December 2020 and June 2021 testing periods . Retained BBB- (negative outlook) credit rating from S&P Global Ratings . No final FY20 dividend – dividends suspended for period of covenant waivers/relief
Significant Accounting Impacts • Complex set of financial results • NZICC fire a significant insurance event . Treated as disposal of damaged asset ($194m write-off of WIP PP&E, offset by reversal of Deferred Licence Value) . Insurance recoveries required to be recognised as income ($337m) • $66.4m gain from Auckland car park concession sale recognised as income • A$150m impairment of SkyCity Adelaide casino licence due to revised timeframe to achieve long-term potential earnings post expansion, exacerbated by impact of Covid-19 – non-cash item and no impact on debt covenant calculations(2)
• NZ wage subsidy and Australian JobKeeper scheme recognised as other income at a property/corporate level (and not normalised) For personal use only use personal For
(1) Pro-forma liquidity includes the following post 30 June 2020 balance sheet movements: (1) net proceeds from share purchase plan (July 2020) of $48m and (2) planned redemption of NZ bonds (September 2020) of $129m 12 (2) Refer to page 53 for more details Capital Expenditure
FY20 group capex ($m) Future major projects capex ($m)
400 600 562
$342m $347m 350 500
300
400 250
267 276 200 300 249
150 200 187
100 99 91 100 81 58 48 50 25 75 72 0 0 Spent to FY20 FY21 FY22 FY23+ FY19 FY20 NZICC/HH project NZICC/HH reinstatement (via insurance)(1) Adelaide expansion (A$) Growth capex Stay-in-business capex
. Growth capex primarily related to major projects and upgrade to . Around $500m of gross capex remaining on NZICC/Horizon Hotel Auckland VIP/premium gaming rooms project, of which around $330m funded via insurance relating to For personal use only use personal For NZICC fire . Stay-in-business capex of $72m, slightly below guidance ($80m)− certain projects deferred due to impact of Covid-19 . Around A$80m of capex remaining on Adelaide expansion
(1) Excludes certain costs arising from NZICC fire not able to be capitalised but funded via insurance (including demolition and site preparation) and other costs already included in pre-opening costs 13 Funding Plan & Capital Allocation
. Successful recapitalisation following implementation of funding plan
• $230m equity raising completed during June and July 2020 (fully underwritten institutional placement and share purchase plan) • $160m additional facilities secured from existing banking group • Debt covenant waivers/relief (for December 2020 and June 2021 testing periods) and extensions secured for upcoming bank maturities
• Dividends suspended for period of covenant waivers/relief − policy to be reviewed during 1H21 Overview . Funding plan in addition to measures to reduce capex and operating costs (incl labour restructure in NZ) . Remain committed to BBB- credit rating (S&P Global Ratings confirmed BBB- (negative outlook) rating following equity raising) . Focused on effective capital discipline
. Following the equity raising, sufficient liquidity to respond to a range of downside scenarios, including a longer and more protracted recovery in NZ and Australia and/or further Covid-19 disruptions (ref. second closure in Auckland) . NZ bonds ($129m) to be redeemed on 28 September 2020 and (if not refinanced) funding available to repay US$100m of USPP notes maturing in March 2021 . Major projects in Adelaide and Auckland fully funded – focused on execution and leveraging benefits
. Expect ongoing stay-in-business capex of $60-70m per annum – required to maintain and refurbish existing properties For personal use only use personal For . Balance sheet capacity for future growth projects and/or capital management to be reviewed when no longer in reliance on
financial settings financial covenant waivers/relief and domestic and international environment becomes more certain
Balance sheet and key key and sheet Balance . Well positioned to raise further debt capital if required in the future 14 Capital Management
. Pro-forma net hedged debt (including Movement in net hedged debt ($m) lease-related liabilities) of $493m as at 800 30 June 2020
153 (177) 700 • Includes cash at bank of $26m as at 30 June 2020
(201) 600 99 347 • Includes net proceeds from share 541 (48) purchase plan ($48m) received during 493 500 488 July 2020 83 (36)
(215) • Includes redemption of NZ bonds 400 ($129m) planned for 28 September 2020 and corresponding drawdown of bank
300 debt to fund this
. Pro-forma gearing of 2.5x as at 30 June 200 2020
100 . Gearing for 30 June 2020 debt covenant calculation includes $66.4m gain from Auckland car park concession sale and
For personal use only use personal For 0 reported (as opposed to normalised) IB Opening net Impact of lease- Group EBITDA Cash funding Movements in Asset sales Capex Distributions Institutional Closing net debt Share purchase Pro-forma net debt related costs/cash tax wor kin g placement (June 2020) plan debt EBITDA (June 2 019) liabilities/other capital/other (net of fees) (net of fees) (June 2020) financing
15 Debt Maturity Profile
Pro-forma hedged debt maturity profile as at 30 June 2020 ($m) . Pro-forma hedged debt maturity profile reflects: • Extension of near-term bank maturities ($170m) to 2023 500 and 2024 (2 x $85m tranches)
450 • $160m of new bank facilities (maturing in FY22)
400 • Redemption of NZ bonds ($129m) planned for 28 September 2020 350 . Pro-forma committed debt (at hedged exchange rates) of 300 $364 $1.1bn at 30 June 2020 250 • Pro-forma liquidity of $559m (includes $26m cash at bank) 200 • $420m in drawn facilities – $325m fixed-term and $95m 150 bank debt
100 $147 • Average maturity for committed debt facilities of 2.7 years 50 $108 $95 $85 $85 $70 $99 . If not refinanced, plan to repay US$100m (hedged at $108m) of
0 USPP notes maturing in March 2021 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 Other . Average interest rate of 6.36% (6.11% in FY19) reflecting higher USPP Bank -Drawn Bank -Undrawn Lease-related liabilities cost 2011 USPP debt as a proportion of total drawn debt
• 2011 USPP debt matures in March 2021 For personal use only use personal For • Expect average interest rate to fall as draw on more cost- effective bank debt
16 Trading Update and
FY21 Outlook For personal use only use personal For Update on Covid-19 in NZ and South Australia
Status of Covid-19 Operating environment for SkyCity
. NZ at Alert Level 2 − Auckland at Alert Level 3 from 12 to 30 . Casino access limited to members (premium customers August 2020 following re-emergence of community only on weekends) transmission . Gaming zones created on main casino floor to ensure • Requirement to adhere to strict social distancing compliance with restrictions on mass gatherings guidelines and restrictions on mass gatherings . Strict measures in place to ensure social distancing on NZ . Reasonable to expect Alert Level 1 (no restrictions) in EGMs and tables and in F&B outlets(1) foreseeable future . Implemented Health & Safety plan (in accordance with . Small number of new cases being caught at border in Ministry of Health guidelines) managed isolation and/or quarantine facilities . International border expected to remain closed for . Infrastructure established to support contact tracing foreseeable future . Negligible IB activity and no international tourist arrivals
. Three-step framework for relaxing restrictions and . Casino access limited to members re-opening the economy − casino and gaming venues . Capacity subject to maximum patronage (around 2,200 opened late June 2020 pax) – limit of one person per 2m2 . <30 new cases since late April 2020 . Strict measures in place to ensure social distancing on South Australia . Interstate border open to all states excluding Victoria EGMs and tables and in F&B outlets(1) (travellers from NSW required to quarantine for 14 days) . Infrastructure established to support contact tracing . Businesses/public activities required to have Covid-Safe . Enhanced hygiene protocols
