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SKYCITY Entertainment Group Limited
Annual Report 2006
REGISTERED OFFICE
AUDITOR
SKYCITY Entertainment Group Limited
PricewaterhouseCoopers
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
sceginfo@skycity.co.nz
email
Website www.skycitygroup.co.nz
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
SOLICITORS
Bell Gully
HP tower
171 Featherston street
Po Box 1291
Wellington
Minter Ellison Rudd Watts
Lumley centre
88 shortland street
Po Box 3798
Auckland
Finlaysons
81 Flinders street
GPo Box 1244
Adelaide
south Australia
188 Quay street
Auckland city
Private Bag 92162
Auckland
BANKERS
ANZ National Bank
Commonwealth Bank of Australia
Bank of New Zealand
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
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
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
c o n t e n t s
Financial Summary
chairman’S report
managing Director’S review
2005/06 objectiveS anD progreSS
10-year timeline
SKycity aucKlanD
SKycity aDelaiDe
SKycity Darwin
SKycity hamilton / SKycity QueenStown
SKycity cinemaS
3
4
8
13
14
16
18
20
22
24
hoSt reSponSibility
our people
our communitieS
boarD oF DirectorS
corporate governance
earningS anD Five-year trenD StatementS
Financial StatementS
DiScloSureS
ShareholDer anD noteholDer inFormation 119
Directory
125
26
30
34
38
40
51
57
112
DISTRIBUTIONTotal distributions for the 2005/06 year are 26.0 cents per share. The final 2005/06 distribution of 14 cents per share will be made on 6 October 2006 to those shareholders on the SKYCITY register as at 5.00pm on 8 September 2006.During 2006 SKYCITY implemented a profit distribution plan whereby profits are distributed by way of non-taxable bonus shares, with an option to have the bonus shares bought back for cash. Further information on the final 2005/06 profit distribution was mailed to shareholders on 20 September 2006.ANNUAL MEETINGThe 2006 annual meeting of SKYCITY Entertainment Group Limited will be held in the Auckland Room, SKYCITY Auckland Convention Centre, 88 Federal Street, Auckland on Friday 27 October 2006, commencing at 11.00am.The notice of meeting, including the agenda, will be mailed to shareholders on 10 October 2006.ANNUAL REPORTThe board of directors is pleased to present the annual report of SKYCITY Entertainment Group Limited for the year ended 30 June 2006.ROD McGEOCh EvAN DAvIESChairman Managing Director27 September 2006 A skycityPERFORMANcE27 SEPTEMBER 200610 YEARS OF ENTERTAINMENTCurrent and historiCal finanCial information, governanCe statements, news releases and other Corporate information are available online at www.skycitygroup.co.nzdirectory PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
If you’re a customer, we’re here to entertain you,
to provide you with a SKYCITY experience you’ll remember.
If you’re a shareholder, the evidence is our performance of
consistent growth and profitability throughout the past decade.
And if you’re one of our team, congratulations,
and thank you.
HOST
RESPONSIBILITY
I s k y c i t y 0 - y e a r a n n I v e r s a r y
OUR
PEOPLE
CORPORATE
GOVERNANCE
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
SKYCITY - the fun never ends
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
SKYCITY - the fun never ends
Every SKYCITY experience is underpinned by a single aim:
to create fun and entertainment for all our customers.
From the adrenalin buzz of gaming and the ambience of fine
dining, to luxury suites and convention choices, to heart‑stopping
attractions like Sky Jump and over 120 screens that play the best
films from around the world, we are determined to be the most
popular entertainment and leisure destination in each of the
communities in which we operate.
We believe in fun. We stand for creative entertainment.
These hallmarks have enabled us to develop a diversified yet
focused business that ranks as one of the top 10 publicly‑listed
companies in New Zealand and a top 150 company in Australia.
The breadth of our operations and our strong track record
over 10 years prove that fun is rewarding in every sense. We will
continue to work hard to deliver experiences, entertainment and
returns that delight our stakeholders.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
I s k y c i t y a n n u a l r e p o r t 0 0 6
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
GROUP SUMMARY
Earnings before Interest and Tax
2006
$m
2005
$m
Movement
(%)
- auckland/Corporate
$154.6
$59.
- Hamilton
- other new Zealand
- adelaide
- Darwin
- total Group eBIt
Funding
Minority Interests
tax
$13.1
$11.0
A$17.1
A$28.0
$229.5
$77.2
$0.4
$32.6
$0.9
$6.3
a$8.8
a$.6
$0.0
$74.4
($.)
38.
net profit after tax
$120.1
$06.4
nZ$m NET PROFIT AFTER TAX
cps** DISTRIBUTIONS/DIVIDENDS
< .9%
> 0.%
< 3.5%
> 94.3%
> 3.9%
> 4.3%
> 3.8%
< 4.4%
> .9%
*
m
1
.
1
2
1
$
m
2
.
7
0
1
$
m
4
.
6
0
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$
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1
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1
$
120
100
80
60
40
20
0
*
m
1
.
5
8
$
*
m
1
.
0
7
$
m
3
.
0
6
$
30
25
20
15
10
5
0
c
5
.
6
2
c
0
.
6
2
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0
.
4
2
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.
3
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9
1
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4
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01
02
03
04
05
06
00
01
02
03
04
05
06
* Before non-recurring items
** cents per share
The greatestperformancesare always tightlychoreographedand carefullymanaged. PERFORMANCE OF 2006SKYCITY - the fun never endsA DECADE WORTHCELEBRATING2005/06PERFORMANCE2005/06 objectivesAND progressSKYCITYAUCKLANDSKYCITYADELAIDESKYCITYDARWINSKYCITYHAMILTONSKYCITYQUEENSTOWNSKYCITYCINEMASHOSTRESPONSIBILITYCORPORATEGOVERNANCEOURPEOPLEOURCOMMUNITIESINTRODUCING OURBOARD OF DIRECTORSYEARS IN BRIEF...The greatestperformancesare always tightlychoreographedand carefullymanaged. PERFORMANCE OF 2006SKYCITY - the fun never endsA DECADE WORTHCELEBRATING2005/06PERFORMANCE2005/06 objectivesAND progressSKYCITYAUCKLANDSKYCITYADELAIDESKYCITYDARWINSKYCITYHAMILTONSKYCITYQUEENSTOWNSKYCITYCINEMASHOSTRESPONSIBILITYCORPORATEGOVERNANCEOURPEOPLEOURCOMMUNITIESINTRODUCING OURBOARD OF DIRECTORSYEARS IN BRIEF...
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
YEARS IN BRIEF...
ROD McGEOcH
c H AI RM AN
SKYCITY
AUCKLAND
4 I s k y c i t y a n n u a l r e p o r t 0 0 6
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
SKYCITY - the fun never ends
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
c H A i R M A N ’ s R E P O R t
sKyCIty is celebrating its 0th year of operation by continuing
to grow and expand its entertainment business and deliver strong
returns to shareholders. I am pleased to report a continuing
high level of commitment by directors, management and staff
to business objectives, best practice corporate governance,
and compliance with regulatory requirements.
SKYCITY has entered its second decade as a truly trans-
Tasman leisure and entertainment business, with over
$1.7 billion in assets spanning tourism, cinema complexes,
hotel and convention centres, bars, restaurants, casinos
and entertainment facilities.
2005/06 Result
Net tax-paid profit of $120.1 million represents a
13% increase over the prior year. As a consequence, our
shareholders have enjoyed an increased distribution of
26 cents per share (tax-effective), compared to 24 cents
last year.
SKYCITY’s 2005/06 result reflects increased earnings
across all of the Group’s major business units.
Auckland, Adelaide, Darwin and Hamilton all reported
ahead of 2004/05, with only SKYCITY Leisure and
SKYCITY Queenstown reporting reduced earnings.
New cinema facilities are expected to enhance the
earnings performance of SKYCITY Leisure and we
note that Queenstown’s 2005/06 result was adversely
impacted by lower than anticipated returns from the
international sector.
This was the first full year of revenues and earnings
from key new facilities, including the five-star SKYCITY
Grand Hotel and new VIP gaming rooms in Auckland,
and new gaming and food and beverage facilities at
SKYCITY Adelaide.
New Projects
Our focus at SKYCITY is to maintain investment and
reinvestment in facilities to meet and exceed the
expectations of our customers and to ensure that the
company’s revenue growth momentum continues strongly
into the future.
We have announced a $40 million renovation of the main
gaming floor at SKYCITY Auckland, to be implemented
over the next 18 months. Implementing a complete
remodelling of the main floor while, at the same time,
minimising impact on customers, will be a challenging
task. However, the extensive experience of our architects,
engineers, construction and fit-out contractors and project
managers in 24/7 projects will ensure the renovation work
is completed with minimum disruption. We are confident
our customers will be delighted by the new experience
that will result from this project.
Based on the success of the first stage of the SKYCITY
Adelaide redevelopment, we are looking to move forward
with the next stages of this exciting A$75-A$80 million
makeover of our Adelaide property and anticipate final
completion of all components by June 2009.
At SKYCITY Darwin, new facilities are planned over the
next three to four years to encourage additional visitation
and spend, and to capitalise on the growth momentum
inherent in that region.
In our cinema business, four new complexes totalling 26
screens are planned to be completed and operating by
the end of the 2007 calendar year.
Returns to Shareholders
SKYCITY’s final distribution of 14 cents per share (interim
distribution 12 cents per share) for the 2005/06 year will
be paid on 6 October 2006. The full year payment of
26 cents per share represents an increase of 2 cents per
share over last year and continues the company’s practice
of returning 90% of after-tax profit to shareholders.
During 2005/06, SKYCITY introduced a bonus share
distribution of profits structure that has been well received
by shareholders. We anticipate this bonus share structure
will continue for future distributions.
Improving shareholder value is a primary objective for
any company and we have been pleased to report strong
returns for SKYCITY’s shareholders over the last 10 years.
A shareholder who purchased shares on SKYCITY’s first
day as a listed company in February 1996, at an effective
price of NZ$1.60 (after two share splits in 2001 and
2003), has more than tripled their original investment.
In addition, they have received more than their original
investment back as dividends and distributions over that
10-year period.
In the 14-month period from July 2005 to September 2006,
SKYCITY shareholders have enjoyed a gross return of 25%,
which compares more than favourably with the NZSX50
Gross Index of 8% over the same period.
5 I s k y c i t y 0 - y e a r a n n I v e r s a r y
c H A i R M A N ’ s R E P O R t
Because SKYCITY has a high proportion of cash-based
earnings and has been able to finance its capital
requirements for maintenance and expansion from its own
cash flows and borrowings, shareholders have been able
to enjoy both strong value enhancement and a high level
of profit distribution. Shareholders can be confident that
the momentum of these earnings and distribution flows
will continue into the future.
The directors are pleased to note that a significant number
of our employees also own a share of their company, with
more than 800 staff holding SKYCITY shares. SKYCITY’s
cash and equity-based incentive remuneration structure
for salaried personnel is designed to encourage employee
ownership and this staff shareholding level shows the
scheme is delivering well in terms of this objective.
Key Strategic Objectives
SKYCITY’s key strategic objectives are to grow shareholder
value, enhance and expand the business, and deliver
strong earnings performance. Central to meeting
these objectives is compliance with gaming regulatory
requirements, a proactive approach to host responsibility
issues, and active community participation in each of our
geographic locations.
The directors, on behalf of shareholders, acknowledge the
commitment of management and staff to achieving the
company’s key strategic objectives.
Corporate Governance Best Practice
SKYCITY is fully committed to corporate governance best
practice as prescribed by the NZX and ASX principles,
recommendations and guidelines. Our governance
framework is outlined in detail in this annual report at
pages 40-50.
The SKYCITY board formally reviews, on an annual basis,
the company’s governing charter documents, code of best
practice, and treasury, delegated authorities, securities
trading and other policies. The directors also review
the performance and effectiveness of the board and its
committees. We confirm that these formal reviews have
been undertaken during the 2005/06 period.
The directors are satisfied that they provide the right
mix of skills and experience at the board table. The
board is also confident that the information provided
by management is to the standard required for effective
consideration of issues and for decision-making.
SKYCITY confirms its compliance with gaming rules
and procedures, liquor licensing requirements and the
monitoring of financial transactions. The company’s
extensive risk management programme, covering all
Group operations, is monitored continuously and is
formally reviewed by the Audit and Risk Committee on an
annual basis.
The board is satisfied that the internal control environment
within the business is robust and effective and that the
company’s internal audit processes and procedures are
effective in identifying issues and initiating remedial
actions as and when required.
SKYCITY is committed to providing a significant
level of detail when reporting on the operational and
financial performance trends within the business. We
communicate with external parties as effectively as we
are able to, within the strict requirements that govern
public company disclosure. The feedback we receive tells
us this interaction and involvement with the investment
community at both institutional and retail shareholder
level is highly valued. We were pleased to host a visit to
SKYCITY Auckland by the New Zealand Shareholders’
Association in June 2006 and look forward to further
contact and liaison with the NZSA.
Regulatory Environment
There has, in recent months, been significant focus and
some concern from both the local and international
investment communities on the regulatory intervention
that has adversely affected the value of a number of
New Zealand-listed companies. We note that SKYCITY’s
regulatory interaction is in a different context to the
circumstances that have affected other companies.
Their issues have related to competitive access and/or
product pricing rather than the social issues associated
with host responsibility and harm minimisation,
which are the key areas of focus for regulators in our
geographical jurisdictions.
6 I s k y c i t y a n n u a l r e p o r t 0 0 6
c H A i R M A N ’ s R E P O R t
SKYCITY shares the same host responsibility and harm
minimisation intentions that are reflected in the gaming
legislation in New Zealand, South Australia and the
Northern Territory. We are fully aligned with these
objectives and can fairly claim we have been operating
in advance of the legislative requirement since we
commenced operations in 1996. We anticipate debate
and discussion about how best to achieve the overriding
objectives for host responsibility and harm minimisation.
However, at the end of the consultative processes that will
be initiated, we expect there to be little disagreement as
to overall approach and purpose.
We are pleased to report our regulatory and government
relationships are on a sound footing in each of our
jurisdictions.
Board of Directors
Audit and Risk Committee
On behalf of the board, I wish to thank Sir Dryden Spring
for his chairmanship of the Audit and Risk Committee
over the last two and a half year period, and to welcome
Rob McLeod as the new chairman of this committee as
from 1 October 2006.
Acknowledgement
The governance environment for listed companies is
imposing increasing demands on boards of directors, and
its committees undertake much of the detailed work on
behalf of the board. I wish to acknowledge the quality of
the work undertaken by directors in respect of both their
board and committee roles.
Director Re-election
Elmar Toime and Sir Dryden Spring retire by rotation at
this year’s annual meeting and have offered themselves for
re-election. SKYCITY’s board charter requires that, where a
director has completed two terms in office since first being
appointed by shareholders, they must be formally invited
by the board to stand again for re-election. At its August
meeting, the board unanimously invited Mr Toime to stand
for re-election. Sir Dryden has completed one term since
first elected by shareholders at the 2004 annual meeting.
The directors confirm that Elmar Toime and Sir Dryden
Spring continue to contribute effectively to the direction
of the company and the stewardship of its affairs and that
they are fully supportive of both directors standing for
re-election at the company’s annual meeting in October.
Accounting and Reporting
The 2005/06 year is the first that SKYCITY has reported
under the new international financial reporting standards
(NZ IFRS). SKYCITY is one of the first New Zealand
companies to report under NZ IFRS and presentation
of our financial results in the new format has gone
very smoothly.
As referred earlier, in the corporate governance section of
this review, SKYCITY is recognised within the investment
and financial communities as a leader in performance
disclosure and we are fully committed to maintaining
this position.
Annual Meeting
The directors look forward to meeting shareholders at
the company’s annual meeting to be held at the SKYCITY
Auckland Convention Centre on 27 October 2006.
Rod McGeoch
CH AIR MAN
7 I s k y c i t y 0 - y e a r a n n I v e r s a r y
EvAN DAvI Es
MANAGI N G D I REctO R
8 I s k y c i t y a n n u a l r e p o r t 0 0 6
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
M A N A G i N G D i R E c t O R ’ s R E V i E W
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
sKyCIty produced a strong financial performance during the
005/06 year, with the company consolidating and building
on its pre-eminent entertainment and gaming position in
each of its locations.
2005/06 objectives
AND progress
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
9 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
M A N A G i N G D i R E c t O R ’ s R E V i E W
our strategy has been to invest in existing facilities and to diversify our
entertainment interests whilst maintaining a strong focus on capital
management. this focus on our core gaming and entertainment
business continues to generate new revenues and means we are
well placed for growth into 007.
New Zealand operations have demonstrated good
recovery from the smoking bans imposed in New Zealand
in December 2004 and customer response to new facilities
at both our Auckland and Hamilton properties has been
very encouraging.
During the course of the 2005/06 year, we have further
enhanced the company’s effectiveness through the
recruitment of specialist host responsibility and problem
gambling personnel.
2005/06 and Beyond
SKYCITY delivered a strong result for the 2005/06 year in
terms of both revenue and earnings performance, with
net profit after tax at $120.1 million representing a 13%
increase over the prior year.
We have maintained and enhanced our important
relationships with gaming regulators in each of our
jurisdictions. And we have a confident view of the future
based on our existing position and on our plans for taking
the business forward.
Our assessment is that we are essentially through the
adverse impact effect from the imposition of smoking bans
in New Zealand. We are also confident that our renovation
plans for the Auckland main gaming floor will help to drive
revenues at our flagship Auckland property into the future.
Additional facilities and enhancement of the overall
entertainment experience at SKYCITY Hamilton means
the strong financial performance achieved to date can be
expected to continue. New cinema projects scheduled
for the next 18 months, with 26 new screens in Auckland,
Hamilton and Wellington, augurs well for revenue
performance in our cinema operations.
At SKYCITY Adelaide, we look forward to the next stage
of redevelopment, following the success of the Stage I
expansion that included a new bar, restaurant and gaming
space. At SKYCITY Darwin, we are planning additional
investment to capitalise on the growth momentum in
this business.
Australian operations moved forward strongly in both
Adelaide and Darwin. The new Southside facilities at
SKYCITY Adelaide have proved popular with existing
and new customers and SKYCITY Darwin has performed
well ahead of expectations in its second year under
SKYCITY management.
In July 2006, SKYCITY acquired 100% ownership of the
New Zealand cinema chain previously owned in a 50:50
joint venture with Village Roadshow. This increased
shareholding extends SKYCITY’s entertainment offering
in New Zealand. It is our intention to rebrand the
New Zealand venues as ‘SKYCITY Cinemas’ during the
next 12 months.
Capital investment in our properties continues to be a
key focus. This enhancement and expansion of our core
business assets will ensure SKYCITY appeals to a wide
range of customers, and that the facilities and services
they experience at SKYCITY will continue to meet and
exceed their expectations.
Host Responsibility
At SKYCITY we are firmly committed to host responsibility
and fully recognise our harm minimisation responsibilities.
We believe this focus is in the best interests of both our
customers and our shareholders.
Our objectives are fully compatible with the intentions of
the gaming legislation, which requires harm minimisation
programmes and outcomes that minimise the risk to those
who may encounter difficulties with their gaming activities.
SKYCITY’s programmes have been developed over an
extended period of time and we are confident we remain
significantly ahead of the legislative requirements.
The increased regulatory focus on the potential risks
for some members of the community is welcome and
we anticipate working closely with regulators at all
operating sites to optimise programmes and outcomes.
0 I s k y c i t y a n n u a l r e p o r t 0 0 6
M A N A G i N G D i R E c t O R ’ s R E V i E W
The 2005/06 Result: Key Elements
When we released our 2005/06 result in August, there was
some disappointment from the investment community
that our second-half results had not matched the very
strong first-half performance at SKYCITY Auckland.
However, if the 2005/06 year is taken as a whole,
the effective recovery in the Auckland business from
smoking bans and the $20 note restriction on gaming
machines is clearly evident when compared to 2004/05.
Within the 2005/06 year, the first-half performance at
Auckland was particularly strong and raised second-half
expectations. However, a number of internal and external
factors, including higher petrol prices and interest
costs, contributed to the second half being below this
heightened expectation. Nevertheless, we are satisfied
with the underlying performance of SKYCITY Auckland
and are confident of continued growth in the Auckland
business as we move into the 2006/07 year.
A review of the results achieved by our properties during
2005/06 reflects well on the efforts and initiatives of
management and staff throughout the Group.
> SKYCITY Auckland revenues for 2005/06 were 8%
ahead of the previous year. Revenue increases were
reported across all sectors with the Convention Centre,
SKYCITY Grand Hotel, and gaming operations the
major contributors to the revenue growth.
Increased resource in key areas, including regulatory
and host responsibility, resulted in indirect costs
being higher than the previous year and this reduced
operating earnings. A significant component of the
increase in indirect costs represents a re-basing of cost
structure and we anticipate a more historical trend
pattern from now on.
> SKYCITY Adelaide delivered a strong revenue
performance, with gaming up 18% and food and
beverage up 50%. The overall revenue increase of
21% flowed through to a 53% increase in operating
earnings before depreciation. Earnings after
depreciation and amortisation of casino licence (EBIT)
almost doubled the level achieved in the prior year.
This strong turnaround in the Adelaide performance is
a consequence of SKYCITY’s strategy of adding to and
enhancing the presentation of our properties and the
on-site experience for our customers.
> SKYCITY Darwin continued to exceed expectations
in its second year under SKYCITY management, with
revenues up 10%. This revenue growth was achieved
despite removal of the community slots rebate from
1 July 2005. Gaming revenues rose 8% and food
and beverage and hotel and convention revenues
were up 18% over 2004/05. Underlying earnings at
Darwin, adjusting for removal of the community slots
rebate, delivered an impressive 26% increase over the
prior period.
> SKYCITY Hamilton produced an excellent
performance, significantly ahead of expectations,
with revenues up 14% and operating earnings after
depreciation up 20%.
> SKYCITY Leisure maintained revenues in line with the
prior year, despite a mixed run of film titles. However,
increased premises rentals and wages costs meant
operating earnings were down on the prior period. We
anticipate that the 26 new cinema screens coming on-
stream during the next 18 months will add significantly
to the revenue potential of our cinema operations.
> SKYCITY’s 41% shareholding in Christchurch Casino
returned $5.3 million in 2005/06, in line with the
previous year. However, our Queenstown operation
was below expectations due to a reduced level of
international commission play.
> In addition to our focus on operational performance,
we achieved some significant foreign exchange gains
in conjunction with our 2005/06 debt restructuring
programme which, together with a reduced 2005/06
tax charge also arising from debt restructuring,
enhanced the Group’s net profit result – up 13% over
the prior year.
I s k y c i t y 0 - y e a r a n n I v e r s a r y
M A N A G i N G D i R E c t O R ’ s R E V i E W
People
Our people continue to work very hard to provide the
best experience possible for our customers and the best
returns possible for our shareholders.
Whilst our performance-oriented culture and incentive
remuneration programmes assist in achieving the high
standards of service delivery that we expect from our staff,
it is the underlying commitment of our people to do the
best job possible on a 24/7 basis that helps to ensure
regular customers enjoy their SKYCITY experience on each
visit and new customers are impressed and want to return.
I wish to acknowledge the efforts and commitment of
SKYCITY’s employees during 2005/06 and it will be a
continuation of this dedication to excellent service that will
drive our performance in the coming year.
Continuing the Momentum
The 2005/06 year was relatively quiet for major capital
expenditure, with the SKYCITY Grand Hotel and
Convention Centre completed during 2004/05 and
Stage I of the Adelaide redevelopment project opening to
customers in June 2005.
As referred to earlier, SKYCITY has acquired full ownership
of the New Zealand cinema operations previously owned
in a 50:50 joint venture with Village Roadshow, and we
look forward to revenue growth from our expanded
cinema interests.
At the 2005/06 result announcement in August we advised
a $40 million renovation of the main gaming floor at
SKYCITY Auckland and also outlined our extension plans
for SKYCITY Darwin. We are optimistic that we will be
able to recommence the redevelopment programme
at SKYCITY Adelaide this financial year, continuing
to increase the revenue potential of that property.
In addition, our cinema expansion programme will
consolidate SKYCITY’s lead position in the New Zealand
cinema sector.
These planned capital programmes are not insignificant in
scale but are all closely aligned to SKYCITY’s core business
operations. The renewal, enhancement and expansion of
existing facilities and the creation of new experiences for
our customers will continue to grow the potential of the
SKYCITY business over the next three years.
We are confident in the future of this business and in the
continuation of high quality returns for shareholders.
Evan Davies
MANA GING DIR E CT OR
I s k y c i t y a n n u a l r e p o r t 0 0 6
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
SKYCITY - the fun never ends
SKYCITY - the fun never ends
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
objECTIVES FoR 2005/06
PRoGRESS AGAInST objECTIVES
YEARS IN BRIEF...
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY EnTERTAInmEnT GRouP
Continue to evaluate gaming/entertainment opportunities
Maintain capital management focus
Positive engagement with regulators in all jurisdictions
Continued leadership position in host responsibility, working closely with service
providers and government agencies
SKYCITY
AUCKLAND
Continued community involvement in all regions
Grow shareholder value
SKYCITY AuCKLAnD
Achieve revenue growth in all sectors
Capitalise on 660 hotel rooms and convention facilities
Continue to enhance SKYCITY Auckland as an entertainment and tourist destination
SKYCITY ADELAIDE
Capitalise on the new gaming, restaurant and bar facilities to expand the
customer base in Adelaide
SKYCITY
ADELAIDE
Optimise and expand the facility to take advantage of the economic
environment in Darwin
SKYCITY DARwIn
SKYCITY HAmILTon
Manage costs, grow revenues and sustain margin performance
SKYCITY
DARWIN
SKYCITY QuEEnSTown
Grow gaming revenues and improve profitability
SKYCITY CInEmAS
Expand and enhance cinema exhibition facilities.
