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SKYCITY Entertainment Group Limited Annual Report 2005
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02 Financial Summary
03 Highlights
04 Our History
05 Our Businesses
06 SKYCITY Auckland
08 SKYCITY Adelaide
10 SKYCITY Darwin
12
SKYCITY Hamilton and
SKYCITY Queenstown Casino
14 SKYCITY Leisure
16 Chairman’s Report
19 Managing Director’s Review
22 Board of Directors
24 Executive Team
26 Our People
31 Our Community
36 Financial and Operating Review
40 Five-Year Summary
47 Financial Statements
85 Corporate Governance
99 Disclosures
110 Glossary
112 Directory
For shareholder and corporate enquiries please phone +64 9 363 6141 or email sceginfo@skycity.co.nz
For customer enquiries and reservations please phone +64 9 363 6000 or 0800 SKYCITY (0800 759 2489)
or fax +64 9 363 6010 or email reservations@skycity.co.nz
SKYCITY website: www.skycitygroup.co.nz
Big city.
WHATEVER. WHENEVER. We’re here to entertain people. To give them a great time. To
ensure that for the time they are with us, every experience is as exciting as
possible. Partly that’s about what we do. Mostly it’s about the ways in which
we do it. At SKYCITY, you can quite literally put a face to every experience.
Because, no matter what you’re doing while you’re here, someone is
personally responsible for ensuring you have the best fun doing it.
SKYCITY fINANCIAl
SuMMARY 005
Years ended 30 June
2005
004
Change (%)
Revenues
EBITDA(1)
$684m
$594m
$286m
$60m
Net surplus after tax
$104.0m
$100.m
Earnings per share
24.9cps
4.0cps
(1) Earnings before interest, tax, depreciation and amortisation.
+15%
+10%
+4%
+4%
DIVIDEND
Total dividends paid for the 2004/05 year are 24.0 cents per share (fully imputed). The final 2004/05 dividend of
12.0 cents per share will be paid on 7 October 2005 to those shareholders on the SKYCITY register as at 5.00pm
on 23 September 2005.
ANNuAl MEETINg
The 2005 annual meeting of SKYCITY Entertainment group limited will be held in the New Zealand Room, SKYCITY
Auckland Convention Centre, 88 Federal Street, Auckland on Friday 28 October 2005, commencing at 10.00am.
The notice of meeting, including the agenda, will be mailed to shareholders on 12 October 2005.
ANNuAl REpORT
The board of directors is pleased to present the annual report of SKYCITY Entertainment group limited for the year
ended 30 June 2005.
For, and on behalf of, the board:
Rod Mcgeoch
ChAIRMAN
27 SEpTEMbER 2005
Evan Davies
MANAgINg DIRECTOR
Current and historical financial information, governance statements, news releases and other corporate information are available online at
www.skycitygroup.co.nz
SKYCITY fINANCIAl
SuMMARY 005
SKYCITY Entertainment Group limited Annual Report 005
SKYCITY ENTERTAINMENT GRouP GoAlS
004/05 HIGHlIGHTS
Customers
focus the business on customer
segments that will drive revenue that
translates into profitable growth
Experiences
Develop distinctive propositions
creating fun and entertainment to
attract key customer segments
People
Develop our people to deliver
exceptional customer entertainment
experiences
Reputation
Create a diversified and reputable
gaming and entertainment franchise
Resources
focus on systems/knowledge that
support the delivery of exceptional
customer experiences
+ Strong Auckland Convention Centre performance generated
additional visitation to main site facilities
+ Positive early customer reaction to A$21m first stage
Adelaide redevelopment
+ Smoking bans proactively addressed in New Zealand through
smoking decks and a customer and staff information campaign
+ Introduction of VIP/commission play in Darwin
+ Customer loyalty programme ‘Action’ introduced
in Darwin
+ ‘North’ restaurant, two new bars, private dining areas and
state-of-the-art gaming facilities open in Adelaide
+ Opening of five-star SKYCITY Grand Hotel and restaurant,
‘dine by Peter Gordon’, in Auckland
+ Completion of three VIP/premium gaming facilities
in Auckland
+ Redevelopment of Darwin property entrance and addition
of 10 premium hotel rooms
+ Refurbishment of Queenstown’s ‘Wild Thyme’ bar
and restaurant and Stratton House atrium/entrance
+ ‘Great Service’ customer training programme rolled out across
Auckland and Queenstown
+ Successful recruitment of 250 staff for Adelaide’s new facilities
and 160 for Auckland’s Grand Hotel
+ Apprentice chef programmes in place at Adelaide
and Auckland
+ Adelaide dealer Jenni Evans ranked third in world champs and
named ‘Australasian Dealer of the Year’
+ Bonus plans to motivate staff to drive great customer service
and to reward exceptional performance
+ Named ‘Trans-Tasman Business of the Year’ in
March 2005
+ First contributions from SKYCITY Darwin and
Christchurch Casino
+ 100% purchase of Hamilton completed
+ New multiplex cinema developments planned for Albany,
Manukau, Hamilton and Wellington
+ New Adelaide Cup, Adelaide Film Festival and Darwin V8
Supercar Championship sponsorships
+ PeopleSoft enterprise application software introduced
across the Group
+ Gaming machine ticket in/ticket out facility ‘Quick Ticket’
introduced in Auckland
+ Dedicated host responsibility co-ordinators established
in Adelaide
+ SKYCITY’s ‘Responsible Service of Alcohol Model’ incorporated
into ALAC’s national guidelines for licensed premises
+ Micros 9700 Hospitality Management system introduced
in Adelaide
3
ouR HISToRY
1994
+ Construction of SKYCITY Auckland commences
1995
+ SKYCITY job expo attracts 18,000 people
1996
+ SKYCITY Auckland opens
+ SKYCITY lists on the New Zealand Stock Exchange
1997
+ Sky Tower opens
1998
+ SKYCITY becomes a New Zealand-managed operation
1999
+ SKYCITY lists on the Australian Stock Exchange
2000
+ SKYCITY Adelaide acquired
+ SKYCITY Queenstown Casino opens
+ Managing Director Evan Davies named ‘New Zealand Executive of the Year’
2001
+ SKYCITY Auckland named ‘Supreme Award Winner’, New Zealand Tourism Awards
+ Acquisition of majority shareholding in Force Corporation (subsequently renamed SKYCITY Leisure)
+ SKYCITY Entertainment Group named ‘New Zealand Company of the Year’
2002
+ SKYCITY Hamilton opens
+ SKYCITY’s ‘Action’ loyalty programme wins international excellence award at the 2002 US National Centre for
Database Marketing Awards
2003
+ First joint-branded Village SKYCITY Cinema opens in Auckland
+ Sky Tower named ‘New Zealand’s Leading Visitor Attraction’ at the New Zealand Tourism Awards
2004
+ SKYCITY Darwin acquired
+ Full acquisition of SKYCITY Leisure Limited
+ 40.5% shareholding in Christchurch Casino acquired
+ SKYCITY Auckland Convention Centre opens
+ Increase to 70% shareholding in SKYCITY Hamilton
+ SKYCITY Entertainment Group Limited wins
PricewaterhouseCoopers Corporate Value Award
2005
+ Five-star SKYCITY Grand Hotel opens in Auckland
+ Full acquisition of SKYCITY Hamilton
+ First stage of SKYCITY Adelaide redevelopment opens
+ SKYCITY named ‘Trans-Tasman Business of the Year’
2006
+ SKYCITY will celebrate 10 years since the opening of SKYCITY Auckland
4
SKYCITY Entertainment Group limited Annual Report 005
ouR BuSINESSES
SKYCITY Auckland (100%)*
large entertainment, casino and
hospitality complex prominently
located in the CBD of New Zealand’s
largest city
SKYCITY Queenstown
Casino (60%)*
Boutique casino and restaurant in
New Zealand’s premium alpine location
+ Gaming: 12 gaming tables, 86 gaming machines
+ Gaming: 110 gaming tables, 1,647 gaming machines
and VIP members’ room
and 3 members’ rooms
+ Restaurants, bars and cafes: 17
+ Restaurants, bars and cafes: 1
+ SKYCITY operates the Queenstown facility under a
+ Accommodation: 344 room 4+ star hotel and
management contract
316 room 5-star hotel
+ Conventions: 21 function rooms catering for up to 4,000
SKYCITY Adelaide (100%)*
large entertainment, casino and
hospitality complex centrally located
in Australia’s fifth-largest city
Christchurch Casino (40.5%)*
Mid-sized casino operation centrally located
in New Zealand’s second-largest city
+ Gaming: 35 gaming tables, 500 gaming machines
+ Gaming: 87 gaming tables, 900 gaming machines
+ Restaurants, bars and cafes: 5
and VIP members’ room
+ Restaurants, bars and cafes: 9
+ Adjacent to 298 room Crowne Plaza Hotel in which
Christchurch Casino has a 32% shareholding
+ Christchurch Casinos Limited has a 33% shareholding
in Dunedin Casino
SKYCITY Darwin (100%)*
Mid-sized casino and hospitality
complex located beachside within
5 minutes of the CBD
+ Gaming: 26 gaming tables, 505 gaming machines
and 50 NT Keno venues
+ Restaurants, bars and cafes: 9
+ Accommodation: 117 room 5-star hotel
+ Conventions: 3 function rooms and unique outdoor venue
‘The Lawns’ which can cater for up to 5,000
SKYCITY Hamilton (100%)*
Mid-sized entertainment and casino
complex in New Zealand’s fourth-
largest city
+ Gaming: 23 gaming tables, 339 gaming machines and
members’ room
+ Restaurants, bars and cafes: 2
+ Conventions: 2 function rooms catering for up to 400
SKYCITY leisure (100%)*
Cinema exhibition company operating
the Village SKYCITY Cinemas joint venture
and SKYCITY Cinemas
+ Cinemas: 93 cinema screens in New Zealand and
10 screens in Fiji
+ SKYCITY Metro Entertainment Centre in central Auckland
(13 cinema screens within retail and entertainment complex)
* shows percentage ownership
5
SKYCITY Auckland
Jeremy Wilson CHIEF CONCIERGE, SKYCITY HOTEL AUCKLAND
6
SKYCITY Entertainment Group limited Annual Report 005
Revenue at SKYCITY Auckland was up 3% during 004/05. Star
performers included the Convention Centre, which hosted 55 events
and 88,000 people during the year and brought new customers to
our hotels, restaurants, bars and casinos. ‘dine by Peter Gordon’ has
quickly established a reputation as one of New Zealand’s premier
dining experiences.
SKYCITY Adelaide
Jonathan Richards BAR PORTER, SKYCITY ADELAIDE
8
SKYCITY Entertainment Group limited Annual Report 005
SKYCITY Adelaide had a challenging year financially, yet looks forward to
a promising future. Customers have responded positively to the A$1m
redevelopment, which delivers on SKYCITY’s broad-based entertainment
strategy and has created 50 new jobs. SKYCITY Adelaide now boasts
a new entrance that enhances the heritage features of the iconic Adelaide
Railway Station, a family-friendly restaurant called ‘North’, two new bars,
private dining areas and state-of-the-art gaming facilities.
9
SKYCITY Darwin
Anne Nguyen-Huyen BANQUET SALES EXECUTIVE, SKYCITY DARWIN
10
SKYCITY Entertainment Group limited Annual Report 005
SKYCITY Darwin had a strong first year under SKYCITY management, with
earnings ahead of pre-acquisition expectations. Changes at the property
included an enhanced entrance-way, 10 new premium hotel rooms and a
10% increase in the number of gaming machines. other highlights included
securing the naming rights to the Darwin V8 Supercar Championship and
industry awards for Evoo Restaurant and the convention facilities.
11
SKYCITY Hamilton and
SKYCITY Queenstown Casino
Rebekah Taylor DEALER/SUPERVISOR, SKYCITY HAMILTON
Brendon Roy SECURITY AND SURVEILLANCE SHIFT MANAGER, SKYCITY HAMILTON
1
SKYCITY Entertainment Group limited Annual Report 005
Both SKYCITY Hamilton and SKYCITY Queenstown Casino had a solid
year during 004/05. Highlights for Hamilton included assuming full
ownership of SKYCITY Hamilton, enhancements to the gaming floor, and
the purchase of retail space in the Riverside Entertainment Centre.
In Queenstown, customers responded well to new gaming machine products
and a refurbishment of ‘Wild Thyme’ restaurant and bar.
13
SKYCITY Leisure
David Tupou FOOD BOULEVARD MANAGER, SKYCITY METRO
Rachel Eriksen ADMINISTRATIVE ASSISTANT, SKYCITY METRO
14
SKYCITY Entertainment Group limited Annual Report 005
Earnings for our cinema exhibition business, SKYCITY leisure, were steady
despite a lack of high-performing box-office movies. Highlights included
high lease occupancy at SKYCITY Metro and the announcement of plans to
develop new Village SKYCITY multiplexes in Albany, Manukau, Hamilton
and Wellington. With ‘King Kong’, ‘Harry Potter’ and the ‘The lion, the
Witch and the Wardrobe’ scheduled for pre-Christmas 005 releases, a
stronger 005/06 cinema season is anticipated.
15
ENTERTAINMENT
IS ALL ABOUT
PERFORMANCE
RoD McGEoCH, CHAIRMAN
The 004/05 financial year has been a period of both development and
consolidation for SKYCITY. Earnings were impacted by a number of external
pressures imposed by smoking bans and restrictions in New Zealand
and South Australia, and from more complex regulatory requirements
in New Zealand.
The company has added significantly to its asset base
been invested during the last 18 months, but the
with the completion of a number of development projects
board is pleased to have been able to grow and
commenced in the previous financial year. Some of
diversify the business base without dilution of existing
these assets, such as SKYCITY Darwin, have made an
shareholder equity.
immediate contribution to earnings and others, such
as the new SKYCITY grand hotel in Auckland, will build
revenues over time.
because the investment programme has been fully
debt-funded, the company has incurred higher servicing
The 2004/05 year proved a difficult period for the
company. In particular, various regulatory changes,
including smoking bans and restrictions in New Zealand
and South Australia, have imposed a range of pressures
on the business. On behalf of the board and shareholders,
costs relating to the carrying cost of the new assets,
I would like to congratulate the company’s employees
with increases in interest and depreciation costs offsetting
the new revenue streams. It will take a number of years
for their commitment and willingness to embrace the
new challenges and to adapt to the new circumstances.
to achieve the full payback on the capital which has
Shareholders can be assured that the company has been
16
SKYCITY Entertainment Group limited Annual Report 005
fully committed to dealing as effectively as possible with
the various challenges as they have arisen. The earnings
The gambling Act 2003 (New Zealand) requires that
any new gaming initiative is considered in the context
result for 2004/05, while lower than underlying earnings
of potential to cause harm. SKYCITY is supportive of the
produced in the 2003/04 year, nevertheless reflects the
harm minimisation focus of the gambling Act and this
determination by the company and its people to continue
is consistent with the company’s approach to gaming
to deliver an appropriate return on the capital invested in
activities since it commenced operations in 1996.
this business.
however, we believe that the mechanisms adopted need
Evan Davies, SKYCITY’s Managing Director, outlines
to be well targeted to be effective.
the key elements of SKYCITY’s 2004/05 financial year
SKYCITY strongly favours the collaborative approach
performance in his Managing Director’s Review on pages
to the complex issue of harm minimisation that has
19-21 of this annual report and details of the result are
been adopted in Queensland and more recently in
included in the Financial and Operating Review on
South Australia. In these states, the regulators, service
pages 36-39.
Corporate governance
Corporate governance has become a focus for all
publicly-listed companies in recent times, but SKYCITY
has always had a strong commitment to governance
best practice.
SKYCITY has an excellent record of compliance
with gaming rules and procedures, liquor licensing
requirements and the monitoring of financial transactions.
In addition, SKYCITY has an extensive programme in
place to manage and mitigate business risk and ensure
business continuity, to maintain a robust and effective
internal control environment, and to ensure that the
corporate governance principles of the New Zealand and
Australian stock exchanges which are incorporated into
the company’s charter, are complied with.
A company charter is not effective if it is simply a paper
document. In this regard, the board of SKYCITY is active
in ensuring that the charter is well understood by the
directors and within the company, is complied with at all
times, and facilitates the company’s business activities.
Corporate governance at SKYCITY is described in more
detail on pages 85-98 of this annual report.
harm Minimisation
At SKYCITY, governance includes host responsibility
providers and operators have combined their expertise
and experience to develop an appropriate set of protocols
and procedures that are well considered and well targeted
in terms of mitigating risk of harm, whilst at the same
time avoid unnecessary disruption to the majority of
customers. We have not yet achieved that combination
of experience and knowledge in New Zealand. We would
welcome an inclusive approach by regulators to the
protocols and procedures which need to be developed
in order to give best effect to the intentions of the
gambling Act.
In South Australia, good progress has been made in
development of the Codes of practice as a consequence
of service providers and operators working together
with regulators to develop an agreed approach to harm
management and host responsibility.
In the Northern Territory, SKYCITY Darwin enjoys an
excellent working relationship with the regulatory
agencies. This relationship is conducive to the
development of effective practices and protocols for
the benefit of all customers.
SKYCITY has always been aware that, for a small
percentage of the population, gaming can create risk
and that protection mechanisms need to be in place for
this group of people. At the same time, the company has
also been mindful that, for the great majority of people,
gaming is an enjoyable activity which they can manage
effectively at their own discretion.
and harm minimisation and the company, at all levels,
The intentions of the new gaming legislation align with
has always adopted a proactive approach in these
the company’s own philosophies. however, the point of
important areas.
Over the years, SKYCITY has established effective and
co-operative working relationships with problem gambling
service providers, alcohol advisory and other community
agencies. Many of the company’s industry-leading host
responsibility and harm minimisation initiatives have
been researched and implemented in conjunction with the
various community agencies which are active in this field.
difference at the current stage of the new regulatory
environment in New Zealand relates to how these
commonly-held intentions can be most effectively
implemented. Implementation measures should take
account of the need to protect the interests of the at-risk
group while, at the same time, minimising the number
of restrictions to be imposed on the large number of
customers who enjoy and can manage their own
gaming experience.
1
board of Directors
looking Ahead
In October last year, the directors welcomed Rob Mcleod
The board expects that 2005/06 will be a year of
to the board and also to the Audit and Risk Committee.
consolidation for SKYCITY as regulatory issues are worked
Rob has made an excellent contribution to board
through and the non-smoking legislation continues to
stewardship during his first year as a director and we look
impact on the New Zealand businesses.
forward to his continuing involvement in the future.
The board is mindful that the company must be fully
patsy Reddy and bill Trotter retire by rotation at this
year’s annual meeting and have offered themselves
resourced to optimise its position in respect of the various
challenges that will continue to confront the business
for re-election. SKYCITY’s board charter requires that,
during the coming year, and is actively engaged with the
where a director has completed two terms in office
senior executive in this regard.
since they were first appointed by shareholders, they
must be formally invited by the board to stand again
for re-election. The directors confirm that Ms Reddy
and Mr Trotter continue to contribute effectively and
independently to the stewardship of the company’s
affairs and the board is fully supportive of Ms Reddy and
Mr Trotter standing for re-election at this year’s annual
meeting in October.
The board, at its August 2005 meeting, reviewed the
independence status of its directors and confirmed that
each non-executive director is independent in accordance
with the company’s definition of independence which
is set out in the board charter. The independence of
directors is further detailed on page 88 of the
Corporate governance section of this annual report.
In accordance with the policy adopted since listing in
1996, the directors have maintained a 90% dividend
payout ratio for the 2004/05 year. It remains the board’s
priority to ensure that shareholder expectations for
capital growth and dividend return continue to be met
into the future.
Annual Meeting
The directors look forward to meeting with shareholders at
the company’s annual meeting to be held at the SKYCITY
Auckland Convention Centre on 28 October 2005.
Accounting and Reporting
SKYCITY has adopted the new International Financial
Reporting Standards (IFRS) for its 2005/06 financial year.
Rod Mcgeoch
The company’s first set of IFRS financial statements will
ChAIRMAN
be for the half-year ending 31 December 2005. While
there will inevitably be some complexities for readers of
financial statements during the transition period from one
basis of reporting to another, SKYCITY has advised that it
does not anticipate any significant impact on its reported
profits as a consequence of the change to the IFRS basis
of accounting.
18
SERIOUSLY
ENTERTAINING
EVAN DAVIES, MANAGING DIRECToR
SKYCITY’s 004/05 financial year was dominated by a number of external
influences on the business and the addition of a number of new earnings
streams to the overall gaming and entertainment mix.
Operating earnings (as measured by earnings before
The key influencing factors on SKYCITY’s 2004/05
interest, tax, depreciation and amortisation: EbITDA)
performance were:
were up 10% at $286 million. however, the additional
depreciation and interest costs associated with the new
invested capital base reduced the net pre-tax surplus
from $163 million (before non-recurring item) in 2003/04,
to $142 million in 2004/05.
+ Imposition of smoking bans in New Zealand
from December 2004
+ Imposition of partial smoking restrictions in Adelaide
from December 2004
+ $20 note acceptor limitation in New Zealand
Costs associated with the new invested capital apply
from March 2004
immediately, while a number of the revenue elements will
take some time to develop. The 2004/05 SKYCITY result
reflects this timing aspect of up-front investment followed
by increased returns building over a period of time.
+ Extended delay in achieving ‘Quick Ticket’ functionality
at SKYCITY Auckland
+ Delay in completion of the stage 1 redevelopment at
SKYCITY Adelaide
19
+ New additions to the earnings mix from SKYCITY
Darwin, an increased shareholding and therefore an
increased earnings share in SKYCITY leisure and
SKYCITY hamilton, a new shareholding position in
Christchurch Casino (40.5%), and new revenues from
the Convention Centre and the new members’ facilities
at SKYCITY Auckland
+ Two quite different experiences in Australia with
SKYCITY Adelaide producing a disappointing second-
half result but SKYCITY Darwin producing a strong
result for the year which was well ahead of pre-
acquisition expectations
+ Increased asset carrying costs (depreciation and
interest) associated with expansion of the company’s
invested capital base.
Smoking bans in New Zealand
The prohibition in New Zealand on smoking in all indoor
areas to which there is public access, applied from
10 December 2004. This, as expected, has had a
significantly adverse impact on the revenues of many
New Zealand business operations, particularly in
the hospitality and entertainment sectors.
As advised in SKYCITY’s May earnings guidance, the
impact of smoking bans has been somewhat greater, and
the recovery/abatement period is expected to be more
extended, than was projected prior to the bans being
imposed. There was good reason to expect that the effect
of smoking bans in New Zealand would be less extensive
and less prolonged than was the case in Australia, but
it now appears likely that the scale and duration of the
impact could be similar.
SKYCITY’s assessment that the impact of smoking bans
in New Zealand might be less than in Australia was based
on the fact that there was a 12-month notice period in
New Zealand prior to imposition and there was already a
more extensive requirement for smoke-free facilities in
New Zealand than was the case in Australia.
SKYCITY took good advantage of the 12-month lead
time. The company established outdoor deck/balcony
facilities for smoking customers at each of its
New Zealand properties and took other proactive
measures including staff training and customer assistance,
for the introduction of the bans in December 2004.
Our current expectation is that the impact of smoking
bans will abate slowly during the 2005/06 financial year
with minimal residual impact prevailing into the 2006/07
financial year.
Smoking Restrictions in Adelaide
Smoking within one metre of a serviced workspace was
prohibited in South Australia from 6 December 2004,
meaning that table games players could not smoke at a
gaming table from that date.
While it is always difficult to isolate individual cause-and-
effect relationships within an overall financial outcome, it is
nevertheless clear that the introduction of these restrictions
had a material impact on table games revenues at SKYCITY
Adelaide during the second half of the 2004/05 year.
Full smoking bans apply in South Australia from October
2007 and there seems to be no reason to expect that the
South Australian experience will be significantly different
for hospitality and entertainment venues than has
occurred in other locations.
$20 Note Acceptor limitation
in New Zealand
The gambling Act 2003 included provision limiting
note acceptors on New Zealand gaming machines to a
maximum denomination of $20 from March 2004. This
had a significant impact on gaming machine play in the
period immediately following introduction and that impact
continued through the 2004/05 year, gradually abating
as the year progressed and as customers became more
acclimatised to the restriction.
As a consequence, gaming machine revenues in
New Zealand reduced, but with a gradual recovery
becoming evident during the second half of the 2004/05
year. There will inevitably be an ongoing residual impact
of the $20 note acceptor limitation, but that impact is
expected to be less significant in 2005/06 than was the
case in the latter part of 2003/04 and during 2004/05.
Ticket Technology
Following an extended and comprehensive process,
the Casino Control Authority approved the use of ticket
technology in June 2004 for a restricted number of
machines (300 out of 1,647 machines) at SKYCITY
Auckland, for play at 20 cent denominations and above.
The objective of ticket technology is to improve the
convenience for higher-end players who represent a
significant proportion of SKYCITY’s gaming machine
revenue mix.
Installation of the technology and associated systems
proved problematic, resulting in a delay in the effective
operation of the new feature for a period of eight
months – from September 2004 until May 2005.
We were pleased to report, in conjunction with the
SKYCITY result announcement in August, that ticket
technology is now functioning well and is generating a
positive response from customers at the higher end of
our player market.
Stage 1 Adelaide Redevelopment
Stage 1 of the Adelaide redevelopment project was
scheduled to be complete and open to customers by
March 2005. however, delays associated with the
heritage status of the building meant that the new
0
facilities (200-seat brasserie-style restaurant, new street-
front bar and new gaming area) were not revenue-
generating until early June 2005.
The SKYCITY Adelaide facility requires renewal in order
to grow revenues and earnings and to reposition the
venue as an attractive and convenient gaming and
entertainment destination for customers. The first stage
(now completed) is the initial step in that direction.
The delays were disappointing but, following their opening
on 6 June 2005, the new facilities are ready to provide
a refreshed earnings impetus for a full 12 months in the
2005/06 year.
New Investments and Facilities
SKYCITY Darwin provided 49 weeks of revenues and
earnings during the 2004/05 year, delivering a strong
return on investment in the first year of SKYCITY
ownership. The result represents a highly favourable 6.5
times EbITDA multiplier for the acquisition, and a pre-tax
return on investment in excess of 12%.
In July 2004, SKYCITY completed the full takeover of
SKYCITY leisure limited, moving from a 74% equity
position to 100%. As a consequence, SKYCITY’s 2004/05
result reflects an increased share of the earnings from
SKYCITY leisure’s cinema exhibition operations.
In July 2004, SKYCITY increased its shareholding in SKYCITY
hamilton from 55% to 70% and on 30 June 2005 moved
to 100% ownership. The 15% increased share of hamilton
earnings is reflected in the 2004/05 result, with the
additional 30% share to be reflected in 2005/06.
Stage 1 of the Adelaide redevelopment programme is
referred to in the previous section of this review.
Other new facilities introduced during the 2004/05
financial year were the SKYCITY Auckland Convention
Centre, the 316-room, 5-star SKYCITY grand hotel in
Auckland, and the new members’ playing facilities at
SKYCITY Auckland which were introduced progressively
during the year. The new Pacific Room for local VIP
players opened in December 2004, the refurbished
International Room (for international VIp player groups)
opened in March 2005 and the new platinum Room for
higher-end machine players opened in July 2005. We
look forward to a full 12 months of operations in the new
premium player facilities in 2005/06.
An additional 10 hotel rooms were added to the SKYCITY
Darwin property during the year, taking the total number
of rooms up to 117.
Convenient carparking facilities are of fundamental
importance to entertainment facilities and SKYCITY
looks forward to receiving the necessary consents for
its carpark development in Adelaide. We are pleased to
report that potential pressure on carparking capacity
at SKYCITY Auckland has been addressed, with the
acquisition of two properties which will provide additional
capacity of up to 900 spaces.
SKYCITY Entertainment Group limited Annual Report 005
Interest and Depreciation
group earnings before interest, depreciation and tax
were up 10% on prior year with the new assets and
investments contributing to that outcome. The immediate
impact of higher interest and depreciation costs will
be steadily offset by increased earnings from the new
assets and investments, some of which will take some
time to develop rather than being realised immediately.
This timing differential had a significant impact on Group
bottom line earnings for the 2004/05 year.
Our people
It is our people who provide the SKYCITY experience.
Whether in the tropics of Darwin, or the icy climes of
Queenstown, our people are the face of SKYCITY.
This year’s annual report profiles SKYCITY’s executive
team on pages 24-25. Several of our senior managers
have been with the company since establishment in 1996.
They combine their knowledge of SKYCITY’s operations
with the skills and experience of managers who have
joined the team in the intervening period.