For personal use only use personal For plan . Negligible IB activity and no international/interstate . Certain restrictions on gatherings remain tourist arrivals
(1) Every second EGM deactivated and limit of 3 people per table game to ensure appropriate social distancing 18 Trading Update (1 of 3)
. Domestic businesses recovered more quickly than anticipated during period 1 June to 11 August 2020
• Positive local gaming activity, with Auckland returning to, and Hamilton ahead of, pre-Covid-19 levels(1) • EGM performance particularly strong across both Auckland and Hamilton • Positive momentum in non-gaming businesses (F&B and hotels) − weekend peaks, mid-week recovering • Significant improvement in operating margins – benefiting from cost savings (incl labour restructure) and operating leverage
NZProperties • EBITDA and cashflow materially ahead of expectations . Auckland closed for period 12 to 30 August 2020, but Hamilton and Queenstown continued to trade ahead of expectations
. Opened on 29 June 2020 in a staged manner with reduced operating hours . Performance since re-opening ahead of expectations – local gaming activity consistent with pre-Covid-19 levels(1)
SkyCity SkyCity . EBITDA and cashflow positive since re-opening Adelaide
. Continues to trade positively after strong growth during April and May 2020 . Around 15k new customer registrations during 3 months to 31 August 2020 (9k new actives)
For personal use only use personal For . Slight reduction in gaming revenue following re-opening of NZ properties – increase in activity during second closure in Auckland Casino
NZ Online NZOnline . EBITDA positive for every month from April 2020
(1) Average daily revenue of 8 months to 29 February 2020 19 Trading Update (2 of 3)
SkyCity Auckland average daily revenue as % SkyCity Hamilton average daily revenue as % SkyCity Adelaide average daily revenue as of pre-Covid-19 levels: 1 June-11 August of pre-Covid-19 levels: 1 June-11 August % of pre-Covid-19 levels: 1 July-31 August (1) 2020 2020(1) 2020(1)
140% 140% 140%
120% 120% 120%
100% 100% 100%
80% 80% 80%
60% 60% 60%
40% 40% 40%
20% 20% 20%
0% 0% 0%
For personal use only use personal For EGMs Tables L oc al Ga min g Non-Gaming Total Revenue EGMs Tables L oc al Ga min g Non-Gaming Total Revenue EGMs Tables L oc al Ga min g Non-Gaming Total Revenue
vs. average daily revenue of 8 months to 29 February 2020 vs. average daily revenue of pcp
(1) Excludes other income associated with NZ wage subsidy or Australian JobKeeper scheme 20 Trading Update (3 of 3)
NZ online casino customer registrations: NZ online casino monthly gaming revenue 1 August 2019 to 31 August 2020 (cumulative) ($m): 1 August 2019 to 31 August 2020
40,000 4.0
35,000 3.5
30,000 3.0
25,000 2.5
20,000 2.0
15,000 1.5
10,000 1.0
5,000 0.5
0 0.0
Aug-19 Sep-19 Oct-19 Nov- 19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Aug-19 Sep-19 Oct-19 Nov- 19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 For personal use only use personal For . 22k first time depositors (actives) as at 31 August 2020 . Average monthly gaming revenue from April to August 2020 of $2.8m . Broad geographic spread of customers across NZ
21 SkyCity Auckland – Operational Initiatives
. Flagship property and key value driver for the Group Loyalty visits and spend per visit: Premium gaming revenue: . Largely domestic business albeit meaningful tourism- 1 June to 11 August 2020: % of pcp 1 June to 11 August 2020: % of pcp related businesses such as hotels, attractions and IB 140% . Leveraged to domestic recovery in NZ 140%
• Strong performance when open, particularly from 120% 120% local gaming business
. Ongoing investment in product and product 100% 100% management
80% . Flexible operating model to meet expected demand 80% and drive sustainable margin growth 60% 60% . Re-focused customer reinvestment model
• Emphasis on premium customers – higher value and 40% 40% captive market
20% 20% • Leveraging digital assets to drive awareness
• Leveraging F&B and hotels to drive visitation from 0% 0% less-active loyalty customers Loyalty visits Spend per loyalty visit For personal use only use personal For EGMs Tables Total premium gaming • Revised approach to on-site promotions and events
22 SkyCity Hamilton – Operational Initiatives
. Leading entertainment venue in Hamilton Loyalty visits and spend per visit: Revenue by activity: . Domestic business – negligible IB and international 1 June to 11 August 2020: % of pcp 1 June to 11 August 2020 vs. pcp tourism activity 140% 100% . Leveraged to domestic recovery in NZ 13% 18% • Strong trading since re-opening from mid-May 2020 90% 120% – rapid return of gaming activity to pre-Covid-19 80% levels(1) 15% 15% 100% • EGMs key value driver for property (70%+ of revenue) 70% • No material difference in performance between Alert 60% 80% Levels 1 and 2 50% . New EGM product and improved floor layout 60% 40% . Flexible operating model to meet expected demand 72% and drive sustainable margin growth 66% 40% 30% . Adopted NZ-wide approach to marketing 20% • Focus on new/re-activated loyalty sign-ups to drive 20% visitation growth 10% • Targeted events for premium customers − increase 0% 0% spend per visit, particularly in EGMs 1 Jun-11-Aug 20 1 Jun-11-Aug 19 For personal use only use personal For Loyalty visits Spend per loyalty visit EGMs Tables Non-gaming • Investment skewed to mass market vs. Auckland given customer segmentation
(1) Average daily revenue of 8 months to 29 February 2020 23 FY21 Outlook
. Assuming no adverse change to the current Covid-19 outlook in NZ and SA, expect Group normalised EBITDA to be above FY20 but still well below pre-Covid-19 and FY19 levels • Domestic businesses to continue to perform well when open – prepared for possibility of further closures • Planning for international border to remain closed for duration of FY21 − negligible IB and international tourism activity . Unable to provide earnings guidance given ongoing uncertainty from Covid-19 and NZICC/Horizon Hotel reinstatement (FY21) Group . Expect stay-in-business capex of $60m-70m and growth capex (including major projects) around $280m . Dividend policy to be reviewed during 1H21 – no interim dividend, but expecting to pay final dividend for FY21 in September/October 2021 assuming no meaningful further Covid-19 disruptions
. Auckland performance expected to return to trends observed prior to second closure, driven by resilient local gaming performance and cost savings, offset by weaker performance from non-gaming businesses . Hamilton expected to deliver good performance vs. pcp – predominately domestic business underpinned by positive EGM activity and cost savings . Queenstown expected to be adversely impacted by international border restrictions . Adelaide expansion expected to open in phases during FY21 (depending on operating environment due to Covid-19) – expect (FY21) EBITDA to be broadly consistent with FY19 levels . Negligible IB turnover expected, with fixed operating costs of around $750k per month
Business Units Business . NZ online casino expected to deliver more meaningful contribution (EBIT)
. Corporate costs expected to be around $34m (vs. like-for-like $35m in FY19)
. NZICC/Horizon Hotel and Adelaide expansion pre-opening costs expected to be around $7m (vs. $4.1m in FY20) For personal use only use personal For . Net interest expense expected to be around $27m, with around $16m of capitalised interest (related to Adelaide expansion) . (FY21) D&A expected to be around $90m .