CHRISTCHuRCH CASIno – 40.5% SHAREHoLDInG
Consider initiatives to refresh and enhance the experience for customers
SKYCITY
HAMILTON
SKYCITY
AUCKLAND
> Revenues up 8%.
> Strong growth in table games, due to new
VIP facilities and introduction of poker.
SKYCITY
ADELAIDE
> Food and beverage revenues up 11%.
> Demand strong for SKYCITY Auckland
Convention Centre, demonstrating
leadership position as the preferred
convention facility in Auckland.
> SKYCITY Grand Hotel a significant new
SKYCITY
DARWIN
> Sky Tower continues as one of the
major tourism ‘must see’ destinations
in Auckland.
revenue stream.
1 6 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
SKYCITY
HAMILTON
HOST
SKYCITY
RESPONSIBILITY
QUEENSTOWN
OUR
PEOPLE
SKYCITY
LEISURE
CORPORATE
OUR
GOVERNANCE
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
3
3
3
3
3
3
3
3
3
3
Under consideration
3
7
(International VIP revenue)
3
In progress
Under consideration
SKYCITY
QUEENSTOWN
SKYCITY
LEISURE
1 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
SKYCITY - the fun never ends
SKYCITY - the fun never ends
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
objECTIVES FoR 2005/06
PRoGRESS AGAInST objECTIVES
YEARS IN BRIEF...
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY EnTERTAInmEnT GRouP
Continue to evaluate gaming/entertainment opportunities
Maintain capital management focus
Positive engagement with regulators in all jurisdictions
Continued leadership position in host responsibility, working closely with service
providers and government agencies
SKYCITY
AUCKLAND
Continued community involvement in all regions
Grow shareholder value
SKYCITY AuCKLAnD
Achieve revenue growth in all sectors
Capitalise on 660 hotel rooms and convention facilities
Continue to enhance SKYCITY Auckland as an entertainment and tourist destination
SKYCITY ADELAIDE
Capitalise on the new gaming, restaurant and bar facilities to expand the
customer base in Adelaide
SKYCITY
ADELAIDE
Optimise and expand the facility to take advantage of the economic
environment in Darwin
SKYCITY DARwIn
SKYCITY HAmILTon
Manage costs, grow revenues and sustain margin performance
SKYCITY
DARWIN
SKYCITY QuEEnSTown
Grow gaming revenues and improve profitability
SKYCITY CInEmAS
Expand and enhance cinema exhibition facilities.
CHRISTCHuRCH CASIno – 40.5% SHAREHoLDInG
Consider initiatives to refresh and enhance the experience for customers
SKYCITY
HAMILTON
SKYCITY
AUCKLAND
> Revenues up 8%.
> Strong growth in table games, due to new
VIP facilities and introduction of poker.
SKYCITY
ADELAIDE
> Food and beverage revenues up 11%.
> Demand strong for SKYCITY Auckland
Convention Centre, demonstrating
leadership position as the preferred
convention facility in Auckland.
> SKYCITY Grand Hotel a significant new
SKYCITY
DARWIN
> Sky Tower continues as one of the
major tourism ‘must see’ destinations
in Auckland.
revenue stream.
1 6 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
SKYCITY
HAMILTON
HOST
SKYCITY
RESPONSIBILITY
QUEENSTOWN
OUR
PEOPLE
SKYCITY
LEISURE
CORPORATE
OUR
GOVERNANCE
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
3
3
3
3
3
3
3
3
3
3
Under consideration
3
7
(International VIP revenue)
3
In progress
Under consideration
SKYCITY
QUEENSTOWN
SKYCITY
LEISURE
1 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
SKYCITY - the fun never ends
SKYCITY - the fun never ends
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
objECTIVES FoR 2005/06
PRoGRESS AGAInST objECTIVES
YEARS IN BRIEF...
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY EnTERTAInmEnT GRouP
Continue to evaluate gaming/entertainment opportunities
Maintain capital management focus
Positive engagement with regulators in all jurisdictions
Continued leadership position in host responsibility, working closely with service
providers and government agencies
SKYCITY
AUCKLAND
Continued community involvement in all regions
Grow shareholder value
SKYCITY AuCKLAnD
Achieve revenue growth in all sectors
Capitalise on 660 hotel rooms and convention facilities
Continue to enhance SKYCITY Auckland as an entertainment and tourist destination
SKYCITY ADELAIDE
Capitalise on the new gaming, restaurant and bar facilities to expand the
customer base in Adelaide
SKYCITY
ADELAIDE
Optimise and expand the facility to take advantage of the economic
environment in Darwin
SKYCITY DARwIn
SKYCITY HAmILTon
Manage costs, grow revenues and sustain margin performance
SKYCITY
DARWIN
SKYCITY QuEEnSTown
Grow gaming revenues and improve profitability
SKYCITY CInEmAS
Expand and enhance cinema exhibition facilities.
CHRISTCHuRCH CASIno – 40.5% SHAREHoLDInG
Consider initiatives to refresh and enhance the experience for customers
SKYCITY
HAMILTON
SKYCITY
AUCKLAND
> Revenues up 8%.
> Strong growth in table games, due to new
VIP facilities and introduction of poker.
SKYCITY
ADELAIDE
> Food and beverage revenues up 11%.
> Demand strong for SKYCITY Auckland
Convention Centre, demonstrating
leadership position as the preferred
convention facility in Auckland.
> SKYCITY Grand Hotel a significant new
SKYCITY
DARWIN
> Sky Tower continues as one of the
major tourism ‘must see’ destinations
in Auckland.
revenue stream.
1 6 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
SKYCITY
HAMILTON
HOST
SKYCITY
RESPONSIBILITY
QUEENSTOWN
OUR
PEOPLE
SKYCITY
LEISURE
CORPORATE
OUR
GOVERNANCE
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
3
3
3
3
3
3
3
3
3
3
Under consideration
3
7
(International VIP revenue)
3
In progress
Under consideration
SKYCITY
QUEENSTOWN
SKYCITY
LEISURE
1 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
v
YEARS IN BRIEF...
Looking back at what we’ve achieved
S K Y C I T Y a u c k l a n d
SKYCITY
AUCKLAND
1994
2001
SKYCITY
ADELAIDE
In 1994, sKyCIty was nothing
more than a hole in the ground
as construction of sKyCIty
auckland and the now iconic
sky tower began.
2003
1995
2004
the hype around auckland’s
first casino soon developed and
a sKyCIty job expo in 1995
attracted 18,000 people.
SKYCITY
DARWIN
sKyCIty auckland opens in
February 1996.
2005
1996
sKyCIty auckland named
‘supreme award Winner’ of the
new Zealand tourism awards.
sKyCIty auckland opens play
casino and Bar3.
sKyCIty auckland Convention
Centre opens.
sKyCIty auckland opens
five-star Grand Hotel
and restaurant ‘dine’ by
peter Gordon.
SKYCITY
HAMILTON
F E B R U A R Y
1996
sKyCIty auckland opens.
sKyCIty limited lists
on the new Zealand
stock exchange.
SKYCITY - the fun never ends
2 0 0 1
S K Y C I T Y C I N E M A S
1 9 9 9
sKyCIty limited lists on the
australian stock exchange.
S K Y C I T Y A D E L A I D E
S K Y T O W E R
S K Y C I T Y Q U E E N S T O W N
sKyCIty limited changes its name to sKyCIty
entertainment Group limited to reflect its evolution from
a single-site company to a multi-national, broad-based
entertainment business.
S K Y C I T Y H A M I LT O N
1985
2004
adelaide Casino opens in
December 1985. the heritage-listed
building was built in 1924 to house
the adelaide railway station.
In 2004, sKyCIty adelaide starts
the first stage of a a$75 million
redevelopment.
2000
sKyCIty acquires the business and
rebrands it sKyCIty adelaide.
2005
the redevelopment wins an award
of distinction at the 2005 south
australian tourism awards.
2000
Boutique casino, sKyCIty
Queenstown, opens in December
2000. sKyCIty is a 60% owner and
operator of sKyCIty Queenstown.
2002
sKyCIty Hamilton opens in september 2002.
2004
sKyCIty increases its shareholding in sKyCIty
Hamilton to 70%.
2005
sKyCIty acquires 100% shareholding in sKyCIty
Hamilton and purchases levels two and three of
the complex, including the Deck Bar and Café,
a tenpin bowling centre, and the Megazone
laser game.
S K Y C I T Y D A R W I N
SKYCITY
QUEENSTOWN
1994 – 1997
the building of the sky
tower took two years
and nine months. During
construction the most
sophisticated telemetry
ever seen in new Zealand
was used, including lasers
and real-time readings from
seven global positioning
satellites.
2003
SKYCITY
LEISURE
sky tower was named
‘new Zealand’s leading
visitor attraction’
at the new Zealand
tourism awards.
OUR
COM MUNITIES
2001
2004
2006
sKyCIty acquires majority
shareholding in Force
Corporation (subsequently
renamed sKyCIty leisure).
2003
First joint-branded village
sKyCIty Cinema opens
in auckland.
sKyCIty fully acquires
sKyCIty leisure limited.
2005
sKyCIty acquires
operational management
of the historical embassy
theatre in Wellington.
Gold Class Cinemas open
in auckland.
sKyCIty purchases the
remaining 50% of village
roadshow’s new Zealand
cinema exhibition business.
In august, a new nine-
screen cinema complex
opens in Queensgate,
lower Hutt.
2 0 0 4 - 2 0 0 6
2004
sKyCIty acquires 40.5% shareholding in
Christchurch Casino.
2005
sKyCIty named ‘trans-tasman Business
of the year’ in March 2005.
2006
sKyCIty celebrates its 10th birthday.
1983
2005
Darwin Casino opens in australia’s
northern territory.
2004
sKyCIty Darwin wins Brolga awards
for ‘Best luxury accommodation’
and ‘tourism restaurants and
Catering services’.
sKyCIty acquires the Darwin Casino
and rebrands it sKyCIty Darwin.
2006
sKyCIty Darwin completes new
swimming pool. the pool features
a 20 metre lap pool, 20 person spa,
beach landing and an infinity edge
which provides a seamless view to the
sea and beyond.
A U G U S T
sky tower
opens.
1997
INTRODUCING OUR
BOARD OF DIRECTORS
2000
J U N E
sKyCIty completes
the purchase of
adelaide Casino.
D E C E M B E R
2000
sKyCIty
Queenstown Casino
opens.
S E P T E M B E R
2002
sKyCIty Hamilton
opens on the banks of
the Waikato river.
J U lY
2004
sKyCIty acquires
Darwin Casino.
2006 sKyCIty celebrates
10 years.
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
v
YEARS IN BRIEF...
Looking back at what we’ve achieved
S K Y C I T Y a u c k l a n d
SKYCITY
AUCKLAND
1994
2001
SKYCITY
ADELAIDE
In 1994, sKyCIty was nothing
more than a hole in the ground
as construction of sKyCIty
auckland and the now iconic
sky tower began.
2003
1995
2004
the hype around auckland’s
first casino soon developed and
a sKyCIty job expo in 1995
attracted 18,000 people.
SKYCITY
DARWIN
sKyCIty auckland opens in
February 1996.
2005
1996
sKyCIty auckland named
‘supreme award Winner’ of the
new Zealand tourism awards.
sKyCIty auckland opens play
casino and Bar3.
sKyCIty auckland Convention
Centre opens.
sKyCIty auckland opens
five-star Grand Hotel
and restaurant ‘dine’ by
peter Gordon.
SKYCITY
HAMILTON
F E B R U A R Y
1996
sKyCIty auckland opens.
sKyCIty limited lists
on the new Zealand
stock exchange.
SKYCITY - the fun never ends
2 0 0 1
S K Y C I T Y C I N E M A S
1 9 9 9
sKyCIty limited lists on the
australian stock exchange.
S K Y C I T Y A D E L A I D E
S K Y T O W E R
S K Y C I T Y Q U E E N S T O W N
sKyCIty limited changes its name to sKyCIty
entertainment Group limited to reflect its evolution from
a single-site company to a multi-national, broad-based
entertainment business.
S K Y C I T Y H A M I LT O N
1985
2004
adelaide Casino opens in
December 1985. the heritage-listed
building was built in 1924 to house
the adelaide railway station.
In 2004, sKyCIty adelaide starts
the first stage of a a$75 million
redevelopment.
2000
sKyCIty acquires the business and
rebrands it sKyCIty adelaide.
2005
the redevelopment wins an award
of distinction at the 2005 south
australian tourism awards.
2000
Boutique casino, sKyCIty
Queenstown, opens in December
2000. sKyCIty is a 60% owner and
operator of sKyCIty Queenstown.
2002
sKyCIty Hamilton opens in september 2002.
2004
sKyCIty increases its shareholding in sKyCIty
Hamilton to 70%.
2005
sKyCIty acquires 100% shareholding in sKyCIty
Hamilton and purchases levels two and three of
the complex, including the Deck Bar and Café,
a tenpin bowling centre, and the Megazone
laser game.
S K Y C I T Y D A R W I N
SKYCITY
QUEENSTOWN
1994 – 1997
the building of the sky
tower took two years
and nine months. During
construction the most
sophisticated telemetry
ever seen in new Zealand
was used, including lasers
and real-time readings from
seven global positioning
satellites.
2003
SKYCITY
LEISURE
sky tower was named
‘new Zealand’s leading
visitor attraction’
at the new Zealand
tourism awards.
OUR
COM MUNITIES
2001
2004
2006
sKyCIty acquires majority
shareholding in Force
Corporation (subsequently
renamed sKyCIty leisure).
2003
First joint-branded village
sKyCIty Cinema opens
in auckland.
sKyCIty fully acquires
sKyCIty leisure limited.
2005
sKyCIty acquires
operational management
of the historical embassy
theatre in Wellington.
Gold Class Cinemas open
in auckland.
sKyCIty purchases the
remaining 50% of village
roadshow’s new Zealand
cinema exhibition business.
In august, a new nine-
screen cinema complex
opens in Queensgate,
lower Hutt.
2 0 0 4 - 2 0 0 6
2004
sKyCIty acquires 40.5% shareholding in
Christchurch Casino.
2005
sKyCIty named ‘trans-tasman Business
of the year’ in March 2005.
2006
sKyCIty celebrates its 10th birthday.
1983
2005
Darwin Casino opens in australia’s
northern territory.
2004
sKyCIty Darwin wins Brolga awards
for ‘Best luxury accommodation’
and ‘tourism restaurants and
Catering services’.
sKyCIty acquires the Darwin Casino
and rebrands it sKyCIty Darwin.
2006
sKyCIty Darwin completes new
swimming pool. the pool features
a 20 metre lap pool, 20 person spa,
beach landing and an infinity edge
which provides a seamless view to the
sea and beyond.
A U G U S T
sky tower
opens.
1997
INTRODUCING OUR
BOARD OF DIRECTORS
2000
J U N E
sKyCIty completes
the purchase of
adelaide Casino.
D E C E M B E R
2000
sKyCIty
Queenstown Casino
opens.
S E P T E M B E R
2002
sKyCIty Hamilton
opens on the banks of
the Waikato river.
J U lY
2004
sKyCIty acquires
Darwin Casino.
2006 sKyCIty celebrates
10 years.
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
v
YEARS IN BRIEF...
Looking back at what we’ve achieved
S K Y C I T Y a u c k l a n d
SKYCITY
AUCKLAND
1994
2001
SKYCITY
ADELAIDE
In 1994, sKyCIty was nothing
more than a hole in the ground
as construction of sKyCIty
auckland and the now iconic
sky tower began.
2003
1995
2004
the hype around auckland’s
first casino soon developed and
a sKyCIty job expo in 1995
attracted 18,000 people.
SKYCITY
DARWIN
sKyCIty auckland opens in
February 1996.
2005
1996
sKyCIty auckland named
‘supreme award Winner’ of the
new Zealand tourism awards.
sKyCIty auckland opens play
casino and Bar3.
sKyCIty auckland Convention
Centre opens.
sKyCIty auckland opens
five-star Grand Hotel
and restaurant ‘dine’ by
peter Gordon.
SKYCITY
HAMILTON
F E B R U A R Y
1996
sKyCIty auckland opens.
sKyCIty limited lists
on the new Zealand
stock exchange.
SKYCITY - the fun never ends
2 0 0 1
S K Y C I T Y C I N E M A S
1 9 9 9
sKyCIty limited lists on the
australian stock exchange.
S K Y C I T Y A D E L A I D E
S K Y T O W E R
S K Y C I T Y Q U E E N S T O W N
sKyCIty limited changes its name to sKyCIty
entertainment Group limited to reflect its evolution from
a single-site company to a multi-national, broad-based
entertainment business.
S K Y C I T Y H A M I LT O N
1985
2004
adelaide Casino opens in
December 1985. the heritage-listed
building was built in 1924 to house
the adelaide railway station.
In 2004, sKyCIty adelaide starts
the first stage of a a$75 million
redevelopment.
2000
sKyCIty acquires the business and
rebrands it sKyCIty adelaide.
2005
the redevelopment wins an award
of distinction at the 2005 south
australian tourism awards.
2000
Boutique casino, sKyCIty
Queenstown, opens in December
2000. sKyCIty is a 60% owner and
operator of sKyCIty Queenstown.
2002
sKyCIty Hamilton opens in september 2002.
2004
sKyCIty increases its shareholding in sKyCIty
Hamilton to 70%.
2005
sKyCIty acquires 100% shareholding in sKyCIty
Hamilton and purchases levels two and three of
the complex, including the Deck Bar and Café,
a tenpin bowling centre, and the Megazone
laser game.
S K Y C I T Y D A R W I N
SKYCITY
QUEENSTOWN
1994 – 1997
the building of the sky
tower took two years
and nine months. During
construction the most
sophisticated telemetry
ever seen in new Zealand
was used, including lasers
and real-time readings from
seven global positioning
satellites.
2003
SKYCITY
LEISURE
sky tower was named
‘new Zealand’s leading
visitor attraction’
at the new Zealand
tourism awards.
OUR
COM MUNITIES
2001
2004
2006
sKyCIty acquires majority
shareholding in Force
Corporation (subsequently
renamed sKyCIty leisure).
2003
First joint-branded village
sKyCIty Cinema opens
in auckland.
sKyCIty fully acquires
sKyCIty leisure limited.
2005
sKyCIty acquires
operational management
of the historical embassy
theatre in Wellington.
Gold Class Cinemas open
in auckland.
sKyCIty purchases the
remaining 50% of village
roadshow’s new Zealand
cinema exhibition business.
In august, a new nine-
screen cinema complex
opens in Queensgate,
lower Hutt.
2 0 0 4 - 2 0 0 6
2004
sKyCIty acquires 40.5% shareholding in
Christchurch Casino.
2005
sKyCIty named ‘trans-tasman Business
of the year’ in March 2005.
2006
sKyCIty celebrates its 10th birthday.
1983
2005
Darwin Casino opens in australia’s
northern territory.
2004
sKyCIty Darwin wins Brolga awards
for ‘Best luxury accommodation’
and ‘tourism restaurants and
Catering services’.
sKyCIty acquires the Darwin Casino
and rebrands it sKyCIty Darwin.
2006
sKyCIty Darwin completes new
swimming pool. the pool features
a 20 metre lap pool, 20 person spa,
beach landing and an infinity edge
which provides a seamless view to the
sea and beyond.
A U G U S T
sky tower
opens.
1997
INTRODUCING OUR
BOARD OF DIRECTORS
2000
J U N E
sKyCIty completes
the purchase of
adelaide Casino.
D E C E M B E R
2000
sKyCIty
Queenstown Casino
opens.
S E P T E M B E R
2002
sKyCIty Hamilton
opens on the banks of
the Waikato river.
J U lY
2004
sKyCIty acquires
Darwin Casino.
2006 sKyCIty celebrates
10 years.
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
v
YEARS IN BRIEF...
Looking back at what we’ve achieved
S K Y C I T Y a u c k l a n d
SKYCITY
AUCKLAND
1994
2001
SKYCITY
ADELAIDE
In 1994, sKyCIty was nothing
more than a hole in the ground
as construction of sKyCIty
auckland and the now iconic
sky tower began.
2003
1995
2004
the hype around auckland’s
first casino soon developed and
a sKyCIty job expo in 1995
attracted 18,000 people.
SKYCITY
DARWIN
sKyCIty auckland opens in
February 1996.
2005
1996
sKyCIty auckland named
‘supreme award Winner’ of the
new Zealand tourism awards.
sKyCIty auckland opens play
casino and Bar3.
sKyCIty auckland Convention
Centre opens.
sKyCIty auckland opens
five-star Grand Hotel
and restaurant ‘dine’ by
peter Gordon.
SKYCITY
HAMILTON
F E B R U A R Y
1996
sKyCIty auckland opens.
sKyCIty limited lists
on the new Zealand
stock exchange.
SKYCITY - the fun never ends
2 0 0 1
S K Y C I T Y C I N E M A S
1 9 9 9
sKyCIty limited lists on the
australian stock exchange.
S K Y C I T Y A D E L A I D E
S K Y T O W E R
S K Y C I T Y Q U E E N S T O W N
sKyCIty limited changes its name to sKyCIty
entertainment Group limited to reflect its evolution from
a single-site company to a multi-national, broad-based
entertainment business.
S K Y C I T Y H A M I LT O N
1985
2004
adelaide Casino opens in
December 1985. the heritage-listed
building was built in 1924 to house
the adelaide railway station.
In 2004, sKyCIty adelaide starts
the first stage of a a$75 million
redevelopment.
2000
sKyCIty acquires the business and
rebrands it sKyCIty adelaide.
2005
the redevelopment wins an award
of distinction at the 2005 south
australian tourism awards.
2000
Boutique casino, sKyCIty
Queenstown, opens in December
2000. sKyCIty is a 60% owner and
operator of sKyCIty Queenstown.
2002
sKyCIty Hamilton opens in september 2002.
2004
sKyCIty increases its shareholding in sKyCIty
Hamilton to 70%.
2005
sKyCIty acquires 100% shareholding in sKyCIty
Hamilton and purchases levels two and three of
the complex, including the Deck Bar and Café,
a tenpin bowling centre, and the Megazone
laser game.
S K Y C I T Y D A R W I N
SKYCITY
QUEENSTOWN
1994 – 1997
the building of the sky
tower took two years
and nine months. During
construction the most
sophisticated telemetry
ever seen in new Zealand
was used, including lasers
and real-time readings from
seven global positioning
satellites.
2003
SKYCITY
LEISURE
sky tower was named
‘new Zealand’s leading
visitor attraction’
at the new Zealand
tourism awards.
OUR
COM MUNITIES
2001
2004
2006
sKyCIty acquires majority
shareholding in Force
Corporation (subsequently
renamed sKyCIty leisure).
2003
First joint-branded village
sKyCIty Cinema opens
in auckland.
sKyCIty fully acquires
sKyCIty leisure limited.
2005
sKyCIty acquires
operational management
of the historical embassy
theatre in Wellington.
Gold Class Cinemas open
in auckland.
sKyCIty purchases the
remaining 50% of village
roadshow’s new Zealand
cinema exhibition business.
In august, a new nine-
screen cinema complex
opens in Queensgate,
lower Hutt.
2 0 0 4 - 2 0 0 6
2004
sKyCIty acquires 40.5% shareholding in
Christchurch Casino.
2005
sKyCIty named ‘trans-tasman Business
of the year’ in March 2005.
2006
sKyCIty celebrates its 10th birthday.
1983
2005
Darwin Casino opens in australia’s
northern territory.
2004
sKyCIty Darwin wins Brolga awards
for ‘Best luxury accommodation’
and ‘tourism restaurants and
Catering services’.
sKyCIty acquires the Darwin Casino
and rebrands it sKyCIty Darwin.
2006
sKyCIty Darwin completes new
swimming pool. the pool features
a 20 metre lap pool, 20 person spa,
beach landing and an infinity edge
which provides a seamless view to the
sea and beyond.
A U G U S T
sky tower
opens.
1997
INTRODUCING OUR
BOARD OF DIRECTORS
2000
J U N E
sKyCIty completes
the purchase of
adelaide Casino.
D E C E M B E R
2000
sKyCIty
Queenstown Casino
opens.
S E P T E M B E R
2002
sKyCIty Hamilton
opens on the banks of
the Waikato river.
J U lY
2004
sKyCIty acquires
Darwin Casino.
2006 sKyCIty celebrates
10 years.
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
SKYCITY - the fun never ends
SKYCITY - the fun never ends
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
objECTIVES FoR 2005/06
PRoGRESS AGAInST objECTIVES
YEARS IN BRIEF...
