SKYCITY ENTERTAINMENT GROUP LIMITED SHAREHOLDER REVIEW YEAR ENDED 30 JUNE 2010 45210_SKY192_SHR_R3.indd 1 17/09/10 4:11 PM SKYCITY ENTERTAINMENT SHAREHOLDER REVIEW GROUP LIMITED 2010 CONTENTS FINANCIAL HIGHLIGHTS SKYCITY ENTERTAINMENT GROUPFinancial Highlights LIMITEDIFC $ Chairman’s Report 04 141.7m 23% CEO’s Report 06 The NPAT before Deferred Tax Adjustment The increase in International Financial Summary 12 business turnover Board of Directors 16 Executive Team 18 $ Our People 22 129.1m $ SKYCITY in the Community 23 The underlying NPAT 20m Directory IBC The saving in interest payments achieved over the last year cps 17.25 $ The dividend for the year 254m The amount of debt repaid during the year 24.6cps The reported earnings per share $ (before Deferred Tax Adjustment) 10.3m The gain over carrying value achieved in the Cinemas sale AT A GLANCE NPAT (before Deferred Tax Adjustment) Net debt: EBITDA now just 2.0 times and Normalised NPAT both record results Exciting plans to develop Federal Street International business continues to grow, with additional bars and restaurants and with strong interest from across Asia a pedestrian friendly focus Local VIP market in Auckland subdued Cinemas successfully divested to because of economic conditions Amalgamated Holdings Limited Marble Hall opens in Adelaide, including Australian Productivity Commission Chandelier Bar releases its report. We support the recommendation of a nationally SKYCITY Adelaide rebranded as consistent pre-commitment model “Adelaide Casino” for gaming machines. Little Mindil site development completed II 45210_SKY192_SHR_R3.indd 2 17/09/10 4:11 PM STEP ON IN IT’s gAME TIME 01 45210_SKY192_SHR_R3.indd 1 17/09/10 4:11 PM SKYCITY ENTERTAINMENT SHAREHOLDER REVIEW GROUP LIMITED 2010 GROUP SUMMARY AT A GLANCE THE GROUP EMPLOYEES 6,280 GAMING TABLES 299 GAMING MACHINES 4,312 HOTEL ROOMS 780 RESTAURANTS/BARS/CAFES 52 AUCKLAND RESTAURANTS/BARS/CAFES 20 HAMILTON HOTEL ROOMS 660 RESTAURANTS/BARS/CAFES 6 GAMING MACHINES 1,647 GAMING MACHINES 339 GAMING TABLES 110 GAMING TABLES 23 EMPLOYEES 2,810 EMPLOYEES 340 CHRISTCHURCH RESTAURANTS/BARS/CAFES QUEENSTOWN 5 GAMING MACHINES 500 RESTAURANTS/BARS/CAFES 2 GAMING TABLES 36 GAMING MACHINES 86 EMPLOYEES 550 GAMING TABLES 12 EMPLOYEES 70 DARWIN RESTAURANTS/BARS/CAFES 10 HOTEL ROOMS 120 GAMING MACHINES 750 GAMING TABLES 28 EMPLOYEES 1,470* ADELAIDE RESTAURANTS/BARS/CAFES 9 GAMING MACHINES 990 GAMING TABLES 90 EMPLOYEES 1,040 * Including all staff during dry season 02 45210_SKY192_SHR_R3.indd 2 17/09/10 4:11 PM WELCOME + AUCKLAND + DARWIN + ADELAIDE 03 45210_SKY192_SHR_R3.indd 3 17/09/10 4:11 PM SKYCITY ENTERTAINMENT SHAREHOLDER REVIEW GROUP LIMITED 2010 Chairman’s REPORT A RECORD RESULT IN TOUGH TIMES + ROD MCGEOCH It is my pleasure, on behalf of the Board, to report a record result for SKYCITY this year. Net profit after tax (NPAT) for the year to the end of June 2010, before the one-off accounting Deferred Tax Adjustment, was $141.7 million. That represents a gain of nearly 23 percent, or $26.4 million, on last year’s NPAT of $115.3 million. The normalised NPAT * of $129.1 million was up 12 percent or $13.8 million on last year’s result. Not surprisingly, given the tough economic Government in Australia has focused on has is one of the city’s most popular tourism conditions, total Group revenue was down been the Commission’s thoughts on the destinations, and our gaming venues offer slightly on last year at $837.8 million. introduction of a pre-commitment system on attractive reasons for high net worth individuals Earnings before interest, tax, depreciation gaming machines in Australia. Whilst the detail to travel to both countries to participate in our and amortisation (EBITDA) of $298.2 million has yet to be worked through – and let’s face games and to see more of the country. We have were steady, but net profit before tax it, the practicality of any report such as this is forged close links with the tourism sector showed a healthy 14.7 percent increase, in the working detail – we are not displeased because the success of our various businesses up $22.9 million to $178.3 million. with the findings overall and see merit in a is inter-linked. Unless the settings and the nationally consistent, pre-commitment system infrastructure are in place to allow us to Adelaide and Hamilton both held up well, with for all gaming machines in all venues. compete effectively for key markets such as the EBITDA for both venues increasing by more International VIP business, there is a very real than 7 percent. International business At the same time though, we would ask risk that we will lose out to emerging venues in continued its momentum, with EBITDA up regulators to remember that the regulations Singapore, Korea, Philippines, Taiwan, Vietnam before normalising by $6.5 million this year. currently in existence in New Zealand