Corporate Normalised effective tax rate expected to be broadly consistent with FY20 (29%) 24
Group Strategy Update For personal use only use personal For
Group Strategic Plan For personal use only use personal For Strategic Reflections and Learnings (FY20)
Resilience of local gaming business re-confirmed Value of VIP/premium gaming customers highlighted following successive demand shocks
Importance of retaining flexible capital structure and Diversity of thought in leadership critical in making access to capital (and strong relationships with both significant strategic decisions rapidly debt and equity providers)
Able to move quickly but with care to restructure the Online gaming channel growing fast (vs. land-based business casinos) and gaining popularity – significant online and omni-channel opportunity
Importance of SkyCity in the community increasingly Exclusive casino licences and major entertainment recognised by key stakeholders during NZICC fire and destinations allow for long-term strategic planning
Covid-19 For personal use only use personal For Significant events during FY20 were challenging but also a reminder of SkyCity’s competitive advantages
27 Strategic Priorities for FY21
Continue positive operating recovery post Complete Adelaide expansion and achieve successful re-opening of properties, particularly in Auckland opening of new facilities
Maximise development opportunities in NZ whilst Progress reinstatement of NZICC/Horizon Hotel maintaining discipline over capital allocation and following fire resume payment of dividends as soon as able
Continue to invest in and enhance key Progress online casino opportunity in NZ
CSR/sustainability initiatives For personal use only use personal For Group strategic plan remains relevant − critical to focus on recovery post Covid-19 and executing major projects
28 Our Business Goals
Improve our operating performance Optimise our existing portfolio Grow and diversify our business
. Following labour restructure, maintain focus . Adelaide expansion and master planning . NZ online casino launched in August 2019 on cost control works on existing building on-track for with GiG via Malta-based subsidiary opening in late 2020 . Maintain flexible operating model to respond • Significant omni-channel opportunity if to different Covid-19 restrictions . Complete major refurbishment and online market regulated in NZ . Ongoing investment in new product, expansion of VIP/premium and other product management and gaming systems gaming facilities in Auckland • Support future regulation in NZ . Continue rollout of RFID technology and . Refine development opportunities in . Monitor and evaluate regional M&A analytics across the Group Auckland/Hamilton/Queenstown opportunities in casino industry . Targeted and tactical marketing used as cost effective tool of driving profitable visitation . Maximise benefits from investment in VIP/premium gaming . Good progress on investment in ICT and
For personal use only use personal For digital capability – CXM/loyalty, web & mobile and data analytics
29 NZICC/Horizon Hotel Project
. NZICC fire and impact of Covid-19 has caused significant project delays − Fletcher Construction recently provided updated programme of works • Expect Horizon Hotel to be completed by late 2021 and NZICC around mid-2023 • Expect 600 NZICC car parks damaged by fire to be returned during 2H21 . Remain comfortable with contractual position on NZICC/Horizon Hotel • Fletcher Construction required to complete project • 2-year extension of long-stop date to complete NZICC (to 2 January 2025) agreed with NZ Government . Appropriate project insurance which is responding to NZICC/Horizon Hotel reinstatement • First tranche of insurance proceeds ($105m) received by SkyCity • Reinstatement costs currently estimated to be at least $336m (excluding clean-up costs) – expected to be fully covered by insurance • Claim also made on material damage and business interruption insurance . No change to previous guidance for total project costs • Expect total project costs of around $750m • Around $170m of net “cash” capex still to spend as at 30 June 2020 under Building Works Contracts (excludes reinstatement costs funded by insurance) . No change to long-term investment thesis for the project
For personal use only use personal For • Investment to support long-term growth in tourism expenditure in NZ • New infrastructure to be significant demand driver for Auckland precinct • Exclusive casino licence for key Auckland property out to 2048
30 Adelaide Expansion
. Good progress with project remaining on-time and on-budget • Total project costs in-line with A$330m budget, with around A$80m of “cash” capex still to be spent as at 30 June 2020 . Expect to open in staged manner from late November 2020, reflecting customer demand • Taking hotel bookings from early December 2020 • Focus initially on local and interstate customers (given expected ongoing international border closures) • Up to 700 new staff in process of being hired . Walker Corporation continues to advance car park development at Festival Plaza • Expect car park to be handed over during 2Q 2021 . SA Government regulatory review completed − targeting implementation of new reforms (note acceptors, TITO (main gaming floor) and Multi-Protocol gaming system) from October 2020 . Master planning works on existing building on-track to complete by expansion opening . A$150m impairment of SkyCity Adelaide casino licence due to revised timeframe to achieve long-term potential earnings post expansion, exacerbated by impact of Covid-19 – non-cash item which reduces intangible asset value (casino licence)(1) . Project expected to transform SkyCity Adelaide into world-class casino and entertainment
complex For personal use only use personal For
(1) Refer to page 53 for more details 31 Property Assets & Master Planning
. Continuing to progress further opportunities to release capital from property assets and restructure over the medium-term • Around $2bn of land and building owned as at 30 June 2020(1) • Potential sale of non-core assets, such as AA Centre (SkyCity HQ) once current building works and leasing completed . Exploring internal restructuring of operations and property assets • Potential opportunity to establish standalone funding structures and unlock unrecognised value in property assets • Plan to separately report operations and property assets once internal restructure complete . Auckland/Hamilton/Queenstown development opportunities continue to be refined but major decisions paused • Balance sheet constrained and uncertain outlook for tourism-related businesses • Significant long-term option value embedded in Auckland precinct (including 2,500m2 of land able to be developed) • Potential hotel opportunity in Hamilton • Re-evaluating future options for Queenstown properties given reliance on VIP/premium
gaming and international tourists For personal use only use personal For
(1) Includes property value of NZICC/Horizon Hotel and Adelaide expansion “as built” 32 Culture and Character Goals
Offer a great and safe place to work Always put customers first Be responsible leaders in our communities
. Continue to refine Health & Safety plan – . Ongoing investment in ICT/digital – launch of . Hardship Fund established to support staff focus on response to Covid-19 and building mobile app/web-based platform for NZ impacted by Covid-19 (over $1m raised from awareness customers staff) . Reduction in gender pay gap in NZ from 8.2% . Facial recognition implemented across all . Carbon neutral across both NZ and Adelaide to 7.5% (no change in Adelaide) sites as part of enhancements to Host . Employee-led green fund allocations . Employee Inclusion Council established in Responsibility programme commenced Auckland . Long-stay player detection technology . Implementing initiatives to reduce waste to . Final instalment of NZ $20 wage by 2020 to currently being trialed in Hamilton landfill and water usage be implemented by end of 2020 . Good progress in ensuring local/ethical . Youth development programme (Project . Upgraded algorithm to enhance detection of sourcing problem gambling Nikau) well established . Gaming taxes and levies of $33m in FY20 . Flexible working framework implemented . Progressing review of CXM/loyalty . Community trusts refocused − $3.7m in across the Group For personal use only use personal For contributions during FY20 . Focus on maintaining staff resilience, morale and motivation
33 Commitment to Sustainability
The impact of Covid-19 on SkyCity has highlighted the need to preserve and grow sustainable profitability alongside enhancing non-financial capitals to ensure long-term
For personal use only use personal For viability and success
34 Distributions to Stakeholders (FY20)
$296m in $126m in $347m remuneration taxes to capital and benefits to Government invested across staff (NZ and the business Australia)
“Better communities at the heart of what we’re doing”
$10m $205m $66m of in community in payments to dividends paid contributions, suppliers to shareholders levies and (mainly local)
For personal use only use personal For sponsorships
Source: FY20 SkyCity Annual Report 35
Appendices For personal use only use personal For Reported and Normalised Results (1 of 2)