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY EnTERTAInmEnT GRouP
Continue to evaluate gaming/entertainment opportunities
Maintain capital management focus
Positive engagement with regulators in all jurisdictions
Continued leadership position in host responsibility, working closely with service
providers and government agencies
SKYCITY
AUCKLAND
Continued community involvement in all regions
Grow shareholder value
SKYCITY AuCKLAnD
Achieve revenue growth in all sectors
Capitalise on 660 hotel rooms and convention facilities
Continue to enhance SKYCITY Auckland as an entertainment and tourist destination
SKYCITY ADELAIDE
Capitalise on the new gaming, restaurant and bar facilities to expand the
customer base in Adelaide
SKYCITY
ADELAIDE
Optimise and expand the facility to take advantage of the economic
environment in Darwin
SKYCITY DARwIn
SKYCITY HAmILTon
Manage costs, grow revenues and sustain margin performance
SKYCITY
DARWIN
SKYCITY QuEEnSTown
Grow gaming revenues and improve profitability
SKYCITY CInEmAS
Expand and enhance cinema exhibition facilities.
CHRISTCHuRCH CASIno – 40.5% SHAREHoLDInG
Consider initiatives to refresh and enhance the experience for customers
SKYCITY
HAMILTON
SKYCITY
AUCKLAND
> Revenues up 8%.
> Strong growth in table games, due to new
VIP facilities and introduction of poker.
SKYCITY
ADELAIDE
> Food and beverage revenues up 11%.
> Demand strong for SKYCITY Auckland
Convention Centre, demonstrating
leadership position as the preferred
convention facility in Auckland.
> SKYCITY Grand Hotel a significant new
SKYCITY
DARWIN
> Sky Tower continues as one of the
major tourism ‘must see’ destinations
in Auckland.
revenue stream.
1 6 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
SKYCITY
HAMILTON
HOST
SKYCITY
RESPONSIBILITY
QUEENSTOWN
OUR
PEOPLE
SKYCITY
LEISURE
CORPORATE
OUR
GOVERNANCE
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
3
3
3
3
3
3
3
3
3
3
Under consideration
3
7
(International VIP revenue)
3
In progress
Under consideration
SKYCITY
QUEENSTOWN
SKYCITY
LEISURE
1 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
MarIana GualBerto,
SKYCITY GRAND HOTEL.
7 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
> Revenues up 21%.
> Strong performance in all areas.
SKYCITY
DARWIN
has stimulated increased visitation and
spend per customer.
> Stage I of property redevelopment
> Gaming machines up 17%, with gaming
tables up 20%.
> Further stages of the redevelopment
project expected to commence within
six months.
SKYCITY
HAMILTON
8 I s k y c i t y a n n u a l r e p o r t 0 0 6
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
GuIHonG QIn,
TABLE GAMES DEALER.
9 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
> Revenues up 10%.
> Gaming revenue increase of 8% driven by
both gaming machines and gaming tables.
SKYCITY
HAMILTON
> Hotel and convention revenues up 26%.
> Economic momentum in Darwin continues
to be sustained.
0 I s k y c i t y a n n u a l r e p o r t 0 0 6
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
aaron McHours,
HEAD SuRvEILLANCE TECHNICIAN.
I s k y c i t y 0 - y e a r a n n I v e r s a r y
teIna stevens,
SECuRITY OFFICER.
I s k y c i t y a n n u a l r e p o r t 0 0 6
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
HOST
2005/06
RESPONSIBILITY
PERFORMANCE
OUR
PEOPLE
2005/06 objectives
AND progress
CORPORATE
GOVERNANCE
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
SKYCITY - the fun never ends
AUCKLAND
YEARS IN BRIEF...
SKYCITY
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
> Revenues up 14%.
> Gaming revenue increase of 9%
driven by both gaming machines and
gaming tables.
> First year of 100% ownership.
> New sports bar, The Zone, under
construction. Scheduled to open
September 2006.
SKYCITY
QUEENSTOWN
> Revenues down by $1.8m.
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
> Lower than expected performance at
SKYCITY Queenstown due primarily to
reduced visitation to the Queenstown
region and a lack of international player
visits to the property.
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
3 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
> Revenues steady.
> A mixed year for film product but
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
OUR
COM MUNITIES
> Queensgate, a new nine-screen complex
in Lower Hutt (Wellington), opened in
August 2006.
mainstream admissions maintained at
FY05 levels.
> Chartwell (Hamilton, six screens) is
scheduled to open in April 2007.
> The new Albany (Auckland) and the
relocated Manukau (Auckland) 10-screen
complexes are scheduled to open in
December 2007.
4 I s k y c i t y a n n u a l r e p o r t 0 0 6
INTRODUCING OUR
BOARD OF DIRECTORS
aDrIan ross,
SECuRITY.
5 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
HOST
RESPONSIBILITY
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
CORPORATE
GOVERNANCE
sKyCIty shares community concerns about those who may experience
problems with gambling or alcohol. We commit significant time and effort into
programmes focused on minimising the harm associated with problem
gambling, and on the responsible service of alcohol.
The SKYCITY programme is comprehensive and Group-
wide. Our dedicated host responsibility team work
closely with management and staff to identify and assist
customers experiencing difficulties. All staff receive
training in host responsibility; it is embedded in the
business as part of our customer service.
OUR
PEOPLE
Upon opening in 1996, SKYCITY introduced its host
responsibility programme, developed in collaboration
with input from government agencies and leading
treatment providers.
Host responsibility is fundamental to the sustainability of our business.
SKYCITY’s Approach to Harm Minimisation
Our Initiatives
SKYCITY’s objective is to minimise the harm associated with
gambling. To that end, we work closely with public health
and problem gambling treatment providers to identify and
assist potential and problem gamblers by:
> Looking for and recognising signs of harm, as
evidenced by customer behaviour or concern
expressed by a third party.
> Providing information and assistance in relation
to responsible gambling and advising where to
seek help.
> Providing programmes that help at-risk customers limit
their play.
> Implementing exclusion policies, including self-barring
and third-party exclusions, for those experiencing
difficulty controlling their gambling behaviour.
Our ten years of experience means we do not
underestimate the challenges and complexities of harm
minimisation. There are few benchmarks and limited
research to draw on and approaches continue to evolve.
Developing and implementing targeted policy is not easy
for regulators or operators.
> Providing strict conditions of re-entry for
excluded customers.
Debbie Edwards
MANAGER HARM MINIMISATION – SKYCITY ENTERTAINMENT GROUP
Debbie has held senior policy and funding roles in public health, most recently as
the Ministry of Health’s Project Leader for Problem Gambling. Debbie leads the
development and implementation of SKYCITY’s harm minimisation framework,
managing initiatives and participating in government policy processes. She
works nationally and internationally across government agencies, the problem
gambling service sector, other gambling industries and researchers. “The
gambling industry, problem gambling services, government agencies and
communities all have important contributions to make towards preventing and
minimising gambling harm. SKYCITY is committed to taking a leading role
through implementation of a robust and effective harm minimisation policy.”
INtRODUcING
6 I s k y c i t y a n n u a l r e p o r t 0 0 6
every day, over 0,000 people visit sKyCIty to experience the breadth
of entertainment we offer. our aim is that they enjoy themselves and
that their experience is a safe and positive one. problem gambling and
intoxication are not consistent with that objective.
pIC TO COME
7 I s k y c i t y 0 - y e a r a n n I v e r s a r y
H O s t R E s P O N s i b i l i t y
SKYCITY is responding to the challenges by continuing
to build positive relationships with regulators, other
government agencies and problem gambling service
providers in all jurisdictions. We firmly believe in
collaborative efforts and that an open dialogue between
operators, problem gambling service providers and
government agencies is the most effective way to
ensure gambling harm is minimised. New Zealand
and South Australia are at the forefront of developing
harm minimisation legislation globally and SKYCITY
is committed to playing a leading role in this
evolutionary process.
In line with this commitment, we have made a deliberate
decision to further expand capacity and resource in host
responsibility during 2006 and into 2007.
2005/06 Initiatives
> Further investment in the harm minimisation and host
responsibility team, with the recruitment of additional
senior health and addiction treatment specialists. Their
expertise will help us extend our policy and research,
training programmes, and identification, intervention
and assistance processes. (See profiles)
> Appointment of a dedicated host responsibility
training manager to develop tailored training
programmes for each of the regulatory environments
in which we operate. Their responsibilities include
ensuring all SKYCITY staff are trained to recognise the
signs of problem gambling and alcohol intoxication.
Host responsibility is an integrated part of our
customer service approach.
> SKYCITY undertakes ongoing programme evaluation
and has initiated internal staff focus groups, run
by leading market research company Colmar
Brunton, to obtain detailed insights into the day-
to-day issues staff face when implementing host
responsibility programmes. Regular ‘mystery shopper’
evaluations focusing on host responsibility assess staff
understanding and identify and address any gaps in
knowledge and implementation.
> The establishment of strict and progressive re-entry
criteria for those who have previously been excluded
from the casino. This policy was developed
collaboratively with input from the Department of
Internal Affairs, Ministry of Health and treatment
providers. The criteria include new rules for
third-party exclusions, and close collaboration with
treatment providers.
Shannon Hanrahan
HOST RESPONSIBILITY MANAGER – SKYCITY ENTERTAINMENT GROUP
Shannon oversees the strategic development and implementation of
SKYCITY’s host responsibility programme across the Group. He was previously
the Alcohol and Liquor Advisory Council of New Zealand’s (ALAC) Host
Responsibility Programme Manager and Project Manager – Liquor Licensing.
He brings a thorough understanding of public health approaches and
implementing these in an industry setting.
INtRODUcING
“This is a really exciting time for host responsibility at SKYCITY. We are building
on a strong base by continuing to invest in specialist skills and experience that
will enhance our leadership in this still-evolving area.”
8 I s k y c i t y a n n u a l r e p o r t 0 0 6
H O s t R E s P O N s i b i l i t y
Outlook
In 2006, we committed to enhancing and evaluating our
host responsibility programme. We have the team strength
and the right tools to maintain a leadership position in
harm minimisation, including host responsibility.
SKYCITY will continue to focus on working with
regulators and problem gambling service providers in
all jurisdictions. As part of our effort to progress debate,
SKYCITY supported and participated in a non-partisan
problem gambling ‘Think Tank’ in September 2006,
where international specialists gathered to discuss
policy, international best practice and research in harm
minimisation.
We are currently developing a Harm Minimisation
Framework – a set of over-arching policies that will
incorporate public health principles, an evidence-based
approach to our programmes with measurement of
outcomes. Within this framework, we will continue to
develop best practice and quality improvement. We will
collaborate with gambling service providers, the health
and social services sector and government agencies to
look at early intervention, use of technology to support
host responsibility and responsible approaches to the
marketing of gambling products.
“sKyCIty must be vigilant
to ensure the dialogue with
new Zealand and australian
regulators and treatment
providers is kept open, and
that the appropriate balance
of harm minimisation and
efficient management
of legal and legitimate
commerce remains at the
top of the agenda.”
evan DavIes, ManaGInG DIreCtor
Linda Poynton
HOST RESPONSIBILITY MANAGER – SKYCITY AUCKLAND
Linda leads the Auckland Host Responsibility Team, managing the
implementation of the host responsibility programme. Linda’s experience
in clinical addiction in the mental health sector includes a role as Clinical
Manager of the Higher Ground Rehabilitation Trust, a 30-bed accredited
residential facility for the treatment of drug and alcohol addictions.
“My team and I continue to embed host responsibility into our overall
customer service ethic. We’re committed to working with industry experts
and well-regarded treatment providers to gather their support, input
and feedback.”
INtRODUcING
9 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
HOST
RESPONSIBILITY
OUR
PEOPLE
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
CORPORATE
GOVERNANCE
evident in the large numbers attending the targeted
training programme ‘Great Service’. The benefits of this
are becoming evident as customer service levels continue
to increase across all our businesses.
at the heart of every positive experience at sKyCIty is great customer
service. that is why we ensure our people are passionate about what
they do, and understand the importance of service excellence.
Our commitment begins with recruiting people with the
right attitude as well as the right technical skills. Customer
service culture is developed by ensuring we have effective
leaders and managers who have the skills to train and
coach our people.
Making SKYCITY a great place to work helps us build
and maintain an engaged and motivated workforce. In
2005/06 we focused on lifting employee engagement
and satisfaction. We strive to understand the personal
aspirations of our people, provide choices and paths that
allow them to grow in their careers, and proactively reward
and recognise performance.
Growing the Skills of our People
SKYCITY employs over 4,000 people across a range of
entertainment and hospitality operations. Doing this
successfully requires dedicated and diverse training
programmes.
In 2006, SKYCITY began to formally acknowledge
individual skills and in-house training programmes
by delivering nationally recognised qualifications in
partnership with tertiary institutes and the New Zealand
Qualifications Authority (NZQA).
SKYCITY is now offering a Certificate in Food and
Beverage Service. This is a nationally recognised, on-site
qualification developed in conjunction with the Hospitality
Standards Institute that will be available to all new and
existing employees.
SKYCITY also promotes programmes that broaden staff
skills. In Adelaide, the introduction of Mandarin language
and culture education has proved popular and has led to
improved employee-customer experiences. In Auckland,
literacy-training group, Workbase, has conducted a
training needs analysis of cleaning and building services
staff. As a result, 21 staff members have been offered
the opportunity to participate in a 48-week literacy
programme starting in July 2006.
Recognition and Reward
SKYCITY is unique in the entertainment and hospitality
sector in offering incentive-based bonuses to waged staff.
The Customer Experience Incentive (CEI) pays waged staff
a cash bonus when both customer service and company
financial targets are met.
Customer satisfaction is independently measured each
month through market research. In 2006 we produced
some of our strongest ever customer service results.
$1.6 million has been paid out, in cash, to 1,820 staff
across all sectors of the business. That lifts the total staff
bonus payout to $6.7 million since the CEI was introduced
in 2000 – tangible recognition of our people’s contribution
to SKYCITY’s success.
In 2006/07 we will move to offer a National Certificate in
Casino Security. Security managers and officers currently
receive in-house training but no formal qualification. The
new NZQA Certificate in Casino Security will formally
recognise staff that have successfully completed training
to a high degree of competency.
Across the Group, our commitment to providing our
customers with a SKYCITY experience to remember is
We are also enhancing our highly successful ‘Quest
for the Best’ programme. This programme provides an
opportunity for staff to identify and recognise colleagues
for their excellence in customer service.
In addition, SKYCITY recognises long-term loyalty to the
company through a Group-wide recognition programme,
where staff are acknowledged for their service at each
five-year anniversary.
3 0 I s k y c i t y a n n u a l r e p o r t 0 0 6
“sKyCIty’s programmes for recruiting, training,
developing and retaining staff are all built around one
core principle – providing great customer service to
deliver memorable sKyCIty experiences.”
evan DavIes, ManaGInG DIreCtor
> leanne lIn, WaItres s .
3 I s k y c i t y 0 - y e a r a n n I v e r s a r y
O U R P E O P l E
Developing Leaders
SKYCITY is committed to developing leadership capability
at all levels of the business. We see this as fundamental to
being a high-performing, customer-focused organisation.
Our approach has been to introduce a suite of programmes
customised to meet the needs of leaders at different
points in their SKYCITY careers.
Our Leadership Trainee Programme has been successfully
identifying leadership talent for three years. This is a great
opportunity for existing high-potential employees and
university graduates interested in a career with SKYCITY
to fast-track to operational management roles. We have
continued to refine our approach in this area over the past
year to ensure trainees are given a solid foundation in the
core operations of our business, supported by leadership
development training and exposure to key business projects.
New supervisors and managers participate in modular
programmes that provide a ‘toolbox’ of management and
leadership skills. Middle to senior managers participate in
more customised programmes that allow them to develop
their individual leadership style and maximise their personal
and team effectiveness. This includes external training,
with middle to senior level managers participating in a
leadership development programme designed to focus on
encouraging behaviours we want our leaders at SKYCITY to
demonstrate to their teams.
Finding the Right People
A low-unemployment environment in Australasia,
and an international shortage in trained hospitality
staff, particularly chefs, have provided SKYCITY with
opportunities to be innovative in its recruitment.
Auckland’s Modern Apprentices Programme is successfully
attracting school-leavers into the workforce and has
almost doubled in size from six to ten trainees.
SKYCITY is launching other initiatives to encourage people
into chef careers. We have created strong networks with
the Worldwide Chef Association, which will partner with us
in an international chef exchange programme.
As part of this, we have recently launched a new website
to attract local and international chefs to positions at
SKYCITY – www.chefnz.co.nz. We are working closely
with national and state authorities to get approval in
principle to fast-track placement and relocation of
international staff.
SKYCITY’s strategy is to become a preferred employer in
every community in which we operate, and we continue to
focus on building a robust and vibrant employment brand.
Snapshot – SKYCITY People
STAFF NUMBERS
2003/04
2004/05
2005/06
SKYCITY Auckland
SKYCITY Adelaide
SKYCITY Darwin*
SKYCITY Hamilton
SKYCITY Queenstown
Group/Corporate
2,217
778
N/A
240
68
60
2,302
997
264
221
69
61
2,377
1,149
345
279
94
73
tOtAl**
3,363
3,914
4,317
* Acquired July 2004. Staff numbers in 2003/04 (pre-acquisition) were 279.
** This table sets out the number of permanent SKYCITY employees (full-time
and part-time). SKYCITY currently employs around 1,000 casual staff across the
Group. Numbers fluctuate throughout the year to accommodate special events.
All STAFF
AVERAGE AGE
AGE GROUPINGS
TENURE wITh ThE cOMPANY
53% male
47% female
34.1 years
<20
20 – 29
30 – 39
40 – 49
50 – 59
>60
< 1 year
1-2 years
2-4 years
4-6 years
6-8 years
8-10 years
>10 years
3.8%
36.5%
29.2%
19.5%
9.0%
2.0%
28.4%
20.8%
18.9%
9.9%
6.6%
5.3%
10.1%
3 I s k y c i t y a n n u a l r e p o r t 0 0 6
O U R P E O P l E
Health and Safety
We are committed to providing a healthy and safe
environment for all our employees and customers.
In New Zealand, SKYCITY has been an Accredited
Employer in the Accident Compensation Corporation
(ACC) Partnership Programme since August 2000, and
our work and injury management practices are audited
annually by ACC as part of this accreditation.
In Australia, SKYCITY Adelaide has retained a Good
Safety Achiever Business System level two rating,
and received favourable comments from auditors
regarding improvements to its Occupational Health and
Safety systems.
Our continued focus is on reducing lost-time injuries
and increasing awareness of health and safety through
education and operational practices.
CASE STUDY
SKYCITY: The Very First to Offer Modern
Apprenticeships for Chefs
SKYCITY’s collaboration with the New Zealand
Government to encourage school leavers into chef careers
is proving a resounding success.
The Government launched the Modern Apprenticeships
Programme in July 2000 to encourage school-leavers into
the workforce. SKYCITY was one of New Zealand’s first
employers to offer in-house apprenticeships and the very
first to offer chef training as part of the pilot programme.
Under the scheme, trainee chefs are paid by
SKYCITY to complete their three-year on the job
culinary apprenticeship.
SKYCITY has trained 10 successful chefs through the
Modern Apprenticeship chef training programme and has
another 19 chefs currently in their first, second and final
year of training. SKYCITY hopes to take on at least 10
new apprentice chefs in the next intake (January 2007).
Recruitment for the next intake is in November 2006.
SKYCITY’s apprentice chefs have won two annual Modern
Apprentice of the Year Awards, launched four years ago
by the Hospitality Standards Institute. This year, Heather
Kaniuk, who has been working at SKYCITY’s ‘dine’ by Peter
Gordon restaurant since October 2005, took top honours.
In 2004, Logan Turner, another SKYCITY apprentice, won
this prestigious award.
This initiative has been applauded by the Minister for
Tertiary Education, Dr Michael Cullen, who recently toured
SKYCITY’s food and beverage facilities and met some
Modern Apprentice trainee chefs.
“Modern apprenticeships have been very
successful in meeting a real need for
workplace-based industry training and I am
very pleased that sKyCIty is embracing the
opportunities offered under the scheme.”
Dr MICHael Cullen, neW ZealanD MInIster For
ter tIary eDuCatIon
> sKyCIty CHeF s at Wo rK .
3 3 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
“our communities have supported sKyCIty as employees, customers,
suppliers and neighbours. In return, we have set ourselves the goal of
becoming a ‘cornerstone enterprise’ in each community in which we
operate. For us this is about demonstrating leadership and integrity
through listening to and supporting our communities.”
INTRODUCING OUR
BOARD OF DIRECTORS
evan DavIes, ManaGInG DIreCtor
SKYCITY’s 10th anniversary year allows us to celebrate
a decade of involvement and partnership with our
communities.
Being an integral part of our communities is an important
part of SKYCITY’s identity. As a trans-Tasman company,
we are committed to business leadership – being a
responsible employer, a tourism leader and contributor to
economic growth.
We work beside our communities in many ways. We have
established long-term community partnerships supporting
local organisations and events. Our community trusts in
Auckland, Hamilton and Queenstown have now distributed
over $20 million, benefiting over a thousand small and large
community groups.
“In the past 0 years, sKyCIty
has grown from a single site in
auckland to become a trans-tasman
entertainment and leisure business.
We now have $.7 billion in assets
spanning tourism, cinema complexes,
hotel and conference accommodation
and casinos. sKyCIty is a strong, truly
diversified entertainment brand.”
evan Dav Ies , ManaGInG DIre C t or
A Leader in Business
SKYCITY strives to reach the highest possible standards
of integrity in business practice and governance. Over
10 years, our business leadership has been recognised as
a tourist attraction, community supporter, wealth creator
and provider of exciting and memorable experiences.
Recognition of business leadership includes:
> 2000: Managing Director Evan Davies
named New Zealand Executive of the Year,
Management Magazine.
> 2001: SKYCITY named New Zealand Company of the
Year, Management Magazine.
> 2002: SKYCITY named one of the world’s top 200
small companies outside the US by Forbes Magazine.
SKYCITY’s customer loyalty programme won an
international excellence award at the US National
Centre for Database Marketing Awards.
> 2004: SKYCITY took first place in the
PricewaterhouseCoopers 2004 Corporate
Value Report.
Our success continued into 2005 with SKYCITY named
inaugural ‘Trans-Tasman Business of the Year’ by the
Trans-Tasman Business Circle. This prestigious award
acknowledged our successful expansion of the New
Zealand business into Australia over five years, making
SKYCITY one of four major players in Australasia’s gaming
and entertainment market.
SKYCITY was also named by Forbes Magazine as one of
the top companies in Asia under US$1 billion turnover.
This is the third time in the past four years that SKYCITY
has been included on this prestigious list.
3 4 I s k y c i t y a n n u a l r e p o r t 0 0 6
O U R c O M M U N i t i E s
“sKyCIty has not tried to be a Kiwi
business in australia. Management
has shown an ability to successfully
translate its new Zealand based
experience and business philosophy
into an australian context, and
to deliver compelling customer
experiences that suit local conditions
and reflect local preferences.”
H on J IM Mc lay, t rans-tasMan BusIne ss C IrC le CHaIrMan
A Leading Tourist Destination
The quality of the fun and entertainment enjoyed by
customers lies at the heart of SKYCITY’s success. Sky
Tower is currently New Zealand’s most popular paid visitor
attraction, with around 700,000 visitors per annum. One
in every two international visitors to Auckland visits Sky
Tower and 50% of Aucklanders have been up at least
once. The Sky Tower, which symbolises our strength in the
tourism industry, has received a number of awards during
the past decade.
> 2001: SKYCITY named Supreme Award Winner,
New Zealand Tourism Awards.
> 2003: Sky Tower named New Zealand’s leading visitor
attraction, New Zealand Tourism Awards.
SKYCITY Auckland’s Food and Beverage Team wins 44
medals at the 11th Annual New Zealand Culinary Fare.
> 2004: SKYCITY Darwin’s Evoo Restaurant awarded
Best Accommodation Division Restaurant by the
Australian Hotels Association.
> 2005: SKYCITY Darwin receives ‘Luxury
Accommodation’ and ‘Tourism Restaurants and
Catering Services’ awards at the Brolga Awards.
>
>
2005: SKYCITY Darwin chefs win the Nestlé Golden
Chef’s Hat competition.
2005: SKYCITY Adelaide receives an Award of
Distinction for its Stage I redevelopment at the South
Australian Tourism Awards.
In May 2006, customers nominated all three SKYCITY
hotels for the inaugural HotelClub Australia and New
Zealand Awards, with SKYCITY Auckland and SKYCITY
Darwin each taking top honours in their category.
The quality of our accommodation was further recognised
in August 2006, when SKYCITY’s Grand Hotel was
recognised as ‘the best of the best’ by Qualmark, which
provides the New Zealand tourism industry’s official
rating. Only 10 hotels in New Zealand carry the Qualmark
five-star quality grading – and the Grand Hotel took prize
position for its exceptional quality standards. The Grand
Hotel was also selected by Qualmark as the benchmark
training property for its accommodation assessors.
In addition, Auckland’s Grand Hotel restaurant ‘dine’ by
Peter Gordon was runner-up ‘Best Restaurant’ and overall
winner ‘Best Dining Room’ in the fiercely contested Metro
Magazine 2006 Best Restaurant Awards.
In Darwin, SKYCITY won both ‘Best Superior
Accommodation’ and ‘Best Accommodation Division
Restaurant’ at this year’s Australian Hotels Association
Awards. SKYCITY Darwin also came first in the ‘Territory
Culinary Challenge 2006’, where Northern Territory
chefs were challenged to create cuisine with uniquely
Territorian ingredients.