Our employee incentive remuneration schemes which
have been in place since 1999 continue to prove effective
in motivating both our wage-earner and salaried
personnel to achieve their individual objectives as well
as the company’s objectives during each financial year.
Our Communities
SKYCITY is proud of its ongoing commitment and
contribution to the communities in which it operates.
During 2004/05, SKYCITY contributed more than
$2.8 million in charitable donations and more than
$1.9 million in sponsorship support.
One of SKYCITY’s primary objectives is to be a cornerstone
enterprise in the communities in which we operate, in
terms of employment opportunity, tourism development,
community support and host responsibility. We see this
community role as being totally consistent with the
company’s financial and governance responsibilities on
behalf of our 25,000 shareholders.
We trust that you will find this annual report an
interesting and informative outline of the company’s
activities during the 2004/05 financial year.
To obtain further information, please visit our
website at www.skycitygroup.co.nz or email us at
sceginfo@skycity.co.nz
Evan Davies
MANAgINg DIRECTOR
1
Board of Directors
The SKYCITY board of directors is responsible for stewardship
of the company’s assets and investments. The board has a
comprehensive set of governance procedures in place to
ensure that the interests of stakeholders are met and that the
company’s responsibilities to internal and external stakeholders
are fully complied with at all times.
The board currently comprises six non-executive directors and one executive director. The chairpersons of the board and
the board committees are non-executive directors, according to the requirements of the board charter. Patsy Reddy and
Bill Trotter, current directors of the company, retire by rotation at the 2005 annual meeting and offer themselves for re-
election. During the 2004/05 year, the board formally met on seven occasions. The board’s Audit and Risk Committee met
four times, the Governance and Remuneration Committee met four times and the Nomination Committee met on one
occasion. In addition, the directors held a number of meetings (by teleconference) on an as-required basis to consider a
range of specific issues.
RoD McGEoCH
Chairman
Rod Mcgeoch was appointed a director in September 2002 and Chairman of the
company on 1 April 2004. based in Sydney, Australia, Mr Mcgeoch is a director of
gulliver’s Travel group limited, lIpA pharmaceuticals limited, Telecom Corporation of
New Zealand limited, Ramsay health Care limited and Frontiers group limited. he is
chairman of Pacific Healthcare Limited and Saatchi & Saatchi’s Trans-Tasman Advisory
board. Mr Mcgeoch is an Australian prime Ministerial appointment to the Australia and
New Zealand leadership Forum.
EVAN DAVIES
Managing Director
Evan Davies has been Managing Director of SKYCITY Entertainment group limited
since February 1996. Mr Davies is an executive director and is also a director of
SKYCITY subsidiary companies, including Queenstown Casinos limited, and is a
director of Christchurch Casinos limited. he is a trustee of the Anglican Trust for
Women and Children and the Melanesian Mission Trust.
SKYCITY Entertainment Group limited Annual Report 005
PATSY REDDY
Deputy Chairperson
patsy Reddy has been a director since 1994. She is Deputy Chairperson of the board
and chairs the governance and Remuneration Committee. Ms Reddy is also a non-
executive director of Telecom Corporation of New Zealand limited and Active Equities
limited and is a member of NZX Discipline. She is a trustee of the New Zealand
International Festival of the Arts, the Victoria university of Wellington Art Collection
Trust, the SKYCITY Auckland Community Trust and a member of the Adam Art gallery
Advisory board.
RoB MclEoD
Rob Mcleod was appointed a director in October 2004. he is chairman of the
New Zealand business Roundtable and has been a councillor and member of the
Executive board of the Institute of Chartered Accountants of New Zealand.
Mr Mcleod is a director of Aotearoa Fisheries limited, ANZ National bank limited,
gulliver’s Travel group limited, Telecom Corporation of New Zealand limited and
Tainui group holdings. he is a member of the Audit and Risk Committee.
SIR DRYDEN SPRING
Sir Dryden Spring was appointed a director on 30 October 2003 and is chairman
of the Audit and Risk Committee. he is chairman of the Asia 2000 Foundation of
New Zealand and the New Zealand ApEC business Advisory Council. he is a director
of ANZ National bank limited and certain subsidiaries, Fletcher building limited
and port of Tauranga. Sir Dryden is also a trustee of the New Zealand business and
parliamentary Trust.
ElMAR ToIME
Elmar Toime was appointed a director in February 1996 and is a member of the
SKYCITY Audit and Risk Committee. Mr Toime is an independent consultant to the
postal and mail sector in the UK and Europe. Formerly chief executive officer of
New Zealand post limited, he has been based in london since March 2003.
BIll TRoTTER
bill Trotter was appointed to the SKYCITY board in March 2000 and is a member
of SKYCITY’s governance and Remuneration Committee. Mr Trotter is Executive
Chairman of First NZ Capital group limited.
3
1
4
4
5
8
3
6
9
SKYCITY Entertainment Group limited Annual Report 005
Executive Team
1 KEVIN BREWER
5 BRYCE MoRRIN
General Manager leisure
Investments
Kevin brewer joined SKYCITY as
general Manager leisure Investments
in October 2000. he is responsible
for the company’s cinema business,
SKYCITY leisure, as well as business
development and acquisitions. Kevin’s
previous roles include director of
finance and operations at Wendy’s
Old Fashioned hamburgers and
associate director with bancorp
merchant bankers.
GIllIAN GIBSoN
General Manager
Group Human Resources
gillian gibson was appointed general
Manager group human Resources
in September 2005, having been
associated with human Resources at
SKYCITY since 1998, most recently as
general Manager of human Resources
for the New Zealand business. gillian
has previously held senior human
resources roles with Telecom New
Zealand, lion Nathan and KFC.
General Manager Capital Projects
bryce Morrin has been responsible for
overseeing the design and managing
the construction of SKYCITY’s major
capital projects in New Zealand and
Australia since 1994. previously a
self-employed property consultant,
bryce was also an executive with
brierley properties.
6 AlISTAIR RYAN
General Manager Corporate
and Company Secretary
Alistair Ryan is responsible for
investor relations, stock exchange
and equity-related matters, internal
audit and control, and insurance and
risk management. Alistair is Company
Secretary for SKYCITY Entertainment
group limited, and a director of
Christchurch Casinos limited,
Queenstown Casinos limited and other
SKYCITY subsidiary companies. prior
to joining SKYCITY in 1995, Alistair
was a financial services partner with
international accounting firm, Ernst &
Young.
3 DAVID KENNEDY
HEATHER SHoTTER
General Manager Group Marketing
and New Zealand operations
8 MICHAEl SIlBERlING
General Manager
Australian operations
Appointed in April 2004, Michael
Silberling is responsible for the
SKYCITY Adelaide and SKYCITY Darwin
operations. he has held a number of
senior positions in management, finance
and operations with American gaming
company harrah’s Entertainment, his
most recent role being Senior Vice-
president and general Manager for
harrah’s Reno, Nevada complex.
9 PETER TREACY
General Manager Group
Regulation and legal
peter Treacy was appointed in July
2005 and is responsible for SKYCITY’s
legal and regulatory affairs. peter
has extensive experience in major
international financing and corporate
transactions, having spent the previous
16 years, including eight as partner,
with international law firm Linklaters in
london, hong Kong and,
most recently, bangkok.
EVAN DAVIES
Managing Director
Evan Davies has led the SKYCITY
executive team as Managing Director
General Manager Public Policy
and Corporate Strategy
David Kennedy is responsible for
SKYCITY’s public policy positions and
corporate strategy. he joined SKYCITY
in 2000 as general Manager – group
Operations. David was previously CEO
of publicly listed property company,
St lukes group. he has also held a
number of senior operational and
strategic roles with Westfield.
4 DAVID lIllY
General Manager Group finance
David lilly joined SKYCITY in January
2002 and is responsible for financial
management (including treasury and
taxation) and information services for
the group. he has previously held CFO
roles at Clear Communications and
heinz Wattie’s.
heather Shotter has held several senior
since February 1996. Formerly
management positions since joining
SKYCITY project Director for brierley
SKYCITY in 1994. She is currently
properties, Evan was responsible for
responsible for SKYCITY’s New Zealand
business operations, and for the
marketing, sales, communications and
managing the SKYCITY Auckland
casino licence application process
and complex construction. (See page
business planning functions across
22 for photograph).
the group. prior to joining SKYCITY,
heather held a number of corporate
roles at Telecom New Zealand and Shell
Oil New Zealand.
5
our
people
6
SKYCITY Entertainment Group limited Annual Report 005
“ Every day, all day, the fun of SKYCITY
is brought to life by our people.”
EVAN DAVIES – MANAGING DIRECTOR
SKYCITY has developed a reputation as an exciting,
fun place to work, with great opportunities for career
development.
The company has a range of strategies and plans in place
to attract and retain the right people in what is a rapidly
changing and competitive employment market, especially
in New Zealand.
A priority during 2004/05 was a company reorganisation
to lift capability and increase accountability and
ownership of results. Significant recruitment exercises
were also successfully undertaken for the opening of the
redeveloped SKYCITY Adelaide complex, which created
250 new jobs, and the SKYCITY grand hotel in Auckland.
Key 2005/06 initiatives include:
+ Establishment of e-performance and
e-recruitment systems
+ Developing the pool of leaders within the company
through leadership training programmes and coaching
+ programmes to lift employee engagement and
satisfaction, including a review of SKYCITY’s group-
wide annual staff satisfaction survey and action
planning process
+ Enhancing the customer service ethic across the
business, including the ongoing implementation of
the staff training programme ‘great Service’.
gearing up for the Future
A new operational model for SKYCITY Auckland’s gaming
management and supervisory structure has also been
implemented. The changes have enabled an increased
focus on customers and people, improved commercial
awareness and competency across the business, and
reduced operating costs.
“ We’ve created a flatter organisational
structure, bringing decision-making
responsibilities closer to our customers
and increasing accountability for results.”
HEATHER SHOTTER – GENERAL MANAGER GROUP MARKETING AND
NEW ZEALAND OPERATIONS
leadership Trainee programme
Recent university graduates and SKYCITY employees with
leadership potential are eligible to apply for one of the
six places available each year on SKYCITY’s leadership
Trainee programme.
The programme was introduced in 2004 to help find and
develop a new generation of operational leaders.
The first year of the competitive two-year programme
includes intensive training in leadership development and
management, and a range of hands-on placements within
SKYCITY Auckland. In their second year, trainees take up
entry-level leadership positions within the wider group.
“ I recommend the programme to anyone
who wants the chance to work in a dynamic
and exciting industry that fosters ongoing
learning and development.”
Over the last 18 months SKYCITY has undertaken
KATE LILLY – LEADERSHIP TRAINEE
a broad-reaching organisational restructure, designed
to align internal capability with the company’s
growth objectives.
Major factors influencing the changes included the
acquisition of SKYCITY Darwin, and the opening of the
SKYCITY Auckland Convention Centre and grand hotel.
Reflecting our expanded presence in Australia, the position
of general Manager Australian Operations was created to
oversee SKYCITY Adelaide and SKYCITY Darwin.
In New Zealand, operations and marketing team
structures have been integrated and flattened,
resulting in better alignment, efficiencies and improved
information sharing.
Customer Focus
‘great Service’
During 2004/05 SKYCITY commenced the
implementation of ‘great Service’, a training
programme for New Zealand staff.
SKYCITY tailored the well-known DDI Service plus®
programme to suit its specific needs. The 51/2-hour
programme aims to increase customer loyalty and
satisfaction by building a service culture in the business,
and provides staff with an understanding of the behaviour
and skills involved in delivering great service.
‘great Service’ is being rolled out at SKYCITY Auckland
and Queenstown, with hamilton and the Australian
properties targeted for implementation in 2005/06. All
new SKYCITY employees in New Zealand now have
‘great Service’ training during their induction process.
graduates receive an Advanced Diploma of hospitality
Management and paid work experience at SKYCITY
Darwin. With one extra year’s study, they can
also complete the Regency College bachelor of
business programme.
grand hotel seeks ‘can do’ attitude
A vibrant personality and positive ‘can do’ attitude were
the key attributes SKYCITY looked for when recruiting
staff for Auckland’s new SKYCITY grand hotel.
SKYCITY grand hotel Manager paul gallop says while
previous front-line experience in hotels and customer
service was important, it was personality and passion that
separated the top candidates from the pack.
“The SKYCITY grand hotel is a uniquely Kiwi
interpretation of a five-star hotel,” says Paul. “Our
people bring the grand’s contemporary, friendly and
unpretentious style to life.”
A total of 600 candidates attended a ‘walk-in day’ during
which they listened to a presentation and undertook
a mini-interview. Of this group, 250 were selected to
attend a group problem-solving exercise and a traditional
interview. The 160 successful recruits then attended a
three to four-week pre-opening training programme.
uleah Westbrook
GUEST SERVICES REPRESENTATIVE, SKYCITY GRAND HOTEL
Snapshot – SKYCITY people
STAFF NuMbERS
2003/04
2004/05
Staff bonus schemes renewed
SKYCITY Auckland
2,217
2,302
SKYCITY’s staff bonus schemes, the Customer Experience
SKYCITY Adelaide
Incentive (CEI) for waged staff and performance pay
Incentive (PPI) for salaried staff, which were first
introduced in 1999/2000, have been renewed for further
three-year terms to June 2008.
CEI and ppI focus staff on customers, company goals and
financial performance.
SKYCITY Darwin*
SKYCITY hamilton
SKYCITY Queenstown
group/Corporate
TOTAl**
778
N/A
240
68
60
997
264
221
69
61
3,363
3,914
The incentive schemes will apply at all properties in
2005/06 including, for the first time, SKYCITY Darwin.
New features incorporated into the CEI include larger
potential bonus payments and a scale that links the size
of CEI payments to financial results.
* Acquired July 2004. Staff numbers in 2003/04
(pre-acquisition) were 279.
** This table sets out the average number of permanent SKYCITY
employees (full-time and part-time). SKYCITY also employs
around 1,000 - 1,200 casual staff across the group. Numbers
fluctuate to accommodate special events.
Casino training a world first
health and Safety
SKYCITY Darwin achieved a world first with the
introduction of casino training programmes at the new
Asia Pacific Casino and Hospitality Management School
in October 2004.
The school is the only casino management school in
Australia and the only one in the world that is actually
within an operating casino and hotel complex.
The initiative is a unique collaboration between Darwin’s
award-winning International College of Advanced
Education and SKYCITY Darwin.
SKYCITY aims to build a strong health and safety culture
at each of its properties.
The year’s highlights included improved reporting,
increased staff training and a significant reduction in lost-
time injuries at SKYCITY Auckland.
There were no prosecutions in the financial year under
the New Zealand health and Safety in Employment Act,
1992, or under South Australian and Northern Territory
health and safety legislation.
8
SKYCITY Entertainment Group limited Annual Report 005
In New Zealand, SKYCITY has been an Accredited
2004/05 highlights
Employer in the Accident Compensation Corporation
(ACC) partnership programme since August 2000. As
part of this accreditation SKYCITY’s work and injury
management practices are audited annually by ACC.
+ 114 SKYCITY Auckland employees received two days’
health and safety training, earning New Zealand
Qualifications Authority (NZQA) Health and Safety
qualifications
Managers, supervisors and elected employee
+ 57 SKYCITY Adelaide managers received OhS
representatives operate 10 health and safety committees
responsibility training and a further 20 staff trained as
at SKYCITY Auckland, and one each at SKYCITY hamilton
OhS representatives
and SKYCITY Queenstown.
In Australia, SKYCITY Adelaide has an Executive
Occupational Health & Safety (OHS) Committee
including senior management and representatives from
departmental committees. The business achieved a
Safety Achiever business System level two rating in
2004/05.
SKYCITY Darwin has a Workplace health and Safety
Committee, including not less than 50% representation
from frontline employees.
+ At SKYCITY Auckland, lost-time injuries per 100,000
hours worked reduced from an average 3.11 in
2003/04 to 2.05 in 2004/05.
priorities for 2005/06 include:
+ moving the organisation from a safety compliance
approach to a behaviour-based health and safety
approach
+ further training in health and safety for managers and
employees
+ improvements to reporting capabilities
In March 2000, SKYCITY Darwin adopted a risk
+ a significant upgrade to SKYCITY Darwin’s fire
management and workers’ compensation programme for
protection system
compensation claims management, in conjunction with
the Territory Insurance Office. Claims are reviewed on a
monthly basis.
Managers and supervisors are assessed and rewarded on
their health and safety performance.
+ enhanced contractor compliance control measures
+ the establishment of a New Zealand-wide health and
Safety Committee.
Kat Gear LOCO BAR ATTENDANT, SKYCITY ADELAIDE
9
Ja-Hyung Kwon TABLE GAMES DEALER, SKYCITY AUCKLAND
Case Study: World First in
Ergonomic gaming Tables for
SKYCITY Staff
Ergonomically-designed gaming tables are being rolled
out at SKYCITY in a world-leading effort to minimise
discomfort and lost-time injuries for staff.
upper extremity, neck and back discomfort are recognised
worldwide as an occupational health and safety concern
for dealers.
A team of SKYCITY staff and a consultant ergonomic
expert analysed the existing table designs and conducted
interviews with dealing staff. prototype blackjack and
roulette tables were then developed and refined following
field-testing. A modified tilted card-dealing ‘shoe’ (from
which cards are dealt for blackjack) was also developed.
Since the initial introduction of the new tables at SKYCITY
Auckland’s ‘plAY’ casino, the company has recorded a
significant reduction in work-related discomfort among
employees using the new equipment, and received
positive feedback from staff.
30
SKYCITY is progressively rolling out the ergonomic
design features, most recently at the redeveloped VIp
Pacific Room in Auckland and the new gaming areas at
SKYCITY Adelaide.
SKYCITY plans to continue to modify and improve the
designs of its gaming tables. The initiative was presented
to positive feedback at three major health and safety
conferences during 2004/05.
“ SKYCITY’s new ergonomic gaming
tables are innovative and world-leading.
The company has, without compromise,
done what is needed to make staff as
comfortable as possible, and is a role
model for future such development
within the industry.”
DES GORMAN – PROFESSOR OF MEDICINE, UNIVERSITY OF AUCKLAND
our
community
31
Ten-year-old Mosimane Tuitupou plays in the new rainforest-themed atrium at Starship Children’s Hospital in Auckland, an initiative that was
part-funded by a grant from the SKYCITY Auckland Community Trust. (Picture: New Zealand Herald)
COMMUNITY INVOLVEMENT AND SUPPORT IS AN IMPORTANT AND DISTINCTIVE
ELEMENT OF SKYCITY ENTERTAINMENT GROUP’S BUSINESS PHILOSOPHY.
“ The challenge we have set ourselves is to
become a cornerstone enterprise in every
community in which we operate.”
EVAN DAVIES – MANAGING DIRECToR
SKYCITY aims to operate gaming and entertainment
properties that are regarded as cornerstone enterprises
in their communities: businesses that act responsibly,
demonstrate leadership and integrity, and are sensitive to
local needs and aspirations.
This commitment to making a positive contribution is
motivated by SKYCITY’s desire, as a major business
enterprise with significant interests in gaming, to reach
the highest standards of ethical business practice
and governance.
3
Delivering on the company’s community responsibilities is
also an important part of SKYCITY’s strategy to manage
risk and achieve continued growth over the long term.
As well as being the mainstay of a wide
range of charitable and grass-roots
organisations, the gaming sector makes a
substantial broad economic contribution.
Annually, New Zealand’s casinos contribute
$1 billion to GDP and $0.5 billion of wages
and salaries to New Zealand households.*
*NEW ZEALAND CASINOS ECONOMIC IMPACT REPORT, URS FINANCE &
ECONOMICS, JULY 2005
host Responsibility
SKYCITY is committed to investing in host responsibility
and participating in productive dialogue with regulators
and stakeholders over harm minimisation.
Our approach is based on a determination to act
with integrity and create a company of which all our
stakeholders can be justifiably proud.
Taking a proactive approach to problem gambling
and alcohol management supports SKYCITY’s ‘fun
and entertainment’ vision and focus on excellent
customer service.
host responsibility also makes good business sense,
contributing to the long-term sustainability of the
gaming industry.
A comprehensive group-wide policy sets out the company’s
commitment to host responsibility, including early
intervention with customers who show signs of problem
gambling and drinking, and training for all staff. Specific,
tailored programmes are in place at each property.
SKYCITY has taken a collaborative approach to developing
and delivering its host responsibility programmes and
training courses, receiving valuable input from problem
gambling experts and treatment providers.
2004/05 highlights
SKYCITY’s group-wide host responsibility policy was
implemented at SKYCITY Darwin upon taking ownership
of the property. Specific changes made as a result of
the policy’s introduction included the appointment of a
host Responsibility Manager and increased staff training.
SKYCITY Darwin is planning to further enhance its host
responsibility programme, including expanding its contact
base within the local community, in 2005/06.
SKYCITY Adelaide introduced a team of host responsibility
co-ordinators in December 2004. This early intervention
programme, which resulted from collaboration between
SKYCITY Adelaide, the Churches gambling Taskforce and
break Even counselling network, is unique within the
wider Australasian gaming industry.
SKYCITY Entertainment Group limited Annual Report 005
The model was based on feedback from front-line staff
and is used as a decision-making tool for intervening with
drinking customers.
Monitor
& Control
Slow
down
Go
Stop & Exit
SKYCITY’S RESPONSIBLE SERVICE
OF ALCOHOL MODEL
based on feedback from staff, we found that the commonly
used three-step ‘Traffic light’ model was difficult to implement.
So we developed the four-step model, shown here. This
programme is more sensitive to the different stages of
intoxication in customers, and therefore provides more tools
for staff to work with.
The model runs from green – the low ‘go’ zone, through to
Red – the high ‘stop and exit’ zone.
We explain it to staff like this:
+ green and blue are like a two-way street – customers might
go between green and blue states – everyone has a good time
+ Yellow and Red are like a one-way street – customers can’t
go back down to green or blue until a long time has passed
(10-12 hours) – not everyone has a good time
+ Our aim is to keep customers ‘in the blue’ – this helps us offer
a comfortable and sophisticated environment, supports our
vision to create fun and entertainment and helps to ensure
everyone – customers and staff – has a good time.
Outlook
priorities for 2005/06 include evaluating existing
initiatives, improving the consistency of host responsibility
implementation across the group, expanding e-learning
programmes to include SKYCITY’s Australian properties
and linking host responsibility deliverables to employee
In New Zealand, one of the year’s highlights was the
key performance indicators.
development of an e-learning module for SKYCITY’s
staff training programme. The online training means
employees can complete the host responsibility training at
a time convenient to them.
SKYCITY is also preparing for the introduction, under
the gambling Act 2003, of further harm-minimisation
measures in New Zealand. New regulations regarding
player information display requirements (pop-up screens)
In March 2005, New Zealand’s Alcohol and liquor
and restrictions on jackpot advertising and branding will
Advisory Council (AlAC) recognised SKYCITY’s leading
approach to the service of alcohol. SKYCITY’s ‘responsible
service of alcohol model’ was included in AlAC’s National
guidelines for licensed premises.
come into effect from 1 October 2005.
33
pROFIlE: Junior Toleafoa
host Responsibility Manager
Junior Toleafoa was appointed host Responsibility Manager
for SKYCITY Entertainment group in January 2005.
Mr Toleafoa was formerly Employee Advocate at SKYCITY
Auckland. In his new role he is responsible for host
responsibility across the SKYCITY group.
“My focus is on ensuring host responsibility has a high
profile with front-line staff, and that it remains at the
forefront of our everyday work culture and ethic.
Externally, I work closely with industry experts and
problem gambling treatment providers, explaining the
latest initiatives at SKYCITY and gathering their input
and feedback.
Problem gambling management is an emerging field –
we’re all learning. My team and I work hard to identify
and monitor international best practice in problem
gambling and alcohol management.
SKYCITY’s implementation of an early intervention policy
with problem gamblers and drinkers is a leading-edge
initiative that we can be really proud of.”
Junior Toleafoa HOST RESPONSIBILITY MANAGER
Community partnerships
Further details of SKYCITY’s host responsibility policy and
SKYCITY supports a wide range of local charities,
programmes are available on www.skycity.co.nz
events and sports in the communities in which it
“ We acknowledge our very real
obligations to our customers and the
community in general. If we fail to meet
those obligations, then our industry
will not – and should not deserve to –
enjoy a prosperous future. However,
harm minimisation initiatives must be
appropriately targeted, based on research,
and shown to be effective. SKYCITY is
committed to productive dialogue and a
strong working relationship between the
industry, regulators and our stakeholders
in the community.”
EVAN DAVIES – MANAGING DIRECTOR
operates. As well as financial support, SKYCITY also
provides expertise in marketing, communications and
project management, and makes its facilities available to
selected community partners.
During the past year, SKYCITY has extended its
sponsorship portfolio in Adelaide, securing the naming
rights to the May 2005 Adelaide Cup carnival, supporting
the Adelaide Film Festival for the first time, and continuing
its four-year partnership with the Mcguinness McDermott
Foundation, which raises funds for child health.
SKYCITY Darwin also signed a major new sponsorship –
naming rights sponsor of the 2005 and 2006 Darwin
round of the V8 Supercar Championship.
In New Zealand, our relationships with Auckland and
Waikato rugby continued during 2004/05, with SKYCITY
sponsoring NpC and Super 12 teams in both regions.
SKYCITY Queenstown continued its long-standing
sponsorship of the lindauer Queenstown Winter Festival
and SKYCITY hamilton again sponsored the ‘boathouse
8s’ Waikato/Cambridge rowing race.
SKYCITY Auckland’s involvement with the Starlight
Symphony, Starship Foundation, Kidz First Children’s
hospital, The New Zealand breast Cancer Foundation and
Special Olympics New Zealand continued during 2004/05.
One of the year’s highlights was the opening in May of
Starship’s new rainforest-themed atrium, part-funded
by a $100,000 grant from the SKYCITY Auckland
Community Trust.
34
SKYCITY Entertainment Group limited Annual Report 005
SKYCITY Community Trusts
Auckland grants
SKYCITY has established Community Trusts in Auckland,
and in hamilton and Queenstown, to provide funds for
community and charitable purposes.
Each trust aims to support local and regional
organisations in undertaking community assistance and
development work, with a focus on projects relating
to health, education, tourism, entertainment, arts and
culture. These areas of focus were selected based on
The SKYCITY Auckland Community Trust celebrated its
10th funding round in June 2005. grants for 2004/05
equalled $2.4 million, and were distributed to 120
community groups and charitable organisations.
Major grants included:
+ $110,000 to the Mangere Community health Trust, to
purchase a portable tattoo removal machine and a van
in which to transport it
research into community preferences, and to complement
SKYCITY’s own focus on entertainment and tourism.
+ $70,000 to the Chinese language Foundation, to
encourage the learning of Chinese in schools and
In 2004/05, the three trusts made 249 grants and
distributed $2.99 million. The total amount was lower
than the $3.78 million distributed in 2003/04, due in
businesses
+ $60,000 to Auckland Zoo’s new Wildlife health and
Research Centre
the main to the impact of non-smoking legislation on
+ $60,000 to the DOCNZ Festival Trust to run New
company profits in New Zealand.
Zealand’s first International Documentary Film Festival
Trust funds distributed to date total $18.6 million,
including $5.7 million to New Zealand’s problem
gambling Committee.*
SKYCITY COMMuNITY TRuST gRANTS, 1996 – 30 JuNE 2005
Contributions to problem
gambling Committee
grants to community groups
and charitable organisations
$5.7 million
$12.9 million
Total Trust distributions
$18.6 million
* The problem gambling Committee, which funded problem
gambling services until 2004, has been disestablished. Instead
of contributing to the Committee via the three community
trusts, between 1 October 2004 and 30 June 2005, SKYCITY
Auckland, hamilton and Queenstown paid problem gambling
levies equal to 0.51% of gaming revenue ($1.5 million
Auckland, $109,000 hamilton, $31,000 Queenstown). The
money raised through this levy is administered by the Ministry
of health and continues to fund problem gambling prevention
and treatment initiatives in New Zealand.
SKYCITY will continue to fund each community trust at
existing levels:
+ 2.5% of net profit from the casino operations of
SKYCITY Auckland
+ 1.5% of the revenue from the casino operations of
SKYCITY hamilton
+ 2.5% of net profit from SKYCITY Queenstown Casino
+ $58,000 to the howick historical Village’s living
history Museum.
hamilton grants
SKYCITY hamilton distributed $458,000 in the 2004/05
year. Ninety-one organisations benefited.