. The differences between FY20 reported and normalised financial information are summarised overleaf − refer to the appendix for more information on why these adjustments have been made . FY20 adjustments (from reported to normalised) • Treat IB commissions as an expense rather than a reduction in revenue which reduces both reported revenue and operating expenses within IB (by $39.3m) – effectively reverses impact of IFRS 15 (Revenue from Contracts with Customers) • Add gaming GST ($73.4m) to reported revenue • Apply theoretical win rate of 1.35% for IB vs. actual win rate of 1.47% • Eliminate gain ($66.4m) arising from Auckland car park concession sale (completed in August 2019) • Eliminate net gain ($268.5m post-tax) arising from impacts of NZICC fire • Reverse impact of labour restructuring ($13.5m) and implementation of funding plan ($5.4m post-tax) associated with response to impacts of Covid-19 • Reverse impact of revaluation (reduction of $14.1m) of Auckland investment properties • Reverse impairment (A$150m) of SkyCity Adelaide casino licence • Eliminate benefit ($24.1m) relating to reversal of deferred tax liabilities previously recognised in relation to non-depreciable buildings . FY19 adjustments (from reported to normalised) • Treat IB commissions as an expense rather than a reduction in revenue which reduces both reported revenue and operating expenses within IB (by $80.3m) – effectively reverses impact of IFRS 15 (Revenue from Contracts with Customers) • Add gaming GST ($95.2m) to reported revenue • Apply theoretical win rate of 1.35% for IB vs. actual win rate of 1.00% • Eliminate significant tax events (net $9.5m decrease to normalised NPAT) • Eliminate gain ($17.4m) arising from sale of Federal St car park (completed in April 2019)
For personal use only use personal For • Reverse impact of revaluation (reduction of $3.2m) of Auckland investment properties • Eliminate Darwin operations from normalised results
37 Reported and Normalised Results (2 of 2)
FY20 FY19
Revenue EBITDA EBIT NPAT Revenue EBITDA EBIT NPAT
$m $m $m $m $m $m $m $m
Reported 1,125.0 348.3 261.7 235.4 822.3 297.8 217.8 144.6
IB revenue adjustment 39.3 - - - 80.3 - - -
Gaming GST 73.4 - - - 95.2 - - -
IB at theoretical win rate (7.3) 0.1 0.1 0.2 49.9 38.7 38.7 27.8
Gain on sale – Auckland car parks (66.4) (66.4) (66.4) (66.4) (17.4) (17.4) (17.4) (17.7)
Revaluation of Auckland properties - 14.1 14.1 14.1 - 3.2 3.2 3.2
Significant tax events ------(9.5)
NZICC fire impacts(1) (384.5) (269.4) (269.4) (268.5) - - - -
Labour restructure - 13.5 13.5 9.7 - - - -
Funding plan costs - - - 5.4 - - - -
Deferred tax liability reversal - - - (24.1) - - - -
SkyCity Adelaide impairment - 160.6 160.6 160.6 - - - -
For personal use only use personal For Sale of Darwin - - - - (0.4) - - 16.2
Normalised 779.5 200.7 114.2 66.3 1,029.8 322.2 242.4 164.6
(1) See page 39 for more details 38 NZICC Fire Accounting Impacts for FY20
Estimated Amount(1) NZICC Fire Impacts Comments(2) ($m) Insurance recovery related to damage to NZICC/Horizon Hotel – required to be recognised as income as Contracts works insurance recovery 336.7 SkyCity is principal in insurance relationship Liquidated damages for Nelson St Damages provided in NZICC Building Works Contract for tunnel closure from date of fire to 20 10.3 car park access December 2019 Other recoveries for business interruption, initial site clearance costs and other assets destroyed Other insurance recoveries 37.5 (e.g. ICT) NZICC fire related income 384.5 Amount included in Income Statement
Write-off of capitalised WIP 193.9 Write-off of WIP PP&E asset – insurance event treated as disposal of damaged asset Release of Deferred Licence Value (165.8) Part of Deferred Licence Value liability released to offset write-off of disposed asset liability Obligation to reinstate NZICC car parks 43.0 Cost to reinstate 600 NZICC car parks already sold under finance lease to Macquarie Principal Finance
Amount payable to contractor/other 36.9 Contractor costs for site clearance work to date plus non-recoverable costs
NZICC fire related costs 108.1 Amount included in Income Statement
Net gain in Income Statement 276.4 NZICC fire related income less costs (per above) Minimum excess on business interruption insurance and compensation payment to Macquarie Less: Other (7.0)
Principal Finance associated with Auckland car park concession For personal use only use personal For EBITDA adjustment for NZICC fire 269.4 Adjustment consistent with SkyCity’s “Non-GAAP Financial Information Policy” impacts
(1) Estimates of the NZICC fire impacts are based on current assessments and may change materially as further information becomes available (2) See note 6 in the FY20 financial statements for more details 39 FY20 Result – Reported
FY20 FY19 Movement
$m $m $m %
Reported Revenue 1,125.0 822.3 302.7 36.8%
Expenses (776.7) (524.5) (252.2) (48.1%)
Reported EBITDA 348.3 297.8 50.5 16.9%
Depreciation & Amortisation (86.6) (79.9) (6.7) (8.3%)
Reported EBIT 261.7 217.8 43.9 20.2%
Net Interest (28.6) (10.2) (18.4) (180.5%)
Reported NPBT 233.1 207.6 25.5 12.3%
Tax 2.2 (46.8) 49.0 104.6%
Profit from Continuing Operations 235.3 160.8 74.5 46.3%
Profit from Discontinued Operations(1) 0.1 (16.2) 16.3 100.7%
Reported NPAT 235.4 144.6 90.8 62.8% For personal use only use personal For
Reported EPS 35.4cps 21.4cps 14.0ps 65.5%
(1) FY19 Reported NPAT includes profit from Darwin operations recognised prior to sale (FY20 profit from discontinued operations relates to deposit received on potential sale of Little Mindil) 40 FY20 Result – Normalised(1)
FY20 FY19 Movement
$m $m $m %
Normalised Revenue (incl Gaming GST) 779.5 1,029.8 (250.3) (24.3%)
Gaming GST (72.8) (101.4) 28.5 28.1%
Normalised Revenue 706.7 928.4 (221.8) (23.9%)
Expenses (506.0) (606.2) 100.2 16.5%
Normalised EBITDA 200.7 322.2 (121.5) (37.7%)
Depreciation & Amortisation (86.6) (79.9) (6.7) (8.3%)
Normalised EBIT 114.2 242.4 (128.2) (52.9%)
Net Interest (21.1) (10.5) (10.6) (100.9%)
Normalised NPBT 93.0 231.8 (138.8) (59.9%)
Tax (26.8) (67.2) 40.4 60.1%
Normalised NPAT 66.3 164.6 (98.3) (59.7%) For personal use only use personal For Normalised EPS 10.0cps 24.4cps (14.4cps) (59.0%)
(1) Darwin has been excluded from normalised results to aid comparability vs. pcp 41 SkyCity Auckland . Robust performance despite significant external factors FY20 FY19 Movement impacting the business
$m $m % . Good momentum prior to NZICC fire and impact of Covid-19 Revenue • Record local gaming activity for 8 months to Gaming Machines 230.8 271.0 (14.8%) 29 February 2020 Tables 128.0 163.3 (21.6%) . Positive performance post re-opening in mid-May 2020 Gaming Revenue (incl GST) 358.8 434.4 (17.4%) prior to second closure
Non-Gaming Revenue 138.5 172.3 (19.6%) • Gaming led-recovery, particularly from premium customers Total Normalised Revenue 497.3 606.7 (18.0%) (incl gaming GST) (excl IB) • Strong EGM performance, despite reduced capacity and limited marketing and promotional activity Gaming GST (46.4) (56.3) 17.5% • Non-gaming businesses performed satisfactorily, Total Normalised Revenue particularly hotels (excl gaming GST) (excl IB) 450.9 550.4 (18.1%) . Property re-opened on 31 August 2020 following Expenses (257.0) (282.5) 9.0% second closure Normalised EBITDA (excl IB) 193.9 267.9 (27.6%) • Around $7m in fixed operating costs incurred during closure period EBITDA Margin (excl IB) 39.0% 44.1%
Depreciation & Amortisation (46.1) (47.4) 2.8%
EBIT (excl IB) 147.8 220.5 (32.9%) For personal use only use personal For
Normalised EBITDA (incl IB) 198.6 303.3 (34.5%)
42 SkyCity Hamilton . Solid performance despite impact of Covid-19 FY20 FY19 Movement • EBITDA only slightly down on pcp on a like-for-like (1) $m $m % basis Record local gaming activity in 8 months to Revenue • 29 February 2020 Gaming Machines 41.4 44.5 (6.8%) • Strong EGM activity, despite being capacity Tables 8.4 8.9 (6.1%) constrained during peak periods
Gaming Revenue (incl GST) 49.8 53.4 (6.7%) . Strong performance post re-opening from mid-May 2020 Non-Gaming Revenue 9.0 8.4 7.1% • EGM revenue above pre-Covid-19 levels(2) Total Normalised Revenue 58.8 61.8 (4.8%) (incl gaming GST) (excl IB) • New EGM product and improved floor layout well Gaming GST (6.5) (7.0) 6.7% received (including increased capacity on smoking decks) Total Revenue 52.3 54.8 (4.6%) (excl gaming GST) (excl IB) . Gambling Commission declined application to vary Expenses (27.9) (27.9) 0.2% licence conditions (substituting tables with EGMs) but intend to convert 12 ATGs to EGMs (which is EBITDA (excl IB) 24.4 26.9 (9.5%) permissible) EBITDA Margin (excl IB) 41.5% 43.6%
Depreciation & Amortisation (4.4) (4.4) 1.0%
EBIT (excl IB) 20.0 22.5 (11.2%) For personal use only use personal For Normalised EBITDA (incl IB) 24.4 27.2 (10.3%)
(1) $700k in costs associated with application to the Gambling Commission (2) Average daily revenue of 8 months to 29 February 2020 43 SkyCity Queenstown/Wharf Casino . Impact of Covid-19 on international visitors to FY20 FY19 Movement Queenstown offset strong local gaming performance in 1H20 $m $m % . Wharf Casino remains closed Revenue
Gaming Machines 5.7 7.0 (18.7%) . Positive EGM performance post opening of SkyCity Queenstown from mid-May 2020 – strong domestic Tables 3.8 4.7 (17.4%) tourism activity during July 2020 Gaming Revenue (incl GST) 9.5 11.6 (18.2%) . Non-Gaming Revenue 1.6 1.5 8.9% Minimal IB activity during 2H20 due to international border restrictions Total Normalised Revenue 11.1 13.1 (15.1%) (incl gaming GST) (excl IB)
Gaming GST (1.2) (1.5) 17.9%
Total Revenue 9.9 11.6 (14.8%) (excl gaming GST) (excl IB)
Expenses (9.2) (9.3) 0.4%
EBITDA (excl IB) 0.7 2.3 (71.8%)
EBITDA Margin (excl IB) 5.9% 17.9%
Depreciation & Amortisation (1.4) (1.0) (39.3%)
EBIT (excl IB) (0.7) 1.4 (152.9%) For personal use only use personal For
Normalised EBITDA (incl IB) 0.8 6.8 (87.7%)
44 SkyCity Adelaide . Progressive improvement in performance prior to FY20 FY19 Movement disruption from Covid-19
A$m A$m % • Stable local gaming activity to 29 February 2020 − casino visitation up slightly vs. pcp Revenue
Gaming Machines 38.3 51.4 (25.6%) • 3-year high in EGM market share (7.8%) achieved in December 2019 Tables 56.9 77.5 (26.5%) . Property closed for duration of 4Q20 Gaming Revenue (incl GST) 95.2 128.9 (26.2%)
Non-Gaming Revenue 25.8 19.8 30.3% • Majority of staff stood-down