> sKyCIty v8 s uperC a r CH a MpI o ns HI p – Dar WIn
3 5 I s k y c i t y 0 - y e a r a n n I v e r s a r y
O U R c O M M U N i t i E s
> CHIlDren Ben eF It Fro M Gra nt s pro vI De D t o nor tH roDney Blue lIGH t
FroM tHe s K yCI ty a uCK la n D Co MMun I ty trust.
Community Partnerships
To connect with our communities in a meaningful
way requires more than one-off donations. It requires
long-term partnerships, which involve building a strong
understanding of community needs and aspirations,
to achieve positive and sustainable outcomes.
As a consequence, many of our partnerships are long-term
relationships which have spanned over many years, some
since our inception in 1996. These have included support
for Starship Foundation, Kidz First Children’s Hospital,
the New Zealand Breast Cancer Foundation, and Special
Olympics New Zealand. SKYCITY Adelaide has worked
to assist the Flinders Medical Centre in the campaign
to fight childhood obesity. However financial support
is only one aspect of these relationships. We provide
additional support for our community partners through
expertise in fundraising, project management, marketing
and communications.
SKYCITY’s brand has become almost synonymous
with Auckland Rugby as a dedicated supporter over
several years. Our recent work with Auckland Rugby’s
nominated charity, Kidz First, has strengthened that
relationship. In Hamilton we continued our commitment
to Waikato Rugby.
We have also looked for new sponsorship opportunities
that reflect the growing diversity of our business. In 2006
SKYCITY became a Gold sponsor of the New Zealand
International Festival of the Arts in Wellington. This
relationship was augmented by SKYCITY’s naming rights
status for the Festival’s ‘Earth from Above’ photographic
exhibition – a free outdoor event which drew 200,000
people, becoming the most popular event in the
Festival’s history. In addition, we announced our principal
sponsorship of the Auckland Festival – AK07, Auckland’s
celebration of the arts, demonstrating our commitment to
making Auckland a vibrant and compelling city.
SKYCITY’s relationship with the horse racing world is
strong. SKYCITY Auckland announced a major new
naming rights sponsorship for the Auckland Racing Club
at the SKYCITY Auckland Cup Carnival in March 2006.
SKYCITY Adelaide has continued its support of the
Adelaide Cup Carnival and SKYCITY Darwin sponsors
Derby Day, one of the major racing meetings of the
Darwin Cup Carnival each year.
SKYCITY Darwin has extended its relationship with motor
racing to become the naming rights sponsor of the Darwin
round of the V8 Supercars Championship.
SKYCITY Darwin also sponsored the Pride of Australia
Awards. These community-based awards recognise the
extraordinary contributions of Australia’s unsung heroes –
everyday Australians who go the extra mile.
3 6 I s k y c i t y a n n u a l r e p o r t 0 0 6
O U R c O M M U N i t i E s
Community Relations
Auckland Grants
Thousands of organisations approach SKYCITY every year
in every jurisdiction in which we operate. Each property
supports hundreds of local community groups, schools,
sports teams, kindergartens and play centres with their
fundraising efforts. This support extends to venue use,
food and beverage, and fundraising.
SKYCITY Community Trusts
Through Community Trusts in Auckland, Hamilton
and Queenstown, SKYCITY is able to provide support
for a diverse range of causes important to each local
community. Each Trust supports local and regional
organisations, and prioritises projects that support
community works, health, education, tourism, and arts
and culture.
In 2005/06 the three Trusts made 240 grants and
distributed $3.5 million. The total amount was higher than
the $3.0 million distributed in 2004/05, and slightly less
than the $3.8 million distributed in 2003/04. The lower
figure in 2004/05 was primarily due to the impact of non-
smoking legislation on SKYCITY profits in New Zealand.
This year’s figures reflect a recovery from this impact.
To date Trust funds distributed total $22.2 million,
including $5.6 million to New Zealand’s Problem Gambling
Committee.*
The SKYCITY Auckland Community Trust distributed
$2.9 million to 98 organisations in the 2005/06 year.
Major grants included:
> $250,000 for Auckland Art Gallery Foundation towards
the development of the heritage Auckland Art
Gallery building.
> $150,000 to the Starship Foundation towards the
Diabetes School Education and Management
Programme.
> $150,000 to the South Auckland Health Foundation
to assist in the building of a community dental health
clinic in Mangere.
> $73,400 for The Kids Help Foundation Trust to install a
modern telephone system to assist with the increasing
number of phone calls they receive daily.
Hamilton Grants
The SKYCITY Hamilton Community Trust distributed
$480,118 to 114 organisations in the 2005/06 year.
Major grants included:
> $21,370 for Invitation to a Voyage Trust towards an
80-minute film about a journey down the Waikato
River with local actors.
> $18,000 for a new Life Pac cardiac monitor for the
skycity cOMMUNity tRUst GRANts, 1996 – 30 June 2006
Order of St John Midland Region.
Total Trust distributions
$22.2 million
> $15,000 towards the annual 10-day summer festival in
* Under New Zealand’s Gambling Act 2003, the Problem Gambling
Committee, which funded problem gambling services, was
disestablished. From 1 October 2004, instead of contributing to
the Problem Gambling Committee via the three Community Trusts,
SKYCITY Auckland, Hamilton and Queenstown have paid a Problem
Gambling Levy of 0.51% of gross profit. The money raised through
this levy is administered by the Ministry of Health, and continues to
fund problem gambling prevention and treatment initiatives.
SKYCITY will continue to fund each Community Trust at
existing levels:
> 2.5% of net profit from the main site operations of
SKYCITY Auckland, or a minimum of $500,000 p.a.
> 1.5% of the revenue from the casino operations of
SKYCITY Hamilton p.a.
> 2.5% of net profit from SKYCITY Queenstown Casino
or a minimum of $100,000 p.a.
Hamilton Gardens.
> $10,000 for Raglan Volunteer Coastguard towards a
new rescue vehicle.
Queenstown Grants
The SKYCITY Queenstown Casino Community Trust
distributed $120,278 to 25 organisations in the
2005/06 year.
Major grants included:
> $25,000 to Destination Queenstown to support the
Queenstown Winter Festival.
> $9,850 for essential training for Arrowtown Volunteer
Fire Brigade.
>
$9,300 to Wakatipu Victim Support for volunteer training.
> $8,000 towards the Arrowtown Autumn Festival.
Full details of the year’s Trust grants are available on
www.skycity.co.nz.
3 7 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
HOST
RESPONSIBILITY
OUR
PEOPLE
CORPORATE
GOVERNANCE
SKYCITY
QUEENSTOWN
SKYCITY
CINEMAS
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
sKyCIty’s board of directors is responsible for stewardship of the company’s assets and
investments and for the effective supervision of the management of the company. the board
and its committees operate under charter documents which are formally reviewed on an
annual basis. In addition to its charter, 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 corporate, community and regulatory responsibilities are fully complied with.
sKyCIty’s corporate governance framework is set out
the board’s audit and risk Committee (chaired by
in detail in this annual report on pages 40-50.
sir Dryden spring) met five times, the Governance
the board currently comprises six non-executive
directors and one executive director. the chairpersons
of the board and each of the three board committees
are non-executive directors, in compliance with the
and remuneration Committee (chaired by
patsy reddy) met four times, and the nomination
Committee (chaired by rod McGeoch) met on
one occasion.
requirements of the board charter.
the board and the committees held a number of
elmar toime and sir Dryden spring, current directors
of the company, retire by rotation at the 006 annual
meeting and offer themselves for re-election.
meetings on an as required basis to consider a range
of issues and a number of additional matters were
attended to by specifically convened subcommittees
of the board, including the sKyCIty aCes notes issue
During the 005/06 year, the board (chaired by
(and prospectus) and due diligence and detailed
rod McGeoch) formally met on eight occasions.
consideration of the taverner acquisition prospect.
1
2
3
4
5
6
7
3 8 I s k y c i t y a n n u a l r e p o r t 0 0 6
1 roD McGeoCH
Chairman
3 patsy reDDy
Deputy Chairperson
rod McGeoch was appointed a director
patsy reddy has been a director since
in september 00 and Chairman of
994. she is Deputy Chairperson of the
the company on april 004. Based
board and chairs the Governance and
in sydney, australia, Mr McGeoch is a
remuneration Committee. Ms reddy
director of telecom Corporation of new
is a non-executive director of telecom
Zealand limited, lIpa pharmaceuticals
Corporation of new Zealand limited and
limited, ramsay Health Care limited and
active equities limited and is a member
Frontiers Group limited. He is chairman
of nZX Discipline. she is a trustee of the
of pacific Healthcare limited, saatchi &
new Zealand International Festival of the
saatchi’s trans-tasman advisory Board and
arts, the victoria university of Wellington
vantage private equity Growth limited.
art Collection trust, the sKyCIty auckland
Mr McGeoch is an australian prime
Community trust and a member of the
Ministerial appointment to the australia and
adam art Gallery advisory Board.
new Zealand leadership Forum, a trustee of
the sydney Cricket and sports Ground trust
4 roB McleoD
and a member of the new Zealand rugby
World Cup 0 advisory Bid Committee.
2 evan DavIes
Managing Director
rob Mcleod was appointed a director
in october 004. He is chairman of the
new Zealand Business roundtable and
has been a councillor and member of
the executive Board of the Institute of
evan Davies has been Managing Director
Chartered accountants of new Zealand.
of sKyCIty entertainment Group since
Mr Mcleod is a director of a number
February 996. Mr Davies is also a director
of companies including telecom
of sKyCIty subsidiary companies and a
Corporation of new Zealand limited,
director of Christchurch Casinos limited.
anZ national Bank limited and sealord
He is a trustee of the anglican trust for
Group limited. He assumes chairmanship
Women and Children and the Melanesian
of the audit and risk Committee from
Mission trust.
october 006.
5 sIr DryDen sprInG
sir Dryden spring was appointed a director in
october 003. He is chairman of anZ national
Bank limited, the asia 000 Foundation of
new Zealand and the new Zealand apeC
Business advisory Council. He is a director of
Fletcher Building limited, port of tauranga
limited and northport limited. sir Dryden is
also a trustee of the new Zealand Business
and parliamentary trust. He was chairman
of the audit and risk Committee until
30 september 006 and remains a member of
the committee.
6 elMar toIMe
elmar toime was appointed a director
in February 996 and is a member of the
audit and risk Committee. Mr toime is a
postal sector and management consultant
and a non-executive director of Deutsche
post a.G. (Germany) and Blackbay limited
(london). Formerly chief executive officer of
new Zealand post limited, he has been based
in london since March 003.
7 BIll trotter
Bill trotter was appointed a director
in March 000 and is a member of the
Governance and remuneration Committee.
Mr trotter is executive chairman of First nZ
Capital Group limited.
1
2
3
4
5
6
7
3 9 I s k y c i t y 0 - y e a r a n n I v e r s a r y
SKYCITY - the fun never ends
PERFORMANCE OF 2006
The greatest
performances
are always tightly
choreographed
and carefully
managed.
A DECADE WORTH
CELEBRATING
2005/06
PERFORMANCE
2005/06 objectives
AND progress
YEARS IN BRIEF...
SKYCITY
AUCKLAND
SKYCITY
ADELAIDE
SKYCITY
DARWIN
SKYCITY
HAMILTON
SKYCITY
QUEENSTOWN
SKYCITY
LEISURE
OUR
COM MUNITIES
INTRODUCING OUR
BOARD OF DIRECTORS
HOST
RESPONSIBILITY
OUR
PEOPLE
s k y c i t y e n t e r ta i n m e n t g r o u p l i m i t e d
CORPORATE
GOVERNANCE
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.
SKYCITY’s governance structures and processes are
regularly reviewed to ensure that the highest levels of
behaviour and accountability are achieved and to ensure
that the company’s governance continues to be consistent
with international best practice both in compliance format
and in substance.
In establishing its governance policies and procedures the
SKYCITY board has adopted ten governance parameters
as the cornerstone principles of its corporate governance
charter. These cornerstone principles, set out below,
reflect the Corporate Governance Best Practice Code
of the New Zealand Stock Exchange (NZX), Corporate
Governance Guidelines of the Australian Stock Exchange
(ASX) and the New Zealand Securities Commission’s
governance recommendations.
The ten cornerstone principles set by the board are:
1. Establish 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.
2. Structure itself to be effective in discharging its
responsibilities and duties.
3. Set standards of behaviour expected of
company personnel.
4. Safeguard the integrity of the company’s
financial reporting.
its affairs. The other supporting charters and policy
documents which combine together to comprise SKYCITY’s
governance framework include:
• The company’s Constitution
• Audit and Risk Committee Charter
• Governance and Remuneration Committee Charter
• Nomination Committee Charter
•
Terms of Appointment/Terms of Reference
for Directors
• Director Independence Guidelines
• 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
• Environmental Policy
• Host Responsibility Policy.
A copy of the board charter and attachments can be
obtained from the ‘Investor Centre’ subsection of the
SKYCITY website at www.skycitygroup.co.nz
The objectives of SKYCITY’s ten cornerstone governance
principles are set out on the following pages.
PRINCIPlE 1
Establish 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.
5. Ensure timely and balanced disclosure.
SKYCITY’s procedures are designed to:
6. Respect and facilitate the rights of shareholders.
7. Recognise and manage risk.
8. Encourage board and management effectiveness.
9. Remunerate fairly and responsibly.
10. Recognise the obligations to all stakeholders.
The board charter is the principal specification of the
governance framework within which SKYCITY conducts
•
•
enable the board to provide strategic guidance for
the company and effective oversight of management
clarify the respective roles and responsibilities of
board members and senior executives in order to
facilitate board and management accountability to
both the company and its shareholders.
4 0 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
c o r p o r at e g o V e r n a n c e
Role of the board
SKYCITY’s board of directors is responsible for supervising
the management of the company.
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.
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 all applicable company and casino law and regulation
is complied with, and that the company is well managed
for the benefit of its shareholders and other stakeholders.
The board also oversees management’s risk profiling and
business continuity plans.
Specific responsibilities of the board include:
•
•
•
•
•
•
•
•
oversight of the company, including its control and
accountability procedures and systems
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 the progress of capital
expenditures, capital management initiatives, and
acquisitions and divestments
approval of 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 and performance review 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 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 board has responsibility for the affairs and activities
of the company, which in practice is achieved through
delegation to the Managing Director and others
(including SKYCITY-appointed directors on subsidiary
company boards) who are charged with the day to day
leadership and management of the company.
The Managing Director also has responsibility to manage
and oversee the interfaces between the company and
the public and to act as the principal representative of
the company.
The board maintains a formal set of delegated authorities
that clearly defines the responsibilities which are
delegated to the Managing Director and management
and those which are retained by the board. These
delegated authorities are approved by the board and are
subject to annual review by the board.
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 the
company’s affairs, provided they have previously notified
the board chairperson of their intention to do so.
The company provides a deed of indemnity in favour
of each director and senior management personnel
and provides professional indemnity insurance cover
for directors and executives acting in good faith in the
conduct of the company’s affairs.
PRINCIPlE 2
Structure the board to be effective in
discharging its responsibilities and duties.
Board effectiveness requires the efficient discharge of the
duties imposed by law on the directors and the addition
of value to the company. To achieve this the SKYCITY
board is structured to:
•
•
•
have a sound understanding of, and competence
to deal with, the current and emerging issues
of the business
effectively review and challenge the performance
of management and exercise independent
judgement, and
assist in the selection of candidates for
shareholder vote.
Board composition
The board ensures that it is of an effective composition
and size to adequately discharge its responsibilities
and duties and to add value to the company’s decision-
making.
In order to meet these requirements, the board
membership comprises a range of skills and experience
to ensure that it has a proper understanding of and
competence to deal with the current and emerging
issues of the business, to effectively review and challenge
the performance of management, and to exercise
independent judgement.
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Directors are appointed under the company’s Terms of
Appointment and Terms of Reference for Directors and
board charter for a term of three years or are subject
to re-appointment on a more frequent basis in order
for the company to comply with the listing rule rotation
requirements of the NZX and the ASX.
SKYCITY supports the separation of the role of board
chairperson from the Managing Director/Chief Executive
Officer position. The current chairman of the board,
Rod McGeoch, is an independent director and is not
the Managing Director or Chief Executive Officer and
has ensured that he has the time necessary to discharge
the role effectively. The chairman of the board and the
chairpersons of the board committees are elected by the
non-executive directors.
The board has established the Nomination Committee
to make recommendations on the board’s size, selection
and removal of directors, on appropriate procedures for
director and board evaluation and performance review,
the induction, orientation and training of new directors in
the company’s operations and the gaming/entertainment
sector generally, and on the board’s succession planning.
All directors are members of the Nomination Committee
and Rod McGeoch is chair of this committee.
The company’s constitution also requires all potential
directors to have satisfied the extensive probity
requirements of each jurisdiction in which the company
holds gaming licences.
The directors at the date of this annual report are
Rod McGeoch (Chairman), Evan Davies (Managing
Director and the only executive director), Rob Mcleod,
Patsy Reddy, Sir Dryden Spring, Elmar Toime and Bill
Trotter. A brief biography of each director is set out on
pages 38 and 39.
Mr Toime and Sir Dryden Spring will retire by rotation
at the 2006 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 be
formally requested by the board to stand for re-election.
At its August 2006 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 Mr Toime
and Sir Dryden. The board noted that both Mr Toime and
Sir Dryden have indicated that they would be pleased
to continue to contribute to the company’s affairs for a
further term and have requested both directors to stand
for re-election at the 2006 annual meeting.
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.
At its June 2006 meeting, the board reviewed the status
of each director in accordance with the independence
specification of the NZX Code and determined that all
current directors, other than the Managing Director (Evan
Davies), are independent.
The board noted that, under the ASX Independence
Guidelines, all non-executive directors except Mr
Trotter are considered independent. Mr Trotter is not
independent under the ASX 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.
SKYCITY’s Code of Business Practice sets out the board’s
policy on conflicts of interest. 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. When conflicts of interest exist, directors exclude
themselves from discussions and do not vote in respect of
the relevant matters. The disclosure of existing interests is
an ongoing responsibility of each director.
There have been no subsequent changes to the
independence determinations for each director as at the
date of this annual report.
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Board committees
The board has three formally appointed committees,
being the Audit and Risk Committee, Governance and
Remuneration Committee and Nomination Committee.
The non-executive directors of the board appoint the
chairperson of each committee.
Each committee operates under a charter document as
agreed by the board. Each committee charter and the
performance of each committee is subject to formal
review by the board on an annual basis.
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 are authorised to do so by their
charters or have been specifically mandated to do so.
All directors are entitled to attend any committee
meeting. All directors receive the papers for each
committee and the minutes of the committee meetings.
The Managing Director attends the board’s Audit and
Risk Committee and Governance and Remuneration
Committee meetings in an ex-officio capacity. 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.
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.
During the 2005/06 year, the board met formally on eight
occasions, seven of which were scheduled meetings and
one of which was called to attend to particular items
of business. The Audit and Risk Committee met five
times, the Governance and Remuneration Committee
four times and the Nomination Committee met once.
In addition, the directors convened by teleconference
to discuss specific issues on a number of occasions
during the year. Sir Dryden Spring was chairman at
each meeting of the Audit and Risk Committee, as was
Patsy Reddy at each meeting of the Governance and
Remuneration Committee and Rod McGeoch at the
Nomination Committee meeting. The following table
shows attendances at board and committee meetings by
directors during the year ended 30 June 2006 with the
number of meetings held in brackets.
AuDIT GOvERNANCE &
BOARD & RISK REMuNERATION NOMINATION
(8)
(5)
Rod McGeoch
Evan Davies
Rob Mcleod
Patsy Reddy
Sir Dryden Spring
Elmar Toime
Bill Trotter
8
8
8
8
8
7
8
5
5
5
(4)
4
4
4
(1)
1
1
1
1
1
1
1
PRINCIPlE 3
Set standards of behaviour expected of
company personnel.
SKYCITY actively promotes ethical and responsible
behaviour and decision-making by:
•
•
clarifying and promoting observance of its
guiding values
clarifying the standards of ethical behaviour required
of company directors and key executives (that is,
officers and employees who have the opportunity
to materially influence the integrity, strategy
and operation of the business and its financial
performance) and encouraging the observance of
those standards, and
•
communicating the requirements relating to trading in
company’s securities by directors and employees.
Directors 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. Directors must also ensure that information
they hold about the company is treated in strict
confidence and that property of the company (including
information) is used solely in the best interests of the
company. Members of the board must also comply with
the company’s codes for business practice and securities
transactions and the company’s insider trading policy.
The Governance and Remuneration Committee is
responsible for monitoring the organisational integrity
of business operations to ensure the maintenance of a
high standard of ethical behaviour. This includes ensuring
that SKYCITY operates in compliance with its Code of
Business Practice, which sets out the guiding principles
of its relationships with stakeholder groups such as
regulators, shareholders, customers, and employees.
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The company’s Code of Business Practice is an integral
component of the board charter and addresses the
following areas:
•
•
•
•
•
•
•
compliance with laws, NZX and ASX listing Rules,
casino licences, other regulatory requirements, and
co-operation with regulatory bodies
honest and fair dealing with customers, suppliers
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, and
•
the receipt of any benefits from external parties.
The company maintains a code of practice for directors
and senior executives that 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, before
trading in the company’s securities, must obtain the prior
consent of the Managing Director or the chairperson
or deputy chairperson of the board. The Managing
Director, before trading in the company’s securities, must
obtain the prior consent of the chairperson or deputy
chairperson of the board.
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 are 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.
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. The company communicates regularly
with the ‘officers’ to remind them of their obligations and
facilitates the filing of notices to ensure full compliance
with this requirement.
Directors and employees are not permitted to participate
in any gaming or wagering activity at SKYCITY-operated
properties or at a related property, including
Christchurch Casino.
PRINCIPlE 4
Safeguard the integrity of the company’s
financial reporting.
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 board has established an Audit and Risk Committee.
This committee comprises three directors, all of whom
are independent non-executive directors and financially
literate.
The Audit and Risk Committee has responsibility for
oversight of the quality, reliability, and accuracy of the
company’s internal and external financial statements, the
quality of the company’s external result presentations,
its internal control environment and risk management
programmes, and for its relationships with its internal and
external auditors.
The Audit and Risk Committee and the board undertake
sufficient inquiry of the company’s management and
the company’s internal and external auditors in order to
enable them to be satisfied as to the validity and accuracy
of the company’s financial reporting.
The Managing Director and the General Manager Group
Finance are required to state in writing to the Audit and
Risk Committee that the company’s interim and full year
financial statements 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 General Manager Corporate provide assurance on
the internal control environment, as set out in Principle 7.
The Audit and Risk Committee meets with the internal
and external auditors independently of management
as often as is appropriate, but not less than twice per
annum. The Committee oversees the independence of
the company’s internal and external auditors and monitors
the scope and quantum of work undertaken and fees paid
to the auditors for other than audit work. The Committee
has adopted an External Audit Independence Policy that
sets out the framework for assessing and maintaining
audit independence.
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The Committee has formally reviewed the independence
status of PricewaterhouseCoopers and is satisfied that its
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
of the company.
Fees paid to PricewaterhouseCoopers during the 2005/06
year were for audit services $655,000, other assurance
services $988,000 and tax advisory services $1,429,000.
Details of these fees are set out in note 7 to the financial
statements.
The Audit and Risk Committee Charter requires rotation
of the external audit partner not less frequently than
every five years. David Randell (PricewaterhouseCoopers),
current external audit partner for SKYCITY, was appointed
effective October 2003.
SKYCITY policy is that there is a separation of the
provision of internal and external audit services. Ernst
and Young has acted as SKYCITY’s internal audit service
provider (previously PricewaterhouseCoopers) since
1 October 2004. Ben Palmer (Ernst and Young), current
internal audit partner, was appointed in September 2004.
PRINCIPlE 5
Ensure timely and balanced disclosure.
The board is committed to ensuring timely and balanced
disclosure of all material matters concerning the company
to ensure compliance with the letter and intent of NZX
and ASX listing Rules such that:
•
•
all investors have equal and timely access to material
information concerning the company, including its
financial situation, performance, ownership and
governance, and
company announcements are factual and presented in
a clear and balanced way.
The company is committed to presenting its financial and
key operational performance results in a clear, effective,
balanced and timely manner to the stock exchanges
on which the company’s securities are listed, and to its
shareholders, analysts and other market commentators,
and ensures that such information is available on the
company’s website.
The company’s policy is to provide timely and
sufficient information in appropriate format to enable
external parties to achieve a sound understanding
of the company’s performance during any six month
reporting period and the key elements of the company’s
business strategy.
Alistair Ryan, General Manager Corporate, is Company
Secretary and the Disclosure Officer for SKYCITY
Entertainment Group limited and is responsible for
bringing to the attention of the board any matter relevant
to the company’s disclosure obligations.
PRINCIPlE 6
Respect and facilitate the rights of
shareholders.
The company’s shareholder communications strategy is
designed to facilitate the effective exercise of shareholder
rights by:
•
•
•
communicating effectively with shareholders
providing shareholders with ready access to balanced
and understandable information about the company
and corporate proposals, and
facilitating participation by shareholders in general
meetings of the company.
The company achieves this by ensuring that information
about the company is available to all shareholders by
means of personal and/or website communication and
through encouraging shareholders to attend general
meetings of the company and making appropriate
time available at such meetings for shareholders to ask
questions of directors and management.
The company’s auditor attends any general meeting
of shareholders and is available to answer questions
about the conduct of the audits and the preparation and
content of the audit reports.
PRINCIPlE 7
Recognise and manage 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/disaster recovery plans are in place and are
well understood throughout the organisation.