Major grants included:
+ $30,000 towards the Indian Char bagh garden at
hamilton gardens
+ $10,000 to habitat for humanity, to build a house at
the parachute Music Festival held at Mystery Creek
+ $10,000 to the hamilton Operatic Society, for staging
the ‘Rocky horror Show’ musical in conjunction with
the 30th anniversary of the film’s release.
Queenstown grants
SKYCITY Queenstown distributed $144,000 in the
2004/05 year. Thirty-five organisations benefited.
Major grants included:
+ $17,000 to St John Wakatipu, for the purchase of a
mannequin for resuscitation training
+ $10,000 to the Wakatipu Trails Trust, for signage on
local walking and cycling trails
+ $8,000 for the 2005 Wanaka ‘Festival of Colour’ –
an arts festival featuring theatre, dance, music,
photography and film.
or a minimum of $100,000 p.a.
Full details of the year’s trust grants are available
on www.skycity.co.nz
35
fINANCIAl AND
oPERATING REVIEW
operating earnings (EBITDA) up 10% on previous year to $86 million.
0% of revenues derived from New Zealand operations and 30% from Australian
operations. 4% of revenues from gaming operations and 6% from hotel,
convention, food and beverage, cinema exhibition and other operations.
Net surplus after tax $104 million, up 4% on prior year.
Dividend payout ratio maintained at 90% of tax-paid earnings.
Major investment and capital expenditure programme during the year
(fully debt-funded).
Total dividends paid for the 004/05 year: 4.0 cents per share (fully imputed).
Interim dividend paid in April 005: 1.0 cents per share. final dividend to be paid
in october 005: 1.0 cents per share.
long-term debt facilities (to replace existing shorter-term facilities) negotiated at
favourable interest rates for terms between and 15 years.
36
SKYCITY Entertainment Group limited Annual Report 005
Key Elements of the 2004/05 Result
The key features of the 2004/05 result (financial year
ended 30 June 2005) were:
+ 15% increase in group revenues from $594 million
to $684 million
+ 10% increase in group operating earnings (earnings
before interest, tax, depreciation and amortisation:
EbITDA) from $260 million to $286 million
+ Increased asset carrying costs (depreciation and
interest), as a result of the significant investment
and capital expenditure programme undertaken
during 2004/05
+ Net surplus after tax at $104 million compared
with $100.2 million in 2003/04 (after Canbet write-off
of $20.9 million)
+ Earnings per share at 24.9 cents up 4% on prior year
(24.0 cents per share).
Smoking bans and Regulatory
Restrictions (New Zealand)
The imposition of smoking bans in New Zealand restricted
the earnings performance of SKYCITY’s Auckland,
hamilton and Queenstown operations during the seven
month period following introduction of the bans in
December 2004.
Issues associated with the new regulatory environment
in New Zealand also inhibited the earnings of the New
Zealand operations (mainly at SKYCITY Auckland) during
the year. The new regulatory environment (from 1 July
2004) is taking time to settle in and this is creating
some restrictions on the company’s ability to operate its
businesses in an optimum manner for the enjoyment of
its customers. It is anticipated that the new regulatory
processes will continue to impede the company’s ability
to best respond to customer preferences but that, as
the regulatory environment develops and matures, the
situation should gradually improve.
Investment and Capital Expenditure
A number of investment initiatives added new revenue
streams or increased existing earnings during the
2004/05 financial year. SKYCITY Darwin was the most
significant addition to Group earnings during the period
but increased shareholdings in SKYCITY hamilton and
SKYCITY leisure, and dividends received from SKYCITY’s
40.5% investment in Christchurch Casinos were also
important contributors.
3
A range of asset enhancement capital expenditures were
also completed during the period. The new SKYCITY
Auckland Convention Centre contributed $13 million in
new revenues during 2004/05 and new and refurbished
facilities for Auckland’s member players were completed.
The 316-room SKYCITY grand hotel opened in April
2005 and will contribute a full 12 months’ revenues in
2005/06. And in Adelaide the first stage of the proposed
A$70 million redevelopment programme opened in June
2005. A full 12 months’ revenues from these facilities will
contribute to 2005/06 earnings.
The significant investment and asset development and
enhancement programmes carried out during the last 18
months have been fully financed without recourse to the
company’s shareholders. As a consequence, there has
been a significant uplift in asset carrying costs (interest
and depreciation) with an immediate impact on cost
structures but with revenues and earnings developing
over subsequent periods.
SKYCITY Auckland
+ Total revenues up 3% despite the imposition of
smoking bans from December 2004, delay in the
introduction of ticket technology for higher-play
customers, and the continuing impact of the $20 note
acceptor restriction introduced in March 2004
+ As a consequence of the factors referred to above,
gaming revenues were down 3%, but food and
beverage, hotel and convention and Sky Tower
revenues were all up strongly
+ The highly-acclaimed Auckland Convention Centre was
a stand-out performer, hosting 525 events with 88,000
attendees and contributing $13 million to Auckland
revenues during the period
+ Despite the increased contribution from convention,
hotel, food and beverage and Sky Tower, the
externally-imposed inhibitors to earnings (primarily
smoking bans and gaming regulatory restrictions)
resulted in a 2% reduction in the Auckland EbITDA
result for 2004/05
+ Regulatory issues are expected to continue to impact
on earnings during 2005/06 but the new facilities
developed during 2004/05 (hotel, convention,
members’ facilities) and the addition of new carparking
capacity will provide earnings momentum for the
Auckland operation going forward.
38
SKYCITY Adelaide’s iconic chandeliers
Other New Zealand Operations
+ SKYCITY hamilton and SKYCITY leisure were both able
to maintain their earnings levels consistent with the
prior financial year, despite the introduction of smoking
bans and other regulatory issues for SKYCITY hamilton
and the absence of high-performing box-office film
product for SKYCITY leisure
+ SKYCITY’s boutique facility, SKYCITY Queenstown
Casino, performed well, with a significant earnings
uplift over the prior year
+ Christchurch Casino’s 2004/05 earnings were impacted
by smoking bans and note acceptor limitations, but
dividends received were in line with expectations
held prior to the acquisition of SKYCITY’s 40.5%
shareholding in June last year.
SKYCITY Adelaide
+ SKYCITY Adelaide disappointed in 2004/05, with
second-half earnings well down on the corresponding
prior period. gaming machines performed reasonably
well (up 6%) but table games were down significantly
on the prior year with the introduction of the one-metre
smoking ban from December 2004 having an adverse
impact on table revenues during the second half
+ EbITDA fell from A$25.3 million to A$18.0 million as a
consequence of lower table games revenues and a range
of cost increases, including a new levy of A$850,000
imposed by the liquor and gambling Commission
+ The first stage (A$21 million) of the A$70 million
Adelaide redevelopment programme (new gaming
area, new bar and restaurant at the North Terrace
frontage of the building) opened in June and initial
results are providing confidence that the expectations
for the redevelopment programme will be realised.
SKYCITY Entertainment Group limited Annual Report 005
SKYCITY Darwin
+ A strong first year under SKYCITY management with
revenues up 9% and operating earnings (EbITDA) up
8% over the previous year
+ First-year earnings were ahead of pre-acquisition
expectations and the strong momentum in the Darwin
The company further advised that the impacts of smoking
bans on SKYCITY’s New Zealand revenue streams are
expected to continue into 2005/06, but that a steady
revenue recovery is anticipated as the year progresses,
with little, if any, residual impact carrying through into
the 2006/07 year.
economy is expected to continue to drive earnings for
At the August result announcement, the company also
some time
+ Return on investment was well ahead of the company’s
investment threshold requirement
+ Removal of the community machines rebate from
1 July 2005 will impact on 2005/06 earnings, but this
change was known and anticipated prior to acquisition
of the property in 2004.
advised that trading patterns at SKYCITY Adelaide during
the three-month period (June-August 2005) show the
new facilities (stage 1 of the A$70 million redevelopment
programme) are generating favourable customer
response and are providing early encouragement that
expectations for growth resulting from the redevelopment
plan will be achieved.
Capital Structure and Funding
During the 2004/05 financial year, the Group expanded
and restructured its debt facilities. Introduction of
longer-term debt funding (7 to 15-year term) was
achieved through a private placement in the uS and
Australian markets. This long-term debt, coupled with
The company’s August statement also advised that the
SKYCITY Darwin operation is anticipated to continue
to benefit from the strong economic momentum in the
Northern Territory.
Five-year Summary
Five-year historical financial statements for the period
the company’s existing senior debt facilities, means that
2001-2005 are set out in the following pages.
group debt is well structured for current and known
future requirements.
The company’s gearing ratio (debt:enterprise value) as
at 30 June 2005 was 39% and is expected to continue in
the 35%-40% range during the 2005/06 year. SKYCITY
enjoys a regular flow of cash-based earnings and, as a
consequence, a gearing ratio of between 30% and 40% is
considered an appropriate approach to debt management
for the group.
Share buyback
An on-market share buyback of 3 million shares was
completed during 2004/05 at an average price of $4.58
per share.
The buyback was not a capital management strategy but
rather was undertaken to reduce any dilution impact on
existing shareholders arising from the issue of new shares
under the terms of the company’s executive remuneration
and share option programmes. All shares issued under
these programmes were offset by shares purchased,
resulting in no dilution for existing shareholders.
A similar buyback programme of up to 4.5 million shares
has been initiated for the 2005/06 year.
Current Trends
The company advised at its 2004/05 result release
(August 2005) that revenue trends at SKYCITY Auckland
continue to provide support to the expectation for a
steady recovery from the impacts of smoking bans within
approximately 18 months from imposition of the bans
(in December 2004).
SKYCITY Darwin’s first birthday celebration in June 2005
39
SKYCITY Entertainment Group limited Annual Report 005
five-Year Summary
sTaTemenTs Of fInancIal perfOrmance
years ended 30 june
Operating revenue
Sales revenue
Investment revenue
Other
Total revenue
Operating expenses
Remuneration/staff
Other
2005
$000
2004
$000
2003
$000
2002
$000
2001
$000
671,941
590,479
556,493
510,243
437,406
10,496
1,794
2,178
1,500
3,041
4,779
2,496
561
2,435
1,676
684,231
594,157
564,313
513,300
441,517
185,790
212,629
160,675
173,817
148,904
161,491
131,751
163,729
118,983
132,243
Total operating expenses
398,419
334,492
310,395
295,480
251,226
earnings before interest expense, taxation
and depreciation (eBITda)
Depreciation and amortisation expense
285,812
259,665
253,918
217,820
62,691
47,677
46,032
42,039
earnings before interest expense and taxation (eBIT)
Interest expense
223,121
211,988
207,886
175,781
81,035
48,563
49,266
45,708
surplus before income tax
Income tax
142,086
163,425
158,620
130,073
36,968
40,400
51,117
44,286
surplus after income tax
net surplus attributable to minority interests
105,118
123,025
107,503
(1,111)
(1,899)
(286)
85,787
10,518(2)
190,291
36,270
154,021
47,716
106,305
38,047
68,258
1,832
net surplus after tax and minority interests
before non-recurring items
104,007
121,126
107,217
96,305
70,090
Non-recurring items(1)
–
(20,904)
–
(39,152)(2)
(1,782)
net surplus after tax, minority interest
and non-recurring items
104,007
100,222
107,217
57,153
68,308
(1) Non-recurring items:
– FY01 relates to IRD settlement for the pre-opening expenses
– FY02 relates to the write-off of the Force investment in Argentina and SKYCITY goodwill on consolidation of Force Corporation Limited
(2)
– FY04 relates to the write-off of the investment in Canbet Limited
Includes Force Corporation Limited’s minority share of the write-off of the investment in Argentina. The net impact of the write-off of the Argentina
investment and goodwill on the financial performance of SKYCITY Entertainment Group Limited was $27.9 million.
40
SKYCITY Entertainment Group limited Annual Report 005
sTaTemenTs Of mOvemenTs In equITy
years ended 30 june
Total recognised revenues and expenses
Net surplus after tax, minority interests and
non-recurring items
Net surplus attributable to minority interests
Foreign currency translation reserve movement
Changes in share capital
Dividends paid
Other movements
2005
$000
2004
$000
2003
$000
2002
$000
2001
$000
104,007
100,222
107,217
1,111
(8,429)
1,899
(9,953)
286
1,111
57,153
(10,518)
(5,152)
68,308
(1,832)
(415)
96,689
92,168
108,614
41,483
66,061
(2,963)
(23,463)
11,960
(114,658)
(100,004)
(133,362)
(923)
(663)
3,485
32,690
(67,150)
16,770
30,003
(27,715)
6,332
movements in equity for the period
(21,855)
(31,962)
(9,303)
23,793
74,681
equity at the beginning of the year
214,603
246,565
255,868
232,075
157,394
equity at the end of the year
192,748
214,603
246,565
255,868
232,075
41
SKYCITY Entertainment Group limited Annual Report 005
five-Year Summary (continued)
sTaTemenTs Of fInancIal pOsITIOn
as aT 30 june
shareholders’ equity
Share capital
Reserves
Retained earnings
Minority interests
non-current liabilities
Borrowings
Subordinated debt – capital notes
Convertible notes
Deferred tax
current liabilities
Bank overdraft
Payables and accruals
Subordinated debt – capital notes
Borrowings
2005
$000
2004
$000
2003
$000
2002
$000
2001
$000
225,777
225,871
246,518
232,180
197,911
(17,948)
(17,925)
2,844
(7,510)
(7,274)
3,516
1,932
(7,492)
5,607
(286)
18,653
5,321
3,872
28,650
1,642
192,748
214,603
246,565
255,868
232,075
956,795
121,510
–
35,450
579,967
–
8,910
27,216
437,113
149,266
13,365
24,683
405,825
148,888
9,315
20,811
382,154
148,510
9,315
19,316
1,113,755
616,093
624,427
584,839
559,295
–
97,297
–
100,758
–
93,619
149,644
101,000
–
64,836
–
1,000
372
61,140
–
1,000
1,081
70,137
–
88,572
198,055
344,263
65,836
62,512
159,790
Total equity and liabilities
1,504,558
1,174,959
936,828
903,219
951,160
non-current assets
Property, plant and equipment
Investments (including associates)
Intangible assets
Other non-current assets
current assets
Cash and bank balances
Inventories
Receivables and prepayments
Income tax receivable
Properties intended for sale
932,658
79,820
357,402
16,384
750,267
78,280
212,373
14,645
636,990
21,586
207,844
3,151
596,037
10,051
223,389
2,250
524,022
8,414
257,795
2,250
1,386,264
1,055,565
869,571
831,727
792,481
62,849
5,382
37,158
12,905
–
53,272
3,017
53,106
9,999
–
57,264
2,898
6,780
315
–
48,456
3,066
19,970
–
–
42,684
3,296
46,149
–
66,550
118,294
119,394
67,257
71,492
158,679
Total assets
1,504,558
1,174,959
936,828
903,219
951,160
4
SKYCITY Entertainment Group limited Annual Report 005
sTaTemenT Of casH flOWs
years ended 30 june
Operating activities
Cash was provided from:
Receipts from customers
Interest received
Dividends
Cash was applied to:
2005
$000
2004
$000
2003
$000
2002
$000
2001
$000
667,845
574,325
3,571
5,624
6,421
163
569,979
3,009
514,913
2,169
–
–
443,026
3,285
1
677,040
580,909
572,988
517,082
446,312
Payments to suppliers and employees
(347,654)
(296,113)
(281,034)
(267,702)
(217,986)
Interest paid
Income tax paid
Other taxes paid
(81,035)
(33,799)
(35,898)
(47,230)
(53,828)
(27,024)
(44,847)
(34,318)
(38,106)
(45,575)
(48,124)
(32,949)
(40,793)
(33,006)
(28,280)
(498,386)
(424,195)
(398,305)
(394,350)
(320,065)
net cash flows from operating activities
178,654
156,714
174,683
122,732
126,247
Investing activities
Cash was provided from:
Sale of fixed assets
Sale of investments
Cash was applied to:
–
–
–
–
–
–
–
–
–
3,384
21,878
25,262
554
–
554
Purchase of property, plant and equipment
(146,159)
(145,874)
(80,760)
Purchase of investments
Capitalised interest paid
Purchase of subsidiaries
Payment for other intangibles
–
(5,780)
(247,910)
(94,609)
(6,784)
(33,270)
–
–
–
(1,173)
–
–
(51,199)
(8,853)
–
(563)
–
(52,172)
(17,099)
(2,166)
(19,667)
(287)
net cash flows applied to investing activities
(399,849)
(280,537)
(81,933)
(35,353)
(90,837)
(399,849)
(280,537)
(81,933)
(60,615)
(91,391)
43
SKYCITY Entertainment Group limited Annual Report 005
five-Year Summary (continued)
sTaTemenT Of casH flOWs (cOnTInued)
years ended 30 june
financing activities
Cash was provided from:
Increase in borrowings
Other
Cash was applied to:
Decrease in borrowings
Shares repurchased
Dividends paid
Other
2005
$000
2004
$000
2003
$000
2002
$000
2001
$000
665,850
4,685
617,000
6,893
187,516
4,903
75,599
12,594
95,056
9,128
670,535
623,893
192,419
88,193
104,184
(317,398)
(375,071)
(152,897)
(110,064)
(94,990)
(13,754)
(27,656)
(12,967)
–
–
(108,552)
(100,004)
(110,990)
–
–
–
(43,923)
(14,103)
(34,894)
(6,276)
(439,704)
(502,731)
(276,854)
(168,090)
(136,160)
net cash flows applied to financing activities
230,831
121,162
(84,435)
(79,897)
(31,976)
net increase/(decrease) in cash held
Foreign currency translation adjustment
Opening cash and bank
9,636
(59)
53,272
(2,661)
(1,331)
57,264
8,315
865
48,084
7,482
(1,001)
41,603
3,434
375
37,794
cash at the end of the year
62,849
53,272
57,264
48,084
41,603
44
SKYCITY Entertainment Group limited Annual Report 005
fInancIal raTIOs
years ended 30 june
2005
2004
2003
2002
2001
EBITDA/revenue
Surplus after tax/revenue
Revenue/total assets
Return on total assets
Earnings per share(1)
Operating cash flow per share (1)
Net tangible assets per share (1)
Dividends paid (1)(2)
Interest coverage
41.8%
15.2%
45.5%
6.9%
24.9cps
42.8cps
$(0.39)
24.0cps
3.5x
43.7%
16.9%
50.6%
8.5%
24.0cps
37.5cps
$0.01
26.5cps
5.4x
45.0%
19.0%
60.2%
11.4%
25.5cps
41.6cps
$0.09
33.5cps
5.2x
42.4%
11.1%
56.8%
6.3%
14.0cps
30.0cps
$0.08
43.1%
15.5%
46.4%
7.2%
17.4cps
32.1cps
$(0.07)
19.0cps
15.75cps
4.8x
4.0x
(1) The number of ordinary shares on issue has been adjusted for the 1:1 share splits in November 2001 and November 2003
(2) The dividend paid in the 2002/03 year of 33.5cps included a special additional dividend of 10.0cps
45
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46
financial
statements
48 Auditor’s Report
49 Statements of Financial Performance
50 Statements of Movements in Equity
51 Statements of Financial Position
52 Statements of Cash Flows
54 Statement of Accounting Policies
58 Notes to the Financial Statements
85 Corporate Governance
99 Disclosures
110 Glossary
112 Directory
47
SKYCITY Entertainment Group Limited Annual Report 2005
Auditor’s Report
To The shareholders of sKYCITY enTerTaInmenT Group lImITed
We have audited the financial statements on pages 49 to 84. The financial statements provide information about the past
financial performance and cash flows of the Company and Group for the year ended 30 June 2005 and their financial position
as at that date. This information is stated in accordance with the accounting policies set out on pages 54 to 57.
dIreCTors’ responsIbIlITIes
The Company’s Directors are responsible for the preparation and presentation of the financial statements which give a true and
fair view of the financial position of the Company and Group as at 30 June 2005 and their financial performance and cash flows
for the year ended on that date.
audITor’s responsIbIlITIes
We are responsible for expressing an independent opinion on the financial statements presented by the Directors and reporting
our opinion to you.
basIs of opInIon
An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements.
It also includes assessing:
(a) the significant estimates and judgements made by the Directors in the preparation of the financial statements; and
(b) whether the accounting policies are appropriate to the circumstances of the Company and Group, consistently applied
and adequately disclosed.
We conducted our audit in accordance with generally accepted auditing standards in New Zealand. We planned and performed
our audit so as to obtain all the information and explanations which we considered necessary to provide us with sufficient
evidence to give reasonable assurance that the financial statements are free from material misstatements, whether caused
by fraud or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the
financial statements.
We have no relationship with or interests in the Company or any of its subsidiaries other than in our capacity as auditors, tax
and accounting advisors.
unqualIfIed opInIon
We have obtained all the information and explanations we have required.
In our opinion:
(a) proper accounting records have been kept by the Company as far as appears from our examination of those records; and
(b) the financial statements on pages 49 to 84:
(i) comply with generally accepted accounting practice in New Zealand; and
(ii) give a true and fair view of the financial position of the Company and Group as at 30 June 2005 and their financial
performance and cash flows for the year ended on that date.
Our audit was completed on 19 August 2005 and our unqualified opinion is expressed as at that date.
Chartered Accountants
Auckland
48
SKYCITY Entertainment Group Limited Annual Report 2005
Statements of
Financial Performance
FOR ThE yEAR ENDED 30 JUNE 2005
NOTES
Operating revenue
Investment revenue
Other revenue
Total operating revenue
Total operating expenses
earnings before interest expense, taxation,
depreciation and amortisation (ebITda)
Depreciation
Amortisation of other intangibles and licences
Amortisation of goodwill
Total depreciation and amortisation
earnings before interest and taxation (ebIT)
Interest expense
surplus before taxation
Taxation expense
surplus after taxation
Net surplus attributable to minority interest
2
3
3
3
12
9
ConsolIdaTed
parenT CompanY
2005
$000
671,941
10,496
1,794
2004
$000
590,479
2,178
1,500
684,231
(398,419)
594,157
(355,396)
2005
$000
–
135,972
2,653
138,625
(17,365)
2004
$000
–
131,829
7,163
138,992
(20,098)
285,812
238,761
121,260
118,894
(55,750)
(5,567)
(1,374)
(44,668)
(2,464)
(545)
(62,691)
(47,677)
223,121
(81,035)
142,086
(36,968)
105,118
(1,111)
191,084
(48,563)
142,521
(40,400)
102,121
(1,899)
(14)
–
–
(14)
(13)
–
–
(13)
121,246
(13,444)
118,881
(14,050)
107,802
104,831
–
–
107,802
104,831
–
–
net surplus attributable to parent shareholders
104,007
100,222
107,802
104,831
The above statements should be read in conjunction with the accompanying notes.
49
SKYCITY Entertainment Group Limited Annual Report 2005
Statements of
Movements in Equity
FOR ThE yEAR ENDED 30 JUNE 2005
NOTES
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
neT surplus for The Year
Comprising:
Parent shareholder’s interest
Minority interest
other recognised revenues and expenses
Foreign currency translation reserve movement
Total recognised revenues and expenses
Acquisition of minority interest
Buyback of shares
Movement in employee share entitlement reserve
Exercise of share options
Shares issued under dividend reinvestment plan
Employee share entitlements issued
Distributions to owners
Minority interest in contributions from owners
6
9
5
9
4
5
4
4
4
7
9
104,007
1,111
100,222
1,899
107,802
104,831
–
–
105,118
102,121
107,802
104,831
(8,429)
(9,953)
–
–
96,689
92,168
107,802
104,831
(1,783)
(13,754)
(2,009)
4,685
6,106
2,869
(114,658)
–
(5,190)
(27,656)
511
4,193
–
2,816
–
(13,754)
(2,009)
4,685
6,106
2,869
–
(27,656)
511
4,193
–
2,816
(100,004)
(114,658)
(100,004)
1,200
–
–
Movements in equity for the year
(21,855)
(31,962)
(8,959)
(15,309)
equITY aT The beGInnInG of The Year
Comprising:
Parent shareholder’s interest
Minority interest
equITY aT The end of The Year
Comprising:
Parent shareholder’s interest
Minority interest
211,087
3,516
240,958
5,607
202,359
217,668
–
–
214,603
246,565
202,359
217,668
189,904
2,844
211,087
3,516
193,400
202,359
–
–
192,748
214,603
193,400
202,359
The above statements should be read in conjunction with the accompanying notes.
50
SKYCITY Entertainment Group Limited Annual Report 2005
Statements of
Financial Position
AS AT 30 JUNE 2005
equITY
Share capital
Reserves
Retained earnings
shareholders’ equity
Minority interests
Total equity
lIabIlITIes
non-current liabilities
Borrowings
Deferred tax
Convertible notes
Subordinated debt – capital notes
Total non-current liabilities
Current liabilities
Payables and accruals
Borrowings
Subordinated debt – capital notes
Subordinated debt – other
Total current liabilities
Total liabilities
Total equity and liabilities
asseTs
non-current assets
Investments in subsidiaries
Investments in associates
Property, plant and equipment
Intangible assets
Other investments
Future income tax benefit
Total non-current assets
Current assets
Cash and bank balances
Receivables and prepayments
Inventories
Income tax receivable
Total current assets
Total assets
ConsolIdaTed
parenT CompanY
NOTES
2005
$000
2004
$000
2005
$000
2004
$000
4
5
6
9
10
11
16
14
13
10
14
15
19
20
17
24
22
23
25
225,777
(17,948)
(17,925)
189,904
2,844
225,871
(7,510)
(7,274)
211,087
3,516
225,777
4,653
(37,030)
193,400
–
225,871
6,662
(30,174)
202,359
–
192,748
214,603
193,400
202,359
956,795
35,450
–
121,510
579,967
27,216
8,910
–
–
–
–
121,510
1,113,755
616,093
121,510
–
–
–
–
–
97,297
758
–
100,000
93,619
101,000
149,644
–
287,755
–
–
–
1,891
–
149,644
–
198,055
344,263
287,755
151,535
1,311,810
960,356
409,265
151,535
1,504,558
1,174,959
602,665
353,894
–
281
932,658
357,402
79,539
16,384
–
255
750,267
212,373
78,025
14,645
598,950
–
788
–
–
–
211,660
–
245
–
–
–
1,386,264
1,055,565
599,738
211,905
62,849
37,158
5,382
12,905
53,272
53,106
3,017
9,999
118,294
119,394
3
2,924
–
–
2,927
2
141,987
–
–
141,989
1,504,558
1,174,959
602,665
353,894
The above statements should be read in conjunction with the accompanying notes.
51
SKYCITY Entertainment Group Limited Annual Report 2005
Statements of
Cash Flows
FOR ThE yEAR ENDED 30 JUNE 2005
NOTES
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
operaTInG aCTIVITIes
Cash was provided from:
Receipts from customers
Interest received
Dividends received
Cash was applied to:
Payments to suppliers and employees
Interest paid
Income taxes paid
Other taxes paid
667,845
3,571
5,624
574,325
6,421
163
677,040
580,909
(347,654)
(81,035)
(33,799)
(35,898)
(296,113)
(47,230)
(53,828)
(27,024)
–
2,399
3,467
5,866
(13,509)
(13,444)
–
–
–
598
–
598
(18,241)
(14,273)
(51,014)
93
(498,386)
(424,195)
(26,953)
(83,435)
net cash inflows/(outflows) from operating activities
178,654
156,714
(21,087)
(82,837)
InVesTmenT aCTIVITIes
Cash was provided from:
Dividends from subsidiaries
Cash was applied to:
Purchase and construction of fixed assets
Capitalised interest paid
Advances and loans to subsidiaries
Purchase of investment
Purchase of subsidiaries
–
–
–
–
130,000
130,000
130,000
130,000
(146,159)
(5,780)
–
–
(247,910)
(145,874)
(6,784)
–
(94,609)
(33,270)
(399,849)
(280,537)
19
(557)
–
–
–
–
(557)
(121)
–
(1,800)
–
(25,377)
(27,298)
net cash inflows/(outflows) from investment activities
(399,849)
(280,537)
129,443
102,702
fInanCInG aCTIVITIes
Cash was provided from:
Proceeds from long-term debt
Exercise of share options
Advances from subsidiaries
Advances from minority interests
Gains on foreign currency swaps hedging investment
in foreign operations
Cash was applied to:
Buyback of shares
Repayment of short-term debt
Repayment of long-term debt
Distributions to shareholders
665,850
4,685
–
–
617,000
4,193
–
1,200
–
4,685
37,400
–
–
4,193
103,604
–
–
1,500
–
–
670,535
623,893
42,085
107,797
(13,754)
–
(317,398)
(108,552)
(27,656)
(1,000)
(374,071)
(100,004)
(13,754)
–
(28,134)
(108,552)
(27,656)
–
–
(100,004)
(439,704)
(502,731)
(150,440)
(127,660)
net cash inflows/(outflows) from financing activities
230,831
121,162
(108,355)
(19,863)
The above statements should be read in conjunction with the accompanying notes.