are and Macau that are able to work in a more For the eight months of trading from Cinemas, more stringent than those that apply to our conducive environment. That in turn means that prior to us divesting that business, we saw two main, and closest, competitors New Zealand and the states in which we do healthy EBITDA, which I’m sure contributed geographically in Victoria and New South business in Australia risk missing out on tourism to the highly satisfactory return we received Wales. While no-one to my knowledge argues business, economic stimulation and the from that sale. I’m also pleased to report to against the need for a responsible gaming cross-border tax revenues associated with shareholders that earnings per share climbed environment, a more level playing field would those visitors. There is room, we believe, for again, up 5.1 percent to 24.6 cents per share enhance the attractiveness of our more discussion and co-operation in this regard. (before the Deferred Tax Adjustment). New Zealand sites as international casino destinations and increase our competitiveness REPRESENTATIVE GOVERNANCE AUSTRALIAN PRODUCTIVITY COMMISSION against our cross-Tasman rivals. REPORT RELEASED Alongside the changes in the business over the NATIONAL SIGNIFICANCE last two years, we have been reviewing and This year, the Australian Productivity revising the composition of the Board. This Commission released a report about the There are, we believe, marked differences on-going process ensures we have an gaming industry in Australia which included between gaming facilities in pubs and hotels appropriate and value-adding governance a raft of recommendations. The report is and the offerings that we deliver that critics of structure. As Chair, I am aware that we need important because its findings are likely to our industry often choose to ignore. One of the to ensure that we have our own succession influence regulators and policy direction in most significant of these, from a government programme in place and that our Board New Zealand as well as Australia. The main point of view, is the macro environment in composition reflects appropriate levels of recommendation that the Federal which we operate. Our Sky Tower in Auckland diversity and expertise. I have felt for some time * Normalised NPAT adjusts for non-recurring items (+$0.9m), International business to theoretical (-$3.2m) and excludes gain on divestment of Cinemas ($10.3m) 04 45210_SKY192_SHR_R3.indd 4 17/09/10 4:11 PM + DARWIN + ADELAIDE + AUCKLAND that the Board is under-represented by people represents an annualised gross dividend yield progressed in parallel with business from Auckland, and I am aware that we have of 8.8 percent. performance, mean we now have a healthy had no representation from Adelaide or the level of depth within our operational ranks. RETURNING TO CORE BUSINESS Northern Territory. The appointment of Bruce My thanks, on behalf of the Board, to Carter to the Board does much to resolve the The Group ends the year in a strong financial everyone who works at SKYCITY. It is a direct last point, and I would encourage readers to position, with the balance sheet robust and tribute to the work you do every day that take a moment to look through Bruce’s profile debt further reduced. We remain cognisant thousands of people seek us out as a place to on page 17 of this Review. He is, to my mind, an however of the need to maximise our existing play, dine, socialise and be entertained. That’s outstandingly qualified person and someone assets and sustain efficiencies and profitability. especially difficult when times are tough and who understands a range of issues that affect Earlier in this report, I alluded to the sale of everyone is looking hard at their discretionary us, not the least of which is the South Australian the Cinemas. While the EBITDA contribution dollars. Congratulations. Government’s commitment to continue was welcomed, the overall net profit from this developing the city of Adelaide. part of the business (after depreciation and LOOKING AHEAD financing costs) was less compelling. This This year, the Board bade farewell to Jane The business is in good shape with sound divestment is consistent with our decision Freeman, who has been with us for some years growth in our International business and major to focus on our core business of gaming and and whose work on talent and HR issues, in events such as the Rugby World Cup rapidly our objective to enhance shareholder value. particular, was tremendously valuable. On approaching, we’re confident that an improving behalf of the whole Board, our deepest thanks We will continue to develop potential assets economy will only be good for the Group. to Jane for her contributions and for the but, in making decisions about capital By continuing to find efficiencies in our commitment she showed to the business.