The Managing Director and the General Manager
Corporate are required to state in writing to the Audit
and Risk Committee that the annual financial statements
are 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.
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The company maintains business continuity, material
damage and liability insurance covers to ensure that
the earnings of the business are well protected from
adverse circumstances.
PRINCIPlE 8
Encourage board and management
effectiveness.
Directors are provided with all information required for
the performance of their duties. Detailed information
to facilitate the decision-making process is included in
the board papers and is supported by access to senior
managers. 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.
The Nomination Committee ensures that new members
take part in an induction programme to familiarise
themselves with the company’s operations and the
gaming/entertainment sector generally. The board also
undertakes a programme of site visits to ensure directors
remain familiar with each of the company’s locations.
The board and committee charters require an evaluation
of their performance on an annual basis. The Nomination
Committee determines and oversees the process for
evaluation which includes assessment of the role and
responsibilities, performance, composition, structure,
training, and membership requirements of the board and
its committees.
The Governance and Remuneration Committee
undertakes the performance review of the Managing
Director and those reporting directly to that position
in accordance with the company’s performance review
procedures.
PRINCIPlE 9
Remunerate fairly and responsibly.
The Governance and Remuneration Committee’s
responsibilities include the review of SKYCITY’s
remuneration policies and procedures, review of the
performance of the Managing Director and the direct
reports to the Managing Director and approval of
their remuneration and incentives, review of incentive
remuneration performance targets and recommendation
of incentive payments, and oversight of the company’s
recruitment, retention and succession policies.
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 the best
available 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, and
to align remuneration for senior executives with the
interests of shareholders.
Non-executive director remuneration
Non-executive director remuneration is paid in the form
of directors’ fees. Fees are 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 remuneration may be paid for additional work
undertaken by any director, at the discretion of the board
and subject to the maximum remuneration amount which
has been approved by shareholders.
The chairpersons of the board and the committees are
paid additional remuneration to reflect the additional
responsibilities of their positions. Where the board
chairperson is also the chair of a committee, no additional
remuneration is paid for that committee chairperson role.
Fees are currently $80,000 for non-executive directors,
$160,000 for the chairman of the board, and an additional
$12,500 for committee chairpersons.
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.
External advice from recognised remuneration consultants
is regularly sought on best practice remuneration
Retirement allowances for SKYCITY directors were
discontinued at 30 June 2004 with retirement allowances
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accrued to that date frozen as to amount. Retirement
allowances accrued as at 30 June 2004 will not carry
any interest entitlement between 1 July 2004 and the
date of payment.
The company pays for a director’s expenses reasonably
incurred in carrying out their duties as a director. The
company secretary may authorise such expenses or refer
them for approval to the board chairperson, or in the case
of the board chairperson, to the chair of the Audit and
Risk Committee.
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 the board sets 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 (50%), share rights (25%) and restricted shares
(25%). Shareholders approved the issue of share rights
and restricted shares to Mr Davies at the 2005 annual
meeting.
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, approved by shareholders at the 2002
annual meeting. These options vested on 10 September
2005 and must be exercised on or before 10 September
2007. Any options not exercised at that time will lapse.
At the date of this annual report, Mr Davies had not
exercised any of the 2,338,530 options.
The exercise price of the options and share rights
escalates from the date of issue by an amount equal to
the company’s cost of equity less distributions/dividends
paid and other returns to shareholders. In this way the
options and share rights have no value unless the return
to shareholders over the period since the date of issue
has exceeded the return that shareholders should expect
from their investment.
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.
This independent advice is sought 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
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 matters as individual capability, scarcity/availability
of resource/skill, 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 market movements.
Every alternate year SKYCITY engages an international
remuneration consultancy to undertake a survey of other
companies considered appropriate as comparatives, to
test remuneration levels specific to roles to ensure valid
comparative data.
SKYCITY also participates in and accesses several
recognised remuneration surveys each year to provide
detailed information including both data and trends.
These also assist 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 flows through into each business unit 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 subsequently 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.
The Governance and Remuneration Committee approves
remuneration increases for the senior executive group.
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Performance Pay Incentive Plan (PPI)
SKYCITY operates an at-risk component of total
remuneration for all salaried employees titled
Performance Pay Incentive (PPI). The amount of
performance 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 must 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 PPI have a minimum trigger point based
on company financial targets and increase according
to the degree by which the company performs relative
to these financial targets. In this way the PPI incentive
links individual reward to business performance and
shareholder interests.
Staff who participate in PPI 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
ten trading days following announcement of the SKYCITY
annual result. The shares components of a 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 invested capital meets, exceeds or is within 10%
of the predetermined target(s) as set by the board (on the
recommendation of the Governance and Remuneration
Committee) at the start of each financial year.
under PPI, salaried personnel 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 (or business
unit) performance against target. Individual PPI bonus
payments are then subject to performance against the
personal goals set at the beginning of the year.
For the 2005/06 year, a total of 1,038 SKYCITY salaried
personnel received PPI bonuses totalling $6.2 million (an
average bonus payment of $5,961 per participant).
Customer Experience Incentive (CEI)
SKYCITY also has an incentive remuneration plan for
waged staff, titled Customer Experience Incentive (CEI).
This scheme reflects the company’s commitment to
providing favourable 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 conducted
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.
Individual bonuses under CEI range from $60 to $550
net after tax in any six month period, depending on the
number of hours worked during the six month periods
ending 31 December and 30 June in each year.
For the 2005/06 year, 2,820 waged employees received
total CEI bonuses of $1.6 million (an average bonus
payment of $581 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 both PPI
and CEI) when they have met the predetermined financial
and other thresholds.
Equity-based executive remuneration
Executive Share Rights Plan
The SKYCITY Executive Share Rights Plan (Rights Plan)
commenced on 1 July 2005, following expiry of the
Executive Share Option Plan 2002. Share rights are
issued to a group of approximately 30 senior executives.
Rights 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 rights to be granted
to each executive. The number of rights issued to
executives is determined based on a rights valuation
calculated by Deloitte Corporate Finance using the
binomial methodology. The Deloitte valuation is subject
to independent review by the company’s auditor,
PricewaterhouseCoopers.
The Executive Share Rights Plan is structured to align
executive interests with shareholder interests, to motivate
executives to drive company performance and to reward
executives for loyalty and commitment.
Rights issued under the Executive Share Rights Plan,
except in special circumstances, cannot be exercised until
three years from the date of issue. Rights issued under the
Plan lapse if not exercised on or before the fifth anniversary
of their date of issue.
The exercise price of executive share rights 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/
distributions, exceeds the company’s cost of equity over
4 8 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
c o r p o r at e g o V e r n a n c e
the same period. The company’s cost of equity 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 SKYCITY Code of Business Practice sets out the
company’s commitment to the community and the
standards of behaviour that can be expected by all
stakeholders, including employees and shareholders.
The cost of equity used to determine the exercise price
is recalculated on an annual basis on the anniversary
of the issue date of the share right, to ensure that the
performance target continues to reflect changes in market
conditions.
The base exercise price for executive share rights is
the average closing price of SKYCITY shares on the
NZSX over the ten trading days following release of
the company’s result for the financial year to 30 June to
the NZX and the ASX. 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/distributions between the date the
right was issued and its exercise date.
At exercise, the net benefit of the share right is calculated
and then the required number of shares are issued. This
results in significantly fewer new shares being issued than
was the case under the previous options plan. The Rights
Plan, which was approved by the board in December
2004, is for a three year period to 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 Rights Plan. The board is satisfied that the Plan
will provide senior executives with an effective longer-
term value incentive based on the company’s equity
market performance.
Executive Share Option Plan
Share options have also been issued to senior executives
under the Executive Share Option Plan (Option Plan) that
expired in 2005.
The Option Plan operates in much the same way as the
Rights Plan, using the same cost of equity less dividends/
distributions structure for determining the base price
multiplier, except that shares are issued for each option
exercised. (under the Rights Plan the number of shares
issued equates to the value between the SKYCITY share
price and the rights exercise price at date of exercise).
PRINCIPlE 10
Recognise the obligations to all stakeholders.
SKYCITY acknowledges legal and other obligations
to non-shareholder stakeholders such as employees,
suppliers, customers, regulators, and the community as
a whole.
SKYCITY recognises the need to control its impact on the
environment and to demonstrate a sound environmental
performance. The company’s Environmental Policy
sets out its environmental commitments. The main
environmental issues are efficient utilisation of energy
and water resources and the efficient handling of
waste materials.
SKYCITY is aware that its business has the potential to
create issues for some customers in terms of negative
social impacts such as problem gambling. The SKYCITY
Host Responsibility Policy has been developed to ensure
a consistent responsible host culture amongst all SKYCITY
staff at all properties.
The objectives of the SKYCITY Host Responsibility Policy
are outlined earlier in this Annual Report. The objectives
of the policy include ensuring that each SKYCITY site:
• minimises the potential harm of gaming by:
–
–
–
–
providing information to customers and
concerned family members on problem gambling
symptoms, self-detection and self-referral for help
implementing Group-wide processes that support
customers seeking to cease gaming or moderate
their behaviour (exclusion) and to take positive
action against those who breach these processes
consulting with problem gambling counselling
and support organisations
promoting community awareness and education
initiatives on moderating gaming activities
as appropriate and the services available for
individuals seeking to control their behaviour.
• promotes the need for management and staff to:
– be alert for excessive gaming activity
–
be alert for under-age gaming and alcohol
consumption
– enforce a standard of dress and behaviour
–
–
–
–
enforce non-smoking requirements (as applicable
in New Zealand and South Australia)
promote the responsible consumption of alcohol
ensure responsible marketing, advertising,
promotion and external signage relating to
gaming activity, and
develop staff competence and commitment
towards good host responsibility, through the
provision of ongoing staff training.
4 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
c o r p o r at e g o V e r n a n c e
COMPlIANCE
The NZX and ASX listing Rules require listed companies
to disclose the extent to which they have followed the
NZX Corporate Governance Best Practice Code and
the ASX Corporate Governance Council’s Principles
of Good Corporate Governance and Best Practice
Recommendations.
NZX Best Practice Code
SKYCITY confirms that it has complied with the NZX
Corporate Governance Best Practice Code during the
2005/06 year.
•
•
ASX Principles and Best Practice
Recommendations
SKYCITY confirms that it has complied with the ASX
Corporate Governance Council’s Principles and Best
Practice Recommendations, except as follows:
•
The company does not disclose the remuneration of
its five highest-paid executives. This is an Australian
Corporations Act requirement that is included in
the ASX Corporate Governance Principles and Best
Practice Recommendations. SKYCITY makes the
remuneration disclosures required of a New Zealand
company under the New Zealand Companies Act
1993 and considers that such disclosure is appropriate
in the New Zealand context.
The company does not make available to external
parties certain internal policies and procedures. SKYCITY
believes that the board charter and the comprehensive
references to governance in this Annual Report and
on the company’s website provide good disclosure of
the company’s internal processes and mechanisms and
that the underlying intention of the ASX Corporate
Governance Council’s recommendations on reporting of
internal mechanisms have been met.
Shareholders have not approved extensions of the
SKYCITY senior executive options/rights plans. The
original SKYCITY executive share option plan was
approved by shareholders at the 1999 annual meeting
of the company and was subsequently extended by
the board in August 2002. The major difference in the
2002 renewal was that the period prior to exercise of
options was extended from one year to three years.
The Executive Share Rights Plan 2005 (which replaces
the Executive Share Option Plan 2002) was approved
by the board in December 2004 and 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 that will be issued will be
significantly reduced. The Executive Share Rights Plan
continues to impose a three year restriction before
benefits under the Plan can be realised by participants.
5 0 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
c o r p o r at e g o V e r n a n c e
earnIngs and
fIve-year trend
statements
5 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
summary
earnIngs statements
s k y c I t y e n t e r ta I n m e n t g r o u p l I m I t e d
YEARS ENDED 30 JuNE
skycity auckland
Gaming revenue
Non-gaming revenue
Total revenue
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Earnings before interest and tax
skycity Hamilton
Gaming revenue
Non-gaming revenue
Total revenue
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Earnings before interest and tax
otHer neW Zealand
Gaming revenue
Non-gaming revenue
Total revenue
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Earnings before interest and tax
5 2 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
2006
$000
2005
$000
MOvEMENT
%
334,761
318,864
+5.0%
92,775
77,190
+20.2%
427,536
396,054
194,381
193,290
+7.9%
+0.6%
(39,747)
(34,067)
+16.7%
154,634
159,223
-2.9%
29,749
5,160
34,909
17,368
(4,318)
13,050
4,909
44,022
48,931
14,405
27,276
3,292
30,568
15,100
+9.1%
+56.7%
+14.2%
+15.0%
(4,246)
+1.7%
10,854
+20.2%
6,717
-26.9%
45,731
52,448
19,435
-3.7%
-6.7%
-25.9%
+8.9%
-32.5%
(3,365)
(3,090)
11,040
16,345
YEARS ENDED 30 JuNE
skycity adelaide (A$)
Gaming revenue
Non-gaming revenue
Total revenue
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Earnings before interest and tax
skycity darWin (A$)
Gaming revenue
Non-gaming revenue
Total revenue
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation expense
Earnings before interest and tax
2006
$000
2005
$000
MOvEMENT
%
114,368
16,787
96,893
11,180
131,155
108,073
27,335
17,794
+18.0%
+50.2%
+21.4%
+53.6%
(10,215)
(9,039)
+13.0%
17,120
8,755
+95.5%
72,161
16,817
88,978
33,650
(5,628)
28,022
62,771
13,531
76,302
29,750
+15.0%
+24.3%
+16.6%
+13.1%
(7,116)
-20.9%
22,634
+23.8%
The summary earnings before income and tax statements by location have been prepared to show the key features of the operating
performance achieved by each major business unit within the Group. This presentation differs from the financial statements in that interest
received and gains on financial transactions which relate to the company’s debt funding arrangements have been included in funding costs.
In the financial statements, interest received and some foreign exchange gains/losses are included in other income. Funding costs and tax are
included in the consolidated income statements on page 54 of this annual report.
SKYCITY Auckland includes corporate costs.
FY05 has been restated to comply with NZ IFRS.
5 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
fIve-year
trend statements
s k y c I t y e n t e r ta I n m e n t g r o u p l I m I t e d
consolidated income statements
YEARS ENDED 30 JuNE
Revenue
Other income/revenue
total revenue
Operating expenses
earnings before interest, tax, depreciation
and amortisation
Depreciation and amortisation expense
earnings before interest and tax
Funding costs
profit before income tax
Income tax expense
(Profit)/loss attributable to minority interests
net profit after tax and before
non-recurring items
Non-recurring items
net profit after tax
Non-recurring items relate to the following:
2006
$000
752,369
5,493
757,862
2005
$000
2004
$000
2003
$000
2002
$000
669,928
7,732
590,479
280
556,493
2,813
677,660
590,759
559,306
510,243
758
511,001
(463,314)
(398,910)
(334,492)
(310,395)
(295,480)
294,548
278,750
256,267
248,911
215,521
(65,016)
229,532
(77,194)
152,338
(32,590)
381
120,129
–
120,129
(58,783)
(47,677)
(46,032)
(42,039)
219,967
208,590
202,879
173,482
(74,364)
(45,165)
(44,259)
(43,409)
145,603
163,425
158,620
130,073
(38,078)
(1,111)
(40,400)
(1,899)
(51,117)
(286)
(44,286)
10,518
106,414
–
121,126
(20,904)
107,217
–
106,414
100,222
107,217
96,305
(39,152)
57,153
– 2002 relates to the write-off of the Force investment in Argentina and SKYCITY goodwill on consolidation of Force Corporation limited and
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 was $27.9 million.
– 2004 relates to the write-off of the company’s investment in Canbet limited.
The above income statements have been prepared to show the key features of the operating performance achieved. This presentation
differs from the financial statements in that interest received and gains on financial transactions which relate to the company’s debt funding
arrangements have been included in funding costs. In the financial statements, interest received and some foreign exchange gains/losses are
included in other income. Other than this difference the five-year summary income statement is based on NZ IFRS (2005 and 2006) and on
NZ GAAP (2002 to 2004).
5 4 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
consolidated balance sHeets
AS AT 30 JuNE
assets
current assets
Cash and bank balances
Inventories
Receivables and prepayments
Derivative financial instruments
Assets classified as held for sale
total current assets
non-current assets
Property, plant and equipment
Investment properties
Other investments (including associates)
Intangible assets
Available for sale financial assets
Tax receivables
Deferred tax assets
Derivative financial instruments
Other non-current assets
total non-current assets
total assets
liabilities
current liabilities
Payables
Interest-bearing liabilities
Derivative financial instruments
total current liabilities
non-current liabilities
Interest-bearing liabilities
Subordinated debt – capital notes
Subordinated debt – SKYCITY ACES
Deferred tax liabilities
Derivative financial instruments
Convertible notes
Other term liabilities
total non-current liabilities
total liabilities
net assets
eQuity
Share capital
Reserves
Retained profits
shareholders’ equity
Minority interests
total equity
2006
$000
2005
$000
2004
$000
2003
$000
2002
$000
74,098
5,241
30,803
1,477
52,400
62,849
5,382
37,158
–
–
53,272
3,017
53,106
–
–
164,019
105,389
109,395
935,123
8,593
78,304
426,011
2,622
47,438
26,667
37,055
–
917,967
52,500
79,820
377,016
–
12,905
13,675
–
–
750,267
–
78,280
212,373
–
9,999
–
–
14,645
1,561,813
1,453,883
1,065,564
1,725,832
1,559,272
1,174,959
100,776
–
25
100,801
950,904
123,720
177,956
60,596
3,072
–
–
97,005
100,758
–
197,763
956,795
121,510
–
45,438
–
–
–
1,316,248
1,123,743
1,417,049
1,321,506
93,619
101,000
–
194,619
579,967
149,644
–
–
–
8,910
27,216
765,737
960,356
57,264
2,898
6,780
–
–
66,942
636,990
–
21,586
207,844
–
315
–
–
3,151
869,886
936,828
64,836
1,000
–
65,836
437,113
149,266
–
–
–
13,365
24,683
624,427
690,263
48,456
3,066
19,970
–
–
71,492
596,037
–
10,051
223,389
–
–
–
–
2,250
831,727
903,219
61,140
1,372
–
62,512
405,825
148,888
–
–
–
9,315
20,811
584,839
647,351
308,783
237,766
214,603
246,565
255,868
281,735
(8,171)
32,756
306,320
2,463
226,726
(5,159)
13,355
234,922
2,844
225,871
(7,510)
(7,274)
211,087
3,516
246,518
1,932
(7,492)
240,958
5,607
232,180
(286)
18,653
250,547
5,321
308,783
237,766
214,603
246,565
255,868
The above balance sheet is based on NZ IFRS (2005 and 2006) and on previous NZ GAAP (2002 to 2004).
5 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
fIve-year
trend statements ( c o n t I n u e d )
s k y c I t y e n t e r ta I n m e n t g r o u p l I m I t e d
financial ratios
EBITDA : Total Revenue
Profit After Tax : Total Revenue
Total Revenue : Total Assets
Return on Total Assets
Earnings Per Share1
Dividends / Distributions Paid2
Net Tangible Assets Per Share1
Interest Cover
2006
$000
38.9%
15.9%
43.9%
7.0%
28.5cps
26.0cps
$(0.28)
3.8x
2005
$000
41.1%
15.7%
43.5%
6.8%
25.5cps
24.0cps
$(0.33)
3.7x
2004
$000
43.4%
17.0%
50.3%
8.5%
24.0cps
26.5cps
$0.01
5.7x
2003
$000
44.5%
19.2%
59.7%
11.4%
25.5cps
33.5cps
$0.09
5.6x
2002
$000
42.2%
11.2%
56.6%
6.3%
14.0cps
19.0cps
$0.08
5.0x
(1) Based on weighted average number of shares on issue. Adjusted for 1 : 1 share splits in November 2001 and November 2003.
(2) The dividend paid in the 2003 year of 33.5cps included a special/additional dividend of 10.0cps.
5 6 I s k y c i t y a n n u a l r e p o r t 2 0 0 6
fInancIal
sTaTeMenTs 2006
Auditor’s Report
Income Statements
Balance Sheets
Statements of Changes in Equity
Cash Flow Statements
Notes to the Financial Statements
58
59
60
61
62
63
5 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
audITor’s
reporT
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
totheshareholdersofskycityentertainmentGrouplimited
We have audited the financial statements on pages 59 to 111. The financial statements provide information about the past
financial performance and cash flows of the Company and Group for the year ended 30 June 2006 and their financial position as
at that date. This information is stated in accordance with the accounting policies set out on pages 63 to 69.
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 2006 and their financial performance and cash flows
for the year ended on that date.
auditor’sresponsibilities
We are responsible for expressing an independent opinion on the financial statements presented by the directors and reporting
our opinion to you.
basisofopinion
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.
unqualifiedopinion
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 59 to 111:
(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 2006 and their financial
performance and cash flows for the year ended on that date.
Our audit was completed on 21 August 2006 and our unqualified opinion is expressed as at that date.
Chartered Accountants
Auckland
5 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
IncoMe
sTaTeMenTs
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
consolidated
parent
FOR ThE yEAR ENdEd 30 JUNE 2006
NOTES
2006
$000
2005
$000
2006
$000
2005
$000
revenue
Other income
Share of net profits of associates
Employee benefits expense
depreciation and amortisation expense
Other expenses
directors’ fees
Finance costs
profitbeforeincometax
Income tax expense
profitbeforeminorityinterest
(Profit)/loss attributable to minority interest
4
5
17
6
6
8
752,369
7,891
4,316
(225,049)
(65,016)
(237,623)
(585)
(83,965)
152,338
(32,590)
669,928
13,055
26
(186,753)
(58,783)
(211,179)
(978)
(79,713)
145,603
(38,078)
119,748
107,525
381
(1,111)
–
109,353
–
(15,941)
(157)
(10,816)
(585)
(9,983)
71,871
–
71,871
–
–
138,625
–
(11,894)
(14)
(5,413)
(966)
(13,445)
106,893
–
106,893
–
profitattributabletoshareholdersofthecompany
120,129
106,414
71,871
106,893
earningspershareforprofitattributableto
theshareholdersofthecompany
Basic earnings per share (cents)
diluted earnings per share (cents)
9
9
28.5
26.9
25.5
25.2
17.1
16.1
25.6
25.3
The above income statements should be read in conjunction with the accompanying notes.
5 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
balance
sheeTs
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
consolidated
parent
AS AT 30 JUNE 2006
NOTES
2005
$000
2006
$000
2005
$000
assets
currentassets
Cash and bank balances
Receivables and prepayments
Inventories
derivative financial instruments
Assets classified as held for sale
Total current assets
non-currentassets
Property, plant and equipment
Investment properties
Investment in subsidiaries
Intangible assets
Available for sale financial assets
Investments in associates
Other investments
Tax receivables
deferred tax assets
derivative financial instruments
Total non-current assets
totalassets
liabilities
currentliabilities
Payables
Interest-bearing liabilities
derivative financial instruments
Total current liabilities
non-currentliabilities
Interest-bearing liabilities
Subordinated debt – capital notes
Subordinated debt – SKyCITy ACES
deferred tax liabilities
derivative financial instruments
Total non-current liabilities
totalliabilities
netassets
equity
Share capital
Reserves
Retained profits
Shareholders’ equity
Minority interest
totalequity
10
11
12
13
14
15
16
17
18
24
11
19
20
11
21
22
23
25
11
2006
$000
74,098
30,803
5,241
1,477
52,400
62,849
37,158
5,382
–
–
164,019
105,389
935,123
8,593
–
426,011
2,622
78,304
–
47,438
26,667
37,055
917,967
52,500
–
377,016
–
281
79,539
12,905
13,675
–
1,561,813
1,453,883
1,725,832
1,559,272
100,776
–
25
100,801
950,904
123,720
177,956
60,596
3,072
97,005
100,758
–
197,763
956,795
121,510
–
45,438
–
1,316,248
1,123,743
1,417,049
1,321,506
308,783
237,766
2
34,166
–
–
–
34,168
1,961
–
724,949
147
–
–
–
–
–
–
727,057
761,225
416,952
–
–
416,952
–
123,720
–
–
–
123,720
540,672
220,553
3
2,924
–
–
–
2,927
788
–
598,950
–
–
–
–
–
–
–
599,738
602,665
287,472
–
–
287,472
–
121,510
–
–
–
121,510
408,982
193,683
27
28(a)
28(b)
29
281,735
(8,171)
32,756
306,320
2,463
308,783
226,726
(5,159)
13,355
281,735
4,948
(66,130)
226,726
3,270
(36,313)
234,922
220,553
193,683
2,844
–
–
237,766
220,553
193,683
The above balance sheets should be read in conjunction with the accompanying notes.