52
SKYCITY Entertainment Group Limited Annual Report 2005
Statements of
Cash Flows (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
NOTES
net increase/(decrease) in cash held
Foreign currency translation adjustment
Opening cash and bank
Cash at the end of the year
Composition of cash
Cash and bank
reConCIlIaTIon WITh operaTInG surplus
reported surplus after tax
Associated entity surpluses
Minority interests
Items not involving cash flows and non-operating cash flows
Depreciation expense
Increase in employee share entitlement reserve
Amortisation of licences, goodwill and other intangibles
Amortisation of deferred expenditure
Increase in deferred taxation
Increase in future income tax benefit
Write-off of associate (Canbet investment)
Dividend from subsidiary
Write-down of subsidiary
Subsidiary funding transactions
Gain on foreign currency interest rate swap
Unrealised gain on investments
Movement in foreign exchange
Impact of changes in working capital items
(Increase)/decrease in receivables and prepayments
(Increase)/decrease in inventory
Increase/(decrease) in payables and accruals
(Increase)/decrease in income tax receivable
Items classified as investing activities
Capitalised items included in working capital movements
ConsolIdaTed
parenT CompanY
2005
$000
9,636
(59)
53,272
2004
$000
(2,661)
(1,331)
57,264
62,849
53,272
62,849
62,849
53,272
53,272
2005
$000
2004
$000
1
–
2
3
3
3
2
–
–
2
2
2
104,007
(26)
1,111
100,222
(117)
1,899
107,802
–
–
104,831
–
–
105,092
102,004
107,802
104,831
55,750
869
6,941
–
8,234
(1,739)
–
–
–
–
–
(1,488)
–
68,567
15,986
(2,391)
3,678
(2,906)
44,668
3,336
3,010
1,303
2,533
(11,494)
20,904
–
–
–
(1,500)
–
1,573
14
869
–
–
–
–
–
(130,000)
–
(424,699)
–
–
–
13
3,336
–
378
–
–
–
(130,000)
2,214
(80,456)
–
–
6
64,333
(553,816)
(204,509)
(29,742)
(119)
28,783
(9,684)
139,063
–
285,864
–
17,328
–
(487)
–
14,367
(10,762)
424,927
16,841
(9,372)
(9,372)
1,139
1,139
–
–
–
–
net cash flow from operating activities
178,654
156,714
(21,087)
(82,837)
The above statements should be read in conjunction with the accompanying notes.
53
SKYCITY Entertainment Group Limited Annual Report 2005
Statement of
Accounting Policies
FOR ThE yEAR ENDED 30 JUNE 2005
entities reporting
The financial statements for the parent are for SKyCITy Entertainment Group Limited (the parent company) and the consolidated
financial statements of the group comprising SKyCITy Entertainment Group Limited, its subsidiaries, associates and joint ventures.
statutory base
SKyCITy Entertainment Group Limited is a company registered under the Companies Act 1993 and is an issuer in terms of the
Securities Act 1978.
The financial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the
Companies Act 1993.
measurement base
The financial statements have been prepared on the historical cost basis, as modified by the revaluation of certain assets as identified
in specific accounting policies below.
accounting policies
The financial statements are prepared in accordance with New Zealand generally accepted accounting practice. The accounting policies
that materially affect the measurement of financial performance, financial position and cash flows are set out below.
Group fInanCIal sTaTemenTs
The group financial statements consolidate the financial statements of subsidiaries, using the purchase method, and include the results
of associates using the equity method.
Subsidiaries are entities that are controlled, either directly or indirectly, by the parent.
Associates are entities in which the parent, either directly or indirectly, has significant influence but not a controlling interest.
All material transactions between subsidiaries or between the parent and subsidiaries are eliminated on consolidation.
The results of subsidiaries or associates acquired or disposed of during the year are included in the consolidated Statements of
Financial Performance from the date of acquisition or up to the date of disposal.
reVenue
Revenues include casino, hotel, conventions, food and beverage, tower admissions, cinema admissions and other revenues. Casino
revenues represent the net win to the casino from gaming activities, being the difference between amounts wagered and amounts won
by casino patrons.
Revenues exclude the retail value of rooms, food, beverage and other promotional allowances provided on a complimentary basis
to customers.
InCome TaX
The company follows the liability method of accounting for deferred taxation. The taxation charge against surplus for the year is the
estimated liability in respect of that surplus after allowance for permanent differences between accounting and tax rules.
The impact of all timing differences between accounting and taxable income is recognised as a deferred tax liability or future income
tax benefit. This is the comprehensive basis for the calculation of deferred tax under the liability method. Timing differences relating to
interest capitalised to buildings are determined on a net present value basis over the estimated life of the buildings.
A deferred tax asset, or the effect of losses carried forward that exceed the deferred tax liability, is recognised in the financial statements
only where there is virtual certainty that the benefit of the timing differences, or losses, will be utilised.
Goods and serVICes TaX (GsT)
The Statements of Financial Performance and Statements of Cash Flows have been prepared so that all components are stated net of
GST. All items in the Statements of Financial Position are stated net of GST, with the exception of receivables and payables, which
include GST invoiced.
54
SKYCITY Entertainment Group Limited Annual Report 2005
foreIGn CurrenCIes
Transactions
Transactions denominated in a foreign currency are converted to New Zealand dollars at the exchange rates in effect at the date of
the transaction, except when forward foreign exchange contracts have been taken out to cover short-term forward currency
commitments. Where short-term forward foreign exchange contracts have been taken out, the transaction is translated at the rate
contained in the contract.
Foreign currency receivables and payables at balance date are translated at exchange rates current at balance date. Exchange gains and
losses are brought to account in determining the surplus for the year, except where monetary liabilities are identified as a hedge against
an independent foreign operation.
foreign operations
Revenues and expenses of independent foreign operations are translated to New Zealand dollars at the exchange rates in effect at
the date of the transaction, or at rates approximating them. Assets and liabilities are converted to New Zealand dollars at the rates of
exchange ruling at balance date.
Exchange differences arising from the translation of independent foreign operations are recognised in the foreign currency
translation reserve, together with unrealised gains and losses on foreign currency monetary liabilities that are identified as hedges
against these operations.
properTY, planT and equIpmenT
The cost of assets is the value of the consideration given to acquire the assets, and the value of other directly attributable costs, which
have been incurred in bringing the assets to the location and condition necessary for their intended service. Funding costs incurred
during the period of construction are capitalised as part of the total cost of the assets.
The cost of self-constructed assets includes the cost of all materials used in construction, direct labour on the project, costs of obtaining
Resource Management Act consents, financing costs that are directly attributable to the project and an appropriate proportion of
variable and fixed overheads. Costs cease to be capitalised as soon as the asset is ready for productive use and do not include any
inefficiency costs.
depreCIaTIon
As construction is completed and property, plant and equipment are used in operations, depreciation is charged on a straight-line basis
so as to write off the cost of the assets to their estimated residual value over their expected useful lives. Gains and losses on disposals of
property, plant and equipment are taken into account in determining the operating result for the year. The estimated economic lives are
as follows:
Category
Buildings
Building fit-out
Plant and equipment
Fixtures and fittings
Software
Vehicles
deferred eXpendITure
estimated useful life
5-75 years
10 years
2-75 years
3-20 years
3-5 years
3 years
Costs directly incurred in obtaining and operating funding arrangements, such as origination, commitment and transaction fees, are
amortised to earnings over the period of the funding arrangement. If an arrangement does not proceed, costs incurred in setting up the
arrangement are expensed to earnings immediately.
Operator rights are expensed to earnings over the period of each management contract.
55
SKYCITY Entertainment Group Limited Annual Report 2005
Statement of
Accounting Policies (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
leased asseTs
as lessee – operating leases
Leases under which the lessor effectively retains all the risks and benefits of ownership are classified as operating leases. Operating lease
payments are recognised as an expense in the periods of expected benefit.
as lessor – operating leases
Property leased out under operating leases is included as property, plant and equipment in the Statements of Financial Position and
depreciated over its expected useful life. Rental income is brought to account on a straight-line basis over the lease term.
InVesTmenTs
The parent company’s investment in the share of its subsidiaries is stated at cost in the Statements of Financial Position.
Other investments are stated at the lower of cost or net realisable value.
JoInT VenTures
When a member of the group participates in a joint venture arrangement, that member recognises its proportionate interest in the
individual assets, liabilities, revenues and expenses of the joint venture. The liabilities recognised include its share of those for which it is
jointly liable.
InTanGIble asseTs
amortisation of casino licences acquired
Amortisation of casino licences is calculated on a straight-line basis so as to expense the cost of the licences over their legal lives. The
directors review the carrying amounts annually and adjust the value of amortisation if an impairment in value above normal amortisation
has occurred.
Goodwill
Goodwill represents the excess of purchase consideration over the fair value of the net identifiable assets held by a subsidiary at the time
of acquisition of shares in that subsidiary. Goodwill is capitalised and amortised over the period of expected benefit, which may be up
to 20 years from the time of acquisition. The directors review the carrying amount annually and adjust the value of goodwill if impairment
in value above normal amortisation has occurred.
ImpaIrmenT
Annually, the directors assess the carrying value of each asset. Where the estimated recoverable amount of the asset is less than its
carrying amount, the asset is written down. The impairment loss is recognised in the Statements of Financial Performance.
InVenTorIes
Inventories, all of which are finished goods, are stated at the lower of cost and net realisable value determined on a first in,
first out basis.
aCCounTs reCeIVable
Accounts receivable are carried at estimated realisable value after providing against debts where collection is doubtful. Bad debts are
written off during the year in which they are identified.
emploYee enTITlemenTs
Employee entitlements to salaries and wages, non-monetary benefits, annual leave and other benefits are recognised when they accrue
to employees. This includes the estimated liability for salaries and wages and annual leave as a result of services rendered by employees
up to balance date.
56
SKYCITY Entertainment Group Limited Annual Report 2005
fInanCIal InsTrumenTs
recognised
Financial instruments carried on the Statements of Financial Position include cash and bank balances, investments, receivables, trade
creditors and borrowings. These instruments are carried at their estimated fair value. For example, receivables are carried net of the
estimated doubtful receivables. The particular recognition methods adopted are disclosed in the individual policy statements associated
with each item.
Where possible, financial assets are supported by collateral or other security. These arrangements are described in the individual policy
statements associated with each item.
unrecognised
The parent company and group are also parties to financial instruments that have not been recognised in the financial statements.
These instruments reduce exposure to fluctuations in interest rates and include fixed rate borrowings, cross-currency interest rate swaps,
interest rate swaps and forward rate agreements, which have been transacted. Any risks associated with these instruments are not
recorded in the financial statements. The net differential paid or received is recognised as a component of interest expense over the
period of the agreement.
Forward exchange contracts entered into as hedges of foreign exchange assets and liabilities are valued at exchange rates prevailing at
period end. Any unrealised gains or losses are offset against foreign exchange gains and losses on the related asset or liability. Premiums
paid on currency options are amortised over the period to maturity.
Full disclosure of information about financial instruments to which the group is a party is provided in note 26.
sTaTemenTs of Cash floWs
The following are definitions of the terms used in the consolidated and parent company’s Statements of Cash Flows:
–
–
–
Operating activities are those activities relating to the trading and management of the business and include all transactions and other
events that are not investing or financing activities. Cash receipts from customers are net of complimentaries.
Investing activities are those activities relating to the acquisition, construction, holding and disposal of fixed assets and of
investments. Investments can include securities not falling within the definition of cash.
Financing activities are those activities that result in changes in the size and composition of the capital structure of the group. This
includes both equity and debt not falling within the definition of cash. Share issues/repurchases and dividends paid in relation to the
capital structure are included in financing activities.
–
Cash is considered to be cash on hand including cash for use within the casino and current accounts in banks, net of bank overdrafts
and short-term deposits.
CapITal noTe InTeresT
Interest on capital notes is expensed to earnings consistent with other interest costs and is included in funding expenses in the
Statements of Financial Performance.
share opTIons
No remuneration expense is recognised in respect of share options issued pursuant to Executive and Non-Executive Director Share
Option Plans. The Non-Executive Director Share Option Plan expired in June 2003 and was not renewed. When the options are
exercised, the proceeds received are credited to share capital.
pre-lICenCe eXpendITure
Pre-licence expenditure relates to expenditure incurred to obtain a casino premises licence. Pre-licence expenditure is expensed
as incurred.
ComparaTIVes
Certain comparatives have been restated in order to conform with current year presentation.
Changes in accounting policies
There have been no significant changes in accounting policies during the current year. Accounting policies have been applied on
a basis consistent with the prior year.
57
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements
FOR ThE yEAR ENDED 30 JUNE 2005
1. seGmenT InformaTIon
GeoGraphIC seGmenTs
assets
revenue
result
Segment
Interest expense
Non-recurring item
net segment result
neW zealand
ausTralIa
ToTal
2005
$000
2004
$000
2005
$000
2004
$000
2005
$000
2004
$000
1,028,490
948,833
476,068
226,126
1,504,558
1,174,959
485,000
469,916
199,231
124,241
684,231
594,157
188,646
(51,688)
–
193,982
(34,495)
–
34,475
(29,347)
–
18,006
(14,068)
(20,904)
223,121
(81,035)
–
211,988
(48,563)
(20,904)
136,958
159,487
5,128
(16,966)
142,086
142,521
The result is that of the Group before income tax and minority interest. The 2004 non-recurring item related to the write-off of the
Canbet Limited investment.
The Group currently operates in the entertainment, leisure and recreation, and tourism sectors.
2. reVenue
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
Sales revenue
671,941
590,479
26
225
–
5,399
4,846
–
1,794
–
117
163
–
–
1,898
–
1,500
–
–
–
–
133,467
–
2,505
–
–
2,653
–
–
–
130,000
–
598
1,231
–
7,163
684,231
594,157
138,625
138,992
Investment revenue
Share of associated company profit after tax
Dividends from associated companies
Dividends from wholly-owned entities
Dividends from related entities
Interest received
Inter-company interest received
other revenue
Foreign currency gains
Other revenue
Total revenue
58
SKYCITY Entertainment Group Limited Annual Report 2005
3. eXpenses
FOR ThE yEAR ENDED 30 JUNE 2005
Included within expenses are the following items:
Depreciation – buildings
Depreciation – plant and equipment
Depreciation – motor vehicles
Depreciation – furniture and fittings
Depreciation – other
Total depreciation
Loss on sale of property, plant and equipment
Rental expense on operating leases
Employee remuneration
Foreign currency translation losses
Costs of offering credit
Bad debts written-off
Increase in estimated doubtful debts
Cost of borrowings
Interest paid
Other funding expenses
Governance expenses
Directors’ fees*
fees paid to principal auditors
Audit:
Compliance audit fees
Statutory audit fees
Audit-related services:
Accounting advice and assistance
Financial due diligence
IT project quality assurance
International Financial Reporting Standards accounting assistance
Tax compliance services
Other services:
Taxation advisory services
Audit fees paid to other auditors
Total amounts paid to auditors
sundry expenses
Community trust and donations
unusual items
Write-down of investment in subsidiary
Write-off of investment in associate
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
15,504
33,833
175
6,171
67
55,750
632
7,768
185,790
–
10,190
29,186
48
5,244
–
44,668
–
7,674
160,675
92
–
444
1
363
–
13
–
1
–
14
–
55
10,985
–
–
–
–
5
–
8
–
13
–
56
10,970
–
–
–
79,367
1,668
46,656
1,907
13,158
286
14,050
–
978
392
966
362
15
560
575
96
333
–
130
305
864
1,097
1,097
38
2,574
360
315
675
131
555
71
156
205
1,118
603
603
51
15
88
103
96
–
–
–
–
96
–
–
–
2,447
199
4,311
3,350
–
–
–
20,904
–
–
–
–
36
36
87
–
–
–
182
269
235
235
–
540
–
2,214
–
* In July 2004 a retirement allowance was paid to Jon Hartley who retired as chairman on 31 March 2004. At July 2004 the retirement allowance provisions
for directors were discontinued and the existing retirement entitlements were frozen and accrued. At the same time directors’ fees were increased by an
amount equal to the loss of the continuing retirement benefit accrual.
59
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
4. share CapITal
Issued and paId-up CapITal
ordinary shares
Balance at the beginning of the year
Shares issued under dividend reinvestment plan
Exercise of share options
Shares issued under employee bonus scheme
Shares repurchased and cancelled
Closing share capital
ordInarY shares
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
225,871
6,106
4,685
2,869
(13,754)
246,518
225,871
246,518
–
4,193
2,816
6,106
4,685
2,869
–
4,193
2,816
(27,656)
(13,754)
(27,656)
225,777
225,871
225,777
225,871
As at 30 June 2005 there were 417,613,974 shares issued and fully paid (2004: 416,401,490). All ordinary shares rank equally with one
vote attached to each fully-paid ordinary share.
dIVIdend reInVesTmenT plan
Pursuant to the Dividend Reinvestment Plan approved by the board of directors on 17 February 2005 1,212,484 shares were issued in
lieu of a cash dividend (2004: nil). The strike price was $5.0356 (2004: n/a).
eXeCuTIVe share opTIon plan
1999 plan
Options issued prior to 2002 are pursuant to the Executive Share Option Plan approved by shareholders at the annual meeting of
the company held on 28 October 1999. Options issued under the 1999 Plan are not exercisable until one year after the date of issue
provided the terms and conditions of the Plan are met and lapse if not exercised within five years of issue.
2002 plan
Options have also been issued pursuant to the Executive Share Option Plan approved by the board in August 2002. Options issued to
executives under the 2002 Plan are exercisable after the third anniversary of the date of issue provided the terms and conditions of the
Plan are met and lapse if not exercised within five years of issue.
The exercise price of options issued under both the 1999 and 2002 Plans is the relevant base exercise price of the option (as
defined in the plans), adjusted for the company’s estimated cost of equity and dividends between the issue date and the exercise
date of the options.
Movements in the number of share options outstanding under the 1999 and 2002 Executive Share Option Plans are as below.
Balance at the beginning of the year
Granted
Exercised
Lapsed
ConsolIdaTed
parenT CompanY
2005
2004
2005
2004
5,288,459
2,475,500
(526,595)
(399,334)
4,798,140
1,062,000
(435,348)
(136,333)
5,288,459
2,475,500
(526,595)
(399,334)
4,798,140
1,062,000
(435,348)
(136,333)
balance at the end of the year (number of options)
6,838,030
5,288,459
6,838,030
5,288,459
60
SKYCITY Entertainment Group Limited Annual Report 2005
4. share CapITal (ConTInued)
Executive share options outstanding at the end of the year have the following terms:
ISSUE
DATE
30/08/00
04/09/01
10/09/02
09/09/03
09/09/03
08/09/04
ExPIRy
DATE
30/08/05
04/09/06
10/09/07
09/09/08
09/09/08
08/09/09
BASE ExERCISE
PRICE AT DATE
OF ISSUE
OPTION VALUE
AT DATE OF
ISSUE
ConsolIdaTed
parenT CompanY
2005
2004
2005
2004
$7.68
$11.61
$7.05
$8.83
$4.42
$4.44
$0.37
$0.82
$0.46
$0.58
$0.29
$0.31
–
459,000
3,238,863
865,667
450,000
1,824,500
348,429
539,500
3,395,530
1,005,000
–
–
–
459,000
3,238,863
865,667
450,000
1,824,500
348,429
539,500
3,395,530
1,005,000
–
–
6,838,030
5,288,459
6,838,030
5,288,459
As a result of one-for-one share splits on 16 November 2001 and 14 November 2003, the 2000 and 2001 options all convert to four
shares upon exercise, and the 2002 and 2003 options, with the exception of a 450,000 tranche issued on 9 September 2003,
convert to two shares upon exercise.
The 450,000 options issued on 9 September 2003 and the 2004 options covert to one share upon exercise.
non-eXeCuTIVe dIreCTor share opTIons
Pursuant to the Non-Executive Directors’ Share Option Plan (2000), approved by shareholders at the annual meeting of the company
on 26 October 2000, 62,892 options remain on issue to non-executive directors as at 30 June 2005 (2004: 129,211).
Options lapse if not exercised within five years of issue. The exercise price of the options issued under the Plan is the relevant base
exercise price of the option (as defined in the Plan), adjusted for the company’s estimated cost of equity and dividends between the
issue date and the exercise date of the options.
The Non-Executive Directors’ Share Option Plan (2000) expired in June 2003 and was not renewed.
Movements in the number of share options outstanding under the Non-Executive Directors’ Share Option Plan are as below.
Balance at the beginning of the year
Exercised
ConsolIdaTed
parenT CompanY
2005
2004
2005
2004
129,211
(66,319)
150,175
(20,964)
129,211
(66,319)
150,175
(20,964)
balance at the end of the year (number of options)
62,892
129,211
62,892
129,211
Non-executive share options outstanding at the end of the year have the following terms:
ISSUE
DATE
04/09/01
10/09/02
ExPIRy
DATE
04/09/06
10/09/07
BASE ExERCISE
PRICE AT DATE
OF ISSUE
OPTION VALUE
AT DATE OF
ISSUE
ConsolIdaTed
parenT CompanY
2005
2004
2005
2004
$11.61
$7.05
$0.82
$0.48
–
62,892
24,390
104,821
–
62,892
24,390
104,821
62,892
129,211
62,892
129,211
61
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
4. share CapITal (ConTInued)
As a result of one-for-one share splits on 16 November 2001 and 14 November 2003, the 2001 options converted to four shares
and the 2002 options will convert to two shares, when exercised.
opTIon ValuaTIon
The options are valued using the Black-Scholes model. The calculation is prepared by Deloitte Corporate Finance and reviewed by
PricewaterhouseCoopers as auditors. Under this calculation the value of all options issued during the year was $627,905 (2004: $746,460).
repurChase and CanCellaTIon of shares
On 2 September 2004, SKyCITy Entertainment Group Limited announced that it would commence a share buyback programme of
the company’s shares from 8 September 2004. The share buyback programme was completed on 29 April 2005. Summary details
are set out below.
DATE
September 2004
October 2004
November 2004
February 2005
March 2005
April 2005
Total shares repurchased
ShARES
REPURChASED
AVERAGE
PURChASE
PRICE
818,535
593,010
9,614
20,000
160,000
1,398,841
3,000,000
4.46
4.43
4.65
4.89
4.94
4.58
4.58
Of the three million shares bought back during the financial year, 2,788,163 shares have been cancelled to offset shares that have been
issued to employees in relation to incentive and option share entitlements and 211,837 shares are held as treasury stock as at 30 June 2005.
5. reserVes
Foreign currency translation reserve
Employee share entitlement reserve
Total reserves
analYsIs
foreign currency translation reserve
Balance at the beginning of the year
Effect of hedging the net investment of overseas subsidiaries
Exchange difference on translation of overseas subsidiaries
balance at the end of the year
employee share entitlement reserve
Balance at the beginning of the year
Less value of shares issued during the year
Less cash issued in lieu of shares
Plus value of share entitlements for the current year
balance at the end of the year
62
ConsolIdaTed
parenT CompanY
2005
$000
(22,601)
4,653
(17,948)
(14,172)
4,052
(12,481)
(22,601)
6,662
(2,869)
(9)
869
4,653
2004
$000
(14,172)
6,662
(7,510)
(4,219)
(3,885)
(6,068)
(14,172)
6,151
(2,816)
(9)
3,336
6,662
2005
$000
–
4,653
4,653
–
–
–
–
6,662
(2,869)
(9)
869
4,653
2004
$000
–
6,662
6,662
–
–
–
–
6,151
(2,816)
(9)
3,336
6,662
SKYCITY Entertainment Group Limited Annual Report 2005
5. reserVes (ConTInued)
Under the SKyCITy Performance Pay Incentive Plan (PPI), selected employees have been eligible for performance-related bonuses in
respect of each of the financial years ending 30 June 2000 through 30 June 2005. The employee share entitlement reserve represents
the value of ordinary shares to be issued in respect of the plan for the years ended 30 June 2003 through 30 June 2005.
Shares under PPI are issued in three equal instalments, being one third of the shares on the bonus declaration date, and provided
eligibility criteria continue to be met, one-third on the next entitlement date (approximately 12 months later) and one-third on the final
entitlement date (approximately 24 months later).
Shares are issued at the average closing price of SKyCITy Entertainment Group Limited’s shares on the New Zealand Exchange for the
ten business days following the release to the New Zealand Exchange of the SKyCITy Entertainment Group Limited’s annual result for
the relevant year of the Plan.
Shares issued have the same rights as existing ordinary shares and are issued as soon as possible after the tenth business day following
the release of the SKyCITy Entertainment Group Limited annual result.
6. reTaIned earnInGs
Balance at the beginning of the year
Net surplus for the year
Dividends paid
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
(7,274)
104,007
(114,658)
(7,492)
100,222
(30,174)
107,802
(35,001)
104,831
(100,004)
(114,658)
(100,004)
balance at the end of the year
(17,925)
(7,274)
(37,030)
(30,174)
Composition
Parent and subsidiaries
Associates
7. dIVIdends
ordinary dividends
Interim dividend paid in cash or reinvested (refer note 4)
Prior year final dividend paid in cash
(18,658)
733
(17,925)
(7,981)
707
(7,274)
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
50,130
64,528
45,691
54,313
50,130
64,528
45,691
54,313
Total dividends
114,658
100,004
114,658
100,004
The dividends are fully imputed.
Subsequent to year end the board of directors resolved to pay a final dividend of 12.0 cents per ordinary share, a total of
$50,113,677. The dividend will be paid on 7 October 2005 to all shareholders on the company’s register at the close of business
on Friday, 23 September 2005.
63
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
8.
ImpuTaTIon CredITs
Imputation credit account
Balance at the beginning of the year
Tax payments, net of refunds
Credits attached to dividends paid
Supplementary tax credits
balance at the end of the year
ConsolIdaTed
2005
$000
2004
$000
9,636
18,716
(54,232)
8,555
7,435
45,398
(49,255)
6,058
(17,325)
9,636
As required by relevant tax legislation, the imputation credit account had a credit balance as at 31 March 2005.
The current debit balance is a result of imputation credits attached to the interim dividend paid in April 2005.
9. mInorITY InTeresTs
Balance at the beginning of the year
Share of surpluses in subsidiaries
Increased shareholding in SKyCITy hamilton Limited and
SKyCITy Leisure Limited
Minority interest in contributions from owners
balance at the end of the year
ConsolIdaTed
2005
$000
3,516
1,111
(1,783)
–
2,844
2004
$000
5,607
1,899
(5,190)
1,200
3,516
sKYCITY hamIlTon lImITed (formerly riverside Casino limited)
On 30 June 2004, SKyCITy Entertainment Group Limited purchased the 15% of SKyCITy hamilton Limited owned by Tainui
Developments Limited.
With effect from 30 June 2005, SKyCITy Entertainment Group Limited purchased the remaining 30% of SKyCITy hamilton Limited.
All prior period minority interest relating to this 30% shareholding in SKyCITy hamilton Limited is now reflected in the fair value and
goodwill relating to the SKyCITy hamilton Limited investment.
sKYCITY leIsure lImITed
From 30 June 2004, SKyCITy Leisure Limited was treated as a wholly-owned subsidiary of SKyCITy Entertainment Group Limited
following the issuance of compulsory acquisition notices to outstanding ordinary share and mandatory convertible note holders on
15 June 2004.
64
SKYCITY Entertainment Group Limited Annual Report 2005
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
758
1,000
–
100,000
758
101,000
52
52
66,827
66,827
961,671
(4,928)
517,000
(3,860)
956,795
579,967
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10. borroWInGs
CurrenT
secured
Bank loans
unsecured
Bank loans
Total current borrowings
non-CurrenT
secured
Bank loans
unsecured
Unsecured loans
Less deferred funding expenses
Total non-current borrowings
sYndICaTed banK faCIlITY
At 30 June 2005, SKyCITy Entertainment Group Limited had in place a $650,000,000 (2004: $1,000,000,000) facility on an unsecured,
negative pledge basis. The funding syndicate is comprised of ANZ National Bank Limited, Bank of New Zealand Limited and
Commonwealth Bank of Australia, New Zealand Branch. During the year the $350,000,000 bridging tranche of the facility was repaid
and cancelled. As at 30 June 2005 the undrawn amount is $260,000,000 (2004: $387,000,000).
unITed sTaTes prIVaTe plaCemenT
During the year, SKyCITy Entertainment Group Limited approached investors in the US private placement market with the intention of
diversifying funding sources and lengthening the borrowing term. As a result of this, on 15 March 2005, SKyCITy Entertainment Group
Limited borrowed a combination of New Zealand dollars, Australian dollars and US dollars from private investors (primarily US based) on
an unsecured basis (as at 30 June 2005, NZ$565,670,000 equivalent in total). The funds were comprised as below.