Total Normalised Revenue 121.0 148.7 (18.7%) • Progressed with property maintenance and various (incl gaming GST) (excl IB) master planning projects in existing building Gaming GST (8.7) (11.7) 26.0% . Minimal IB activity during 2H20 due to international Total Revenue 112.3 137.1 (18.0%) border restrictions (excl gaming GST) (excl IB)
Expenses (101.1) (116.1) 12.9% . Trading performance since re-opening ahead of expectations – revenue during July and August 2020 at EBITDA (excl IB) 11.2 20.9 (46.3%) around 80% of pre-Covid-19 levels(1) EBITDA Margin (excl IB) 9.3% 14.1% . Focused on operational readiness plan for expansion Depreciation & Amortisation (18.1) (16.6) (8.7%)
EBIT (excl IB) (6.9) 4.4 NA For personal use only use personal For
Normalised EBITDA (incl IB) 10.4 22.3 (53.4%)
(1) Average daily revenue of 8 months to 29 February 2020 45 International Business (1 of 2) . Significantly weaker volumes and normalised earnings FY20 FY19 Movement FY20 FY19 vs. record pcp $bn $bn % . Weaker performance driven by: Turnover Actual Win % • Impact of Covid-19 on visitation from Asia from Auckland 3.9 11.3 (65.2%) January 2020 Other NZ 0.6 1.6 (63.1%) • Closure of international border from late March (2) Adelaide (A$) 1.3 1.0 23.3% 2020 Total Turnover 5.8 14.1 (58.6%) 1.47% 1.00% • Ongoing fixed operating costs required to support Normalised Revenue ($m)(1) 78.9 190.5 (58.6%) business despite no revenue generation during 4Q20 Reported Revenue ($m) 38.0 42.3 (10.9%) . FY20 reported EBITDA slightly above pcp due to higher win rate (1.47% vs. 1.00%) offsetting lower FY20 FY19 Movement FY20 FY19 turnover
$m $m % . Retained conservative approach to credit, but higher EBITDA Margin % bad debts due to Covid-19-related payment issues
Auckland 4.7 35.4 (86.7%) . Significant focus on KYC/AML checks for both Other NZ 0.7 4.8 (85.8%) prospective and existing customers
Adelaide (A$)(2) (0.8) 1.4 NA
Total Normalised EBITDA(1) 4.5 41.7 (89.1%) 5.8% 21.8% For personal use only use personal For Total Reported EBITDA 3.8 3.0 25.5%
(1) FY20 normalised results in IB adjusted for turnover at the actual win rate of 1.47% vs theoretical win rate of 1.35%, IFRS 15 (Revenue from Contracts with Customers) and Gaming GST. Combined impact of adjustments on reported revenue of ($42.1m) and reported EBITDA of ($0.1m) 46 (2) Includes IB revenue (A$2m) and EBITDA (A$0.1m) attributable to Darwin prior to settlement of sale of the property in April 2019 International Business (2 of 2)
IB Turnover: FY10-FY20 ($bn) IB Win: FY10-FY20 (%)
9 2.5%
8
2.0% 7
6 1.5% 5
Turnover 1.28% 4 1.0%
3
2 0.5%
1
0.0% 0 1H11 1H13 1H15 2H11 1H12 1H17 1H19 1H16 1H18 1H14 1H10 2H13 2H15 2H12 2H17 2H16 2H19 2H18 2H14 2H10 1H20 2H20 1H11 1H13 1H15 2H11 1H12 1H17 1H16 1H19 1H18 1H14 1H10 2H13 2H15 2H12 2H17 2H16 2H19 2H18 2H14 2H10 1H20 2H20 Win rate (%) Average win (%)
. IB turnover continues to be volatile and difficult to predict . Average win rate of 1.28% since FY10 (1.35% excl FY19), in-line with
. FY20 performance impacted by external factors and one-off theoretical win rate (1.35%) For personal use only use personal For demand shocks (i.e. Covid-19) . Bet size and frequency of play can vary and cause win rate to . 5-year average annual IB turnover of around $10bn (FY16-FY20) deviate from the theoretical over discrete periods
47 SkyCity Hotels Group
. Hotels Group established during FY20 – led by The Grand by SkyCity Hotel, Combined Brad Burnett SkyCity, Auckland Hotels Auckland . Focused on delivery of Eos by SkyCity in Adelaide and Horizon Hotel in Auckland FY20 Operating KPIs • Longer-term development opportunities on existing Number of rooms 316 323 639 precincts continue to be refined but major decisions paused Occupancy (%) 79% 79% 79% . Softer performance in 1H20 further exacerbated by Average room rate (excl GST) ($) 270 216 243 property closures due to Covid-19 . Positive performance from Hotels Group when open RevPAR ($) 214 170 192 • Weekend peaks, mid-week recovering RevPAR of local compset ($) 173(1) 142(1) NA • Average occupancy for period 1 June to 11 August 2020 around 50% FY20 FY19 Movement • Continue to outperform peers in Auckland hotel market $m $m % . Hotels remain important to integrated offering – Total Revenue (incl GST)(2) 41.1 54.6 (24.8%) currently around 15% of room nights sold are complimentary for gaming customers Expenses(3) (20.9) (22.5) 7.3%
EBITDA 20.2 32.0 (37.1%) For personal use only use personal For EBITDA Margin(4) 49.1% 58.7%
(1) RevPAR of Auckland 5 Star (for The Grand by SkyCity) and 4 Star (for SkyCity Hotel) compset during FY20 (Source: STR) (2) Revenue includes non-cash complimentary room nights 48 (3) Fully-costed standalone hotel expenses – excludes certain costs assumed for Hotels Group at time of 2019 Investor Day (ref. page 83 of Investor Day presentation) (4) Margins include hotel management services NZ Online Casino . NZ online casino successfully launched in August 2019 FY20 FY19 Movement with GiG via Malta-based subsidiary
Operating KPIs . Sequential growth in customer registrations, first-time depositors (actives) and gaming revenue over the period Customer registrations 25,661 - NA despite operational constraints
First time depositors (actives) 15,855 - NA • Over 35k customer registrations as at 31 August 2020 (with 25k from March 2020) − broad geographic Deposit conversion (%) 62% - NA spread of customers across NZ
Total bets ($m) 253.5 - NA • 22k first time depositors (actives) as at 31 August 2020
• EBITDA positive every month from April 2020 FY20 FY19 Movement • EBITDA margin around 20%, in-line with expectations $m $m % . Benefitted from Covid-19 lockdowns in NZ during April Gaming revenue 10.2 - NA and May 2020 • Slight reduction in gaming revenue following GiG costs and bonusing (5.7) - - re-opening of NZ properties Gaming revenue (attributable to SkyCity) 4.5 - NA • Increase in activity during second closure in Auckland – around 5k new customer registrations over the Expenses (2.4) - NA period EBITDA (attributable to SkyCity) For personal use only use personal For 2.2 - NA
EBITDA Margin (vs. total gaming revenue) 20.7% - -
49 Reported and Normalised Results (1 of 4)
. 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 information which:
• Is representative of SkyCity’s underlying performance (as a potential indicator of future performance);
• Can be compared across years; and
• Can assist with comparison between publicly listed casino companies in NZ and Australia
. This objective is achieved by:
• Eliminating inherent volatility or “luck” factor from IB which has variable turnover and actual win % from period to period;
• Eliminating structural differences in the business between periods; and
• Eliminating known different treatments with other NZ and Australian publicly listed casino companies
. SkyCity believes that by making these adjustments the users of the financial information are able to understand the underlying performance of the Group and form a view on future performance
. For internal purposes, including budgeting and determination of staff incentives, normalised results are used
. Non-GAAP information is prepared in accordance with a Board approved “Non-GAAP Financial Information Policy” and is reviewed by the Board at each reporting period
.only use personal For Application of SkyCity’s “Non-GAAP Financial Information Policy” is consistent with the approach adopted in FY19
50 Reported and Normalised Results (2 of 4)
Adjustment Discussion
Treat IB commissions as an expense rather than . This adjustment adds back IB commissions (treated as a reduction from revenue in the reported results) and increases both revenue and reduction in revenue which reduces both reported expenses. This adjustment does not impact EBITDA, EBIT or NPAT revenue and operating expenses within IB (by $39.3m in FY20 and $80.3m in FY19) . This adjustment has been made to maintain the relationship between turnover and the theoretical win rate of 1.35% when determining normalised revenue
Add gaming GST to reported revenue . Reported revenue included within the financial statements of the Group excludes GST (by $73.4m in FY20 and $95.2m in FY19) . This adjustment adds back GST associated with gaming so that normalised revenue equals the amount bet by gaming customers . All publicly listed NZ and Australian casino companies include GST associated with gaming within their revenue results. Including gaming GST within reported revenue is not consistent with GAAP and SkyCity therefore does not do so . However, SkyCity does include gaming GST within its normalised revenue . This adjustment does not impact EBITDA, EBIT or NPAT
Apply theoretical win rate of 1.35% for IB vs. actual . This adjustment recalculates gaming win from IB to the theoretical win rate. The vast majority of IB play is baccarat. Statistically, over the long- win rate of 1.47% (FY20) and 1.00% (FY19) term the casino expects to win 1.35% of all bets taken on baccarat. However, in any particular reporting period the actual results of play will vary depending on “luck” . The 1.35% win rate is used by all publicly listed NZ and Australian casino companies in addition to casino companies in Asia and the United States . In order to understand the long-term results within IB there is the need to eliminate the inherent volatility or “luck” factor
Eliminate gain ($66.4m) arising from Auckland car . The FY20 reported results include a significant gain relating to the Auckland car park concession sale which settled in August 2019 park concession sale (completed in August 2019) . The FY19 reported results include a significant gain relating to the sale of the Federal St car park which settled in April 2019 and the FY19 gain ($17.4m) on sale of Federal St car
park (sold in April 2019) . The adjustment reverses these gains For personal use only use personal For