6 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
sTaTeMenTs of
changes In equITy
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
consolidated
parent
FOR ThE yEAR ENdEd 30 JUNE 2006
NOTES
2006
$000
2005
$000
2006
$000
2005
$000
totalequityatthebeginningoftheyear
Restatement on adoption of NZ IAS 39
237,766
(4,073)
256,726
–
193,683
–
restatedtotalequityatthebeginningoftheyear
233,693
256,726
193,683
Available for sale financial assets
Movement in cash flow hedge reserve
Exchange differences on translation of foreign operations
28
28
28
netincomerecogniseddirectlyinequity
profitfortheyear
totalrecognisedincomeandexpensefortheyear
Exercise of share options
Buy back of shares
Share options/rights issued for employee services
Employee share entitlements issued
Shares issued under dividend reinvestment plan
Shares issued under profit distribution plan
distributions to owners
Movement in employee share entitlement reserve
Change in minority interest
Acquisition of minority interest
Amalgamations
27
27
30
28
29
(69)
(22,161)
21,552
(678)
120,129
119,451
10,009
(14,894)
874
2,139
6,431
50,450
(100,667)
1,678
(381)
–
–
–
–
(8,429)
(8,429)
106,414
97,985
4,685
(13,754)
569
2,869
6,106
–
(114,658)
(2,090)
1,111
(1,783)
–
–
–
–
–
71,871
71,871
10,009
(14,894)
874
2,139
6,431
50,450
(100,667)
1,678
–
–
(1,021)
203,063
–
203,063
–
–
–
–
106,893
106,893
4,685
(13,754)
569
2,869
6,106
–
(114,658)
(2,090)
–
–
–
totalequityattheendoftheyear
308,783
237,766
220,553
193,683
(44,361)
(116,945)
(45,001)
(116,273)
The above statements of changes in equity should be read in conjunction with the accompanying notes.
6 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
cash flow
sTaTeMenTs
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
consolidated
parent
FOR ThE yEAR ENdEd 30 JUNE 2006
NOTES
2006
$000
2005
$000
2006
$000
2005
$000
cashflowsfromoperatingactivities
Receipts from customers
Payments to suppliers and employees
dividends received
Interest received
Other taxes paid
Income taxes paid
netcashflowsfromoperatingactivities
cashflowsfrominvestingactivities
Purchase of business, net of cash acquired
Purchase of property, plant and equipment
Payments for investment property
Payments for intangible assets
dividends from subsidiaries
netcashflowsfrominvestingactivities
cashflowsfromfinancingactivities
Exercise of share options
Proceeds from borrowings
Cash flows associated with closed derivatives
Buy back of shares
Repayment of borrowings
Advances from subsidiaries
dividends paid to company shareholders
Interest paid
39
34
758,729
(418,559)
340,170
3,444
3,583
(50,884)
(45,538)
667,845
(347,654)
320,191
5,624
3,571
(35,898)
(33,799)
250,775
259,689
(247,910)
(146,159)
–
–
–
–
(21,166)
(21,166)
–
971
–
–
(20,195)
–
(1,452)
–
–
106,251
–
(13,509)
(13,509)
3,467
2,399
–
–
(7,643)
–
(557)
–
–
130,000
(394,069)
104,799
129,443
4,685
665,850
–
(13,754)
(317,398)
–
(108,552)
(86,815)
10,009
2,210
–
(14,890)
–
(29,111)
(43,790)
(9,033)
4,685
–
–
(13,754)
(28,134)
37,400
(108,552)
(13,444)
–
(57,851)
(8,593)
(14,527)
–
(80,971)
10,009
157,550
8,098
(14,890)
(182,754)
–
(43,790)
(92,773)
netcashflowsfromfinancingactivities
(158,550)
144,016
(84,605)
(121,799)
netincrease/(decrease)incashandcashequivalents
Cash and bank balances at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
cashandbankbalancesattheendoftheyear
11,254
62,849
(5)
74,098
9,636
53,272
(59)
62,849
(1)
3
–
2
1
2
–
3
The above cash flow statements should be read in conjunction with the accompanying notes.
6 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
noTes To The
fInancIal sTaTeMenTs
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
1.Generalinformation
SKyCITy Entertainment Group Limited (SKyCITy or the
company and its subsidiaries or the Group) operates in the
entertainment, leisure and recreation, and tourism sectors.
The Group has operations in New Zealand, Australia and Fiji.
The company is a limited liability company incorporated and
domiciled in New Zealand. The address of its registered office
is Federal house, 86 Federal Street, Auckland. The company
has its primary listing on the New Zealand stock exchange and
is also listed on the Australian stock exchange.
These consolidated financial statements have been approved
for issue by the board of directors on 21 August 2006.
2.summaryofsiGnificantaccountinG
policies
These general purpose financial statements for the year ended
30 June 2006 have been prepared in accordance with New
Zealand generally accepted accounting practice (NZ GAAP).
They comply with New Zealand equivalents to International
Financial Reporting Standards (NZ IFRS), and other applicable
New Zealand Financial Reporting Standards.
(a)basisofpreparation
The principal accounting policies adopted in the preparation
of the financial report are set out below. These policies have
been consistently applied to all the periods presented, unless
otherwise stated.
Compliance with IFRS
The separate and consolidated financial statements of
SKyCITy also comply with International Financial Reporting
Standards (IFRS).
Entities Reporting
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of the Group as at 30 June
2006 and the results of all subsidiaries, joint ventures and
associates for the year then ended. SKyCITy Entertainment
Group Limited and its subsidiaries together are referred to in
these financial statements as the Group.
The financial statements of the ‘Parent’ are for the company as
a separate legal entity.
The Parent company and the Group are designated as profit-
oriented entities for financial reporting purposes.
Statutory Base
SKyCITy 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.
Application of NZ IFRS 1 First-time Adoption of New Zealand
Equivalents to International Financial Reporting Standards
These financial statements are the first Group annual financial
statements to be prepared in accordance with NZ IFRS. NZ
IFRS 1 First-time Adoption of New Zealand Equivalents to
International Financial Reporting Standards has been applied
in preparing these financial statements.
Financial statements of the Group until 30 June 2005
were prepared in accordance with previous New Zealand
Financial Reporting Standards (NZ FRS). NZ FRS differ in
certain respects from NZ IFRS. When preparing the financial
statements, the company has amended certain accounting,
valuation and consolidation methods applied in the NZ
FRS financial statements to comply with NZ IFRS. With the
exception of financial instruments, the comparative figures in
respect of 2005 were restated to reflect these adjustments.
The Group has taken the exemption available under NZ IFRS 1
only to apply NZ IAS 32 and NZ IAS 39 from 1 July 2005.
Reconciliations and descriptions of the effect of transition from
previous NZ FRS to NZ IFRS on the Group’s equity and net
income are given in note 41.
Historical Cost Convention
These financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
available for sale financial assets, financial assets and liabilities
(including derivative instruments) at fair value through profit or
loss and investment property.
Critical Accounting Estimates
The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires the
company to exercise its judgement in the process of applying
the Group’s accounting policies.
(b)principlesofconsolidation
(i) Subsidiaries
Subsidiaries are all those entities (including special purpose
entities) over which the company has the power to govern the
financial and operating policies, generally accompanying a
shareholding of more than one half of the voting rights.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated
from the date that control ceases.
6 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
The purchase method of accounting is used to account for
the acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed
at the date of exchange, plus costs directly attributable to
the acquisition. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess
of the cost of acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is recorded as
goodwill. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognised directly in the Income Statement.
Inter-company transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed, where
necessary, to ensure consistency with the policies adopted by
the company.
Minority interests in the results and equity of subsidiaries are
shown separately in the consolidated Income Statement and
Balance Sheet respectively.
(ii) Associates
Associates are all entities over which the Group has significant
influence but not control, generally evidenced by holdings
of between 20% and 50% of the voting rights. Investments
in associates are accounted for in the parent entity’s financial
statements using the cost method, and in the consolidated
financial statements using the equity method of accounting,
after initially being recognised at cost. The Group’s investment
in associates includes goodwill (net of any accumulated
impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or
losses is recognised in the Income Statement, and its share
of post-acquisition movements in reserves is recognised in
Reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment.
dividends received from associates are recognised in the
parent entity’s income statement, while in the consolidated
financial statements they reduce the carrying amount of the
investment.
When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on
behalf of the associate.
6 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group’s interest
in the associates. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the
asset transferred. Accounting policies of associates have been
changed where necessary to ensure consistency with the
policies adopted by the Group.
(iii) Joint Ventures
The proportionate interests in the assets, liabilities and expenses
of a jointly controlled operation have been incorporated in the
financial statements under the appropriate headings.
(c)segmentreporting
A geographical segment is engaged in providing products or
services within a particular economic environment and may
be subject to risks and returns that are different from those
of segments operating in other economic environments.
A business segment is a group of assets and operations
engaged in providing products or services that may be
subject to risks and returns that are different to those of other
business segments. SKyCITy has determined that its primary
segments are geographical and its secondary are business
segments.
(d)foreigncurrencytranslation
(i) Functional and Presentation Currency
Items included in the financial statements of each of the
company’s operations are measured using the currency that
best reflects the economic substance of the underlying events
and circumstances relevant to that operation (‘functional
currency’). The consolidated and parent financial statements
are presented in New Zealand dollars, which is the Group’s
functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and from
the translation at year end exchange rates of monetary
assets and liabilities denominated in foreign currencies are
recognised in the Income Statement, except when deferred
in equity as qualifying cash flow hedges and qualifying net
investment hedges.
Translation differences on non-monetary items, such as
equities held at fair value through profit or loss, are reported
as part of the fair value gain or loss. Translation differences
on non-monetary items, such as equities classified as available
for sale financial assets, are included in the fair value reserve
in equity.
(iii) Foreign Operations
The results and financial position of foreign entities (none of
which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
•
•
•
assets and liabilities for each Balance Sheet presented
are translated at the closing rate at the date of that
balance sheet;
income and expenses for each Income Statement are
translated at average exchange rates; and
all resulting exchange differences are recognised as a
separate component of equity.
Exchange differences arising from the translation of any
net investment in foreign entities, and of borrowings and
other currency instruments designated as hedges of such
investments, are taken to shareholders’ equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
(e)revenuerecognition
Revenue is recognised as follows:
(i) Operating Revenue
Operating revenues include casino, hotel, 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.
(ii) Interest Income
Interest income is recognised on a time-proportion basis using
the effective interest method.
(iii) Dividend Income
dividend income is recognised when the right to receive
payment is established.
(f)incometax
The income tax expense for the period is the tax payable on
the current period’s taxable income, based on the income tax
rate for each jurisdiction. This is then adjusted by changes in
deferred tax assets and liabilities attributable to temporary
differences between the tax bases of assets and liabilities
and their carrying amounts in the financial statements, and
changes in unused tax losses.
deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to apply when
the assets are recovered or liabilities are settled, based on
those tax rates which are enacted or substantively enacted
for each jurisdiction. The relevant tax rates are applied to the
cumulative amounts of deductible and taxable temporary
differences to measure the deferred tax asset or liability.
An exception is made for certain temporary differences
arising from the initial recognition of an asset or a liability.
No deferred tax asset or liability is recognised in relation to
these temporary differences if they arose in a transaction,
other than a business combination, that at the time of the
transaction did not affect either accounting profit or taxable
profit or loss.
deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and
tax bases of investments in foreign operations where the
company is able to control the timing of the reversal of the
temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly
in equity.
(g)leases
(i) The Group is the Lessee
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases (net
of any incentives received from the lessor) are charged to the
Income Statement on a straight-line basis over the period of
the lease.
(ii) The Group is the Lessor
Assets leased to third parties under operating leases are
included in property, plant and equipment in the Balance
Sheet. They are depreciated over their expected useful lives
on a basis consistent with similar owned property, plant
and equipment. Rental income (net of any incentives given
to lessees) is recognised on a straight-line basis over the
lease term.
6 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
(h)impairmentofassets
Intangible assets that have an indefinite useful life are
not subject to amortisation and are tested annually for
impairment. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows
(cash generating units).
(i)cashandbankbalances
Cash and bank balances includes cash on hand, deposits
held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in
value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the Balance Sheet.
(j)tradereceivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
doubtful debts.
Collectability of trade receivables is reviewed on an ongoing
basis. debts which are known to be uncollectable are written
off. A provision for doubtful debts is established when there is
objective evidence that the Group will not be able to collect
all amounts due according to the original terms of receivables.
(k)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.
(l)investmentsandotherfinancialassets
From 1 July 2005
The Group classifies its investments in the following
categories: financial assets at fair value through profit or loss,
loans and receivables, held to maturity investments, and
available for sale financial assets. The classification depends
on the purpose for which the investments were acquired. The
company determines the classification of its investments at
initial recognition and re-evaluates this designation at each
reporting date.
(i) Financial Assets at Fair Value through Profit or Loss
This category has two sub-categories: financial assets held for
trading and those designated at fair value through profit or
loss on initial recognition. A financial asset is classified in this
category if acquired principally for the purpose of selling in
the short term or if so designated by the company. The policy
of the company is to designate a financial asset at fair value
through profit and loss if there exists the possibility it will be
sold in the short term and the asset is subject to frequent
changes in fair value. derivatives are categorised as held for
trading unless they are designated as hedges. Assets in this
category are classified as current assets if they are held either
for trading or are expected to be realised within 12 months of
the Balance Sheet date.
(ii) Loans and Receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an
active market. They arise when the Group provides money,
goods or services directly to a debtor with no intention of
selling the receivable. They are included in current assets,
except for those with maturities greater than 12 months after
the balance sheet date which are classified as non-current
assets. Loans and receivables are included in receivables in
the Balance Sheet.
(iii) Held to maturity Investments
held to maturity investments are non-derivative financial
assets with fixed or determinable payments and fixed
maturities that the Group has the positive intention and ability
to hold to maturity.
(iv) Available for sale Financial Assets
Available for sale financial assets, comprising principally
marketable equity securities, are non-derivative assets that are
either designated in this category or not classified in any of
the other categories. They are included in non-current assets
unless the company intends to dispose of the investment
within 12 months of the balance sheet date.
Available for sale financial assets and financial assets at fair
value through profit and loss are carried at fair value. Loans
and receivables and held to maturity investments are carried
at amortised cost using the effective interest method. Realised
and unrealised gains and losses arising from changes in the
fair value of the financial assets at fair value through profit
or loss category are included in the Income Statement in
the period in which they arise. Unrealised gains and losses
arising from changes in the fair value of non-monetary
securities classified as available for sale are recognised in
equity in the available for sale investments revaluation reserve.
6 6 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
When securities classified as available for sale are sold, the
accumulated fair value adjustments are included in the Income
Statement as gains and losses from investment securities.
The fair values of quoted investments are based on current
bid prices.
(m)derivatives
derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value. The method of recognising
the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Group designates certain
derivatives as either hedges of the fair value of recognised
assets or liabilities or a firm commitment (fair value hedges)
or hedges of exposures to variability in cash flows associated
with recognised assets or liabilities or highly probable forecast
transactions (cash flow hedges).
At the inception of the transaction, SKyCITy documents
the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy
for undertaking various hedge transactions. The Group also
documents its assessment, both at hedge inception and on
an ongoing basis, of whether the derivatives that are used in
hedging transactions have been and will continue to be highly
effective in offsetting changes in fair values or cash flows of
hedged items.
(i) Fair Value Hedge
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recognised in the Income
Statement, together with any changes in the fair value of
the hedged asset or liability that are attributable to the
hedged risk.
(ii) Cash Flow Hedge
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss
relating to the ineffective portion is recognised immediately in
the Income Statement.
Amounts accumulated in equity are recycled in the Income
Statement in the periods when the hedged item will affect
profit or loss (for instance when the forecast sale that is
hedged takes place). however, when the forecast transaction
that is hedged results in the recognition of a non-financial
asset (for example, inventory) or a non-financial liability, the
gains and losses previously deferred in equity are transferred
from equity and included in the measurement of the initial
cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated,
or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity
at that time remains in equity and is recognised in the
Income Statement when the forecast transaction is ultimately
recognised in the Income Statement. When a forecast
transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately
transferred to the Income Statement.
(iii) Derivatives that do not qualify for Hedge Accounting
Changes in the fair value of any derivative instrument that
does not qualify for hedge accounting are recognised
immediately in the Income Statement.
(n)property,plantandequipment
Property, plant and equipment (except for investment
properties refer to note 2(o)) is stated at historical cost less
depreciation. historical cost includes expenditure that is
directly attributable to the acquisition of the items. Cost
may also include transfers from equity of any gains/losses on
qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance are
charged to the Income Statement during the financial period
in which they are incurred.
Land is not depreciated. depreciation on other assets is
calculated using the straight-line method to allocate their
cost, net of their residual values, over their estimated useful
lives, as follows:
• Buildings
• Building fit-out
5-75 years
10 years
• Plant and equipment
2-75 years
• Vehicles
3 years
• Fixtures and fittings
3-20 years
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date. An
asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (note 2(h)).
Gains and losses on disposals are determined by comparing
proceeds with carrying amount.
6 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
(o)investmentproperty
Investment property is held for long-term rental yields and
is not occupied by the Group. Investment property is carried
at fair value, representing open-market value determined
annually by independent external valuers. Changes in fair
values are recorded in the Income Statement as part of
other income.
(p)intangibleassets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets of the acquired business/associate at the date of
acquisition. Goodwill on acquisitions of businesses is included
in intangible assets. Goodwill on acquisitions of associates is
included in investments in associates. Goodwill acquired in
business combinations is not amortised. Instead, goodwill is
tested for impairment annually, or more frequently if events or
changes in circumstances indicate that it might be impaired,
and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash generating units for the purpose
of impairment testing.
(ii) Casino Licences
The casino licences that have a finite useful life are carried
at cost less accumulated amortisation. Amortisation of these
casino licences is calculated on a straight-line basis so as to
expense the cost of the licences over their legal lives.
The casino licences that have been determined to have
an indefinite useful life for amortisation purposes are not
amortised but rather are reviewed for impairment on an
annual basis.
(iii) Acquired Software
Acquired computer software licences are capitalised on
the basis of the costs incurred to acquire and bring to use
the specific software. These costs are amortised over their
estimated useful lives (three to seven years).
(q)borrowings
Borrowings, including capital notes and Adjustable Coupon
Exchangeable Securities (SKyCITy ACES), are initially
recognised at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortised cost
unless part of an effective hedging relationship. Any difference
between the proceeds (net of transaction costs) and the
redemption amount is recognised in the Income Statement
over the period of the borrowings using the effective
interest method.
6 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
(r)borrowingcosts
Borrowing costs are expensed, except for costs incurred for
the construction of any qualifying asset which are capitalised
during the period of time that is required to complete and
prepare the asset for its intended use or sale.
(s)employeebenefits
(i) Wages, Salaries and Annual Leave
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within
12 months of the reporting date, are recognised in other
payables in respect of employees’ services up to the reporting
date and are measured at the amounts expected to be paid
when the liabilities are settled.
(ii) Share-based Payments
SKyCITy operates an equity settled, share based
compensation plan. The fair value of the employee services
received in exchange for the grant of the options or shares is
recognised as an expense. The total amount to be expensed
over the vesting period is determined by reference to the
fair value of the options or shares granted, excluding the
impact of any non-market vesting conditions (for example,
profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of
options or shares that are expected to become exercisable
or distributed. At each balance sheet date, the entity revises
its estimates of the number of options that are expected to
become exercisable and shares expected to be distributed.
It recognises the impact of the revision of original estimates,
if any, in the Income Statement, and a corresponding
adjustment to equity over the remaining vesting period.
The proceeds received net of any directly attributable
transaction costs are credited to share capital when the
options are exercised.
(t)sharecapital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
Where any Group company purchases the company’s equity
share capital, the consideration paid, including any directly
attributable incremental costs (net of income taxes), is
deducted from equity attributable to the company’s equity
holders until the shares are cancelled, reissued or disposed of.
In preparing these consolidated financial statements in
accordance with NZ IFRS 1, the Group has applied the
mandatory exceptions and certain of the optional exemptions
from full retrospective application of NZ IFRS.
The Group has elected to apply the following optional
exemptions from full retrospective application.
(a) Business Combinations Exemption
The Group has applied the business combinations exemption
in NZ IFRS 1. Business combinations that took place prior to
the 1 July 2004 transition date have not been restated.
(b) Fair Value as Deemed Cost Exemption
The Group has elected to measure certain items of property,
plant and equipment at fair value as at 1 July 2004 and use
that fair value as its deemed cost as at 1 July 2004.
(c) Cumulative Translation Differences Exemption
The Group has elected to set the cumulative translation to
zero at 1 July 2004. This exemption has been applied to all
subsidiaries in accordance with NZ IFRS 1.
(d) Exemption from Restatement of Comparatives for NZ IAS
32 and NZ IAS 39
The Group elected to apply this exemption. The Group
applies previous NZ FRS rules to derivatives, financial assets,
financial liabilities and to hedging relationships for the 2005
comparative information. The adjustments required for
differences between NZ FRS and NZ IAS 32 and NZ IAS 39 are
determined and recognised at 1 July 2005.
(e) Share-based Payment Transaction Exemption
The Group has elected to apply the share-based payment
exemption. The Group applied NZ IFRS 2 to those options
that have been granted since 7 November 2002.
The reconciliations in note 41 provide a quantification of the
effect of the transition to NZ IFRS.
Where such shares are subsequently sold or reissued, any
consideration received, net of any directly attributable
incremental transaction costs and the related income
tax effects, is included in equity attributable to the
company’s equity holders.
(u)dividends/distributions
Provision is made for the amount of any dividend/distribution
declared on or before the end of the financial year but not
distributed at balance date.
(v)earningspershare
(i) Basic Earnings per Share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the company by the weighted
average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares
issued during the year.
(ii) Diluted Earnings per Share
diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential
ordinary shares.
3.transitiontonZifrs
applicationofnZifrs1
These financial statements for the year ended 30 June 2006
are the first annual financial statements that comply with NZ
IFRS and IFRS. These financial statements have been prepared
as described in note 2(a). The Group has applied NZ IFRS 1 in
preparing these consolidated financial statements.
The company’s transition date is 1 July 2004 and the opening
NZ IFRS balance sheet is prepared as at that date. The
reporting date of these financial statements is 30 June 2006.
SKyCITy’s NZ IFRS adoption date is 1 July 2005. The company
has restated the 2005 comparative figures as set out in
these financial statements for compliance with NZ IFRS. This
information was released to the New Zealand and Australian
stock exchanges on 9 February 2006.
6 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
4.revenue
Gaming
Non-gaming
consolidated
parent
2006
$000
578,391
173,978
752,369
2005
$000
524,812
145,116
669,928
2006
$000
–
–
–
2005
$000
–
–
–
Non-gaming revenue includes revenues from hotels, cinemas, food and beverage, convention centre, car parking, property
rentals and Sky Tower.
5.otherincome
Fair value gains on financial assets at fair value
through profit or loss
Fair value adjustment to investment property (note 14)
Interest income
dividend income
Other income
dividends from wholly-owned entities
consolidated
parent
2006
$000
2005
$000
2006
$000
2005
$000
4,107
(166)
3,583
367
–
–
7,891
2,013
572
4,846
5,624
–
–
–
–
971
–
2,131
106,251
13,055
109,353
–
–
2,505
–
2,653
133,467
138,625
7 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
6.expenses
profitbeforeincometaxincludesthefollowing
specificexpenses:
Depreciation
Buildings
Plant and equipment
Other
Furniture and fittings
Motor vehicles
Total depreciation
Amortisation
Casino licences
Software
Rights and concessions
Total amortisation
Finance costs
Interest and finance charges paid/payable
Exchange gains on foreign currency borrowings
Total finance costs
Rental expense relating to operating leases
Lease payments
Total rental expense relating to operating leases
consolidated
parent
2006
$000
2005
$000
2006
$000
2005
$000
18,081
33,889
57
6,534
275
58,836
2,341
3,839
–
6,180
94,263
(10,298)
83,965
8,076
8,076
12,969
30,796
68
6,171
175
50,179
5,467
3,037
100
8,604
81,536
(1,823)
79,713
7,768
7,768
–
131
–
–
–
131
–
26
–
26
9,983
–
9,983
–
–
–
14
–
–
–
14
–
–
–
–
13,445
–
13,445
–
–
7 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
7.remunerationofauditors
during the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related
practices and non-related audit firms:
consolidated
parent
2006
$000
2005
$000
2006
$000
2005
$000
(a)assuranceservices
Audit services
PricewaterhouseCoopers
Compliance audit fees
Statutory audit fees
Other audit firms for the audit or review of financial
reports of subsidiaries
Total remuneration for audit services
Other assurance services provided by PricewaterhouseCoopers
Accounting advice and assistance
Financial due diligence
Systems assurance
IFRS accounting assistance
Tax compliance services
Total remuneration for other assurance services
36
619
55
710
242
382
68
73
223
988
15
560
38
613
96
333
–
130
305
864
Total remuneration for assurance services
1,698
1,477
(b)otherservices
PricewaterhouseCoopers
Taxation advisory services
Total other services
1,429
1,429
1,097
1,097
36
111
–
147
242
–
68
73
42
425
572
617
617
15
88
–
103
96
–
–
–
–
96
199
–
–
The Group employs PricewaterhouseCoopers on assignments additional to their statutory audit duties where
PricewaterhouseCoopers’ expertise and experience with the Group are important and auditor independence is not impaired.
These assignments are principally tax advice and due diligence reporting on acquisitions. In all other cases other external
advisers are used.