MATURING
March 2012
March 2017
March 2020
Total
NEW ZEALAND
DOLLARS
$000
UNITED STATES
DOLLARS
$000
AUSTRALIAN
DOLLARS
$000
47,275
200,500
74,900
–
21,127
27,000
–
68,402
227,500
–
–
74,900
65
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
10. borroWInGs (ConTInued)
All US dollar borrowing has been converted to New Zealand dollars by way of cross-currency interest rate swaps.
sKYCITY hamIlTon lImITed
At balance date, SKyCITy hamilton Limited had an unsecured bank facility of $18,000,000 (2004: $19,000,000) of which $6,000,000
was drawn down (2004: $9,000,000). Since balance date, this facility has been repaid and cancelled.
sKYCITY leIsure Group
At balance date, SKyCITy Cinemas Fiji Limited had a bank term loan facility of F$908,432 (NZ$758,000) (2004: F$869,899 (NZ$760,202)
secured by first mortgage over the Fiji multiplex. Since balance date, this facility has been repaid and cancelled.
During the year, a bank term loan facility (2004: $37,405,000) in the name of SKyCITy Leisure Limited and a bank cash advance
facility (2004: $20,500,000) in the name of SKyCITy Metro Limited were both repaid and cancelled.
At balance date, Village Rialto Cinemas Limited had a drawn-down bank term loan facility of $210,000. SKyCITy Entertainment Group
Limited’s share is $52,500 (2004: $210,000) and is secured by registered mortgage debenture over Village Rialto Cinemas Limited
(SKyCITy Entertainment Group Limited has a 25% interest in Village Rialto Cinemas Limited). Village SKyCITy Cinemas Limited provides
a guarantee for 50% of the outstanding facility.
WeIGhTed aVeraGe InTeresT raTe
The weighted average interest rate on the Group’s funding facilities (inclusive of margin and hedging derivatives) incurred during
the year ended 30 June 2005 was 7.62% (2004: 7.13%).
11. deferred TaX lIabIlITY
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
non-current
Balance at the beginning of the year
Prior year timing differences
Current year movements
Foreign currency adjustment
Impact of purchase, disposal and amalgamation of subsidiaries
27,216
1,100
4,759
24
2,351
24,683
770
2,722
(959)
–
balance at the end of the year
35,450
27,216
–
–
–
–
–
–
–
–
–
–
–
–
66
SKYCITY Entertainment Group Limited Annual Report 2005
12. InCome TaX
Surplus before tax
142,086
142,521
107,802
104,831
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
permanent differences
Acquisition of SKyCITy Darwin holdings Pty Limited
Dividends received
Capitalised interest
Previously unrecognised tax losses and timing differences
Non-deductible write-off of associate
Inter-company eliminations
Share of associates’ tax-paid earnings
Non-taxable income
Expenditure not deductible for tax
Additional depreciable value
Future income tax benefits not recognised
Adjustment for other tax rates
Foreign exchange rate differences
Tax effect of imputation credits on taxable dividends
Share of partnership expenditure
Foreign exchange variations
Over-provision in prior years
Surplus subject to tax
Tax at 33%
(4,472)
–
(4,716)
–
–
–
(26)
(3,417)
9,229
(616)
–
(10,535)
(180)
(4,556)
(10,893)
(1,153)
1,273
(4,160)
(28,198)
20,904
–
–
–
3,172
(588)
148
(9,886)
382
–
–
–
(1,870)
112,024
122,425
36,968
40,400
–
–
–
–
(133,467)
(130,000)
–
–
–
–
–
–
25,248
24,609
–
–
417
–
–
560
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Income tax recognised in the statements of financial performance
36,968
40,400
Comprising:
Current taxation
Future income tax benefit
Overestimation in prior years
Deferred income tax liability
31,702
87
420
4,759
46,204
(8,017)
(509)
2,722
36,968
40,400
The parent company, together with its New Zealand-based wholly-owned subsidiary companies, excluding SKyCITy Management
Limited, SKyCITy Wellington Limited, SKyCITy hamilton Limited, SKyCITy Investments Christchurch Limited and SKyCITy Leisure
group companies form a consolidated group for income tax purposes. SKyCITy Leisure group companies form a consolidated group
for income tax purposes. Accordingly, income tax payments and imputation credit movements are generally reported on a consolidated
basis and are available to shareholders through their shareholding in the parent company.
At 30 June 2005 the Group has income tax receivable of $12,905,000 (2004: $9,998,860).
67
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
13. paYables and aCCruals
Current
Trade creditors
Accrued expenses
Amounts due to subsidiaries
Employee entitlements
Purchase of minority interest in subsidiary
14. subordInaTed debT – CapITal noTes
Balance at the beginning of the year
Matured during the year
Reissued during the year
Balance at the end of the year
Deferred expenses at cost
Accumulated amortisation
Balance at the end of the year
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
24,802
49,366
–
23,129
–
97,297
12,439
53,782
105
1,679
–
285,971
16,296
11,102
–
–
–
1,891
–
–
–
93,619
287,755
1,891
ConsolIdaTed
parenT CompanY
2005
$000
150,000
(150,000)
121,687
2004
$000
150,000
–
–
2005
$000
150,000
(150,000)
121,687
2004
$000
150,000
–
–
121,687
150,000
121,687
150,000
356
(179)
177
1,875
(1,519)
356
356
(179)
177
1,875
(1,519)
356
net capital notes at the end of the year
121,510
149,644
121,510
149,644
In May 2000, SKyCITy Entertainment Group Limited issued 150 million unsecured subordinated capital notes at an issue price of
$1.00 per note. The capital notes offered holders a fixed interest rate until the first election date, being 15 May 2005. Election dates
will occur every five years after the first election date.
Prior to the election date, the company must notify holders of the proportion of their capital notes it will redeem (if any) and, if
applicable, the new conditions (including as to interest rate, interest dates, new election date, and other modifications to the existing
conditions) that will apply to the capital notes from the election date. holders may then choose either to retain some or all of their
capital notes on the new terms, and/or to convert some or all of their capital notes into SKyCITy Entertainment Group Limited
ordinary shares. SKyCITy Entertainment Group Limited may elect to redeem or purchase some or all of the capital notes that holders
have elected to convert, at an amount equal to the principal amount plus any accrued but unpaid interest.
If capital notes are converted, holders will receive ordinary shares equal in value to the aggregate of the principal amount of the notes
plus any accrued but unpaid interest. The value of the shares is determined on the basis of 95% of the weighted average sale price of
an ordinary share on the New Zealand Exchange during the 15 days prior to the election dates.
68
SKYCITY Entertainment Group Limited Annual Report 2005
14. subordInaTed debT – CapITal noTes (ConTInued)
The capital notes do not carry voting rights. Capital note holders are not entitled to any distributions made by SKyCITy Entertainment
Group Limited in respect of its ordinary shares prior to the conversion date of the capital notes, and do not participate in any change
in value of the issued shares of SKyCITy Entertainment Group Limited.
On 16 May 2005 the capital notes were reissued for a new term of five years to 15 May 2010. The notes were reissued on the same
terms and conditions as the existing capital notes except for the new coupon interest rate of 8.0% (previously 9.25%).
Of the 150,000,000 capital notes, the holders of 103,859,750 notes elected to retain capital notes for a further five-year term. The
remaining 46,140,250 notes were repurchased by SKyCITy Entertainment Group Limited to be held as treasury stock. On 27 June 2005,
20,000,000 of the notes held as treasury stock were sold into the market. As at 30 June 2005, there were 150,000,000 capital notes on
issue of which 121,687,750 are issued with 28,312,250 held as treasury stock by SKyCITy Entertainment Group Limited.
The capital notes have been classified as non-current liabilities based on the 15 May 2010 election date. The 2004 comparative figures
were classified as current based on the 15 May 2005 election date.
15. subordInaTed debT – oTher
ANZ National Bank Limited
Total
ConsolIdaTed
parenT CompanY
2005
$000
100,000
100,000
2004
$000
–
–
2005
$000
–
–
2004
$000
–
–
In June 2005, SKyCITy Entertainment Group Limited arranged a six month fully subordinated facility with ANZ National Bank Limited for
$100,000,000. The facility is fully utilised as at 30 June 2005. This facility matures on 27 December 2005.
16. ConVerTIble noTes
ConsolIdaTed
parenT CompanY
Balance at the beginning of the year
Conversion to ordinary shares
Minority interest in convertible notes purchased during the year
2005
$000
8,910
(8,910)
–
2004
$000
13,365
–
(4,455)
balance at the end of the year
–
8,910
2005
$000
2004
$000
–
–
–
–
–
–
–
–
On 30 June 2005, all convertible notes issued by SKyCITy hamilton Limited were converted to ordinary shares and SKyCITy
Entertainment Group Limited acquired the Riverside Trust’s 30% interest in SKyCITy hamilton Limited, to bring its interest to 100%.
69
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
17. properTY, planT and equIpmenT
Group
buildings
Buildings at cost
land
Land at cost
plant and equipment
Plant and equipment at cost
motor vehicles
Motor vehicles at cost
fixtures and fittings
Fixtures and fittings at cost
other capital assets
Capital work in progress
parenT
plant and equipment
Plant and equipment at cost
furniture, fixtures and fittings
Furniture, fixtures and fittings at cost
other capital assets
Capital work in progress
CosT or
ValuaTIon
$000
2005
aCCum
depn
$000
booK
Value
$000
COST OR
VALUATION
$000
2004
ACCUM
DEPN
$000
BOOK
VALUE
$000
707,505
(95,030)
612,475
492,623
(66,945)
425,678
95,180
–
95,180
84,224
–
84,224
246,989
(159,897)
87,092
218,692
(128,197)
90,495
811
(449)
362
358
(304)
54
82,044
(42,989)
39,055
58,936
(37,800)
21,136
98,494
–
98,494
128,680
–
128,680
1,231,023
(298,365)
932,658
983,513
(233,246)
750,267
432
(196)
236
232
(107)
88
(48)
40
243
(123)
512
–
1,032
(244)
512
788
–
475
–
(230)
125
120
–
245
Borrowing costs in relation to the funding of the SKyCITy Grand hotel, SKyCITy Auckland Convention Centre, the gaming expansion
and car park building purchases have been capitalised to these projects: $5,780,011 (2004: $5,610,912). Total capitalised interest and
facility fees included in the cost of land and buildings at 30 June 2005 is $45,538,629 (2004: $39,758,618).
A memorandum of encumbrance is registered against the title of land for the Auckland casino in favour of Auckland City Council.
Auckland City Council requires prior written consent before any transfer, assignment or disposition of the land. The intent of the
covenant is to protect the Council’s rights under the resource consent, relating to the provision of the bus terminus, public car park
and the provision of public footpaths around the complex.
70
SKYCITY Entertainment Group Limited Annual Report 2005
17. properTY, planT and equIpmenT (ConTInued)
A further encumbrance records the Council’s interest in relation to the sub-soil areas under Federal and hobson Streets used by
SKyCITy as carparking and a vehicle tunnel. The encumbrance is to notify any transferee of Council’s interest as lessor of the sub-
soil areas.
Part of the SKyCITy hamilton Limited property was held on trust for Perry Developments Limited. This area comprised the parts of
the property not comprising the casino premises and the car park. These areas were to have been transferred to Perry Developments
Limited when strata titles were issued for the complex. This interest was purchased by SKyCITy Entertainment Group Limited as part of
the acquisition of the remaining minority interest in SKyCITy hamilton Limited. Drainage rights have been granted over parts of the land
appurtenant to Lot 2 Plan 5.23789 (CT22C/1428). There is also a right of way granted over part of Lot 1 and part of Lot 2 DP580554.
The hamilton site is also subject to the normal rights that the Crown reserves in respect of minerals and mining in relation to the sub-soil
areas. Furthermore, the land title is subject to Section 27B of the State-Owned Enterprises Act 1986 which does not provide for the
owner of the land to be heard in relation to any recommendations of the Waitangi Tribunal for the resumption of the land. At balance
date the company was not aware of any matters pertaining to the land under the State-Owned Enterprises Act 1986.
18. CommITmenTs
The following amounts have been committed to by the Group or parent, but not recognised in the financial statements.
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
operaTInG leases
Non-cancellable operating lease commitments:
Payable not later than one year
Payable later than one, but not later than two years
Payable later than two, but not later than five years
Payable later than five years
11,794
11,651
29,779
261,849
5,710
6,625
14,967
241,405
315,073
268,707
CapITal eXpendITure
Amounts committed to capital expenditure
23,563
63,809
The above capital expenditure relates to purchases of plant and equipment.
2
–
–
–
2
–
7
2
–
–
9
–
71
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
19. InVesTmenTs In subsIdIarIes
The parent’s investment in subsidiaries comprises shares at cost. Significant subsidiaries (including subsidiaries of subsidiaries) are listed.
INTEREST hELD By ThE GROUP
NAME OF ENTITy
PRINCIPAL ACTIVITIES
Abdiel Investments Limited
Property
Queenstown Casinos Limited
Casino premises licence holder
Riverside Fund Limited
holding company
SKyCITy Action Management Limited
Loyalty programme
SKyCITy Auckland holdings Limited
Group funding
SKyCITy Auckland Limited
Casino premises licence holder
SKyCITy Casino Management Limited
Casino operator’s licence holder
SKyCITy Cinemas (Fiji) Limited
SKyCITy Cinemas Limited
Cinema exhibition
Cinema exhibition
SKyCITy Cinemas (Whangarei) Limited
Cinema exhibition
SKyCITy Construction Limited
Non-trading
SKyCITy hamilton Construction Limited
Property owner
SKyCITy hamilton Limited
Casino premises licence holder
SKyCITy International holdings Limited
holding company
SKyCITy Investments Auckland Limited
holding company
SKyCITy Investments Limited
holding company
SKyCITy Leisure holdings Limited
Property and administration
SKyCITy Leisure Limited
holding company
SKyCITy Management (Auckland) Limited
Employment of staff
SKyCITy Metro Limited
Property
SKyCITy Queenstown Investments Limited
Joint venture partner
SKyCITy Wellington Limited
Promotion company
Sky Tower Limited
Non-trading
SKyCITy International ApS
Danish holding company, incorporated in Denmark
SKyCITy Adelaide Pty Limited
Adelaide Casino licence holder and operator,
incorporated in Australia
SKyCITy Australia Finance Pty Limited
Group funding, incorporated in Australia
SKyCITy Australia Limited Partnership
Group funding, incorporated in Australia
SKyCITy Australia Pty Limited
Australian holding company, incorporated in Australia
SKyCITy Darwin holdings Pty Limited
Darwin holding company, incorporated in Australia
SKyCITy Darwin Pty Limited
Darwin Casino licence holder and operator,
incorporated in Australia
Territory Property Trust
Darwin land holder
2005
100%
60%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2004
100%
60%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
100%
–
–
–
72
SKYCITY Entertainment Group Limited Annual Report 2005
19. InVesTmenTs In subsIdIarIes (ConTInued)
All wholly-owned subsidiary companies and significant partly-owned subsidiaries have balance dates of 30 June.
SKyCITy Darwin Pty Limited and Territory Property Trust were acquired as part of the 100% acquisition of SKyCITy Darwin holdings
Pty Limited on 22 July 2004.
aCquIsITIon of subsIdIarY
sKYCITY darwin holdings pty limited
On 22 July 2004, SKyCITy Australia Pty Limited, a wholly-owned subsidiary of SKyCITy Entertainment Group Limited, acquired
100% of the share capital of SKyCITy Darwin holdings Pty Limited.
summarY of The effeCT of aCquIsITIon of subsIdIarIes
net assets acquired – sKYCITY darwin
Working capital balances
Property, plant and equipment
Casino licence
Goodwill
Consideration paid (including costs and taxes)
net cash impact of acquisition of subsidiaries
SKyCITy Darwin
Less deposit paid in 2004 for SKyCITy Darwin
SKyCITy Leisure final stepped acquisition
SKyCITy hamilton Tainui stepped acquisition
SKyCITy hamilton Perry stepped acquisition
net cash impact of acquisitions
ConsolIdaTed
2005
$000
2004
$000
(3,167)
94,050
38,580
92,051
221,514
221,514
(25,377)
7,388
11,102
33,283
247,910
–
–
–
–
–
–
–
–
–
–
–
73
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
20. InVesTmenTs In assoCIaTes
deTaIls of assoCIaTes
The parent’s investment in associates comprises shares at cost. Significant associates (including associates of subsidiaries) are as below.
NAME OF ENTITy
Canbet Limited
Village Cinemas SA (Argentina)
PRINCIPAL ACTIVITIES
Online wagering
Movie exhibition
Vista Entertainment Solutions Limited
Ticket software systems
INTEREST hELD By ThE GROUP
2005
–
25%
25%
2004
33%
25%
25%
Village Cinemas SA is incorporated in Argentina and Vista Entertainment Solutions Limited is incorporated in New Zealand.
Village Roadshow Limited holds an option in respect of 40% of SKyCITy’s shareholding in Village Cinemas SA (10% of total shares).
Refer note 27.
All entities have balance dates of 30 June with the exception of Vista Entertainment Solutions Limited, which has a 31 December balance
date. The directors are not aware of any significant events or transactions since Vista Entertainment Solutions Limited’s balance date.
The investment in Canbet Limited was disposed of during the year. In exchange for SKyCITy Entertainment Group Limited’s share in
Canbet Limited the group received a 6.8% interest in International All Sports Limited, a publicly-listed Australian entity.
resulTs of assoCIaTes
ConsolIdaTed
2005
$000
39
(13)
26
2004
$000
175
(58)
117
ConsolIdaTed
parenT CompanY
2005
$000
255
26
–
–
–
281
2004
$000
2005
$000
2004
$000
21,586
117
(100)
(20,904)
(444)
255
–
–
–
–
–
–
–
–
–
–
–
–
Share of surplus (less deficits) before income tax
Income tax
Total recognised revenues and expenses
InTeresTs In assoCIaTes
Carrying value
Balance at the beginning of the year
Share of total recognised revenues and expenses
Associate disposed of during the year
Write-off of associate during the year
Foreign currency translation impact
Total investments in associates
74
SKYCITY Entertainment Group Limited Annual Report 2005
21. JoInT VenTures
hard roCK JoInT VenTure
The Group’s interest in the hard Rock joint venture was dissolved during the year. There was no significant impact on the Group.
sKYCITY leIsure JoInT VenTures
NAME OF ENTITy
PRINCIPAL ACTIVITIES
Village SKyCITy Cinemas JV
Village SKyCITy hoyts Queen St Cinema JV
Village Rialto Cinemas JV
Damodar Village SKyCITy Fiji Cinemas JV
Cinema owner/operator
Cinema owner/operator
Cinema owner/operator
Cinema owner/operator
INTEREST hELD By ThE GROUP
2005
50%
33%
25%
33%
2004
50%
33%
25%
33%
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
fInanCIal performanCe
The Group’s share of operating revenues and expenses of
joint ventures, proportionately consolidated, was:
Revenue
Expenses
net contribution to Group operating surplus
fInanCIal posITIon
The Group’s share of assets and liabilities of joint ventures,
proportionately consolidated, was:
Current assets
Cash and bank balances
Receivables and prepayments
Other
non-current assets
Property, plant and equipment
Other
Share of total assets included in the Group
liabilities
Payables and accruals
Other
Borrowings
Share of total liabilities included in the Group
29,615
(25,444)
34,529
(28,367)
4,171
6,162
2,568
801
103
3,472
12,117
254
12,371
15,843
2,289
697
810
3,796
2,769
552
205
3,526
14,752
288
15,040
18,566
2,306
1,264
922
4,492
net assets employed in the joint ventures
12,047
14,074
All the above joint ventures have been audited.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
22. oTher InVesTmenTs
Christchurch Casinos Limited
International All Sports Limited
ConsolIdaTed
parenT CompanY
2005
$000
77,983
1,556
2004
$000
78,025
–
79,539
78,025
2005
$000
2004
$000
–
–
–
–
–
–
The purchase of a 40.5% interest in Christchurch Casinos Limited was completed on 28 June 2004 and has been accounted for as
an investment. Christchurch Casinos Limited has a 31 March financial year end.
23. fuTure InCome TaX benefIT
non-current
Balance at the beginning of the year
Prior year timing differences
Current year movements
Previously unrecognised losses and timing differences
Foreign exchange adjustment
Impact of purchase, disposal and amalgamations of subsidiaries
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
14,645
392
(87)
–
(17)
1,451
3,151
933
(1,289)
9,305
(262)
2,807
16,384
14,645
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Realisation of future income tax benefits recognised is subject to the requirements of the income tax legislation being met.
76
SKYCITY Entertainment Group Limited Annual Report 2005
24. InTanGIble asseTs
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
Casino licences
Casino licences at the beginning of the year
Accumulated amortisation at the beginning of the year
Unamortised balance at the beginning of the year
Foreign currency translation
Purchase of Darwin licence
Current year amortisation
195,519
(9,514)
186,005
(1,245)
38,580
(5,467)
203,029
(7,149)
195,880
(7,510)
–
(2,365)
Unamortised balance at the end of the year
217,873
186,005
rights and concessions
Rights and concessions at the beginning of the year
Accumulated amortisation at the beginning of the year
Unamortised balance at the beginning of the year
Transfer following 100% purchase of SKyCITy hamilton Limited
Current year amortisation
Unamortised balance at the end of the year
Goodwill on consolidation
Goodwill on consolidation at the beginning of the year
Accumulated amortisation at the beginning of the year
Unamortised balance at the beginning of the year
Goodwill arising on the acquisition of subsidiaries
Current year amortisation
Unamortised balance at the end of the year
Total intangible assets
CasIno lICenCes
2,250
(437)
1,813
(1,713)
(100)
–
29,408
(4,853)
24,555
116,348
(1,374)
2,250
(337)
1,913
–
(100)
1,813
14,071
(4,308)
9,763
15,337
(545)
139,529
24,555
357,402
212,373
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
SKyCITy Entertainment Group Limited acquired the Darwin casino licence on 22 July 2004 as a result of the acquisition of 100% of the
shares in SKyCITy Darwin holdings Pty Limited, through its wholly-owned subsidiary SKyCITy Australia Pty Limited on that date. The
cost of the casino licence and other assets and liabilities of SKyCITy Darwin holdings Pty Limited has been determined by the directors
applying fair value assessments to all assets (including the casino licence) and liabilities acquired as part of the acquisition of SKyCITy
Darwin holdings Pty Limited. The casino licence is being amortised over 11 years, at approximately $3.5 million per annum, being the
remaining period of the licence.
SKyCITy Entertainment Group Limited acquired the Adelaide casino licence on 30 June 2000 as a result of the acquisition of 100% of
the shares in SKyCITy Adelaide Pty Limited, through its wholly-owned subsidiary SKyCITy Australia Pty Limited on that date. The cost of
the casino licence and other assets and liabilities of SKyCITy Adelaide Pty Limited have been determined by the directors applying fair
value assessments to all assets (including the casino licence) and liabilities acquired as part of the acquisition of SKyCITy Adelaide Pty
Limited. The casino licence is being amortised over 85 years, being the remaining period of the licence from date of acquisition.
77
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
24. InTanGIble asseTs (ConTInued)
rIGhTs and ConCessIons
Rights and concessions relate to a management contract associated with the hamilton casino. These rights and concessions have been
included within the acquisition adjustments following SKyCITy Entertainment Group Limited’s purchase of the remaining shares in
SKyCITy hamilton Limited.
GoodWIll
The goodwill arising on the acquisition of subsidiaries relates to the acquisition of the outstanding minority interest in SKyCITy Leisure
Limited, the increased interest in SKyCITy hamilton Limited and the acquisition of SKyCITy Darwin holdings Pty Limited.
The goodwill balance associated with Darwin has not been amortised in the current year. Under current accounting standards goodwill
amortisation of $4,152,000 would have been recorded in the Statement of Financial Performance. however, as SKyCITy Entertainment
Group Limited has decided to adopt International Financial Reporting Standards (under which goodwill is not amortised) from 1 July
2005 (refer note 31), the directors have not recorded any goodwill amortisation in the current year on the grounds that, on adoption of
IFRS, any goodwill amortisation that had been recorded in the 2004/05 financial year would be reversed.
The directors are of the opinion that there has been no deterioration in the value of Darwin goodwill.
In future years, goodwill will be tested for impairment.
25. reCeIVables and prepaYmenTs
Current
Trade receivables
Sundry receivables
MGM Darwin deposit and capitalised costs
Amounts due from subsidiaries
Christchurch hotels Limited
Other receivables
Interest receivable
Prepayments
ConsolIdaTed
parenT CompanY
2005
$000
2004
$000
2005
$000
2004
$000
5,801
9,613
–
–
16,584
1,276
1,275
2,609
3,903
5,438
25,377
–
16,584
–
–
1,804
–
2,662
–
–
–
–
106
156
–
3,202
25,377
113,342
–
–
–
66
37,158
53,106
2,924
141,987
As part of the acquisition of Christchurch Casinos Limited, SKyCITy Entertainment Group Limited acquired an interest-bearing advance
to Christchurch hotels Limited.
78
SKYCITY Entertainment Group Limited Annual Report 2005
26. fInanCIal InsTrumenTs
The Group is subject to currency risk, interest rate risk and credit risk as a result of its operations.
To manage and limit the effects of those financial risks, the board has approved policy guidelines and authorised the use of various
financial instruments. The policies approved and the financial instruments being utilised at balance date are outlined below.
CurrenCY rIsK
Currency risk arises from movements in foreign exchange rates and can impact cash flows.
Payments to overseas suppliers are made using the currency conversion rate at the date of payment. The value of such transactions has
been and will continue to be at a relatively low level.
For certain more significant committed expenditure it is the Group’s policy to enter into forward foreign exchange contracts to manage
the exposure to fluctuations in currency rates. There were no forward foreign exchange contracts hedging expenditure commitments as
at 30 June 2005 (2004: nil).
The currency risk and interest rate risk in foreign currencies relate to funding facilities and Australian investments. To manage these, the
Group utilises cross-currency interest rate swaps, forward foreign exchange contracts and interest rate swap contracts, within parameters
as set out in the Group treasury policy. As at 30 June 2005 there were A$75,000,000 (2004: A$75,000,000) and US$274,500,000
(2004: $nil) of cross-currency interest rate swaps and A$74,900,000 (2004: A$187,500,000) of forward foreign exchange contracts and
A$80,000,000 (2004: A$65,000,000) of Australian dollar interest rate swaps.
InTeresT raTe rIsK
To ensure that the Group’s cost of funds is reasonably predictable from year to year, it is the Group’s policy that floating rate debt does
not exceed 50% of total debt. Furthermore, of fixed rate debt, 30% to 70% must re-price within one to five years, 30% to 70% in five
to ten years and 0% to 20% in ten to fifteen years. The Group uses interest rate and cross-currency interest rate swaps to manage its
interest rate risk. The interest on debt is either converted from fixed to floating or floating to fixed through entering into interest rate
swaps or cross-currency interest rate swaps. At 30 June 2005 the maximum term of an interest rate swap is until March 2017 (2004: June
2013) and the maximum term of a cross-currency interest rate swap is until March 2017 (2004: June 2012).
unreCoGnIsed balanCes
The notional or principal contract amounts of interest rate swaps outstanding at balance date were as below.
Interest rate swaps (fixed to floating)
Interest rate swaps (floating to fixed)
Cross-currency interest rate swaps
re-prICInG analYsIs
ConsolIdaTed
parenT CompanY
2005
$000
–
887,451
468,176
2004
$000
120,000
708,929
86,167
1,355,627
915,096
2005
$000
2004
$000
–
–
–
–
–
–
–
–
The following tables identify the periods in which interest rates are subject to review on interest-bearing financial assets and liabilities
and provide the current weighted average interest rate of each item.
Trade receivables, trade creditors and sundry receivables and creditors have not been included in the tables as they are not interest
rate sensitive.