51 Reported and Normalised Results (3 of 4)
Adjustment Discussion
Reverse impact of revaluation (reduction of . SkyCity has a number of investment properties in Auckland. In accordance with the appropriate accounting standard, these investment $14.1m) of Auckland investment properties (FY19 properties will be revalued by an independent expert every year and the carrying value adjusted within the Group’s financial statements $3.2m) . This adjustment reverses the decline in value of these properties . 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 Eliminate net gain ($268.5m post-tax) arising . On 22 October 2019, there was a significant fire at the construction site of the New Zealand International Convention Centre (“NZICC”) in Auckland from impacts of NZICC fire . This fire has caused extensive damage to the NZICC and relatively minor damage to the Horizon Hotel which is being constructed on the adjacent site . Both buildings are insured and all significant costs associated with the fire are expected to be fully covered. Any costs not covered by insurance are expected to be sought from Fletcher Construction . The fire has significant implications for the financial statements for the Group – these are explained further on page 184 and in SkyCity’s financial statements which have been released to the NZX and ASX . At this point in time a full assessment of the damage is not available, nor is an agreed reconstruction timeline. As a result, the financial statements include a number of significant judgements and estimates to determine the appropriate accounting. These judgements and estimates will continue to be reviewed as new information becomes available . The NZICC fire (and associated accounting impact) is a significant, one-off event that has impacted the comparability of the FY20 result with the prior year
Labour restructure ($13.5m) and funding plan . As part of its response to Covid-19, SkyCity undertook a labour restructure in NZ and implemented a new funding plan costs ($5.4m post-tax) . This adjustment eliminates the costs associated with those actions
Deferred tax liability reversal ($24.1m) . As part of its response to Covid-19, the NZ Government reinstated tax depreciation for commercial properties, this resulted in a non-cash
accounting reduction in the FY20 tax expense For personal use only use personal For . This adjustment eliminates this one-off reduction to tax expense
52 Reported and Normalised Results (4 of 4)
Adjustment Explanation
SkyCity Adelaide licence impairment (A$150m) . In the current year the Group has impaired the SkyCity Adelaide casino licence by A$150m ($160.6m) . The impairment has arisen due to revised expectations regarding the timeframe 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 IB activity may take some years to recover . This adjustment eliminates this non-cash expense
Eliminate significant tax events (net $9.5m During FY19, SkyCity had a number of significant tax events which have impacted the reported effective tax rate decrease to normalised NPAT) (FY19 only) ATO tax review As part of the Australian Tax Office’s (ATO) Streamlined Assurance Review of SkyCity’s Australian operations, SkyCity and the ATO agreed to settle differences of opinion on the treatment of certain financing arrangements. As a result of this settlement, SkyCity made a A$3.5m payment to the ATO. This payment relates to historical items only and does not change SkyCity’s future tax payments or tax expense
Auckland car park concession sale deferred tax The deferred tax consequences of the Auckland car park concession sale were recognised in FY19, this was a $11.5m reduction in tax expense
Share of partnership expenditure – tax election In the current year, SkyCity made a NZ tax election for the SkyCity Australian Limited Partnership. This resulted in a one-off benefit of $1.9m in the FY19 tax expense
Summary This adjustment eliminates the net reduction (from the above items) in tax expense for the purpose of the normalised results
Eliminate Darwin operations from normalised . During FY19, SkyCity sold its Darwin operations For personal use only use personal For results (FY19 only) . Darwin has been fully excluded from FY19 normalised results to enable appropriate comparisons with FY20
53 . All information included in this presentation is provided as at 3 September 2020
Disclaimer . This presentation includes a number of forward-looking statements. Forward-looking statements, by their nature, involve inherent risks and uncertainties. Many of those risks and uncertainties are matters which are beyond SkyCity’s control and could cause actual results to differ from those predicted. Variations could either be materially positive or materially negative
. This presentation has not taken into account any particular investors investment objectives or other
circumstances. Investors are encouraged to make an independent assessment of SkyCity For personal use only use personal For
54 For personal use only Annual Report
Year Ended 30 June 2020 For personal use only use personal For For personal use only 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 For personal use only use personal For 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 Chair’s Review
The 2020 financial year was a tough one for SkyCity and its stakeholders. The external events which impacted the year are well known and the financial performance of the company reflects those events. It also reflects a great deal of skill, energy and support from our stakeholders across the board to react to those events. We have maintained a strong asset, people, and capital base and barring further negative external events SkyCity will recover and grow.
The accounting and financial report on a year with these shock events is inevitably complex. In this report, and in our wider commentary on the business, we endeavour to provide clear information and guidance to enable investors and other stakeholders to genuinely understand the past, current and future of SkyCity. • in the course of this, we have prudently The key events of the year, though well known to all restructured our funding, including raising new readers of this annual report, may be summarised equity to manage ongoing commitments and for the record as: operating risk;
• the ongoing delay to completion of the • the important SkyCity Adelaide expansion New Zealand International Convention project has moved towards substantive Centre and Horizon Hotel project was deeply completion effectively within the planned time 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 people, as was the return to operations across expectations when it was launched in 2018. the Auckland site. The reestablishment of work Accordingly, we have been required to impair the and a path to completion have also been difficult investment to reflect a realistic current value; and tasks with effective progress made; • we have successfully launched an online casino • COVID-19 halted our business at every location. business which is already a good contributor Our people have effectively managed operations to the Group financially and provides a good during restrictive periods and with greater base for participation in this growing part of the operating freedom when pandemic regulations casino business globally. allowed. But our operations and results across Obviously from such a momentous year there are the Group will continue to reflect a more difficult learnings. For the SkyCity Board, the important environment for some time; immediate learnings are: • we have had no option, despite much • to recognise the resilience of the core gaming appreciated Government support for our people business in each area where we hold a licence during the COVID-19 crisis, but to substantively and to ensure that we maintain our presence, restructure our business to meet this more quality of service, financial control and host difficult environment; responsibility/harm management processes
at the highest level; For personal use only use personal For
4 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 GENERAL
• the importance of maintaining a strong balance responding supportively. Finally, to those vital sheet and operating the business to provide people who make it all work – our customers in sustainable returns to investors; the casinos in person or online, in our hotels and meeting rooms, in our restaurants, bars, Sky Tower • to keep a strong focus on disciplined capital and other facilities – our warm appreciation and allocation and not to make allocations which do ongoing welcome. not fully reflect an appropriate return adjusted for the risks involved; and
• to conduct the business holistically within the terms of the sustainability framework for SkyCity Rob Campbell which is detailed elsewhere in this annual report. Chair, SkyCity Entertainment Group A few comments on the outlook for the current financial year, comments which must reflect a high degree of uncertainty given the global environment:
• SkyCity can operate under current trading conditions, but at present we do not have an operating model which can optimise the business to previous levels without a recovery in the economy and international tourism, including our International Business and convention travel. So, while on our current outlook we can expect continuity and some growth, there is something of a holding position across several aspects of our business; and
• this means that, in this period, the SkyCity Board and management are fully directed towards efficient completion of committed projects, improving the quality and efficiency of operating our existing facilities, and being well prepared equally to react to further adverse external events and to take any genuine opportunities which arise in the markets where we are present.