7 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
8.incometaxexpense
(a)incometaxexpense
Current tax
deferred tax
Under/(over) provided in prior years
Income tax expense
deferred income tax/(revenue) expense included in
income tax expense comprises:
(Increase)/decrease in deferred tax assets (note 24)
Increase in deferred tax liabilities (note 25)
(b)numericalreconciliationofincome
taxexpensetoprimafacietaxpayable
Profit from continuing operations before income tax expense
Tax at the New Zealand tax rate of 33% (2005: 33%)
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Inter-company eliminations
Acquisition of SKyCITy darwin holdings Pty Limited
Expenditure not deductible for tax
Share of net profit of associates
Additional depreciable value
Foreign exchange rate differences
Non-taxable income
Tax effect of imputation credits on taxable dividends
Exempt dividends received
Share of partnership expenditure
Other
difference in overseas tax rates
(Over)/under provision in prior years
Income tax expense
consolidated
parent
2006
$000
2005
$000
2006
$000
2005
$000
22,880
10,218
(508)
32,590
(5,744)
15,962
10,218
31,414
5,956
708
38,078
87
5,869
5,956
–
–
–
–
–
–
–
–
–
–
–
–
–
–
152,338
50,272
145,603
48,049
71,871
23,717
106,893
35,275
–
–
2,034
(1,424)
–
(8,781)
(58)
–
–
(3,639)
(754)
37,650
(4,651)
(409)
(5,060)
32,590
–
(1,476)
1,252
(9)
(203)
(440)
(1,128)
(1,503)
–
(3,595)
–
40,947
(3,577)
708
(2,869)
38,078
11,147
–
199
–
–
–
–
–
(35,063)
–
–
–
–
–
–
–
8,631
–
138
–
–
–
–
–
(44,044)
–
–
–
–
–
–
–
The weighted average applicable tax rate was 21.4% (2005: 26.2%). The decrease in tax rate from 2005 to 2006 was primarily
due to movements in the New Zealand dollar against the Australian dollar which resulted in tax deductible items but no
associated profit before tax impact.
7 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
9.earninGspershare
earningspershareforprofitattributableto
theshareholdersofthecompany
Basic earnings per share (cents)
diluted earnings per share (cents)
(a)reconciliationsofearningsusedincalculating
earningspershare
Basic earnings per share
Profit attributable to the ordinary equity holders of the
company used in calculating basic earnings per share
Diluted earnings per share
Profit attributable to the ordinary equity holders of the
company used in calculating basic earnings per share
Interest savings on capital notes
Interest savings on SKyCITy ACES
Tax on the above
Profit attributable to the ordinary equity holders of the
consolidated
parent
2006
$000
2005
$000
2006
$000
28.5
26.9
25.5
25.2
17.1
16.1
2005
$000
25.6
25.3
120,129
106,414
71,871
106,893
120,129
9,892
6,379
(5,369)
106,414
13,196
–
(4,355)
71,871
9,892
–
(3,264)
106,893
13,196
–
(4,355)
company used in calculating diluted earnings per share
131,031
115,255
78,499
115,734
(b)Weightedaveragenumberofsharesusedas
thedenominator
Weighted average number of ordinary shares used as
the denominator in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
SKyCITy ACES
Options/share rights
Capital notes
Weighted average number of ordinary shares and potential
ordinary shares used as the denominator in calculating
diluted earnings per share
(c) informationconcerningtheclassificationofsecurities
2006
number
2005
NUMBER
421,218,240
417,436,317
33,942,891
9,207,463
22,937,474
–
12,445,344
27,122,768
487,306,068
457,004,429
(i) SKYCITY ACES
SKyCITy ACES are considered to be potential ordinary shares and have been included in the determination of diluted earnings
per share from their date of issue. The SKyCITy ACES have not been included in the determination of basic earnings per share.
details relating to the SKyCITy ACES are set out in note 23.
(ii) Options/Share Rights
Options and rights granted to employees under the SKyCITy Executive Share Option and Rights Plans are considered to be
potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they
are dilutive. The options and rights have not been included in the determination of basic earnings per share. details relating to
the options and rights are set out in note 32.
(iii) Capital Notes
Capital notes are considered to be potential ordinary shares and have been included in the determination of diluted earnings
per share from their date of issue. The notes have not been included in the determination of basic earnings per share. details
relating to the notes are set out in note 22.
7 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
10.receivablesandprepayments
consolidated
parent
Trade receivables
Advance to Christchurch hotels Limited
Sundry receivables
Prepayments
Interest receivable
Amounts due from subsidiaries
11.derivativefinancialinstruments
currentassets
Interest rate swaps – cash flow hedges
Total current derivative financial instrument assets
non-currentassets
Interest rate swaps – cash flow hedges
Cross-currency interest rate swaps – cash flow hedges
Cross-currency interest rate swaps – fair value hedges
Total non-current derivative financial instrument assets
currentliabilities
Forward foreign currency contracts
Total current derivative financial instrument liabilities
non-currentliabilities
Interest rate swaps – cash flow hedges
Total non-current derivative financial instrument liabilities
2006
$000
6,330
16,422
5,933
2,118
–
–
30,803
2005
$000
5,801
16,584
10,889
2,609
1,275
–
37,158
2006
$000
–
–
92
170
–
33,904
34,166
2005
$000
–
–
2,662
156
106
–
2,924
fairvalue
notionalprincipal
2006
$000
2005
$000
2006
$000
2005
$000
1,477
1,477
2,089
33,071
1,895
37,055
25
25
3,072
3,072
–
–
–
–
–
–
–
–
–
–
120,000
120,000
313,236
365,028
21,592
699,856
12,195
12,195
264,958
264,958
–
–
–
–
–
–
–
–
–
–
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 of directors 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 on the following page.
7 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
11.derivativefinancialinstruments(continued)
currencyrisk
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 2006 (2005: nil).
The currency risk and interest rate risk in foreign currencies relates 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 set out in the Group treasury policy.
creditrisk
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 2006 is the fair value of the financial asset/liability. The Group and
parent company’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.
Concentration of credit exposure is managed within a Group policy approved by the directors.
interestraterisk
To ensure the Group’s cost of funds is reasonably predictable from year to year, it is the Group’s policy that floating rate debt
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 swap agreements.
Gains and losses on derivatives which are part of an effective cash flow hedging relationship are recognised in the cash flow
hedge reserve. The balance in the reserve is expected to be released to the Income Statement over the maturity profile of the
underlying debt as detailed in note 21.
Refer to note 21 for the Group’s exposure to interest rate risk.
transitiontonZias32andnZias39
SKyCITy has elected to take up the exemption available under NZ IFRS 1 to apply NZ IAS 32 and NZ IAS 39 from 1 July 2005.
Previous NZ GAAP has been applied in the comparative information on financial instruments within the scope of NZ IAS 32
and NZ IAS 39. Therefore the following derivatives are not recognised on the balance sheet in the comparatives. The notional
principal amounts outstanding at 30 June 2005 were $887,500,000 (fair value negative $8,764,032) interest rate swaps,
$248,200,000 (fair value positive $9,087,056) cross-currency interest rate swaps, and $81,900,000 (fair value positive $1,614,355)
forward foreign exchange contracts.
At the date of transition to these standards of 1 July 2005, an adjustment of a $4,073,000 decrease in net assets was recognised.
There was no impact on the parent entity.
7 6 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
12.assetsclassifiedasheldforsale
consolidated
parent
SKyCITy Metro Centre
2006
$000
52,400
2005
$000
–
2006
$000
–
2005
$000
–
during the year, SKyCITy announced its intention to sell the SKyCITy Metro Centre in Auckland. This building was previously
classified as an investment property.
13.property,plantandequipment
CONSOLIdATEd
at30June2004
Cost
Accumulated depreciation
LANd
$000
BUILdINGS
$000
PLANT
ANd
EqUIPMENT
$000
FIxTURES
ANd
FITTINGS
$000
MOTOR
VEhICLES
$000
CAPITAL
WORK IN
PROGRESS
$000
TOTAL
$000
152,190
–
412,947
(66,945)
201,787
(115,719)
58,936
(37,800)
358
(304)
128,680
–
954,898
(220,768)
Net book value
152,190
346,002
86,068
21,136
54
128,680
734,130
movementsintheyearended
30June2005
Opening net book value
Exchange differences
Additions
Transfers
depreciation charge
152,190
–
10,956
–
–
346,002
(15)
202,288
–
(12,969)
86,068
(49)
26,381
–
(30,796)
21,136
–
24,090
–
(6,171)
54
–
483
–
(175)
128,680
(16)
–
(30,102)
(68)
734,130
(80)
264,198
(30,102)
(50,179)
Closing net book value
163,146
535,306
81,604
39,055
362
98,494
917,967
at30June2005
Cost
Accumulated depreciation
163,146
–
627,829
(92,523)
225,981
(144,377)
82,044
(42,989)
811
(449)
98,494 1,198,305
(280,338)
–
Net book value
163,146
535,306
81,604
39,055
362
98,494
917,967
movementsintheyearended
30June2006
Opening net book value
Exchange differences
Additions
depreciation charge
Transfers
163,146
1,564
25,554
–
–
535,306
12,027
43,847
(18,081)
–
81,604
2,705
49,690
(33,889)
–
39,055
457
5,791
(6,534)
–
362
40
318
(275)
–
98,494
3,216
–
(57)
(69,217)
917,967
20,009
125,200
(58,836)
(69,217)
Closing net book value
190,264
573,099
100,110
38,769
445
32,436
935,123
at30June2006
Cost
Accumulated depreciation
190,264
–
685,812
(112,713)
279,694
(179,584)
88,823
(50,054)
1,207
(762)
32,436 1,278,236
(343,113)
–
Net book value
190,264
573,099
100,110
38,769
445
32,436
935,123
7 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
13.property,plantandequipment(continued)
PARENT
at30June2004
Cost
Accumulated depreciation
Net book value
movementsintheyearended30June2005
Opening net book value
Additions
disposals
depreciation charge
Closing net book value
at30June2005
Cost
Accumulated depreciation
Net book value
movementsintheyearended30June2006
Opening net book value
Additions
depreciation charge
Closing net book value
at30June2006
Cost
Accumulated depreciation
Net book value
PLANT
ANd
EqUIPMENT
$000
FIxTURES
ANd
FITTINGS
$000
CAPITAL
WORK IN
PROGRESS
$000
232
(107)
125
125
124
–
(13)
236
432
(196)
236
236
449
(131)
554
853
(299)
554
243
(123)
120
120
–
(79)
(1)
40
88
(48)
40
40
44
–
84
135
(51)
84
–
–
–
–
512
–
–
512
512
–
512
512
811
–
1,323
1,323
–
1,323
TOTAL
$000
475
(230)
245
245
636
(79)
(14)
788
1,032
(244)
788
788
1,304
(131)
1,961
2,311
(350)
1,961
Borrowing costs in relation to the funding of car park building purchases (2005: the SKyCITy Grand hotel, SKyCITy Auckland
Convention Centre, the gaming expansion and car park building purchases) have been capitalised to these projects, $1,223,659
(2005: $5,780,011). Total capitalised interest and facility fees included in the cost of land and buildings at 30 June 2006 is
$46,762,288 (2005: $45,538,629). Interest is capitalised based on the interest rate on the syndicated bank facility.
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.
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 the council’s interest as lessor of the
sub-soil areas.
The hamilton site is 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. 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.
7 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
14.investmentproperties
consolidated
parent
atfairvalue
Balance at the beginning of the year
Acquisitions
Capitalised subsequent expenditure
Net (loss)/gain from fair value adjustment
Transfer to assets held for sale
Balance at the end of the year
Rental income
direct operating expenses from property that
generated rental income
2006
$000
2005
$000
2006
$000
2005
$000
52,500
8,593
66
(166)
(52,400)
8,593
4,663
51,900
–
28
572
–
52,500
4,761
953
880
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The SKyCITy Metro Centre in Auckland was originally classified under NZ IFRS as an investment property. Investment properties
are not depreciated and are required to be fair valued each year. The SKyCITy Metro Centre was valued with effective dates of
1 July 2004, 30 June 2005 and 30 June 2006 by dTZ New Zealand Limited, which employs registered valuers and members of
the New Zealand Property Institute. The basis of valuation is fair value being the estimated amount for which an asset should
exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper
marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.
SKyCITy has announced its intention to sell the SKyCITy Metro Centre and this building has been transferred to assets held
for sale.
On 29 June 2006, the Group purchased 97-101 hobson Street in Auckland for $8,593,000 (including costs). This amount was
determined to be the fair value as at 30 June 2006.
7 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
15. intanGibleassets
CONSOLIdATEd
at30June2004
Cost
Accumulated depreciation
Net book amount
movementsintheyearended30June2005
Opening net book amount
Exchange differences
Additions
Acquisition of subsidiary
Amortisation charge
Transfer following 100% purchase of
SKyCITy hamilton
GOOdWILL
$000
CASINO
LICENCES
$000
COMPUTER
SOFTWARE
$000
RIGhTS ANd
CONCESSIONS
$000
24,555
–
24,555
24,555
–
–
129,100
–
195,519
(9,514)
186,005
186,005
(1,245)
–
38,580
(5,467)
16,906
(12,478)
4,428
4,428
–
4,097
–
(3,037)
2,250
(437)
1,813
1,813
–
–
–
(100)
TOTAL
$000
239,230
(22,429)
216,801
216,801
(1,245)
4,097
167,680
(8,604)
–
–
–
(1,713)
(1,713)
Closing net book amount
153,655
217,873
5,488
at30June2005
Cost
Accumulated amortisation
Net book amount
153,655
–
232,610
(14,737)
21,008
(15,520)
153,655
217,873
5,488
movementsintheyearended30June2006
Opening net book amount
Exchange differences
Additions
Amortisation charge
153,655
12,180
2,608
–
217,873
25,326
44
(2,341)
Closing net book amount
168,443
240,902
5,488
189
14,828
(3,839)
16,666
at30June2006
Cost
Accumulated amortisation
Net book amount
168,443
–
259,926
(19,024)
38,043
(21,377)
168,443
240,902
16,666
–
–
–
–
–
–
–
–
–
–
–
–
377,016
407,273
(30,257)
377,016
377,016
37,695
17,480
(6,180)
426,011
466,412
(40,401)
426,011
8 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
15.intanGibleassets(continued)
PARENT
yearended30June2006
Opening net book amount
Additions
Amortisation charge
Closing net book amount
at30June2006
Cost
Accumulated amortisation
Net book amount
COMPUTER
SOFTWARE
$000
TOTAL
$000
–
173
(26)
147
173
(26)
147
–
173
(26)
147
173
(26)
147
TOTAL
$000
168,443
38,798
207,241
153,655
153,655
(a)impairmenttestsforintangibleswithindefinitelives
Goodwill and licences with indefinite lives are allocated to the Group’s cash generating units (CGUs) identified below.
2006
Goodwill
Casino Licence
2005
Goodwill
REST OF
NEW ZEALANd
$000
SKyCITy
dARWIN
$000
52,919
–
52,919
50,311
50,311
115,524
38,798
154,322
103,344
103,344
The Group has reviewed the expected ongoing conditions associated with the SKyCITy darwin casino licence and has
determined that the licence should be accounted for as having an indefinite life with effect from 1 July 2005.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections
approved by directors covering a three year period. The growth rate does not exceed the long-term average growth rate for
the business in which the CGU operates. There is a significant surplus between the carrying values of indefinite life assets and
value in use calculation.
(b)keyassumptionsusedforvalueinusecalculations
GrossmarGin
GroWthrate
discountrate
cashGeneratinGunits
Rest of New Zealand
SKyCITy darwin
2006
%
49.4
47.4
2005
%
52.9
47.5
2006
%
3.0
3.0
2005
%
3.0
3.0
2006
%
8.6
8.6
2005
%
8.7
8.7
8 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
16.availableforsalefinancialassets
consolidated
parent
Balance at the beginning of the year
Adjustment on adoption of NZ IAS 32 and NZ IAS 39
Exchange differences
Revaluation surplus transfer to equity
Balance at the end of the year
Listed equity securities
Unlisted equity securities
2006
$000
–
2,578
113
(69)
2,622
1,600
1,022
2,622
2005
$000
2006
$000
2005
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
transitiontonZias32andnZias39
The Group has taken the exemption available under NZ IFRS 1 First-time Adoption of New Zealand Equivalents to International
Financial Reporting Standards to apply NZ IAS 32 Financial Instruments: Disclosure and Presentation and NZ IAS 39 Financial
Instruments: Recognition and Measurement from 1 July 2005. At the date of transition to these standards the Group reclassified
the investments in Christchurch hotels Limited and International All Sports Limited previously recognised as other investments.
17.investmentsinassociates
(a) carryingamounts
Information relating to associates is set out below.
nameofcompany
principal
activity
oWnership
interest
consolidated
parent
2006
%
2005
%
2006
$000
2005
$000
2006
$000
2005
$000
Unlisted
Vista Entertainment
Solutions Limited
Christchurch Casinos Limited
Village Cinemas SA Argentina
Ticket software
systems
Casino operator
Cinemas
25
41
–
25
41
25
254
78,050
–
78,304
281
–
–
281
–
–
–
–
–
–
–
–
Vista Entertainment Solutions Limited is incorporated in New Zealand and 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.
Christchurch Casinos Limited is incorporated in New Zealand and has a 31 March balance date. The directors are not aware of
any significant events or transactions since Christchurch Casinos Limited’s balance date.
8 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
17.investmentsinassociates(continued)
2006
$000
(b)movementsincarryingamounts
Balance at the beginning of the year
Share of profits after income tax
Christchurch Casinos Limited*
dividends received/receivable
Carrying amount at the end of the year (including goodwill $53,127,000 (2005: $53,127,000))
281
4,316
76,784
(3,077)
78,304
2005
$000
255
26
–
–
281
* With effect from 1 July 2005, SKyCITy Entertainment Group Limited has accounted for its investment in Christchurch Casinos Limited as an associate
(previously accounted for as an investment).
(c)summarisedfinancialinformationofsignificantassociates
GROUP’S ShARE OF
ASSETS
$000
LIABILITIES
$000
REVENUES
$000
PROFIT
$000
Christchurch Casinos Limited
16,774
1,712
19,803
4,316
18.otherinvestments
Christchurch Casinos Limited
Christchurch hotels Limited
International All Sports Limited
consolidated
parent
2006
$000
–
–
–
–
2005
$000
76,961
1,022
1,556
79,539
2006
$000
2005
$000
–
–
–
–
–
–
–
–
With effect from 1 July 2005, Christchurch Casinos Limited has been accounted for as an associate.
In accordance with NZ IAS 39, with effect from 1 July 2005 the investments in Christchurch hotels Limited and International All
Sports Limited have been accounted for as available for sale financial assets.
19.payables
Trade payables
Accrued expenses
Employee benefits
Amounts due to subsidiaries
consolidated
parent
2006
$000
11,995
58,295
30,486
–
100,776
2005
$000
24,797
49,079
23,129
–
97,005
2006
$000
2005
$000
–
3,061
–
413,891
416,952
105
1,387
–
285,980
287,472
8 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
20.currentinterest-bearinGliabilities
consolidated
parent
current
Bank loans
Subordinated debt – ANZ National Bank Limited
Total current interest-bearing borrowings
2006
$000
2005
$000
2006
$000
2005
$000
–
–
–
758
100,000
100,758
–
–
–
–
–
–
In June 2005, SKyCITy Cinemas Fiji Limited had a bank term loan facility of F$908,432 (NZ$758,000) secured by first mortgage
over the Fiji multiplex. This facility was repaid and cancelled in August 2005.
In June 2005, SKyCITy Entertainment Group Limited arranged a fully subordinated facility with ANZ National Bank Limited for
$100,000,000. This facility was fully repaid in November 2005.
21.non-currentinterest-bearinGliabilities
consolidated
parent
secured
Bank loans SKyCITy Leisure Group
unsecured
United States private placement
Syndicated bank facility
deferred funding expenses
Total unsecured non-current interest-bearing borrowings
Total non-current interest-bearing liabilities
skycityleisureGroup
2006
$000
2005
$000
2006
$000
2005
$000
52
52
640,408
314,007
(3,563)
950,852
950,904
565,670
396,001
(4,928)
956,743
956,795
–
–
–
–
–
–
–
–
–
–
–
–
At balance date, Village Rialto Cinemas Limited had a drawndown bank term loan facility of $210,000, SKyCITy share $52,500
(2005: $52,500) secured by registered mortgage debenture over Village Rialto Cinemas Limited; SKyCITy has a 25% interest in
Village Rialto Cinemas Limited. Village SKyCITy Cinemas Limited provides a guarantee for 50% of the outstanding facility.
unitedstatesprivateplacement
during the prior year, SKyCITy approached investors in the US private placement market with the intention of diversifying
funding sources and lengthening the borrowing profile of the Group’s debt. On 15 March 2005, SKyCITy borrowed
NZ$96,571,000, A$74,900,000 and US$274,500,000 with maturities between 2012 and 2020 from private investors (primarily
US based) on an unsecured basis.
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.
syndicatedbankfacility
At 30 June 2006, SKyCITy had in place a $500,000,000 (2005: $650,000,000) facility on an unsecured, negative pledge
basis maturing April 2009. The funding syndicate is comprised of ANZ National Bank Limited, Bank of New Zealand Limited
and Commonwealth Bank of Australia, New Zealand Branch. As at 30 June 2006, the undrawn amount was $186,000,000
(2005: $260,000,000).
8 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
21.non-currentinterest-bearinGliabilities(continued)
interestraterisk
The following table sets out the Group’s exposure to interest rate risk, including the contractual re-pricing dates and the
effective weighted average interest rate.
principal–interestratere-pricinG
2006
Bank
Borrowings
Capital notes
SKyCITy ACES
IRS/CCIRS*
Re-pricing gap
1 yEAR OR
LESS
$000
%
1-2
yEARS
$000
2-3
yEARS
$000
3-4
yEARS
$000
4-5
yEARS
$000
OVER 5
yEARS
$000
TOTAL
$000
7.25
7.65
8.00
5.75
–
42,624
(502,098)
–
(183,195)
191,576
–
–
–
–
(51,639)
–
–
–
–
(15,000)
–
–
(123,860)
–
(24,426)
(451,093)
(51,639)
(15,000)
(148,286)
–
–
–
–
–
–
–
(452,369)
–
–
(100,511)
42,624
(954,467)
(123,860)
(183,195)
–
(552,880) (1,218,898)
principal–interestratere-pricinG
1 yEAR OR
LESS
$000
%
1-2
yEARS
$000
2-3
yEARS
$000
3-4
yEARS
$000
4-5
yEARS
$000
OVER 5
yEARS
$000
TOTAL
$000
2005
Bank
Borrowings
Capital notes
ANZ National Bank Limited
IRS/CCIRS *
6.75
7.76
8.00
8.24
–
35,458
(396,810)
–
(100,000)
370,832
–
–
–
–
(136,397)
–
–
–
–
(47,794)
–
–
–
–
(131,863)
–
–
(121,687)
–
(40,000)
–
(565,670)
–
–
(14,778)
35,458
(962,480)
(121,687)
(100,000)
–
Re-pricing gap
(90,520)
(136,397)
(47,794)
(131,863)
(161,687)
(580,448) (1,148,709)
* Interest rate swaps and cross-currency interest rate swaps. Notional principal amounts.
For both 2006 and 2005 capital notes are the only interest-bearing debt within the parent entity. The parent entity is not party to
any derivatives.
fairvalues
The fair value of interest-bearing liabilities, capital notes and SKyCITy ACES is not materially different from the carrying values.
8 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
22.subordinateddebt–capitalnotes
consolidated
parent
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
2006
$000
121,688
–
2,172
123,860
178
(38)
140
2005
$000
2006
$000
2005
$000
150,000
(150,000)
121,688
121,688
–
2,172
150,000
(150,000)
121,688
121,688
123,860
121,688
356
(178)
178
178
(38)
140
356
(178)
178
Net capital notes at the end of the year
123,720
121,510
123,720
121,510
In May 2000, SKyCITy Entertainment Group Limited issued 150 million unsecured subordinated capital notes at an issue price of
$1.00 per note.
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.
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 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, 17,828,000 of the notes held as treasury stock were sold into the market. On 6 July 2005, a further
2,172,000 notes were sold. As at 30 June 2006, there were 150,000,000 (2005: 150,000,000) capital notes on issue, of
which 123,859,750 (2005: 121,687,750) are issued with 26,140,250 (2005: 28,312,250) held as treasury stock by SKyCITy
Entertainment Group Limited.
8 6 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
23.subordinateddebt–skycityaces
consolidated
parent
SKyCITy ACES
deferred expenses
2006
$000
2005
$000
2006
$000
2005
$000
183,195
(5,239)
177,956
–
–
–
–
–
–
–
–
–
In October 2005, SKyCITy Investments Australia Limited issued in Australia 1.5 million unsecured subordinated perpetual reset
exchangeable securities (SKyCITy ACES) at an issue price of A$100.00 per note. The SKyCITy ACES offer holders a fully franked
variable rate coupon until the first reset date of 15 december 2010. The coupon is reset quarterly at the Australian 90 day bank
bill rate plus 2.25%, net of the Australian corporate tax rate (30%) with franking credits attached.
On any reset date (the first being 15 december 2010 and every five years thereafter), the issuer may elect to exchange or
redeem the SKyCITy ACES or change the coupon rate and certain other terms. The holder can request exchange of the
SKyCITy ACES at any reset date. If the holder requests exchange, the issuer may elect to exchange for ordinary shares or
redeem or repurchase for cash.
Coupons are payable unless the directors of the issuer determine that a coupon not be paid. If a coupon is not paid for this
reason, the holder has no right to receive that coupon, as coupons are non-cumulative. however, if a coupon is not paid,
SKyCITy Entertainment Group Limited will be prohibited from paying dividends on its ordinary shares until certain conditions
are satisfied.