79
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
26. fInanCIal InsTrumenTs (ConTInued)
Group 2005
assets
Bank
Total assets
liabilities
Borrowings*
Capital notes
ANZ subordinated loan
Total liabilities
effeCTIVe
InTeresT
raTes
CurrenT
$000
1-2 Years
$000
2-5 Years
$000
> 5 Years
$000
ToTal
$000
6.75%
35,458
7.76%
8.00%
8.24%
35,458
(396,810)
–
(100,000)
(496,810)
–
–
–
–
–
–
–
–
–
(121,687)
–
–
–
35,458
35,458
(565,670)
–
–
(962,480)
(121,687)
(100,000)
(121,687)
(565,670)
(1,184,167)
unrecognised
Interest rate swaps/cross-currency interest rate swaps*
370,832
(136,397)
(219,657)
(14,778)
–
re-pricing gap
(90,520)
(136,397)
(341,344)
(580,448)
(1,148,709)
* The average interest rate of debt at 30 June 2005 includes hedging instruments.
Group 2004
assets
Bank
Total assets
liabilities
Borrowings*
Capital notes
Convertible notes
Total liabilities
unrecognised
Interest rate swaps*
re-pricing gap
EFFECTIVE
INTEREST
RATES
CURRENT
$000
1-2 yEARS
$000
2-5 yEARS
$000
> 5 yEARS
$000
TOTAL
$000
5.75%
24,728
6.91%
9.25%
13.38%
24,728
(684,827)
(150,000)
–
(834,827)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,910)
24,728
24,728
(684,827)
(150,000)
(8,910)
(8,910)
(843,737)
620,429
(70,000)
(207,451)
(342,978)
–
(189,670)
(70,000)
(207,451)
(351,888)
(819,009)
* The average interest rate of debt at 30 June 2004 includes hedging instruments.
80
SKYCITY Entertainment Group Limited Annual Report 2005
26. fInanCIal InsTrumenTs (ConTInued)
parenT 2005
assets
Bank
Total assets
liabilities
Capital notes
Total liabilities
re-pricing gap
parenT 2004
assets
Bank
liabilities
Capital notes
re-pricing gap
CredIT rIsK
effeCTIVe
InTeresT
raTes
CurrenT
$000
1-2 Years
$000
2-5 Years
$000
> 5 Years
$000
ToTal
$000
3
3
–
–
3
–
–
–
–
–
–
–
(121,687)
(121,687)
(121,687)
–
–
–
–
–
3
3
(121,687)
(121,687)
(121,684)
CURRENT
$000
1-2 yEARS
$000
2-5 yEARS
$000
> 5 yEARS
$000
TOTAL
$000
8.00%
EFFECTIVE
INTEREST
RATES
2
9.25%
(150,000)
(149,998)
–
–
–
–
–
–
–
–
–
2
(150,000)
(149,998)
Credit risk is the risk of the failure of a debtor or counterparty to honour its contractual obligation.
Financial assets, which potentially subject the group and parent company to concentrations of credit risk, consist principally of cash,
short-term deposits, trade receivables, interest rate swaps, cross-currency interest rate swaps and forward foreign exchange contracts.
The maximum credit risk at 30 June 2005 is the fair value of the financial asset. The parent company and Group’s cash equivalents and
short-term deposits are placed with high credit quality financial institutions. Trade receivables are presented net of the allowance for
estimated doubtful receivables. Credit risk with respect to trade receivables is limited due to the relatively low value of receivables at any
given time as the nature of the business is cash-oriented. Accordingly, the directors believe the Group has no significant concentration of
credit risk.
faIr Values
The following methods and assumptions were used to estimate the fair value of each class of financial instrument.
Cash at bank, bank overdraft, term deposits, loans issued, receivables and trade creditors
The carrying values of these items are equivalent to their fair value.
81
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
26. fInanCIal InsTrumenTs (ConTInued)
borrowings and subordinated debt
All borrowings and subordinated debt except capital notes and US private placement US dollar borrowings are at floating interest rates
so the fair value is equal to the carrying value.
The US private placement fixed rate US dollar borrowings have been converted to New Zealand dollar floating rate borrowings by use
of cross-currency interest rate swaps. The fair value of the converted debt (inclusive of the fair value of the cross-currency interest rate
swaps) is equal to the carrying value. The fair value of the cross-currency interest rate swaps hedging the US private placement fixed rate
US dollar borrowings is positive $9,625,313 at 30 June 2005 (2004: $nil).
The carrying value of capital notes is equivalent to their fair value.
Interest rates swaps and cross-currency interest rate swaps
The fair value of interest rate swaps is negative $8,764,032 (2004: positive $3,889,481), cross-currency interest rate swaps is positive
$9,087,056 (2004: positive $3,637,840) and forward foreign exchange contracts is positive $1,614,355 (2004: negative $8,622,245).
The Group was party to a financial instrument in respect of a guarantee not recognised above and this is disclosed in note 27.
27. ConTInGenT GaIns and losses
SKyCITy Leisure Limited is one of the guarantors for a loan facility utilised by Village Cinemas SA Argentina, an associate company. The
maximum liability and exposure at 30 June 2005 under this guarantee is US$4,000,000 (2004: US$4,000,000).
As part of the negotiations for recapitalisation of Village Cinemas SA, SKyCITy Leisure Limited has granted an option to Village
Roadshow Limited for it to acquire 40% of its shareholding in Village Cinemas SA (10% of total shares) for US$1.00. The option can be
exercised at any time prior to the repayment of the Village Cinemas SA funding facility.
28. relaTed parTY InformaTIon
subsIdIarIes, assoCIaTes and JoInT VenTures
All members of the group as listed in notes 19, 20 and 21 are considered to be related parties of the parent company SKyCITy
Entertainment Group Limited.
During the year, the company advanced and repaid loans and provided accounting and administrative services to its subsidiaries,
associates and joint ventures. In presenting the financial statements of the Group, the effect of transactions and balances between
subsidiaries and those with the parent company have been eliminated. All transactions with related parties are in the normal course of
business and provided on commercial terms.
InTeresT of dIreCTors In CerTaIn TransaCTIons
Each company within the Group maintains an interests register in which members of its board record all parties and transactions in which
they may have a potential or actual self-interest. Fees in the amount of $2,120,701 for the year ended 30 June 2005 (2004: $146,967)
were paid to First NZ Capital Group Limited (FNZC) on normal commercial terms for advisory, consulting and other work. Mr W R Trotter,
who is a director of SKyCITy Entertainment Group Limited, is executive chairman of FNZC. Mr Trotter declared an interest with respect
to FNZC on each occasion when the board considered the engagement of advisory and consulting services with FNZC.
The Group has borrowed $100 million from the ANZ National Bank Limited as disclosed in note 15. Sir Dryden Spring and Rob McLeod
are directors of both SKyCITy Entertainment Group Limited and ANZ National Bank Limited. The facility was established on an arms-
length, commercial basis. Neither Sir Dryden nor Rob McLeod participated in the decision to enter into the facility.
82
SKYCITY Entertainment Group Limited Annual Report 2005
29. eVenTs oCCurrInG afTer balanCe daTe
proVIsIon for dIVIdend
As disclosed in note 7, the directors have resolved to provide for a final dividend to be paid in respect of the year ended 30 June 2005.
The fully imputed dividend of 12.0 cents per share will be paid on 7 October 2005 to all shareholders on the company’s register at the
close of business on Friday, 23 September 2005.
30. earnInGs per share
Number of ordinary shares on issue. Weighted average (000’s)
417,436
417,828
Group surplus from operations per share (cents)
24.9
24.0
ConsolIdaTed
2005
2004
Earnings per share is calculated by dividing the Group operating surplus after income tax and minority interests by the weighted
average number of ordinary shares on issue during the year.
31. adopTIon of InTernaTIonal fInanCIal reporTInG sTandards (Ifrs)
In December 2002 the Accounting Standards Review Board announced that New Zealand reporting entities are required to comply with
the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) for reporting periods commencing
on or after 1 January 2007 with optional adoption for reporting periods commencing on or after 1 January 2005.
SKyCITy Entertainment Group Limited has adopted NZ IFRS with effect from 1 July 2005. To comply with NZ IFRS on initial
adoption, SKyCITy Entertainment Group Limited will need to restate its Statement of Financial Position as at 30 June 2004 and as
at 30 June 2005 and restate its Statement of Financial Performance, Statement of Movements in Equity and the Statement of Cash Flows
for the year ended 30 June 2005. Adjustments required to restate the Statement of Financial Position as at 30 June 2004 are made by
adjusting equity. The first set of financial statements that SKyCITy Entertainment Group Limited will publish under NZ IFRS will
be the interim financial statements for the six months ended 31 December 2005. These current financial statements for the year ended
30 June 2005 will be the last set published under current New Zealand accounting standards.
To date, SKyCITy Entertainment Group Limited has identified the following key differences between current accounting treatments
and NZ IFRS.
foreign currency translation reserve
As a one-off adjustment on adoption of NZ IFRS, the 30 June 2004 balance in the foreign currency translation reserve of $14.2 million
(debit) will be set to zero.
off balance sheet financial instruments
Derivative financial instruments with a fair value totalling $7.5 million will be recognised as assets and derivative financial instruments
with a fair value totalling $8.6 million will be recognised as liabilities as at 30 June 2004 in the Statement of Financial Position. Each
reporting period thereafter, derivative financial instruments will be adjusted to their then fair value. It is SKyCITy Entertainment Group
Limited’s expectation that the Group will obtain the benefit of hedge accounting with effect from 1 July 2004.
83
SKYCITY Entertainment Group Limited Annual Report 2005
Notes to the
Financial Statements (continued)
FOR ThE yEAR ENDED 30 JUNE 2005
31. adopTIon of InTernaTIonal fInanCIal reporTInG sTandards (Ifrs) (ConTInued)
performance pay Incentive plan
The expense associated with the Performance Pay Incentive Plan will be recognised over the relevant vesting period of up to three years.
At present the expense is recognised within one financial year.
executive share option plan
An expense, based on the fair value at issue date, will be recognised for any options issued subsequent to 9 November 2002. At present
no expense is recognised on these options although the fair value amount is disclosed in the notes to the financial statements.
Carrying value of land and other fixed assets
On first time adoption of NZ IFRS, entities are permitted to adjust the carrying value of selected fixed assets to their current fair value
without creating a need for ongoing revaluations. SKyCITy Entertainment Group Limited is currently reviewing its assets to determine
which, if any, should be revalued in the opening IFRS-compliant balance sheet, as a one-off adjustment.
amortisation of goodwill
Under NZ IFRS, goodwill is no longer amortised but is subject to an annual impairment test. SKyCITy Entertainment Group Limited
does not expect its goodwill balances to be impaired on adoption of NZ IFRS.
Christchurch investment
The investment in Christchurch Casinos Limited will need to be revalued to fair value each reporting period with changes in fair value
recorded in equity unless they relate to impairment. No change in carrying value is expected as at 30 June 2004.
deferred tax
Deferred tax will be recognised on the above adjustments and on interest capitalised within fixed assets.
segment reporting
IFRS requires the Group to identify its primary and secondary segments and make certain disclosures. SKyCITy Entertainment Group
Limited has identified the following segments:
Primary – Geographical
• Auckland complex
• Rest of New Zealand
• Adelaide, Australia
• Darwin, Australia
Secondary – Business
• Gaming – tables
• Gaming – machines
• Other
Note: the actual impact of adopting NZ IFRS may vary from the information presented above. While not expected to be so,
any variation may be material.
84
SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance
The SKyCITy board and management confirm that the company is committed to maintaining best practice governance structures
throughout its operations in New Zealand and Australia.
SKyCITy is a leading New Zealand-based entertainment company listed on the New Zealand and Australian stock exchanges (NZx and
ASx respectively). It is a requirement of these exchanges that the board of directors formally adopts approved corporate governance
practices. The governance structures and processes adhered to by SKyCITy are regularly reviewed to ensure that the highest levels of
behaviour and accountability are achieved and to ensure that SKyCITy’s governance continues to be consistent with international best
practice both in compliance format and in substance.
sKYCITY’s approaCh To CorporaTe GoVernanCe
framework
At SKyCITy, governance reflects the tone and behavioural expectations that the board sets on behalf of stakeholders. It encompasses
the company’s decision-making structures and the mechanisms used to manage the organisation.
The board has adopted the 10 governance principles, as set out below. These principles reflect the ASx, NZx and New Zealand
Securities Commission’s governance recommendations.
The board of SKyCITy Entertainment Group, through a set of formal policies and procedures:
–
establishes a clear framework for oversight and management of the company’s operations and for defining the respective roles
and responsibilities of the board and management
– structures itself to be effective in discharging its responsibilities and duties
– sets standards of behaviour expected of company personnel
– safeguards the integrity of the company’s financial reporting
– ensures timely and balanced disclosure
–
–
respects and facilitates the rights of shareholders
recognises and manages risk
– encourages board and management effectiveness
–
–
remunerates fairly and responsibly
recognises its obligations to all stakeholders.
The governance framework at SKyCITy is defined by the company’s board charter which includes a number of supporting charters and
policies and expands on the governance principles as defined by the NZx and the ASx. The support charters and policy statements, in
addition to the company’s constitution, comprise the following:
– Terms of Appointment and Terms of Reference for Directors
– Audit and Risk Committee Charter
– Governance and Remuneration Committee Charter
– Nomination Committee Charter
– Code of Business Practice
– Code for Securities Transactions and Insider Trading Policy
– Delegated Authorities Policies
– Protected Disclosures Policy
– Policies and Procedures for Employees
– Risk Management Programme
– Relationship Governance Policy.
85
SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
ComplIanCe WITh nzX besT praCTICe Code and asX CorporaTe GoVernanCe CounCIl
besT praCTICe reCommendaTIons
The NZx and ASx Listing Rules require SKyCITy to disclose the extent to which it has followed the NZx Corporate Governance
Best Practice Code and the ASx Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice
Recommendations, respectively.
• nzX best practice Code
In accordance with the requirements of NZx Listing Rule 10.5.3(i), SKyCITy confirms that it has complied with the NZx Corporate
Governance Best Practice Code during the 2004/05 year.
The requirements of the NZx Best Practice Code relate to code of ethics, director appointment, training and remuneration, separation
of board and management, supply of information from management to board, and board performance. The Code requires that separate
Audit, Remuneration and Nomination committees should be established for larger organisations such as SKyCITy and identifies the
preferred membership criteria for those committees. The Code also refers to the important relationship between the external auditor
and the company.
• asX principles and best practice recommendations
In accordance with the requirements of ASx Listing Rule 4.10, SKyCITy confirms that it has complied with the ASx Corporate
Governance Council’s Principles and Best Practice Recommendations, except in respect of recommendations that the company’s internal
policies and procedures are made available to external parties and that any options plan is approved by shareholders.
SKyCITy believes that the board charter and the comprehensive references to governance in this annual report provide good disclosure
of the company’s internal processes and mechanisms and that the underlying intentions of the various ASx Corporate Governance
Council’s recommendations on reporting of internal mechanisms have been met.
The Managing Director Share Option Plan 2002 was approved by shareholders at the 2002 annual meeting of the company. A
replacement share rights plan is proposed for the Managing Director to cover the period 2005-08 and this plan will be included as an
agenda item for the company’s annual meeting to be held on 28 October 2005. The Notice of Annual Meeting, to be circulated to
shareholders on 12 October 2005, will include details of the proposed Managing Director Share Rights Plan.
The Executive Share Rights Plan 2005 was approved by the board in December 2004. The Share Rights Plan is essentially a renewal of
the company’s longer-term incentive remuneration structure for senior executives but, due to changes in the mechanism within the plan,
the number of new shares which will be issued will be significantly reduced. The original executive share option plan was approved by
shareholders at the 1999 annual meeting of the company and was then subsequently extended and approved by directors in August
2002. The major difference in the 2002 renewal was that the period prior to exercise of options was (except in special circumstances)
extended from one year to three years. The Executive Share Rights Plan (which replaces the Executive Share Options Plan 2002)
continues to impose a three-year restriction before benefits under the Plan can be realised by participants.
board of dIreCTors
• role of the board and responsibilities
SKyCITy’s board of directors is elected by shareholders to govern the business in the shareholders’ best interests.
The board establishes the company’s objectives, the major strategies for achieving those objectives, the overall policy framework within
which the business of the company is conducted, and monitors management’s performance with respect to these matters.
86
SKYCITY Entertainment Group Limited Annual Report 2005
The board is also responsible for ensuring that the company’s assets are maintained under effective stewardship, that decision-making
authorities within the organisation are clearly defined, that the letter and intent of New Zealand and Australian company and casino law
is complied with, and that the company is well managed for the benefit of its shareholders. The board also oversees management’s risk
profiling and business continuity plans.
Specific responsibilities of the board include the following:
– oversight of the company, including its control and accountability procedures and systems, and the delegation of authorities within
the company
–
–
approval and monitoring of the progress of significant capital expenditure projects, capital management initiatives, and acquisitions
and divestments, and the funding thereof
approval of the corporate strategy and objectives and oversight of the adequacy of the company’s resources required to achieve the
strategic objectives
– approval and monitoring of actual results against the annual business plan and budget (including the capital expenditure plan)
–
review and ratification of the company’s systems of risk management and internal compliance and control, codes of conduct, and
legal compliance
– appointment, performance and removal of the Managing Director (chief executive officer)
– confirmation of the appointment and removal of the senior executive group (being the direct reports to the Managing Director)
– setting the remuneration of the Managing Director and approval of the remuneration of the senior executive group.
The board has appointed three committees, being:
–
–
–
the Audit and Risk Committee
the Governance and Remuneration Committee
the Nomination Committee.
Each committee is authorised to deal with matters as set out in its committee charter and/or falling within its intended mandate, on the
following basis:
–
–
to submit recommendations to the board on matters for which decision-making authority has not been delegated by the board
to make decisions on matters for which decision-making authority has been delegated by the board.
The board maintains a formal set of delegated authorities (including a Treasury Policy), which clearly define the responsibilities that are
delegated to management and those which are retained by the board. These delegated authorities are approved by the board and are
subject to formal review by the board on a regular basis but not less than once per annum.
The board appoints new directors under formal terms of reference/appointment. Directors must comply with the terms of reference
at all times.
The Code of Business Practice sets out the board’s policy on conflicts of interest. When conflicts of interest exist, directors exclude
themselves from discussions, and do not vote in respect of the relevant matters.
The chairperson of the board and the chairpersons of the board committees are elected by the non-executive directors. SKyCITy
supports the separation of the role of board chairperson from the chief executive officer position.
The chairperson’s role is to manage the board effectively, to provide leadership to the board, and to facilitate the board’s interface with
the Managing Director. The current chairman of the board, Mr Rod McGeoch, is a non-executive director and meets the independence
criteria as set by the board in Schedule 2 of the board charter.
87
SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
• board Charter
SKyCITy’s board and management are committed to ensuring that the company maintains best practice governance structures and
principles and the highest ethical standards. In this regard, the board has developed a board charter, which describes the board’s
role and responsibilities and regulates board procedures. It incorporates the ASx Corporate Governance Council’s Principles of Good
Corporate Governance and Best Practice Recommendations, the NZx governance and the NZx Corporate Governance Best Practice
Code recommendations, and the New Zealand Securities Commission’s Governance Principles and Guidelines.
The board charter and its attached schedules are the principal specification of the governance framework within which SKyCITy
conducts its affairs. A copy of the board charter is posted on the company’s website at www.skycitygroup.co.nz in the ’Investor
Centre’ subsection.
• director Independence
The board charter requires that the board contains a majority of its number who are independent of management, substantial
shareholders, or other parties with whom SKyCITy has a business or other relationship that could reasonably be perceived to interfere
with the exercise of unfettered and independent judgement. In addition, the board will ensure it comprises not less than the minimum
number of independent directors required by the listing rules of the stock exchanges on which the company’s securities are quoted.
In determining the independence of directors, the board has adopted the definition of independence set out in the NZx Corporate
Governance Best Practice Code, and has taken into account the independence guidelines as recommended in the ASx Principles of
Good Corporate Governance.
As required by the board charter, the board chairperson, Rod McGeoch, is an independent director, is not the company’s chief executive
officer, and has ensured that he has the time necessary to discharge the role effectively.
At its August 2005 meeting, the board reviewed the status of each director in accordance with the independence specification (as set
out in Schedule 2 of its charter) which mirrors the independence tests of the NZx Code. The board determined that all current directors,
other than the Managing Director (Evan Davies), were independent.
The board noted that, under the ASx Independence Guidelines, all non-executive directors except Bill Trotter would be considered
independent. Mr Trotter is not independent, under these Guidelines, given his relationship with First NZ Capital Limited, which is a
consultant and advisor to the company. Mr Trotter is Executive Chairman of First NZ Capital Group Limited.
Directors are required to ensure that all relationships and appointments bearing on their independence (whether generally or for a
specific matter) are disclosed on a timely basis and must provide any further information required to enable the board to make an
informed assessment of their independence on a continuous basis.
The disclosure of existing interests is an ongoing responsibility of each director. Where a conflict of interest arises (or where a potential
conflict of interest may arise), each director must formally advise the company about any matter relating to that conflict (or potential
conflict) of interest.
There have been no subsequent changes to the independence determinations for each director as at the date of this annual report.
88
SKYCITY Entertainment Group Limited Annual Report 2005
• board structure and membership
Directors are appointed under the company’s Terms of Appointment, Terms of Reference for Directors and the board charter for a term
of three years or are subject to reappointment on a more frequent basis in order for the company to comply with the listing rules of the
NZx and the ASx.
The board currently comprises seven directors, six of whom are non-executive. Evan Davies, Managing Director of the company, is the
only executive director.
Rob McLeod was appointed to the board on 8 October 2004. Mr McLeod’s appointment was confirmed by shareholders at the 2004
annual meeting.
Patsy Reddy and Bill Trotter, current directors of the company, will retire by rotation at the 2005 annual meeting of the company and,
being eligible, offer themselves for re-election. The board charter requires that any director who has served for two terms since their first
appointment by shareholders must be formally requested by the board to stand for re-election. At its August 2005 meeting, the board
considered its composition, the mix of skills and experience on the board, the term of directors on the board, and a range of other
matters relating to the continuance of Ms Reddy and Mr Trotter. The board noted that Ms Reddy and Mr Trotter had indicated that they
would be pleased to continue to contribute to the company’s affairs for a further term and it requested both directors to stand for re-
election at the 2005 annual meeting.
board and CommITTee meeTInG aTTendanCe
The board meets at least six times per annum (over one and a half days) on a formal, scheduled basis and on other occasions
as required.
The non-executive directors of the board (and the board’s committees) also meet independently of the Managing Director and
management personnel on a number of occasions during the course of the year, to discuss various issues.
During the 2004/05 year, the board met formally on a total of seven occasions, six of which were scheduled meetings and one of which
was called to attend to particular items of business. In addition, the directors convened by teleconference to discuss specific issues on
a number of occasions during the year. The table below shows attendances at board and committee meetings by directors during the
year ended 30 June 2005.
number of meetings held
R h McGeoch
E W Davies
R A McLeod
P L Reddy
Sir Dryden Spring
E Toime
W R Trotter
AUDIT
AND RISK
COMMITTEE
GOVERNANCE
AND
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
BOARD
7
7
7
7
7
7
7
6
4
1*
4**
3*
4
4
4
4
4**
4
3
1
1
1
1
1
1
1
1
* Rob McLeod joined the Audit and Risk Committee in October 2004 replacing Rod McGeoch.
** Evan Davies attends meetings of the Audit and Risk Committee and Governance and Remuneration Committee in an ex-officio
capacity but is not a member of either committee.
89
SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
board CommITTees
• Committee roles and Composition
The committees of the board review and analyse policies and strategies, usually developed by management, which are within their terms
of reference. The board’s committees examine proposals and, where appropriate, make recommendations to the board. The committees
do not take action or make decisions on behalf of the board except where they have been specifically mandated to do so.
The board appoints the chairperson of each committee.
All committees are required to comprise a minimum of three members.
Each committee operates under a charter document, as agreed by the board, which sets out its role and responsibilities, authorities,
relationship with the board, reporting requirements, composition, structure and membership requirements. Copies of these committee
charters are attachments to the board charter. Each committee charter is subject to formal review by the board on an annual basis.
The board, on an annual basis, reviews the performance of each committee in accordance with its charter.
All directors are entitled to attend any committee meeting and receive the agenda and the papers for each committee meeting and the
minutes of each meeting. The Managing Director (Evan Davies) attends meetings of each of the board’s committees.
From time to time the board creates specific subcommittees to deal with a particular matter or matters and/or to have certain decision-
making authority as the board may elect to delegate to that subcommittee. The minutes of any such subcommittee meetings are
circulated to all directors.
• audit and risk Committee
Current members of the Audit and Risk Committee are Sir Dryden Spring (chairman), Rob McLeod and Elmar Toime.
The Audit and Risk Committee’s primary roles are to assist the board in fulfilling its responsibilities relating to accounting and reporting,
tax planning and compliance, internal control practices and procedures, and protection of the company’s assets and business operations
through risk planning and mitigation strategies and adequate insurance coverage.
The committee’s responsibilities also include the oversight of the quality, reliability, and accuracy of the company’s internal and external
financial statements, for the accuracy of the company’s external result presentations, and for its relationships with its internal and
external auditors.
The Audit and Risk Committee must undertake sufficient inquiry of the company’s management and the company’s internal and external
auditors in order to be satisfied as to the validity and accuracy of the company’s financial reporting.
The committee meets four times per annum on a formal scheduled basis and on other occasions as required.
The Audit and Risk Committee comprises at least three directors, all of whom are independent, non-executive directors, who must be
financially literate.
The committee is chaired by an independent director who is not also the chairperson of the board. At least one member of the
committee must have financial expertise (i.e. has knowledge and experience of accounting, and of financial matters and regulations).
The Audit and Risk Committee meets with the company’s internal and external auditors independently of management as often as is
appropriate, but not less than twice per annum.
The Audit and Risk Committee oversees the independence of the company’s internal and external auditors and monitors the scope and
quantum of work undertaken by, and fees paid to, the auditor for other than audit work.
This annual report, in Note 3 to the financial statements, identifies the level of audit and other services provided by
PricewaterhouseCoopers, the company’s auditor, during the 2004/05 financial year. In the year ended 30 June 2005, assurance services
provided by PricewaterhouseCoopers totalled $1.439 million and tax advisory services totalled $1.097 million.
The committee has formally reviewed the independence status of PricewaterhouseCoopers and is satisfied that their objectivity and
independence is not compromised as a consequence of other than audit work undertaken for the company. PricewaterhouseCoopers
has confirmed to the committee that it is not aware of any matters that could affect its independence in performing its duties as auditor
for the company.
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SKYCITY Entertainment Group Limited Annual Report 2005
The Audit and Risk Committee Charter requires rotation of external and internal audit partners not less frequently than every seven
years but with a guideline that five years is, except in special circumstances, an appropriate period of tenure for any one individual.
David Randell, current external audit partner for SKyCITy, succeeded John harvey as audit partner in February 2003.
Until 30 September 2004, PricewaterhouseCoopers provided external audit and internal audit services to SKyCITy. In mid-2004 the
board resolved to separate the provision of internal and external audit services. After a formal tender process during September,
Ernst & young was appointed as SKyCITy’s internal audit service provider, with effect from 1 October 2004.
• Governance and remuneration Committee
The current members of the Governance and Remuneration Committee are Patsy Reddy (chairperson), Rod McGeoch and Bill Trotter.
The Governance and Remuneration Committee monitors senior executive performance and remuneration, the ethics of the organisation,
protection of the group’s casino licences, statutory and regulatory compliance, host responsibility and problem gambling programmes
and initiatives, and the identification of and planning for emerging issues.
The Governance and Remuneration Committee meets not less than three times per annum on a formal scheduled basis and on other
occasions as required. During the 2004/05 year, the Governance and Remuneration Committee met on four separate occasions.
The composition of the committee meets the requirement of the committee charter, being that the committee comprises at least three
non-executive directors, a majority of whom are independent.