I wish to thank my fellow directors for their assiduous attention to their duties over this difficult time, our management team for their skill and commitment in meeting some most unusual challenges with aplomb, our people working in the business (including those who have had to leave in the restructuring) for what they have contributed to keeping us all going and able to continue with
confidence, and to our external stakeholders for For personal use only use personal For
Chair's Review 5 Chief Executive Officer’s Review
The year under review has been extremely complex and challenging for SkyCity. It commenced with good momentum with our operations trading at record levels (at a revenue level) until October 2019, when a significant fire broke out on the roof of the New Zealand International Convention Centre site. Fire and emergency crews battled over several days to bring the fire under control with the fire causing significant disruption to the Auckland CBD, including an unprecedented three-day closure of the entire SkyCity Auckland precinct. The SkyCity Board and management team were still focused on dealing with the impacts of the fire when the COVID-19 pandemic emerged in early 2020, culminating in the mandated closure of SkyCity’s properties in New Zealand and Adelaide on 23 March 2020 following announcements by the New Zealand and Australian Governments. been aided by Government responses in the form of wage subsidies and other assistance measures. We were able to reopen our New Zealand properties Our core domestic gaming business is resilient and on 14 May 2020 (with the exception of Wharf Casino has returned to being cash positive and profitable. in Queenstown which currently remains closed), The other aspects of our business that are more albeit initially with reduced operating hours and reliant on international visitors (including VIP subject to restrictions on mass gatherings and gaming, hotels and restaurants) will clearly only fully physical distancing requirements. Our Adelaide recover when country borders reopen. Our domestic property was able to reopen on 29 June 2020 businesses have recovered more quickly than as part of the South Australian Government’s anticipated when open and, if we can sustain this, three-stage approach to easing the COVID-19 the business is not under threat and can wait it out restrictions. Then, from 12–30 August 2020, until the world recovers. our Auckland casino and entertainment facilities were closed again and physical distancing and Fortunately, development work on the hygiene requirements were reinstated at our SkyCity Adelaide expansion and hotel projects Hamilton and Queenstown properties when the and associated master planning projects was COVID-19 Alert Level increased to Alert Level 3 able to continue over the period – these projects in Auckland and to Alert Level 2 for the rest of continue to progress very well and remain New Zealand following a new outbreak in the on-budget and on-time, with the SkyCity Adelaide Auckland community. expansion and Eos by SkyCity, the new 120-room luxury hotel, due to open before the end of 2020. An unprecedented number of significant strategic Work recommenced in late May 2020 on the decisions and actions have had to be taken to New Zealand International Convention Centre and mitigate the impacts of these events: Horizon Hotel projects following the move to Alert • significant operational effort has gone into Level 3 of the COVID-19 Alert system in New Zealand closing and reopening our properties with and we now expect Horizon Hotel to be delivered rigorous health and safety measures in place; during 2021 and the New Zealand International Convention Centre to be completed during 2023. • w e rapidly restructured our New Zealand workforce, downsizing it by around 25% to The capital raising announced in June 2020 ensures ensure SkyCity is positioned to be sustainable as that our major construction projects remain fully a smaller domestically focused business; and funded and that we are also able to continue with smaller projects that will enhance operations. • we executed a capital raising and debt The $230 million equity raising was well supported For personal use only use personal For restructure to ensure that SkyCity has sufficient and underpinned the restructure of our debt liquidity and funding capacity. facilities, enabling us to obtain covenant relief These actions mean that SkyCity is well positioned through to 30 June 2021, securing extensions to to deal with the foreseeable future. We have also bank facilities due to mature in that period and
6 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 GENERAL
additional debt facilities. We now have “buffer” SkyCity’s strategic plan is focused on managing facilities of liquidity available to draw down should the post COVID-19 recovery and completing the COVID-19 situation worsen, but at present this its major projects in Adelaide and Auckland, is not required. Dividends are currently suspended, which will underpin medium term earnings and but this will be reviewed against market and cash flow growth. trading conditions during the financial year ending We are also able to continue with the many initiatives 30 June 2021. that we have underway under our sustainability A positive feature of the year has been the launch of pillars. Minimising harm to our customers remains SkyCity Online Casino, which operates out of Malta our core focus and we have made a number of but provides an attractive online entertainment investments into technology over the past year, offering to New Zealanders. This business ramped significantly improving the tools that we have. We up significantly from March 2020 and has now will be investing further into digital technology to grown into a profitable operation despite the improve our customer experience. We have the very low key and conservative approach taken in challenge of rebuilding employee culture after the comparison to other offshore online businesses significant restructure and we are very focused targeting New Zealanders. We observed a slight on that as well as furthering initiatives relating to reduction in online gaming revenue following workplace flexibility and diversity. We have made the reopening of the New Zealand properties in good progress in refocusing our SkyCity Community May 2020, but saw an increase in activity during Trusts in New Zealand on initiatives that will enhance the recent closure in Auckland in August 2020 the employability, wellbeing and advancement of with customer registrations currently over 35,000. youth and we have upweighted strategies to ensure We continue to prepare for a regulated online our supply chain is ethical and supports local business. industry in New Zealand and are supportive of We have followed through on our commitment to go Government initiatives in this regard. carbon neutral in Australia as planned (having gone neutral in New Zealand last year) and we are well The result for the financial year ended 30 June 2020 advanced with solutions to reduce waste to landfill. is complicated by strategic actions taken in The COVID-19 crisis has reinforced how important 2019 and 2020, the New Zealand International business profitability is as an underpin to any Convention Centre fire and COVID-19 related sustainability initiatives – something that perhaps we issues. Comparability between the FY19 and FY20 took for granted historically, but have now included periods is impacted by COVID-19 related property as a critical element of being sustainable in the short closures and the sale of the long term concession and long term. over the SkyCity Auckland car parks (completed in early FY20). In determining normalised earnings The past financial year has been incredibly relative to reported earnings, various adjustments challenging and stressful for the entire SkyCity family. have been made, including the New Zealand We have had to make some significant, tough International Convention Centre fire impact, decisions to ensure that our business survives and a number of COVID-19 related adjustments and a continues to provide a great place to work and A$150 million impairment of the SkyCity Adelaide precincts enjoyed by thousands of our customers. casino licence. The Board has been intimately involved with the executive team in making these decisions, but we Our domestic businesses have been performing would not be as well positioned were it not for the stronger than expectations when open in enormous amount of hard work and effort made by New Zealand and South Australia, although the the wider teams at corporate and property levels. outlook remains unpredictable as we adjust to The energy, selfless commitment and willingness new social and economic settings. We reasonably to keep stepping up the effort to deal with multiple expect that, in the short to medium term, weaker challenges is a humbling reflection of the company economies, lower personal disposable income culture and I would like to thank everyone for their and changed entertainment habits, as well as unwavering support in these unprecedented times. longer term travel restrictions, will result in SkyCity
For personal use only use personal For being a smaller, domestically focused business. International Business should recover once travel restrictions are lifted, but the parts of our business driven by corporate travel and by tourism, such Graeme Stephens as our hotels and the Sky Tower, will take longer Chief Executive Officer to recover.
Chief Executive Officer's Review 7 For personal use only use personal For
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. 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 For personal use only use personal For
9 For personal use only 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 o f a refreshed f arefreshed • • yCity OnlineCasino • AUGUST in New Zealand Premier Rewards members, for customers and SkyCity websites, andnew apps Launched ne parks completed over SkyCity Auckland car Sale o Innovation GroupInc iGaming company Gaming with international launched inpartnership Sk
f longterm concession
w customer yCity announced as • SEPTEMBER in March2021 the 36thAmerica’s Cup New Zealanddefence of for theEmirates Team Entertainment Partner’ Hotelsthe ‘Official and Sk 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 signific ant firebroke • onstruction commenced • • NOVEMBER 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 Top 200Awards inthe2019Deloitte category Most Improved Performance Group namedafinalistinthe Sk Six Sk SkyCity Auckland the Federal Streetprecinctat and NgāiTahu Tourism, in between New ZealandRugby an exciting new venture on theAllBlacks Experience, C
yCity Entertainment
yCity Auckland restaurants
• w external LEDlightbulbs • 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 Sk by 10% from lightingtheSky Tower reduce carbon emissions change commitment to supporting SkyCity’s climate installed ontheSky Tower, Ne yCity joinedthe For personal use only 2020 he Guardsman,anew • 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, T aising activities • FEBRUARY Australian bushfires support thedevastating acknowledge and Foundationto Service Australia Fire Country $55,000 for theSouth properties raised over Adelaide andHamilton across theAuckland, Fundr • ompleted a$5.5 million • MARCH response to COVID-19 their immediate closurein Governments mandating Australian andNew Zealand announcements by the on 23March2020following All Sk in Auckland 'Horizon' gamingsuites our International Business of $6 millionrefurbishment VIP tablegamearea,anda ofrefurbishment EIGHT, a C yCity properties closed yCity propertiesclosed • • APRIL Eos b New Zealand salaried employee basein the managementteam and immediate restructureof costs, includingan and minimisingoperating reducing capital expenditure including significantly in responseto COVID-19, Changes implement 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 y SkyCity announced
he SkyCity Auckland, • • 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 Sk Alert Level 2 decision to move to New ZealandGovernment’s 14 May 2020following the Wharf Casino) reopened on properties (excluding Hamilton andQueenstown T ed ed yCity moved forward
• • • • • JUNE Sk A Restructure o S&P GlobalRatingsaf 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$230millionequityr restrictions approach to easing theCOVID-19 Australian Government’s three-stage 29 June2020aspartof theSouth SkyCity’s 2019annualreport Sustainability ReportingAwards for Silver Award inthe2020Australasian Australasian ReportingAwards anda ratings asBBB-(Negative Outlook) issuer creditrating anditsdebtissue Entertainment GroupLimited’s long term workforce inNew Zealandcompleted warded aSilver Award inthe2020 yCity Adelaide reopenedon f therostered (waged) firmed SkyCity firmed SkyCity
aising aising 11
GENERAL Creating Value Our Business As at 30 June 2020
3,817staff
5 properties across New Zealand and Australia 1 online casino
GAMING
land-based casino5 licences table273 games
electronic3,204 gaming automated307 table games machines
HOSPITALITY
restaurants19 bars14
HOTELS SKY TOWER 635 hotel rooms metres328 tall
FY20 REVENUE BY BUSINESS ACTIVITY
Reported Normalised
% % For personal use only use personal For Local Gaming 71% 67% International Business 6% 10% Hotel & Conventions 7% 6% Food & Beverage 12% 10% Other 4% 7%
12 GENERAL
FY20 Outputs & Financial Results
FY20 revenue and annual visitation
GAMING
$ million $ million* million including496.0 online including601.3 online 1.9visits from loyalty card members (reported) (normalised) to our land-based casinos**
HOSPITALITY
$76.8 million 3.5 million restaurant/bar covers
HOTELS
$34.6million 158,377 rooms occupied
SKY TOWER
$14.9 million 410,321 visits
$ million $ million $ million 125.5 66.4 to 204.5 in taxes to Governments of dividends declared in relation suppliers (including GST, gaming tax and to FY20 period for shareholders For personal use only use personal For income tax) $ million of capital347 invested $ million $ million in community10.4 contributions, in remuneration295.8 and benefits levies and sponsorships 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 13 a customer's patronage on a day irrespective of how many times they used their card on that day. FY20 Outcomes & Impacts
Our sustainability vision recognises that, to be a sustainable business, we must be a responsible business actively protecting and promoting the people we serve and the places we share, whilst creating value for our shareholders. SkyCity’s sustainability initiatives are therefore focused on doing good for our customers, our employees, our communities, our suppliers, our environment and our shareholders.
OUR CUSTOMERS OUR PEOPLE Significant investment in additional Establishment of a $1 million SkyCity host responsibility measures to improve Employee Hardship Fund, from funds our ability to detect excluded persons contributed by the Senior Leadership Team and continuous play, including the and other senior executives across the introduction of facial recognition business via voluntary salary reductions technology across all SkyCity land-based and voluntary contributions by other staff casinos, which has led to a significant members, to assist employees impacted by increase in the detection of excluded COVID-19. persons returning to a SkyCity casino in breach of their exclusion orders during Downsized our New Zealand workforce the period. by around
in25% response to COVID-19 cameras installed43 across SkyCity casinos for facial recognition during FY20
ZEROfatalities or serious injuries customers identified1,757 in breach of their exclusion orders during FY20 reduction FY19 – 874 in8% Total Recordable Incident Frequency Rate (TRIFR) from FY19 baseline As at 30 June 2020
customers 72% increase have21,327 downloaded the new SkyCity app in hazard identification reports from (launched in August 2019) FY19 baseline
SkyCity’s sustainability strategy is linked to seven of the 17 United Nations Sustainable Development Goals (a set of goals to end poverty, protect the planet, and ensure prosperity for all as part of a new sustainable
For personal use only use personal For development agenda) – Good Health and Well-being (Goal 3), Quality Education (Goal 4), Gender Equality (Goal 5), Decent Work and Economic Growth (Goal 8), Responsible Consumption and Production (Goal 12), Climate Action (Goal 13) and Partnerships to Achieve the Goal (Goal 17).
A full description of the Sustainable Development Goals is available at www.un.org/sustainabledevelopment. SkyCity recognises that, for the Goals to be achieved, everyone needs to do their part and business and industry play an important role. We are committed to playing our part in helping to achieve the Goals.
14 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 GENERAL
OUR COMMUNITIES OUR ENVIRONMENT Contributed a total of $3.7 million to the SkyCity was among the first major four New Zealand SkyCity Community New Zealand companies to go carbon Trusts for distribution to communities in neutral and was certified carbonzero the Auckland, Waikato, and Queenstown by Toitū Envirocare in New Zealand in Lakes regions. In addition to company tax, October 2019 having paid $86,000 to offset 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 Envirocare are generated by international projects, which will fund 48,000 solar $ million household cookers for rural communities in paid3.7 to the SkyCity Community Trusts China and help build wind farm capacity in FY19 – $4 million India to replace fossil fuel alternatives.
Certified carbonzero in New Zealand by $ million offsetting in FY20 the equivalent of paid33.1 in gaming taxes and problem gaming levies tonnes CO2e FY19 – $43.1 million 12,866
tonnes CO2e OUR SUPPLIERS total15,137 carbon footprint FY19 – 19,093 tonnes CO2e SkyCity has approximately 800 key ongoing significant suppliers across the SkyCity Group, Sky Tower lighting upgraded with a substantial number of these being in to LED resulting in a the food and beverage sector. Over 10% energy saving
$ million paid530 to suppliers of goods and services during FY20 (including capital expenditure) OUR SHAREHOLDERS FY19 – over $450 million cents 10total dividend per share (fully imputed) FY19 – 20 cents per share
FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) has confirmed that SkyCity Entertainment Group has been independently assessed according to For personal use only use personal For the FTSE4Good criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index Series. Created by the global index provider FTSE Russell, the FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE4Good indices are used by a wide variety of market participants to create and assess responsible investment funds and other products.
Creating Value 15 Performance
FY20 Highlights SkyCity’s financial result for the financial year ended 30 June 2020 has been significantly impacted by the New Zealand International Convention Centre fire and COVID-19 pandemic that emerged in New Zealand and Australia in early 2020, with normalised EBITDA and NPAT for the Group for the period to 30 June 2020 negatively impacted but at the top-end of the guidance range provided at the time of our equity raising in June 2020.
Our reported results were up significantly over the prior year however due to accounting for the New Zealand International Convention Centre fire and the gain from the sale of the long term concession of the SkyCity Auckland car park, partially offset by a A$150 million impairment of the Adelaide casino licence.
Pleasingly, our domestic business (which has historically accounted for over 85% of Group EBITDA) has demonstrated its resilience and traded well ahead of expectations when open and fully operational following the property closures in March 2020.
The key features of the FY20 result are:
EBITDA Reported Normalised $348.3 million $200.7 million NPAT Reported Normalised $235.4 million $66.3 million
DIVIDEND Interim dividend* (fully imputed) of 10 cents per share
EQUITY RAISING $230 million equity raising launched in June 2020 and successfully completed during June and July 2020
SKYCITY ONLINE CASINO Over
For personal use only use personal For 35,000 customer registrations SkyCity Online Casino has grown rapidly since its launch in August 2019 despite operational constraints, with significant growth in its customer base over the period – with over 35,000 customer registrations as at 31 August 2020 – and the business being profitable since April 2020
*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 the company in June 2020.
16 SkyCity Entertainment Group Annual Report Year Ended 30 June 2020 Our Performance History GENERAL
Group Revenue 1,119 1,125* 200 1,084 1,101 1,008 1,029 919 000 867 878 816 822 780 00