The Governance and Remuneration Committee’s responsibilities include:
–
–
–
monitoring organisational integrity of business operations to ensure a high standard of ethical behaviour is maintained
by the organisation
reviewing the company’s remuneration policies and procedures and approving senior executive remuneration and incentives
reviewing incentive remuneration plan performance targets and recommending incentive payments and targets to the board
for approval
– overseeing the company’s recruitment, retention and termination policies and procedures for senior management
–
–
–
reviewing the Managing Director’s performance evaluation of his direct reports and approving salaries and incentive remuneration,
executive share option participation, and any other variation of the terms and conditions of employment of the Managing Director’s
direct reports
reviewing the performance of Ms heather Shotter, an associated person of the Managing Director, and determining her performance
objectives, remuneration in terms of salary, incentive bonus and executive share option participation
reviewing the Relationship Governance Policy and monitoring compliance with that policy. This policy sets out the procedures that
are required to be followed with respect to related parties within the organisation
– overseeing management succession planning for key roles within the company
–
–
reviewing non-executive director remuneration
monitoring relationships with shareholders and ensuring the intent of the board charter as to communications with shareholders
is achieved
– monitoring issues relating to the Group’s casino licences and relationships with government licensing and regulatory agencies
–
–
–
–
monitoring the company’s compliance with NZx and ASx Listing Rules, and companies and commercial legislation applicable
to the group’s business operations
overseeing and monitoring the Group’s host responsibility and problem gambling programmes and initiatives, and ensuring
co-operation with social and government agencies
ensuring the board charter and support charters and policies continue to represent best corporate governance practice and are
appropriate to the company’s operations
monitoring the company’s procedures and internal authorities relating to the communication of company information to external
parties including shareholders, financial analysts and commentators, and the media.
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SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
• nomination Committee
All directors are members of the Nomination Committee and Rod McGeoch is chair of this committee.
The Nomination Committee meets at least once per annum to review board and director performance and on other occasions as
required in order to attend to any other matters under its charter.
The current composition of the committee meets the requirements of the committee charter that the committee should comprise a
minimum of three independent directors, which directors form the majority of the committee.
One of the primary roles of the Nomination Committee is to recommend the appointment and removal of directors. Ultimately the
appointment and removal of directors is governed by the company’s constitution. The constitution requires all potential directors to
have satisfied the extensive probity requirements of each jurisdiction in which the company holds gaming licences.
The Nomination Committee’s responsibilities include:
– making recommendations to the board as to its size
–
regularly reviewing the criteria for selection of directors and recommending to the board any necessary alterations
– determining search and selection processes for new potential directors
–
recommending appropriate director candidates to the board
– determining appropriate procedures for director and board evaluation and performance review
–
–
–
recommending the removal of a director from the board
ensuring that potential director candidates understand the role of the board and the time commitment involved when acting as a
member of the board
ensuring adequate induction, orientation and training for directors in the company’s operations and the gaming/entertainment
sector generally
–
reviewing the board’s succession planning.
General maTTers relaTInG To dIreCTors
• Knowledge and expertise
The Nomination Committee’s charter includes assessment of the role and responsibilities, performance, composition, structure, training,
and membership requirements of the board, with this assessment being formally undertaken on an annual basis.
Directors are expected to maintain an up-to-date knowledge of the company’s business operations and of the industry sectors within
which the company operates. Briefings, circulation of information and site visits are organised as appropriate to assist directors to be
aware of and to understand company and industry issues.
•
Indemnity and Insurance
The company has signed a deed of indemnity, access and insurance in favour of each director (and a nominated group of senior
executives), which covers acts or omissions of directors (or executives) in their capacity as such.
The company also provides professional indemnity insurance cover for directors acting in good faith in the conduct of the
company’s affairs.
The company has effected directors’ and officers’ liability insurance cover for the 12-month period 30 September 2004 to
30 September 2005 at a premium cost of $108,400 (plus GST) and statutory and employer’s liability insurance for the 12-month
period at a premium cost of $26,785 (plus GST).
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SKYCITY Entertainment Group Limited Annual Report 2005
• protection of Company Information
Members of the board (and management) must ensure that sensitive information they have access to about the company is well
protected and treated in strict confidence, and that property of the company (including information) is used solely in the best interests of
the company.
The company maintains internal policies and procedures and monitors compliance with those policies and procedures in order to protect
the confidentiality of its commercially-sensitive information.
• other
Under the board charter, directors are required to advise the chairperson of all outside directorships or other appointments which may
have a bearing on their role as a SKyCITy director, prior to taking up any such appointment.
Directors are entitled to obtain independent professional advice (at the expense of the company) on any matter relating to their
responsibilities as a director or to the company’s affairs, provided they have previously notified the board chairperson of their intention
to do so. No such notifications or requests were received from directors during the 2004/05 year.
InTeGrITY and eThICal behaVIour
Members of the board (and management) must, at all times, comply with the express terms and spirit of their fiduciary obligations to the
company, including acting honestly and in good faith and in what they reasonably believe to be the best interests of the company.
The company operates in accordance with a Code of Business Practice (attached as Schedule 3 to the board charter). The Code sets out
the guiding principles of the company’s relationships with stakeholder groups including regulators, shareholders, customers,
and employees.
The Code addresses the following areas:
– compliance with laws and casino licences, and co-operation with regulatory bodies
– honest and fair dealing with customers and employees
–
respect for and compliance with human rights standards
– preservation of privacy and confidentiality of company and personal information
–
insider trading obligations
– conflicts of interest
– competitive behaviours and actions
– promotional and advertising responsibilities
– community participation and contribution
– host responsibility
–
receiving gifts or other benefits from external parties.
The company has adopted a policy for employees to report instances of suspected breaches of laws or wrongdoing by the company
and/or any of its employees or directors, without fear of adverse consequences, and for such reporting to be properly investigated.
The company maintains a code of practice for directors and senior executives which sets out the procedures that must be followed
before trading in the company’s securities. Prior consent must be obtained from the Company Secretary before undertaking any trading
in the company’s securities. The Company Secretary must obtain the prior consent of the Managing Director or the chairperson or
deputy chairperson of the board. The Managing Director must obtain the prior consent of the chairperson or deputy chairperson of
the board.
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SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
Details of any share trading by directors or executives who are subject to the company’s Insider Trading Policy and Code for Securities
Transactions are notified to the board. The company’s Policy and Code is supported by education for directors and executives about
their obligations when trading in the company’s securities. The company’s Code prohibits trading in the company’s securities by
company personnel outside the window periods as defined by the Insider Trading (Approved Procedure for Company Officers)
Notice 1996.
From 3 May 2004, ’officers’ of the company (currently comprising 18 senior-level executives) must formally disclose their SKyCITy
shareholdings and other securities holdings to the NZx within five business days of any change in their holding of such securities.
Directors and staff are not permitted to participate in any gaming or wagering activity at SKyCITy-operated properties or at a related
company, including Christchurch Casino.
fInanCIal reporTInG
• framework
The board is responsible for ensuring that effective policies and procedures are in place to provide confidence in the integrity of the
company’s financial reporting.
The Managing Director and the Group General Manager Finance have certified to the board in writing that the financial statements
included in this annual report present a true and fair view, in all material respects, of the company’s financial condition and operational
results and are in accordance with relevant accounting standards. The Managing Director and the General Manager Corporate have
certified to the board in writing that the confirmation referred to above is founded on a sound system of risk management and internal
compliance and control which implements the policies adopted by the board, and that the company’s risk management and internal
compliance and control systems are operating efficiently and effectively in all material respects.
• Timely and balanced disclosure
The company communicates its financial and key operational performance results in a clear, effective, balanced, and timely manner to its
shareholders, analysts and other market commentators, and to the stock exchanges on which the company’s securities are listed.
This result information is available on the company’s website.
The company’s policy is to provide timely and sufficient information in appropriate format so as to enable external parties to achieve a
sound understanding of the company’s performance during any six-month reporting period and to achieve an understanding of the key
elements of the company’s business strategy.
The board and the Audit and Risk Committee ensure that company announcements are made in a timely manner, are factual, do not
omit any material information, and are expressed in a clear and objective manner.
The agenda for each board meeting includes formal consideration of the company’s disclosure obligations and any matters
relevant thereto.
The Company Secretary is responsible for bringing any matter relevant to the company’s disclosure obligations to the attention
of the board.
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SKYCITY Entertainment Group Limited Annual Report 2005
reCoGnITIon and manaGemenT of rIsK
The company maintains a programme for the identification, assessment, monitoring, and management of risk to the company’s
business. The risk management programme is approved and overseen by the Audit and Risk Committee in accordance with the charter
for that committee.
The company maintains an up-to-date risk profile for each of its business operations and ensures that business continuity and disaster
recovery plans are in place and are well understood throughout the organisation.
The company also maintains comprehensive business continuity, material damage and liability insurance covers to ensure that the
earnings of the business are well covered in the event of adverse circumstances.
remuneraTIon
The board is supported by the Governance and Remuneration Committee on matters relating to staffing, personnel (human resources)
and remuneration.
• non-executive director remuneration
Non-executive director remuneration is paid in the form of directors’ fees. Directors’ fees for the 2004/05 year were paid in cash.
The total remuneration available to non-executive directors is determined by shareholders at the annual meeting. At the 2003 annual
meeting, shareholders approved, effective from 1 November 2003, a total remuneration amount for non-executive directors of $600,000
per annum (plus GST if any).
Non-executive directors are paid the same base fee but additional fees may be paid, at the discretion of the board, to a director who
undertakes additional work at the specific request of the board. No such additional fees were paid during the 2004/05 financial year.
The chairpersons of the board and the committees are paid additional remuneration to reflect the additional responsibilities of their
positions. Where the board or a committee chairperson is also the chair of the Nomination Committee, no additional remuneration is
paid for that chairperson role.
For those directors who were in office on or before 1 May 2004, SKyCITy’s constitution permits the company, at the discretion of the
board, to make a retirement payment to a director (or to his or her dependants), provided that the total amount of the payment does
not exceed the total remuneration of the director in his or her capacity as a director in any three years chosen by the company. For
directors appointed after 1 May 2004 the NZx Listing Rules require that the amount or method of calculation of any retirement benefit
be authorised by shareholders.
Retirement allowances for SKyCITy directors were discontinued at 30 June 2004 with retirement allowances accrued to that date frozen
as to amount. Retirement allowances accrued up to 30 June 2004 will be payable upon the retirement of a director, provided that the
director has served at least three years on the board. Retirement allowances accrued as at 30 June 2004 will not carry any interest
entitlement between 1 July 2004 and the date of payment.
In order to reflect the remuneration value foregone as a result of the discontinuation of retirement allowances, directors’ fees were
increased with effect from 1 July 2004. The fees, effective 1 July 2004, are $80,000 for non-executive directors, $160,000 for the
chairman of the board, and $12,500 for committee chairpersons. Total directors’ fees under this structure have remained within the
$600,000 total limit approved by shareholders at the 2003 annual meeting.
Prior to the new fees being approved, the board obtained independent confirmations from John Egan Associates of Sydney that the
fees were fair and reasonable, having regard to market practice for companies of similar size and complexity in Australasia at that time
and from Deloitte Corporate Finance Auckland that the 23% adjustment to fees was an appropriate financial adjustment to compensate
non-executive directors for the discontinuation of retirement allowances.
Directors’ expenses reasonably incurred in carrying out their duties as directors are paid for by the company.
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SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
• managing director remuneration
The Managing Director (Evan Davies) has an employment contract with SKyCITy which reflects standard conditions appropriate to a
chief executive operating within the New Zealand business community. Under his contract, Mr Davies is paid a salary plus an annual
performance-related incentive amount, as approved by the board.
The performance-related incentive is a variable amount and is determined with reference to the return on invested capital achieved by
the company during the financial year and also various performance measures which are set by the board for each year, in consultation
with Mr Davies. These measures include financial and strategic criteria set with reference to the company’s business and strategic plans
as well as qualitative criteria including corporate governance and leadership. Performance against these measures is assessed at the end
of each year and payment of the amount so determined is made in cash. The maximum amount payable to Mr Davies as performance-
related incentive is currently set at an amount equal to his fixed salary.
Mr Davies also has a long-term equity incentive, comprising 2,338,530 share options issued by the company under the terms
of the Managing Director Share Option Plan, as approved by shareholders at the 2002 annual meeting. The options vested on
10 September 2005 and must be exercised by 10 September 2007. Any options not exercised at that time will lapse. At the date
of this report Mr Davies has not exercised any of the 2,338,530 options.
The exercise price escalates from the date of issue by an amount equal to the company’s cost of equity less dividends paid and other
returns to shareholders. In this way the options have no value unless the return to shareholders over the period since the date of issue
has exceeded the return which shareholders should expect from their investment. The value of these options at the date of issue, as
determined by the Black-Scholes method of valuation, was $350,000 per annum for the three-year period from 1 July 2002 to
30 June 2005.
Before setting the remuneration for the Managing Director, the board receives formal advice from one or more independent
remuneration consultants with expertise in the Australasian listed company environment, to ensure that the remuneration is structured
in a way that is fairly aligned with shareholders’ interests and appropriately set having regard to the remuneration provided to senior
executives in comparable companies in New Zealand and Australia.
• sKYCITY employee remuneration
The Governance and Remuneration Committee reviews employee remuneration strategy, policy, and practices. External advice from
recognised remuneration consultants is regularly sought on best practice remuneration structure, market trends, and market rates.
The guiding principles that underpin SKyCITy’s remuneration policies are:
–
–
–
–
–
to be market competitive at all levels to ensure the company can attract and retain best possible talent
to be performance-oriented so that remuneration practices recognise and reward high levels of performance and to avoid an
entitlement culture
to provide a significant at risk component of total remuneration which drives performance to achieve company goals and strategy
to manage remuneration within levels of cost efficiency and affordability
to align remuneration for senior executives with the interests of shareholders.
Processes and practices exist which ensure consistency throughout the SKyCITy Group in approach and implementation of
remuneration policy.
All salaried roles within SKyCITy are job-sized using internationally-recognised methodology to measure the impact, accountability,
and complexity of each role as it contributes to the organisation. Advice is then sought as to remuneration ranges by job band or level
being paid by the market to ensure competitiveness at both base and total remuneration levels. Individual remuneration is set within the
appropriate range taking into account such things as individual capability, scarcity of resource, and specific business needs. This process
ensures internal equity between roles and allows comparison with the overall market. Remuneration ranges are reviewed annually to
reflect any market movements.
Every alternate year SKyCITy engages an international remuneration consultancy to undertake a survey, with other companies
considered appropriate as comparatives, to test senior executive remuneration levels specific to roles to ensure further valid
comparison data.
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SKYCITY Entertainment Group Limited Annual Report 2005
SKyCITy also participates in and accesses several recognised remuneration surveys each year to provide detailed information including
both data and trends. These also assist SKyCITy in ensuring market competitiveness.
SKyCITy has a formal performance review process. Each year the company reviews its strategic and risk management plans and
develops an annual operating plan. This cascades to each business and, in turn, to each function and each role. Formal goals are set for
each salaried staff member as an individual performance plan to clarify expectations against which individual performance is assessed.
SKyCITy’s commitment to paying for performance means that, along with taking market relativities into account, each person’s
remuneration is directly linked to the degree to which they have delivered the goals set out in their individual performance plan.
Remuneration increases for the senior executive team are approved by the Governance and Remuneration Committee.
• performance pay Incentive plan (ppI)
SKyCITy operates an at-risk component of total remuneration for all salaried employees called Performance Pay Incentive (PPI). The
amount of variable pay a person can receive varies according to the band or level at which their role is evaluated. To enable payment of
any at-risk incentive component, the business has to achieve minimum financial targets. If those targets are not met no bonus incentive
is paid. In addition to overall financial achievement, all salaried staff have a number of individual targets that they must achieve which
account for up to 50% of their at-risk remuneration.
Payments under the PPI scheme have a minimum trigger point based on company financial targets and increase according to the degree
by which the company performs relative to its financial targets. In this way the PPI incentive scheme links individual reward to business
performance and shareholder interests. Staff who participate in the PPI scheme are paid 40% in cash and 60% in SKyCITy shares. The
value of shares is determined by the closing price of SKyCITy shares on the NZSx for the 10 trading days following the announcement
of the SKyCITy annual result. The shares components of the PPI bonus are issued in three equal tranches over a two-year period.
PPI is only paid when the company’s (or business unit’s) Return on Investment Capital has exceeded (or is close to) the predetermined
target(s) as set by the board (on the recommendation of the Governance and Remuneration Committee) at the start of the financial year.
Under the PPI, salaried personnel’s base bonuses range from 6.5% to 30.0% of annual salary. The actual bonus amount can be zero or
between 0.15 times and 1.5 times the base bonus percentage depending on company performance against target. Individual PPI bonus
payments are then subject to performance against personal goals set at the beginning of the year.
During the 2004/05 year, a total of 670 SKyCITy salaried personnel received total PPI bonuses of $969,000 (an average bonus payment
of $1,446 per participant).
• Customer experience Incentive (CeI)
SKyCITy also has an at-risk incentive plan for waged staff called Customer Experience Incentive (CEI). This scheme reflects the
company’s commitment to providing outstanding experiences for customers. Waged staff can earn additional bonus remuneration
depending on the achievement of financial targets and customer satisfaction targets based on focused surveys run by independent
survey companies.
CEI is only paid when the company’s (or business unit’s) predetermined financial and customer service targets have been met.
Bonuses under the CEI range from $60 to $450 ($60 to $550 from 2005/06) net after tax in any six-month period, depending on the
number of hours worked in the six-month periods ending 31 December and 30 June in each year.
During the 2004/05 year 1,773 waged employees received total CEI bonuses of $164,000 (an average bonus payment of $92.50
per participant).
Both the PPI and CEI incentive schemes require that sufficient returns have been created during the period in order to cover the cost of
bonuses paid, but also to ensure that the cost of such bonuses are only a proportion of the returns created. In this way, shareholders and
employees share in the returns created, but employees only share in those returns (under the PPI/CEI schemes) when they have met the
predetermined financial and other thresholds.
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SKYCITY Entertainment Group Limited Annual Report 2005
Corporate Governance (continued)
• senior executive share option plan
In addition to the Managing Director Share Option Plan referred to earlier in this section, share options are issued to a group of
approximately 50 senior executives under the Executive Share Options Plan (expires 2005 – refer below). Options are issued as a long-
term incentive to encourage retention and value creation. The Governance and Remuneration Committee recommends to the board for
approval the number of options to be granted to each executive. The number of options issued to an executive is determined based on
an option valuation, independently calculated by Deloitte Corporate Finance using the Black-Scholes methodology.
The exercise price of executive share options is structured so that the employee benefits only if the total return received by the
company’s shareholders, measured as the combination of share price appreciation and dividends, exceeds the company’s estimated cost
of equity over the same period. The company’s estimated cost of equity to be used in the calculation is equivalent to the market’s return
expectations for a company with the risk profile and prospects of SKyCITy Entertainment Group Limited.
The estimated cost of equity used to determine the exercise price is recalculated on an annual basis on the anniversary of the issue date
of the option, to ensure that the performance target continues to reflect changes in market conditions.
The base exercise price for executive share options is the average closing price of SKyCITy shares on the NZSx over the 10 trading days
following the release of the company’s result for the financial year to 30 June to the New Zealand and Australian stock exchanges. The
base exercise price, which is independently calculated, is escalated (on a daily basis) by the company’s estimated cost of equity capital
adjusted for dividends between the date the option was issued and its exercise date.
The Executive Share Option Plan is structured to align executive interests with shareholder interests and to motivate executives to drive
company performance and to reward executives for their loyalty and commitment throughout a three-year period.
Options issued under the SKyCITy Executive Share Option Plan, except in special circumstances, cannot be exercised until three years
from the date of issue. Options issued under the Plan lapse if not exercised on or before the fifth anniversary of their date of issue.
• senior executive share rights plan
The Executive Share Option Plan 2002 expired on 30 June 2005 and has been replaced from 1 July 2005 by the Executive Share Rights
Plan (Rights Plan). The Rights Plan operates in much the same way as the Options Plan, using the same cost of equity less dividends
structure for determining the base price multiplier, except that the net benefit is calculated and then the required number of shares are
issued at the date of exercise. This will result in significantly fewer new shares being issued than was the case under the previous plan.
The terms of the Rights Plan, which was approved by the board in December 2004, is for a three-year period ending 30 June 2008.
The board undertook extensive research and obtained independent expert advice on longer-term incentive remuneration structures
before finalising the terms of the Executive Share Rights Plan. It is satisfied that the Plan will continue to provide senior executives with
an effective longer-term value incentive based on the company’s equity market performance.
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SKYCITY Entertainment Group Limited Annual Report 2005
Disclosures
sToCK eXChanGe lIsTInGs
SKyCITy Entertainment Group Limited is listed on both the New Zealand and Australian stock exchanges.
subsIdIarY CompanIes
The changes to subsidiary company directorships during the 12-month period ended 30 June 2005 were as set out below.
On 15 July 2004, J F hansen resigned as a director of SKyCITy International ApS and T F Nielson was appointed as a director
of SKyCITy International ApS.
On 19 July 2004, G F hawkins resigned as a director and secretary and R h McGeoch was appointed as a director and secretary
of SKyCITy Australia Pty Limited and SKyCITy Adelaide Pty Limited.
On 22 July 2004, J J Murren, G N Jacobs and B L Wright resigned as directors and E W Davies and A B Ryan were appointed as
directors of SKyCITy Darwin Pty Limited (formerly Diamond Leisure Pty Limited), SKyCITy Darwin holdings Pty Limited (formerly
Diamond Darwin Pty Limited) and Fernbank Pty Limited.
On 28 July 2004, B S Nabbs resigned as a director of SKyCITy hamilton Limited (formerly Riverside Casino Limited) and SKyCITy
hamilton Construction Limited (formerly Riverside Casino Construction Limited).
On 13 August 2004, M W Daniel and D B henry resigned as directors of SKyCITy Leisure Limited.
On 20 August 2004, D R K Gascoigne resigned as a director of SKyCITy Leisure Limited.
On 27 October 2004, R h McGeoch resigned as a director and secretary and M J Silberling was appointed as a director and secretary
of SKyCITy Adelaide Pty Limited.
On 13 December 2004, A B Ryan was appointed as a director of SKyCITy Cinemas Limited, SKyCITy Leisure holdings Limited,
SKyCITy Metro Limited, Ab Initio holdings No. 13 Limited, Cine-Force Limited, Planet hollywood (Civic Centre) Limited, and
SKyCITy Cinemas (Whangarei) Limited.
On 14 April 2005, T F Nielson resigned as a director and B Kreiborg was appointed as a director of SKyCITy International ApS.
On 30 June 2005, S Perry resigned as a director and M R Gutry resigned as an alternate director for S Perry for each of SKyCITy
hamilton Limited and SKyCITy hamilton Construction Limited.
The following people held office as directors of subsidiaries of SKyCITy Entertainment Group Limited as at the end of the 2005 financial
year, being 30 June 2005. (A) denotes alternate director.
sKYCITY auckland holdings limited, sKYCITY auckland limited, sKYCITY Casino management limited, sKYCITY management
limited (formerly sKYCITY management (auckland) limited), sKYCITY Construction limited, sky Tower limited, sKYCITY
Wellington limited, sKYCITY International holdings limited, sKYCITY Investments limited, sKYCITY Investments auckland
limited, sKYCITY Investments Christchurch limited, sKYCITY action management limited, riverside fund limited and sKYCITY
Investments queenstown limited (formerly queenstown (hard rock) Investments limited)
Directors: E W Davies, A B Ryan
sKYCITY australia pty limited,
Directors: E W Davies, R h McGeoch, A B Ryan
sKYCITY australia finance pty limited, sKYCITY adelaide pty limited
Directors: E W Davies, A B Ryan, M J Silberling
sKYCITY darwin pty limited, sKYCITY darwin holdings pty limited, fernbank pty limited
Directors: E W Davies, A B Ryan, T A K Wilson
sKYCITY International aps
Directors: E W Davies, B Kreiborg, J van Rijn, A B Ryan (A)
A B Ryan is alternate director for E W Davies
queenstown Casinos limited
Directors: E W Davies, P J hensman, A B Ryan, B C Thomas
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SKYCITY Entertainment Group Limited Annual Report 2005
Disclosures (continued)
sKYCITY hamilton limited, sKYCITY hamilton Construction limited
Directors: E W Davies, A B Ryan
sKYCITY leisure limited
Directors: E W Davies, D I Kennedy, A B Ryan
sKYCITY leisure holdings limited, sKYCITY Cinemas limited, sKYCITY Cinemas (Whangarei) limited, sKYCITY metro limited,
ab Initio holdings no.13 limited, planet hollywood (Civic Centre) limited, Cine-force limited
Directors: P J holdaway, A B Ryan
sKYCITY Cinemas (fiji) limited
Directors: D Damodar, P J holdaway
Subsequent to balance date, the changes as set out below have occurred in the directorships of the Group companies.
On 1 July 2005, R h McGeoch resigned as a director and M J Silberling was appointed as a director of SKyCITy Australia Pty Limited.
Certain amalgamations were effected, with the amalgamated companies and resulting changes in directorships taking effect on
1 July 2005.
Abdiel Investments Limited was amalgamated with SKyCITy Auckland Limited. E W Davies and A B Ryan were directors of both
companies prior to the amalgamation and were appointed as directors of the amalgamated company, SKyCITy Auckland Limited.
Cine-Force Limited and SKyCITy Cinemas (Whangarei) Limited amalgamated with SKyCITy Cinemas Limited. A B Ryan and
P J holdaway were directors of each company prior to the amalgamation. E W Davies and A B Ryan were appointed as directors
of the amalgamated company, SKyCITy Cinemas Limited. P J holdaway was appointed as an alternate director for each director.
SKyCITy Leisure Limited amalgamated with SKyCITy Leisure holdings Limited. Prior to the amalgamation, E W Davies, D I Kennedy
and A B Ryan were directors of SKyCITy Leisure Limited and A B Ryan and P J holdaway were directors of SKyCITy Leisure holdings
Limited. E W Davies and A B Ryan were appointed as directors of the amalgamated company, SKyCITy Leisure holdings Limited.
P J holdaway was appointed as an alternate director for each director.
Riverside Fund Limited, SKyCITy Investments Limited and SKyCITy Investments Auckland Limited amalgamated with SKyCITy
Entertainment Group Limited. Prior to the amalgamation, E W Davies and A B Ryan were directors of SKyCITy Investments Limited,
SKyCITy Investments Auckland Limited and Riverside Fund Limited. E W Davies, D T Spring, R h McGeoch, E Toime, R A McLeod,
W R Trotter and P L Reddy were directors of SKyCITy Entertainment Group Limited prior to the amalgamation and were appointed as
directors of the amalgamated company, SKyCITy Entertainment Group Limited.
SKyCITy Entertainment Group Limited holds a 40.5% shareholding in Christchurch Casinos Limited. During the 2004/05 year,
E W Davies and A B Ryan were appointed directors of Christchurch Casinos Limited.
remuneraTIon of dIreCTors
Remuneration paid to directors or former directors for services in their capacity as directors of SKyCITy Entertainment Group
Limited during the year ended 30 June 2005 was as listed below.
E W Davies
R h McGeoch
R A McLeod
P L Reddy
Sir Dryden Spring
E Toime
W R Trotter
J P hartley (retired)
$1,438,992
$160,000
$73,333
$92,500
$92,500
$80,000
$80,000
$284,375
The Managing Director, E W Davies, is not paid director’s fees. The amount shown next to his name represents the salary and
performance bonus paid to him as an employee of the company. The remuneration paid to Mr Davies comprised a base salary of
$900,000 plus a performance-related incentive payment of $538,992 relating to the 2003/04 financial year.
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SKYCITY Entertainment Group Limited Annual Report 2005
Mr J P hartley, former director and chairman of SKyCITy Entertainment Group Limited was paid a retirement amount of $284,375 in
July 2004. No other non-executive director of the Group or parent company has, since the end of the financial year, received or become
entitled to receive a benefit other than director’s fees for the 2004/05 financial year or reimbursement of expenses incurred in relation to
company matters, or as is disclosed elsewhere in this annual report.
The SKyCITy board resolved to freeze and accrue non-executive director retirement allowances as at 30 June 2004. An adjustment
was made at the time to directors’ fees to compensate non-executive directors for discontinuance of retirement entitlements. Director
retirement allowances as at 30 June 2004 have been accrued in the financial statements for the 2004/05 year and will be paid to each
entitled director at their date of retirement.
Remuneration paid to former directors of SKyCITy Leisure Limited during the year ended 30 June 2005 was:
M W Daniel
D R K Gascoigne
D B henry
$3,014
$5,425
$3,014
Remuneration paid to directors of Queenstown Casinos Limited (QCL) during the year ended 30 June 2005 was:
E W Davies
P J hensman
A B Ryan
B C Thomas
$7,500
$7,500
$7,500
$7,500
QCL directors’ fees for E W Davies and A B Ryan were paid to SKyCITy Entertainment Group Limited and were not received personally
by Messrs Davies or Ryan. Apart from the amounts listed above, no remuneration is received by the directors of the SKyCITy subsidiary
companies in their capacity as directors of those companies.
dIreCTors’ and offICers’ IndemnITIes
Indemnities have been given to directors and senior managers of the SKyCITy Group to cover acts or omissions of those persons in
carrying out their duties and responsibilities as directors and senior managers of the company and its subsidiaries.
InTeresTs reGIsTer
disclosure of directors’ interests
Section 140(1) of the Companies Act 1993 requires a director of a company to disclose certain interests. Under subsection (2) a director
can make disclosure by giving a general notice in writing to the company of a position held by a director in another named company or
entity. The following are particulars as entered in the company’s Interests Register as at 30 June 2005 with the notices given by directors
during the year ended 30 June 2005 marked with an asterisk:
e W davies
Anglican Trust for Women and Children*
Melanesian Mission Trust
Trustee
Trustee
r h mcGeoch
Aon Risk Services Limited
Member NSW Board of Advice
Frontiers Group (Australasia) Limited
Frontiers Group (UK) Limited
Gullivers Travel Group Limited*
LIPA Pharmaceuticals Limited*
McGeoch holdings Limited
Pacific healthcare Limited
Ramsay health Care Limited
Saatchi & Saatchi Trans-Tasman Advisory Board
Sydney Cricket and Sports Ground Trust
Telecom Corporation of New Zealand Limited
Vantage Private Equity Growth Limited*
Chairman
Director
Director
Director
Chairman
Chairman
Director
Chairman
Trustee
Director
Chairman
101
SKYCITY Entertainment Group Limited Annual Report 2005
Disclosures (continued)
r a mcleod
AFL Management Limited*
ANZ National Bank Limited*
Aotearoa Fisheries Limited*
Arthur Andersen (NZ) Limited*
Credit and Debit Limited*
Debit and Credit (Wellington) Limited*
Gullivers Travel Group Limited*
hobson Downs Trust*
McLeod Custodian Limited (trustee of Scott Trust)*
New Zealand Business Roundtable Limited*
North East Limited and associated companies*
Raukura Moana Fisheries Limited*
Steward Limited*
Tainui Group holdings Limited and certain subsidiaries*
Telecom Corporation of New Zealand Limited*
p l reddy
Te Ohu Kaimoana Limited*
Active Equities Limited
Infinity Group Limited
Director
Director
Director
Director
Director and Shareholder
Director and Shareholder
Director
Trustee
Director and Shareholder
Director and Shareholder
Director and Shareholder
Director
Director and Shareholder
Director
Director
Director
Director and Shareholder
Associated Person of Shareholder
INSiTE Management Services Pty Limited*
Alternate Director
MobilefoneRepair.com Limited
SKyCITy Community Trust
TeamTalk Limited
Associated Person of Shareholder
Trustee
Associated Person of Shareholder
Telecom Corporation of New Zealand Limited
Director
The New Zealand Exchange Limited
Member NZx Discipline
The New Zealand International Festival of the Arts
sir dryden spring
ANZ National Bank Limited and subsidiaries
Asia 2000 Foundation of New Zealand
Fletcher Building Limited
New Zealand APEC Business Advisory Council
New Zealand Business and Parliamentary Trust
Port of Tauranga Limited
Trustee
Director
Chairman
Director
Chairman
Trustee
Director
W r Trotter
First NZ Capital Group Limited and certain subsidiaries
Executive Chairman
102
SKYCITY Entertainment Group Limited Annual Report 2005
The following details included in the Interests Register as at 30 June 2004, or entered during the year ended 30 June 2005, have been
removed during the year ended 30 June 2005.
E W Davies was appointed a director of ACB Group holdings Limited on 8 February 2005 and resigned on 20 June 2005.
R h McGeoch is no longer a consultant to Corrs Chambers Westgarth, an Ambassador for CLEAN EVENT International Pty Limited, or
chairman of Telecom Corporation of New Zealand Australia Pty Limited.
Sir Dryden Spring is no longer chairman or a director of WEL Networks Limited.
E Toime is no longer Executive Deputy Chairman of Royal Mail holdings Plc, a director of Royal Mail Group Plc or Post Office Limited,
Chairman of General Logistics Systems BV, or a board member of International Postal Corporation.
dIsClosure of dIreCTors’ InTeresTs In share TransaCTIons
Directors disclosed, pursuant to section 148 of the Companies Act 1993 and Rule 10.5.3 of the Listing Rules of the NZx, the following
acquisitions and disposals of relevant interests in SKyCITy shares during the period to 30 June 2005, as set out below.
E W Davies
E Toime
DATE OF
ACQUISITION/
DISPOSAL DURING
PERIOD
CONSIDERATION
ShARES ACQUIRED/
(DISPOSED OF)
1 October 2004(1)
1 October 2004
$1,960,897.23
5,263,310.76
1 April 2005(2)
14 April 2005(3)
12,612.72
Nil
1,141,716
(1,141,716)
2,510
41,928
(1)
The transaction shown relates to the exercise of 285,429 options granted to Mr Davies pursuant to the Executive Share Option
Plan approved by shareholders at the annual meeting of the company held on 28 October 1999.
(2) The transaction shown represents the issue of shares in lieu of dividends pursuant to the company’s dividend reinvestment plan.
(3)
The transaction represents a transfer by Mr Toime to a corporate trustee (in which Mr Toime is a shareholder) for a trust of which
Mr Toime is a discretionary beneficiary.
dIsClosure of dIreCTors’ InTeresTs In shares, opTIons and CapITal noTes
Directors disclosed, pursuant to Rule 10.5.3 of the Listing Rules of the NZx, the following relevant interests in SKyCITy shares, options
and capital notes as at 30 June 2005, as set out below.
E W Davies
R h McGeoch
R A McLeod
P L Reddy
Sir Dryden Spring
E Toime
W R Trotter
shares
opTIons
BENEFICIALLy
hELD
NON-
BENEFICIALLy
hELD
BENEFICIALLy
hELD
NON-
BENEFICIALLy
hELD
400,001
–
16,000
140,264
10,000
149,544
656,668
–
–
–
2,713,530
20,964
–
7,330
20,964
–
–
–
–
–
20,964
–
–
–
–
–
–
–
103
SKYCITY Entertainment Group Limited Annual Report 2005
Disclosures (continued)
Mr Trotter is a trustee of a trust that held 200,000 capital notes as at 30 June 2004. The capital notes were sold for $1.00 each plus
accrued interest at the expiry date of the capital notes being 15 May 2005.
No directors held any interest in the capital notes of the company as at 30 June 2005.
Options issued to Mr Davies are issued pursuant to the Executive Share Option Plan (1999 Executive Plan) approved by shareholders at
the annual meeting of the company held on 28 October 1999, and the Managing Director Share Option Plan (Managing Director Plan)
approved by shareholders at the annual meeting of the company held on 30 October 2002.
Options issued to the non-executive directors are issued pursuant to the Non-Executive Director Share Option Plan approved by
shareholders at the annual meeting of the company held on 26 October 2000.
Options issued under the 1999 Executive Plan are exercisable one year after the date of issue, at the exercise price determined pursuant
to the Plan, and lapse if they are not exercised within five years of the date of issue.
Options issued under the Managing Director Plan are exercisable three years after the date of issue, at the exercise price determined
pursuant to the Plan, and lapse if they are not exercised within five years of the date of issue.
emploYee remuneraTIon
The numbers of employees or former employees of the company and its subsidiaries, not being directors of the company, who received
remuneration and other benefits in their capacity as employees, the value of which was in excess of $100,000 during the financial year
ended 30 June 2005, are as listed below.
remuneration
employees
remuneration
employees
$100,000 – $109,999
$110,000 – $119,999
$120,000 – $129,999
$130,000 – $139,999
$150,000 – $159,999
$160,000 – $169,999
$180,000 – $189,999
$190,000 – $199,999
$200,000 – $209,999
$210,000 – $219,999
$220,000 – $229,999
$230,000 – $239,999
donaTIons
17
12
9
7
3
8
3
2
2
3
2
2
Donations are referred to in note 3 of the financial statements.
$240,000 – $249,999
$250,000 – $259,999
$270,000 – $279,999
$280,000 – $289,999
$310,000 – $319,999
$380,000 – $389,999
$410,000 – $419,999
$440,000 – $449,999
$500,000 – $509,999
$570,000 – $579,999
$600,000 – $609,999
2
1
3
3
1
1
1
1
1
1
1
104
SKYCITY Entertainment Group Limited Annual Report 2005
TWenTY larGesT shareholders as aT 22 auGusT 2005
1
Investors Mutual Limited
2 UBS Global Asset Management Group
3 Commonwealth Bank Group/Colonial First
State Global Asset Management
4 Maple Brown Abbott
5 Columbia Wanger Asset Management
6 State Street Global Advisors Group
7 Barclays Global Investors Group
8 Fidelity Group
9 Morgan Stanley Investment Management Group
10 Promina Group
11 AMP Capital Investors
12 Deutsche Asset Management Group
13 Tower Asset Management
14 First NZ Securities (Private Clients)
15 ING Investment Management Group
16 ABN AMRO Craigs Limited (Private Clients)
17 Bank of New Zealand Structured Finance
18 Accident Compensation Corporation
19 AxA Group
20 Union Investment Group
Total
NUMBER OF
ShARES
%
OF ShARES
31,932,216
25,750,873
22,026,703
13,719,973
9,862,759
9,343,989
9,061,545
8,924,323
8,372,093
7,841,248
7,109,839
6,167,822
5,988,385
4,479,950
4,255,421
4,236,864
4,200,000
3,593,540
2,710,993
2,689,859
7.65%
6.17%
5.27%
3.29%
2.36%
2.24%
2.17%
2.14%
2.00%
1.88%
1.70%
1.48%
1.43%
1.07%
1.02%
1.01%
1.01%
0.86%
0.65%
0.64%
192,268,395
46.04%
The analysis as set out above has been compiled based upon information provided by Computershare Analytics Pty Limited.
Total shares on issue as at 22 August 2005 were 417,613,974.
dIsTrIbuTIon of ordInarY shares and reGIsTered shareholdInGs as aT 22 auGusT 2005
SIZE OF hOLDING
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
over 100,000
Total
NUMBER OF
ShAREhOLDERS
NUMBER
OF ShARES
3,871
2,298,505
13,458
35,958,581
4,049
3,369
29,907,559
77,169,079
147
272,280,250
24,894 417,613,974
As at 22 August 2005 there were 337 holdings of less than 113 shares, being the minimum marketable parcel of shares under ASx Listing
Rules. The ASx Listing Rules define the minimum parcel as having a value of A$500. Calculation of the minimum parcel of 113 shares is
based on an exchange rate of A$0.9221 and a SKyCITy share price of NZ$4.82.
105
SKYCITY Entertainment Group Limited Annual Report 2005
Disclosures (continued)
subsTanTIal seCurITY holders
As at 19 July 2005, Commonwealth Bank of Australia Group gave notice, in accordance with the New Zealand Securities Markets
Act 1988, that it was a substantial security holder in the company and had a relevant interest in 21,118,018 (5.06%) ordinary shares
in the company.
As at 1 June 2005, Investors Mutual Limited gave notice, in accordance with the New Zealand Securities Markets Act 1988, that it was a
substantial security holder in the company and had a relevant interest in 30,337,928 (7.26%) ordinary shares in the company.
As at 3 May 2005, UBS Nominees Pty Limited gave notice, in accordance with the New Zealand Securities Markets Act 1988, that it
was a substantial security holder in the company and had a relevant interest in 21,813,251 (5.22%) ordinary shares in the company.
TWenTY larGesT CapITal noTe holders as aT 22 auGusT 2005
1
Investment Custodial Services Limited
2 Private Nominees Limited
3 Forbar Custodians Limited – PPM Medium A/C
4 Forbar Custodians Limited – PPM Low A/C
5 Custodial Services Limited – A/C 3
6 First NZ Capital Custodians Limited
7 Royal & SunAlliance Corporate Bond Premium Income Trust
8 Citibank Nominees (New Zealand) Limited
9 Forbar Custodians Limited – PPM high A/C
10 Guardian Trust Investment Nominees (RWT) Limited
11 Custodial Services Limited – A/C 2
12 University of Otago
13 Public Trust
14 Waikimihia Farm Limited
15 Cogent Nominees Limited
16 Morrow Plastics Limited
17 John William Dudley Ryder
18 Forbar Custodians Limited – Residents 19.5% A/C
19 Forbar Custodians Limited – Residents 33.0% A/C
20 Knox home Trust Board Inc
NUMBER
OF CAPITAL
NOTES
%
OF CAPITAL
NOTES
5,023,000
4,435,000
3,906,000
1,816,000
1,453,000
1,145,000
1,000,000
857,000
656,000
598,000
511,000
500,000
500,000
500,000
500,000
500,000
500,000
490,000
411,000
400,000
3.35%
2.96%
2.60%
1.21%
0.97%
0.76%
0.67%
0.57%
0.44%
0.40%
0.34%
0.33%
0.33%
0.33%
0.33%
0.33%
0.33%
0.33%
0.28%
0.27%
Total
25,701,000
17.13%
As at 22 August 2005, 150 million SKyCITy Capital Notes (each capital note having an issue value of $1.00) were on issue. As at
22 August 2005 SKyCITy is the holder of 26,140,250 capital notes, as treasury stock.
The capital notes have a maturity date of 15 May 2010.
106
SKYCITY Entertainment Group Limited Annual Report 2005
dIsTrIbuTIon of CapITal noTe holdInGs as aT 22 auGusT 2005
SIZE OF hOLDING
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
over 100,000
Total
NUMBER
OF NOTE
hOLDERS
NUMBER
OF CAPITAL
NOTES
–
421
895
–
2,102,000
8,402,250
2,335
74,278,500
92
65,217,250
3,743 150,000,000
WaIVers from The neW zealand eXChanGe (nzX) lIsTInG rules
The following waivers from the NZx Listing Rules were effective as at balance date.
On 5 September 2002, the NZx granted waivers from compliance with Listing Rule (LR) 7.3.6 in respect of the participation by
Ms h R Shotter in the company’s Performance Pay Incentive Plan (PPI) and the Executive Share Option Plan (2002). Under the PPI,
salaried employees of the company and its subsidiaries are entitled to bonuses, payable in cash and shares, if relevant financial and
personal performance targets are met. Under the Executive Share Option Plan, options cannot be exercised before three years after
the date of issue except in special circumstances. Options lapse if not exercised five years after the date of issue. Ms Shotter is married
to Mr Davies, the Managing Director of the company. Accordingly, in the absence of the waiver, issues of shares under the PPI and
options under the Executive Share Option Plan would require shareholder approval. The NZx granted the waiver on the condition that
Ms Shotter’s participation in the PPI and the Executive Share Option Plan is determined by an independent committee of the board of
directors of the company, and that Mr Davies does not participate in determining the benefits provided to Ms Shotter.
On 5 April 2005, the NZx granted a waiver from LR 7.6.1 in respect of the purchase of capital notes by the company on expiry of the
initial term of the capital notes on 16 May 2005. The capital notes are equity securities for the purposes of the NZx Listing Rules. If the
waiver had not been granted, the capital notes could only have been acquired in accordance with the requirements of the Companies
Act 1993 applicable to the purchase of shares or by obtaining the approval of all holders of equity securities whose rights have been
materially affected by the redemption. The NZx granted the waiver on condition that prior to the resale of any capital notes that had
been repurchased, the directors sign a certificate with the content prescribed by section 49(2) of the Companies Act 1993, in respect of
the transfer as if the transfer involved an issue of the repurchased capital notes, and to deliver that certificate to the NZx.
On 9 June 2005, the NZx granted a waiver from LR 9.2.1 in respect of a $100 million subordinated bridge facility with ANZ National
Bank Limited. ANZ is a related party of the company under LR 9.2.3 by virtue of the fact that Sir Dryden Spring and Rob McLeod are
directors of both companies. If the waiver had not been granted, the company would have been required to obtain the approval of
shareholders for the facility. The NZx granted the waiver on the condition that directors of the company other than Sir Dryden Spring
and Mr McLeod provide confirmation to NZx that the decision to enter into the facility was an arm’s-length, commercial decision for
SKyCITy, was not unduly influenced by Sir Dryden Spring or Mr McLeod, and was in the best interests of the company’s shareholders.
On 24 June 2005, the NZx granted waivers from LRs 8.1.3, 8.1.4, 8.1.5, 8.1.8 and 8.1.9 in respect of the company’s Executive Share
Rights Plan 2005 (Rights Plan). The Rights Plan is substantially similar to the 2002 Option Plan referred to above. The material difference
is that participants in the Rights Plan will be issued with rights that do not have a set conversion formula into ordinary shares. On
exercise, a right holder will receive a number of shares calculated on the difference between the then prevailing market price of the
shares and the exercise value of the rights under the Plan. The effect is that rights holders do not have to sell a large number of the
shares received on exercise of their rights in order to pay the relevant exercise price. As a result the number of shares issued on exercise
of the rights is less dilutionary for existing shareholders.
As for the 2002 Executive Share Option Plan, rights cannot be exercised before three years from their issue except in special
circumstances. Rights lapse if not exercised within five years of their issue date. If the NZx had not granted the waivers the company
would otherwise have had to adopt an option scheme to replace the 2002 Option Plan that was more dilutionary for existing
shareholders than the Rights Plan. In addition, SKyCITy’s directors would not have been able to make appropriate adjustments to the
number of shares to be received on exercise in the event of a bonus issue of shares to shareholders. The NZx granted the waivers on
condition that the company provide advance notice to NZx of any proposed adjustment to the terms of the rights to take into account
any corporate action and provide a copy of the confirmation that the adjustment is fair from an independent party.
107
SKYCITY Entertainment Group Limited Annual Report 2005
Disclosures (continued)
In addition, on 24 June 2005, the NZx granted waivers from compliance with LR 7.3.6 in respect of the participation by Ms Shotter in the
company’s renewed Performance Pay Incentive Plan (2005 PPI) and the Executive Share Rights Plan 2005 (Rights Plan). As noted above
under the Rights Plan, rights cannot be exercised before three years after the date of their issue, except in special circumstances. In the
absence of the waivers, issues of shares under the 2005 PPI and rights under the Rights Plan to Ms Shotter would require shareholder
approval. The NZx granted the waivers on the condition that an independent committee determines Ms Shotter’s participation in the
2005 PPI and the Rights Plan, and that Mr Davies does not participate in determining the benefits provided to Ms Shotter.
The effect of all other waivers granted had ceased as at balance date.
opTIon holders
As at 22 August 2005, options on issue were as detailed below.
•
•
•
•
459,000 options issued under the Executive Share Option Plan approved by shareholders at the annual meeting of the company
on 28 October 1999, held by three holders. These options have no voting rights but entitle the holder to four shares on exercise of
each option
62,892 options issued under the Non-Executive Director Share Option Plan approved by shareholders at the annual meeting of the
company held on 26 October 2000, held by three holders. These options have no voting rights and entitle the holder to two shares
on exercise of each option
2,338,530 options issued under the Managing Director Share Option Plan approved by shareholders at the annual meeting of the
company on 30 October 2002, held by one holder. These options have no voting rights but entitle the holder to two shares on
exercise of each option
4,040,500 options issued under the Executive Share Option Plan approved by directors of the company in August 2002, held by
28 holders. The options have no voting rights but 1,766,000 of the options entitle the holder to two shares on exercise of each
option and the balance of 2,274,500 entitles the holder to one share on exercise of each option.
lImITaTIons on aCquIsITIon of ordInarY shares
The company’s constitution contains various provisions which were included to take into account the application of:
•
•
•
•
the Gambling Act 2003 (New Zealand)
the Casino Act 1997 (South Australia)
the Gaming Control Act 1993 (Northern Territory)
the legislation providing for the establishment, operation and regulation of casinos in any other jurisdiction in which SKyCITy or any
of its subsidiaries may hold a casino licence to SKyCITy Entertainment Group Limited and any of its subsidiaries.
SKyCITy needs to ensure, when it participates in gaming activities:
•
•
that it has the power under its constitution to take such action as may be necessary to ensure that its suitability to do so in a particular
jurisdiction is not affected by the identity or actions (including share dealings) of a shareholder
that there are appropriate protections to ensure that persons do not gain positions of significant influence or control over SKyCITy or
its business activities without obtaining any necessary statutory or regulatory approvals in those jurisdictions.
Accordingly, the constitution contains the following provisions restricting the acquisition of shares in the company to achieve this.
Transfer of shares
Clause 12.11 of the constitution provides that if a transfer of shares results in the transferee, and the persons associated with
that transferee:
• holding more than 5% of the shares in SKyCITy; or
•
increasing their combined holding further beyond 5% if:
– they already hold more than 5% of the shares in SKyCITy; and
– the transferee has not been approved by the relevant regulatory authority as an Associated Casino Person of any casino
licence holder;
108
SKYCITY Entertainment Group Limited Annual Report 2005
Transfer of shares – ConTInued
then the votes attaching to all shares held by the transferee and the persons associated with that transferee are suspended unless and
until either:
• each regulatory authority advises that approval is not needed
•
•
•
any regulatory authority which determines that its approval is required approves the transferee, together with the persons associated
with that transferee, as an Associated Casino Person of any applicable casino licence holder
the board of the company is satisfied that registration of the proposed transfer will not prejudice any casino licence; or
the transferee, and the persons associated with that transferee, disposes of such number of SKyCITy’s shares as will result in their
combined holding falling below 5% or, if the regulatory authorities approve in respect of the transferee, and the persons associated
with that transferee, a higher percentage, the lowest such percentage approved by the regulatory authorities.
If a regulatory authority does not grant its approval to the proposed transfer, SKyCITy may sell such number of the shares held by the
transferee and by any persons associated with that transferee, as may be necessary to reduce their combined shareholding to a level that
will not result in the transferee and the persons associated with that transferee, being an Associated Casino Person of that casino
licence holder.
The power of sale can only be exercised if SKyCITy has given one month’s notice to the transferee of its intention to exercise that power
and the transferee has not, during that one-month period, transferred the requisite number of shares in SKyCITy to a person who is not
associated with the transferee.
oTher leGIslaTIon/requIremenTs
General limitations on the acquisition of the securities imposed by the jurisdiction in which SKyCITy is incorporated (i.e. New Zealand
law) are referred to below.
Other than the provisions noted above, the only significant restrictions or limitations in relation to the acquisition of securities are those
imposed by New Zealand laws relating to takeovers, overseas investment and competition.
The New Zealand Takeovers Code creates a general rule under which the acquisition of more than 20% of the voting rights in SKyCITy,
or the increase of an existing holding of 20% or more of the voting rights in SKyCITy, can only occur in certain permitted ways. These
include a full takeover offer in accordance with the Takeovers Code, a partial takeover offer in accordance with the Takeovers Code,
an acquisition approved by an ordinary resolution, an allotment approved by an ordinary resolution, a creeping acquisition (in certain
circumstances) or compulsory acquisition if a shareholder holds 90% or more of the shares in the company.
The New Zealand Overseas Investment Act 1973 and the Overseas Investment Regulations 1995 regulate certain investments in
New Zealand by overseas persons. In general terms, the consent of the New Zealand Overseas Investment Commission is likely to be
required when an ‘overseas person’ acquires shares or an interest in shares in SKyCITy Entertainment Group Limited that amount to
more than 25% of the shares issued by the company, or if the overseas person already holds 25% or more, the acquisition increases
that holding.
The New Zealand Commerce Act 1986 is likely to prevent a person from acquiring shares in SKyCITy if the acquisition would have, or
would be likely to have, the effect of substantially lessening competition in a market.
oTher requIred dIsClosures
SKyCITy Entertainment Group Limited has no securities subject to an escrow arrangement.
SKyCITy Entertainment Group Limited is incorporated in New Zealand and is not subject to Chapters 6, 6A, 6B and 6C of the
Corporations Act (Australia).
SKyCITy Entertainment Group Limited currently has in place an on-market buyback programme (commenced 29 August 2005).
There are no material differences between the ASx Appendix 4E issued by SKyCITy Entertainment Group Limited for 30 June 2005
and this annual report.
109
SKYCITY Entertainment Group Limited Annual Report 2005
Glossary
2004/05
aCC
action
alaC
amortisation
asX
CeI
Financial year ended 30 June 2005
Accident Compensation Corporation
SKyCITy loyalty card scheme
New Zealand Alcohol and Liquor Advisory Council
Process of allocating acquisition cost or other value of intangible assets to
periods as expenses
Australian Stock Exchange
Customer Experience Incentive scheme
Consolidated financial statements
Financial statements for SKyCITy Entertainment Group Limited, its subsidiaries, associates
and joint ventures
cps
depreciation
dIa
drp
dps
eps
ebIT
Cents per share
Difference between the cost (or value) of an asset and its residual value, allocated over the
series of accounting periods in the asset’s useful life
New Zealand Department of Internal Affairs
Dividend Reinvestment Plan
Dividend per ordinary share
Earnings per ordinary share
Earnings before interest and tax
ebITda
Operating earnings before interest, tax, depreciation and amortisation
fully imputed dividend
Dividend paid out of profits on which tax has already been paid
Gdp
Goodwill
Gross domestic product
Future benefits from unidentifiable assets that are carried as intangible assets
of an entity
110
SKYCITY Entertainment Group Limited Annual Report 2005
Group
GsT
Ifrs
JV
npC
nzqa
nzsX
nzX
SKyCITy Entertainment Group Limited
Goods and services tax
International Financial Reporting Standards
Joint venture
National Provincial Championship
New Zealand Qualifications Authority
The main equities market operated by NZx
New Zealand Exchange
nzX discipline
ohs
The NZx complaints disciplinary and market surveillance body
Occupational health and Safety
operating earnings
Operating earnings before interest, tax, depreciation and amortisation
ordinary share
parent company
ppI
sKYCITY leisure
Ticket technology
A fully paid share in SKyCITy Entertainment Group Limited
SKyCITy Entertainment Group Limited
Performance Pay Incentive Plan
SKyCITy’s cinema exhibition company
Ticket in/ticket out technology providing improved convenience for higher-end
gaming machine players
111
SKYCITY Entertainment Group Limited Annual Report 2005
Directory
reGIsTered offICe
sKYCITY entertainment Group limited
Level 6
Federal house
86 Federal Street
PO Box 6443
Wellesley Street
Auckland
New Zealand
Telephone +64 9 363 6141
Facsimile +64 9 363 6140
Email
sceginfo@skycity.co.nz
Website www.skycitygroup.co.nz
sKYCITY entertainment Group limited’s
registered office in australia
c/o Finlaysons
81 Flinders Street
GPO Box 1244
Adelaide
South Australia
Telephone +61 8 8235 7400
Facsimile +61 8 8232 2944
audITor
pricewaterhouseCoopers
188 Quay Street
Auckland City
Private Bag 92162
Auckland
share reGIsTrars
neW zealand
Computershare Investor services limited
Level 2
159 hurstmere Road
Takapuna
Auckland
Private Bag 92119
Auckland
Telephone +64 9 488 8700
Facsimile +64 9 488 8787
112
ausTralIa
Computershare Investor services
pty limited
Level 3
60 Carrington Street
Sydney NSW 2000
GPO Box 7045
Sydney NSW 1115
Telephone +61 2 8234 5000
Facsimile +61 2 8234 5050
banKers
anz national bank
Commonwealth bank of australia
bank of new zealand
CapITal noTes TrusTee
The new zealand Guardian
Trust Company limited
48 Shortland Street
PO Box 1934
Auckland
Telephone +64 9 379 3630
Facsimile +64 9 377 7477
solICITors
bell Gully
hP Tower
171 Featherston Street
PO Box 1291
Wellington
minter ellison rudd Watts
BNZ Tower
125 Queen Street
PO Box 3798
Auckland
finlaysons
81 Flinders Street
GPO Box 1244
Adelaide
South Australia
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02 Financial Summary
03 Highlights
04 Our History
05 Our Businesses
06 SKYCITY Auckland
08 SKYCITY Adelaide
10 SKYCITY Darwin
12
SKYCITY Hamilton and
SKYCITY Queenstown Casino
14 SKYCITY Leisure
16 Chairman’s Report
19 Managing Director’s Review
22 Board of Directors
24 Executive Team
26 Our People
31 Our Community
36 Financial and Operating Review
40 Five-Year Summary
47 Financial Statements
85 Corporate Governance
99 Disclosures
110 Glossary
112 Directory
For shareholder and corporate enquiries please phone +64 9 363 6141 or email sceginfo@skycity.co.nz
For customer enquiries and reservations please phone +64 9 363 6000 or 0800 SKYCITY (0800 759 2489)
or fax +64 9 363 6010 or email reservations@skycity.co.nz
SKYCITY website: www.skycitygroup.co.nz
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SKYCITY Entertainment Group Limited Annual Report 2005