The SKyCITy ACES do not carry voting rights and holders are not entitled to any distributions made by SKyCITy Entertainment
Group Limited in respect of its ordinary shares prior to exchange. There is a minimum exchange ratio so a SKyCITy ACES holder
participates in any increase in the SKyCITy Entertainment Group Limited ordinary share price above A$7.40.
8 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
24.deferredtaxassets
thebalancecomprisestemporarydifferencesattributableto:
Amounts recognised in profit or loss
Provision and accruals
Fixed assets
Foreign exchange differences
Tax losses
Other
Amounts recognised directly in equity
Cash flow hedges
deferred tax assets
movements
Balance at the beginning of the year
Under-provided in prior years
Credited/(charged) to the income statement (note 8)
Credited to equity
Acquisition of subsidiary
Transfer to deferred tax liability
Foreign exchange differences
Balance at the end of the year
expectedsettlement
Within 12 months
In excess of 12 months
consolidated
parent
2006
$000
2005
$000
2006
$000
2005
$000
14,096
26
(4,322)
6,510
1,889
18,199
8,468
26,667
13,675
–
5,744
8,468
–
–
(1,220)
26,667
4,237
22,430
26,667
3,928
–
898
8,849
–
13,675
–
13,675
14,645
392
(87)
–
1,451
(2,709)
(17)
13,675
4,526
9,149
13,675
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
25.deferredtaxliabilities
consolidated
parent
2006
$000
2005
$000
2006
$000
2005
$000
thebalancecomprisestemporarydifferencesattributableto:
Amounts recognised in profit or loss
Provisions and prepayments
depreciation
Foreign exchange
Amounts recognised directly in equity
Cash flow hedges
deferred tax liabilities
movements
Balance at the beginning of the year
Under-provided in prior years
Charged to the income statement (note 8)
Credited to equity
Acquisition of subsidiary
Transfer to deferred tax asset
Foreign exchange differences
Balance at the end of the year
expectedsettlement
Within 12 months
In excess of 12 months
2,314
54,818
4,869
62,001
(1,405)
60,596
45,438
–
15,962
(1,405)
–
–
601
60,596
2,891
57,705
60,596
(2,804)
48,141
101
45,438
–
45,438
26,051
1,100
5,869
–
15,103
(2,709)
24
45,438
15,159
30,279
45,438
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
26.imputationcredits
imputationcreditaccount
Balance at the beginning of the year
Tax payments, net of refunds
Credits attached to dividends/distributions paid
Balance at the end of the year
2006
$000
2005
$000
(17,325)
36,499
(21,837)
(2,663)
9,636
18,716
(45,677)
(17,325)
As required by relevant tax legislation, the imputation credit account had a credit balance as at 31 March 2006. The current
debit balance is a result of imputation credits attached to the interim distribution paid in April 2006.
27.sharecapital
Opening balance of ordinary shares issued
Shares issued under dividend reinvestment plan
Shares issued under profit distribution plan
Exercise of share rights/options
Issue of share options
Shares issued under employee bonus scheme
Shares repurchased and cancelled
2006
shares
2005
ShARES
2006
$000
417,613,974
1,353,016
10,320,187
2,785,202
–
479,704
(3,264,906)
416,401,490
1,212,484
–
2,092,466
–
695,483
(2,787,949)
226,726
6,431
50,450
10,009
874
2,139
(14,894)
2005
$000
226,251
6,106
–
4,685
569
2,869
(13,754)
Closing balance of ordinary shares issued
429,287,177
417,613,974
281,735
226,726
All ordinary shares rank equally with one vote attached to each fully-paid ordinary share.
repurchaseandcancellationofshares
On 22 August 2005, SKyCITy Entertainment Group Limited announced that it would commence an on-market share buyback
programme of the company’s shares from 29 August 2005 to 28 August 2006. Summary details are set out below.
ShARES
REPURChASEd
AVERAGE
PURChASE
PRICE
10,000
10,000
135,506
960,130
1,115,636
4.74
4.80
4.54
4.63
4.62
dATE
August 2005
September 2005
October 2005
November 2005
Total shares purchased
9 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
28.reservesandretainedprofits
consolidated
parent
(a) reserves
Available for sale investments revaluation reserve
hedging reserve – cash flow hedges
Foreign currency translation reserve
Employee share entitlement reserve
availableforsaleinvestmentsrevaluationreserve
Movements:
Balance at the beginning of the year
Revaluations
Balance at the end of the year
hedgingreserve–cashflowhedges
Movements:
Balance at the beginning of the year
Adjustment on adoption of NZ IAS 32 and
NZ IAS 39 (note 11)
Revaluation
Transfer to net profit
deferred tax
Balance at the end of the year
foreigncurrencytranslationreserve
Movements:
Balance at the beginning of the year
Exchange difference on translation of overseas subsidiaries
Effect of hedging the net investment of overseas subsidiaries
Balance at the end of the year
employeeshareentitlementreserve
Movements:
Balance at the beginning of the year
Less value of shares issued during the year
Less cash issued in lieu shares
Plus value of share entitlements for the year
Balance at the end of the year
2006
$000
2005
$000
2006
$000
2005
$000
(69)
(26,173)
13,123
4,948
(8,171)
–
–
(8,429)
3,270
(5,159)
–
–
–
4,948
4,948
–
–
–
3,270
3,270
–
(69)
(69)
–
(4,012)
24,048
(56,082)
9,873
(26,173)
(8,429)
29,953
(8,401)
13,123
3,270
(2,139)
–
3,817
4,948
–
–
–
–
–
–
–
–
–
–
(8,429)
–
(8,429)
5,360
(2,869)
(9)
788
3,270
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,270
(2,139)
–
3,817
4,948
5,360
(2,869)
(9)
788
3,270
9 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
28.reservesandretainedprofits(continued)
(i) Available for sale investments revaluation reserve
Changes in the fair value of investments, such as equities, classified as available for sale financial assets, are taken to the
available for sale investments revaluation reserve, as described in note 2(l). Amounts are recognised in profit and loss when the
associated assets are sold or impaired.
(ii) Hedging reserve – cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly
in equity, as described in note 2(m). Amounts are recognised in profit and loss when the associated hedged transaction affects
profit and loss.
(iii) Foreign currency translation reserve
Exchange differences arising on translation of foreign-controlled entities are taken to the foreign currency translation reserve, as
described in note 2(d). The reserve is recognised in profit and loss when the net investment is disposed of.
(iv) Employee share entitlement reserve
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 2001 through 30 June 2006. 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 2004 through
30 June 2006.
PPI shares 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
on 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 SKyCITy Entertainment Group Limited’s annual result.
(b)retainedprofits
Movements in retained profits were as follows:
consolidated
parent
Balance at the beginning of the year
Net profit for the year
distributions/dividends
Adjustment on adoption of NZ IAS 39
Amalgamations accounted for at cost
Balance at the end of the year
2006
$000
2005
$000
2006
$000
2005
$000
13,355
120,129
(100,667)
(61)
–
21,599
106,414
(114,658)
–
–
(36,313)
71,871
(100,667)
–
(1,021)
(28,548)
106,893
(114,658)
–
–
32,756
13,355
(66,130)
(36,313)
9 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
29.minorityinterest
Balance at the beginning of the year
Share of surpluses in subsidiaries
Increased shareholding in SKyCITy hamilton Limited and SKyCITy Leisure Limited
Balance at the end of the year
consolidated
2006
$000
2,844
(381)
–
2,463
2005
$000
3,516
1,111
(1,783)
2,844
The minority interest relates to the 40% of queenstown Casinos Limited which is not owned by SKyCITy Entertainment
Group Limited.
30.distributions/dividends
consolidated
parent
Prior year’s final distribution/dividend
Interim distribution/dividend
Total distribution/dividend
2006
$000
50,217
50,450
2005
$000
64,528
50,130
2006
$000
50,217
50,450
2005
$000
64,528
50,130
100,667
114,658
100,667
114,658
On 21 February 2006, the directors resolved to make a pro rata issue of bonus shares representing a distribution of 12 cents per
share, in respect of the six month period ended 31 december 2005. The bonus shares were issued to all shareholders on the
company’s register at the close of business on 10 March 2006. The number of bonus shares issued was calculated as 12 cents
per share divided by the strike price. The strike price was set as the weighted average price of shares traded on the NZSx during
the five days from 13 to 17 March inclusive, less a 2.5% discount. Shareholders were able to elect to have the company buy back
some or all of their bonus shares on the day of issue at the strike price. The proceeds received by the shareholder as a result of
having elected to sell some or all of their bonus shares were fully imputed by the company. The bonus shares were issued and
buyback proceeds paid to shareholders on 7 April 2006.
On 21 August 2006, the directors resolved to make a pro rata issue of bonus shares in respect of the year ended 30 June 2006,
(refer to note 40 for further details).
31.seGmentinformation
(a)descriptionofsegments
Geographicsegments
The Group is organised on a global basis into the following main geographic areas:
SKYCITY Auckland
SKyCITy Auckland includes casino operations, hotels, food and beverage, convention centre, car parking and Sky Tower.
Rest of New Zealand
Rest of New Zealand includes the Group’s interest in SKyCITy hamilton, SKyCITy queenstown, Christchurch Casino and the
interest in the Village SKyCITy cinema joint venture.
SKYCITY Adelaide
SKyCITy Adelaide includes casino operations and food and beverage.
SKYCITY Darwin
SKyCITy darwin includes casino operations, food and beverage and hotel.
9 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
31.seGmentinformation(continued)
businesssegments
Although the Group is managed on a geographical basis, it operates in the following business segments:
Gaming machines
A gaming machine is a device that does not involve a human dealer and is totally or partly mechanically or electronically
operated and designed for use in casino gambling.
Table games
Table games are all other methods of gaming, other than gaming machines.
Other
Other includes hotels, cinemas, food and beverage, convention centre, car parking, property rentals and Sky Tower.
(b)primaryreportingformat–Geographicsegments
SKyCITy
REST OF
AUCKLANd NEW ZEALANd
$000
$000
SKyCITy
AdELAIdE
$000
SKyCITy
dARWIN
$000
TOTAL
$000
2006
Revenue from external customers
Shares of net profits of associates
Other revenue/income
427,460
78,422
146,889
99,598
752,369
–
5,795
4,316
1,279
–
295
–
522
4,316
7,891
Total segment revenue/income
433,255
84,017
147,184
100,120
764,576
Segment result
Finance costs
Profit before income tax
Income tax expense
Minority interest
Net profit for the year
Segment assets
Segment liabilities
Investments in associates
160,353
24,262
19,643
32,045
236,303
(83,965)
152,338
(32,590)
381
120,129
847,661
294,654
272,195
311,322
1,725,832
1,320,891
–
43,440
78,304
20,184
32,534
1,417,049
–
–
78,304
Acquisitions of property, plant and equipment,
intangibles and other non-current
segment assets
100,010
20,372
depreciation and amortisation expense
40,174
7,504
41,154
11,045
11,676
173,212
6,293
65,016
9 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
31.seGmentinformation(continued)
SKyCITy
REST OF
AUCKLANd NEW ZEALANd
$000
$000
SKyCITy
AdELAIdE
$000
SKyCITy
dARWIN
$000
TOTAL
$000
2005
Revenue from external customers
Shares of net profits of associates
Other revenue
Total segment revenue/income
Segment result
Finance costs
Profit before income tax
Income tax expense
Minority interest
Net profit for the year
Segment assets
Segment liabilities
396,054
75,394
116,391
82,089
669,928
–
4,275
400,329
163,498
26
8,079
83,499
27,523
–
280
116,671
9,523
–
421
82,510
24,772
26
13,055
683,009
225,316
(79,713)
145,603
(38,078)
(1,111)
106,414
736,717
284,096
258,154
280,305
1,559,272
1,235,486
42,936
20,215
25,578
1,324,215
Investments in associates
–
281
–
–
281
Acquisitions of property, plant and equipment,
intangibles and other non-current
segment assets
depreciation and amortisation expense
98,841
35,422
63,889
6,051
26,748
234,266
423,744
9,645
7,665
58,783
(c) secondaryreportingformat–businesssegments
SEGMENT REVENUES
FROM ExTERNAL
CUSTOMERS
SEGMENT ASSETS
ACqUISITIONS OF
PROPERTy, PLANT
ANd EqUIPMENT,
INTANGIBLES ANd
OThER NON-CURRENT
SEGMENT ASSETS
Gaming machines
Table games
Other
2006
$000
2005
$000
2006
$000
2005
$000
2006
$000
2005
$000
345,865
232,526
173,978
36,225
40,628
321,126
3,999
203,686
5,041
145,116 1,685,608 1,513,603
26,446
1,972
144,794
13,955
2,976
406,813
752,369
669,928 1,725,832 1,559,272
173,212
423,744
Inter-segment transactions
Segment revenues, expenses and results include transactions between segments. Such transactions are accounted for in
accordance with the Group’s internal transfer pricing policies and are eliminated on consolidation.
9 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
32.share-basedpayments
executiveshareoptionplan1999
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.
executiveshareoptionplan2002
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 distributions/dividends between the issue date
and the exercise date of the options.
As a result of one-for-one share splits on 16 November 2001 and 14 November 2003, the 2000 and 2001 options convert to four
shares upon exercise, and the 2002 and 2003 options, with the exception of the 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 (and subsequent) options convert to one share upon exercise.
executivesharerightsplan2005
The Executive Share Rights Plan (Rights Plan) was approved by directors in december 2004 and commenced on 1 July 2005
following expiry of the 2002 Executive Share Option Plan. Share rights issued under the Rights Plan are exercisable after the
third anniversary of their date of issue provided the terms and conditions of the Plan are met, and lapse if not exercised within
five years. As for the 1999 and 2002 option plans the exercise price of the share rights is the base exercise price adjusted for the
company’s estimated cost of equity and distributions/dividends between the issue date and the exercise date of the rights.
9 6 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
32.share-basedpayments(continued)
Movements in the number of share options outstanding under the 1999 and 2002 Executive Share Option Plans and 2005
Executive Share Rights Plan are as follows:
consolidatedandparent–2006
GRANT
dATE
ExPIRy
dATE
04/09/01
10/09/02
09/09/03
09/09/03
08/09/04
05/09/05
Total
04/09/06
10/09/07
09/09/08
09/09/08
08/09/09
05/09/10
ExERCISE
PRICE
$11.61
$7.05
$8.83
$4.42
$4.44
$4.81
BALANCE AT
START OF
ThE yEAR
NUMBER
GRANTEd
dURING ThE
ThE yEAR
NUMBER
ExERCISEd
dURING ThE
ThE yEAR
NUMBER
ExPIREd
dURING ThE
ThE yEAR
NUMBER
BALANCE AT
ENd OF
ThE yEAR
NUMBER
ExERCISABLE
AT ENd OF
ThE yEAR
NUMBER
459,000
3,238,863
865,667
450,000
1,824,500
–
–
–
–
–
–
1,585,000
(309,000)
(560,333)
(133,334)
–
(149,333)
–
–
–
(115,333)
–
150,000
2,678,530
617,000
450,000
(344,000) 1,331,167
(119,000) 1,466,000
150,000
2,678,530
–
–
–
–
6,838,030
1,585,000
(1,152,000)
(578,333) 6,692,697
2,828,530
Weighted average exercise price per share
$4.04
$4.81
$3.80
$4.70
$4.39
$3.74
consolidatedandparent–2005
GRANT
dATE
ExPIRy
dATE
30/08/00
04/09/01
10/09/02
09/09/03
09/09/03
08/09/04
Total
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
$7.68
$11.61
$7.05
$8.83
$4.42
$4.44
BALANCE AT
START OF
ThE yEAR
NUMBER
GRANTEd
dURING ThE
ThE yEAR
NUMBER
ExERCISEd
dURING ThE
ThE yEAR
NUMBER
ExPIREd
dURING ThE
ThE yEAR
NUMBER
BALANCE AT
ENd OF
ThE yEAR
NUMBER
ExERCISABLE
AT ENd OF
ThE yEAR
NUMBER
348,429
539,500
3,395,530
1,005,000
–
–
–
–
–
–
450,000
2,025,500
(348,429)
(80,500)
(77,666)
(20,000)
–
–
–
–
(79,001)
(119,333)
–
(201,000)
–
459,000
3,238,863
865,667
450,000
1,824,500
–
459,000
–
–
–
–
5,288,459
2,475,500
(526,595)
(399,334)
6,838,030
459,000
Weighted average exercise price per share
$3.58
$4.44
$2.29
$4.34
$4.04
$3.04
The weighted average exercise price at the date of exercise of options exercised regularly during the year ended 30 June 2006
was $3.80 (2005: $2.29).
The weighted average remaining contractual life of options outstanding at the end of the period was 2.40 years (2005: 2.85 years).
Fair value of share rights granted
The assessed fair value at grant date of share rights granted during the year ended 30 June 2006 was 38 cents per share right
(2005: 31 cents per option). The fair value at grant date is prepared by deloitte Corporate Finance using a binomial option
pricing model that takes into account the exercise price, the term of the rights, the vesting criteria, the impact of dilution, the
non-tradable nature of the option, the share price at grant date and the volatility of the returns on the underlying share and the
risk-free interest rate for the term of the right. The valuation is reviewed by PricewaterhouseCoopers as external auditors.
9 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
32.share-basedpayments(continued)
The model inputs for share rights granted during the year ended 30 June 2006 (comparative information relates to options
issued during the year ended 30 June 2005) included:
•
rights are granted for no consideration
• exercise price: $4.81 (2005: $4.44)
• grant date: 5 September 2005 (2005: 8 September 2004)
• expiry date: 5 September 2010 (2005: 8 September 2009)
• share price at grant date: $4.95 (2005: $4.55)
• expected price volatility of the company’s shares: 20% (2005: 20%)
• expected dividend yield: 4.6% (2005: 6.1%)
•
risk-free interest rate: 5.6% (2005: 6.2%).
The expected price volatility is derived by analysing the historic volatility over a recent historical period similar to the term of
the right.
non-executivedirectorshareoptions
Pursuant to the Non-Executive directors’ Share Option Plan (2000), approved by shareholders at the annual meeting of the
company on 26 October 2000, 57,892 options (issued in September 2002) remain on issue to non-executive directors as at
30 June 2006 (2005: 62,892).
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 2003 and was not renewed.
Movements in the number of share options outstanding under the Non-Executive directors’ Share Option Plan are as below.
consolidatedandparent–2006
GRANT
dATE
ExPIRy
dATE
ExERCISE
PRICE
10/09/02
10/09/07
$7.05
Total
62,892
62,892
Weighted average exercise price per share
$3.65
BALANCE AT
START OF
ThE yEAR
NUMBER
GRANTEd
dURING ThE
ThE yEAR
NUMBER
ExERCISEd
dURING ThE
ThE yEAR
NUMBER
ExPIREd
dURING ThE
ThE yEAR
NUMBER
BALANCE AT
ENd OF
ThE yEAR
NUMBER
ExERCISABLE
AT ENd OF
ThE yEAR
NUMBER
–
–
(5,000)
(5,000)
$3.64
–
–
57,892
57,982
57,892
57,982
$3.78
$3.78
consolidatedandparent–2005
BALANCE AT
START OF
ThE yEAR
NUMBER
GRANTEd
dURING ThE
ThE yEAR
NUMBER
ExERCISEd
dURING ThE
ThE yEAR
NUMBER
ExPIREd
dURING ThE
ThE yEAR
NUMBER
BALANCE AT
ENd OF
ThE yEAR
NUMBER
ExERCISABLE
AT ENd OF
ThE yEAR
NUMBER
–
–
–
(24,390)
(41,929)
(66,319)
$3.33
–
–
–
–
62,892
62,892
–
–
–
$3.65
$3.65
GRANT
dATE
ExPIRy
dATE
04/09/01
10/09/02
Total
04/09/06
10/09/07
ExERCISE
PRICE
$11.61
$7.05
24,390
104,821
129,211
Weighted average exercise price per share
$3.47
9 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
32.share-basedpayments(continued)
The weighted average exercise price at the date of exercise of options exercised regularly during the year ended 30 June 2006
was $3.64 (2005: $3.33).
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.20 years
(2005: 2.19 years).
As a result of one for one share splits on 16 November 2001 and 14 November 2003, the 2001 options convert to four shares
and the 2002 options will convert to two shares, when exercised.
performancepayincentiveplan(ppi)
Salaried employees are eligible for performance related bonus partially paid in shares. details of this plan are provided in
note 28.
expensesarisingfromshare-basedpaymenttransactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were as below.
consolidated
parent
Options/rights issued under executive option/rights plans
Shares issued under employee incentive share plan
2006
$000
684
4,007
4,691
2005
$000
569
1,842
2,411
2006
$000
684
1,733
2,417
2005
$000
569
738
1,307
33.relatedpartytransactions
(a) keymanagementandpersonnelcompensation
Key management personnel and director compensation for the years ended 30 June 2006 and 2005 is set out below. The key
management personnel include the directors of the company and the direct reports to the Managing director.
2006
2005
ShORT-TERM
BENEFITS
$
ShARE-BASEd
PAyMENTS
$
TOTAL
$
5,614,741
5,493,272
1,617,072
467,585
7,231,813
5,960,857
Key management personnel exercised options previously granted as part of their compensation.
9 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
33.relatedpartytransactions(continued)
(b)othertransactionswithkeymanagementpersonnelorentitiesrelatedtothem
Information on transactions with key management personnel or entities related to them, other than compensation, are set
out below.
Fees in the amount of $82,503 (2005: $2,120,701) were paid to First NZ Capital Group Limited (FNZC) on normal commercial
terms for advisory, consulting and other work. 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 or when the board discussed or made a decision with respect to
any matter that might involve FNZC.
In 2005 the Group borrowed $100,000,000 from the ANZ National Bank Limited. R A McLeod and Sir dryden Spring are
directors of both SKyCITy Entertainment Group Limited and ANZ National Bank Limited. The facility was established on an
arm’s-length, commercial basis. Neither Sir dryden nor Mr McLeod participated in the decision to enter into the facility.
The Group purchased voice services, data network services, and mobile network services for $860,279 (2005: $683,033) from
Telecom Corporation of New Zealand Limited on an arm’s-length, commercial basis. R h McGeoch, R A McLeod and P L Reddy
are directors of both SKyCITy Entertainment Group Limited and Telecom Corporation of New Zealand Limited. Neither Messrs
McGeoch, McLeod nor Ms Reddy are involved in the negotiation of supply contracts between Telecom and SKyCITy.
(c) subsidiaries
Interests in subsidiaries are set out in note 35.
34.businesscombination
summaryoftheeffectofacquisitionofsubsidiaries
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.
consolidated
netassetsacquired–skycitydarwin
Working capital balances
Property, plant and equipment
Casino licence
Goodwill
Consideration paid (including costs and taxes)
netcashimpactofacquisitionofsubsidiaries
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
1 0 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
2006
$000
2005
$000
–
–
–
–
–
–
–
–
–
–
–
(15,919)
94,050
38,580
104,803
221,514
221,514
(25,377)
7,388
11,102
33,283
247,910
35.subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 2(b).
All wholly-owned subsidiary companies and significant partly-owned subsidiaries have balance dates of 30 June.
nameofentity
equityholdinG
COUNTRy OF
INCORPORATION
CLASS OF
ShARES
2006
%
2005
%
Abdiel Investments Limited (amalgamated)
queenstown Casinos Limited
Riverside Fund Limited (amalgamated)
SKyCITy Action Management Limited
SKyCITy Auckland holdings Limited
SKyCITy Auckland Limited
SKyCITy Casino Management Limited
SKyCITy Cinemas Limited
SKyCITy hamilton Construction Limited
SKyCITy hamilton Limited
SKyCITy International holdings Limited
SKyCITy Investments Auckland Limited (amalgamated)
SKyCITy Investments (Australia) Limited
SKyCITy Investments (Christchurch) Limited
SKyCITy Investments Limited (amalgamated)
SKyCITy Leisure holdings Limited
SKyCITy Leisure Limited (amalgamated)
SKyCITy Management (Auckland) Limited
SKyCITy Metro Limited
SKyCITy queenstown Investments Limited
SKyCITy Wellington Limited
Sky Tower Limited
SKyCITy Adelaide Pty Limited
SKyCITy Australia Finance Pty Limited
SKyCITy Australia Limited Partnership
SKyCITy Australia Pty Limited
SKyCITy darwin holdings Pty Limited
SKyCITy darwin Pty Limited
Territory Property Trust
SKyCITy International ApS
SKyCITy Cinemas (Fiji) Limited
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
denmark
Fiji
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
–
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
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
1 0 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
36.interestsinJointventures
Jointventureoperation
NAME OF ENTITy
Village SKyCITy Cinemas JV
Village SKyCITy hoyts queen St Cinema JV*
Village Rialto Cinemas JV
damodar Village SKyCITy Fiji Cinemas JV
* Purchased by Village SKyCITy Cinemas JV.
interestsheldbytheGroup
PRINCIPAL ACTIVITIES
2006
2005
Cinema owner/operator
Cinema owner/operator
Cinema owner/operator
Cinema owner/operator
50
–
25
33
50
33
25
33
Subsequent to year end, SKyCITy purchased Village Roadshow Limited’s interest in the above joint ventures, resulting in the
Group’s interest in these joint ventures increasing by 100%.
consolidated
parent
shareofpartnership’srevenue,expensesandresults
Revenues
Expenses
Net contribution to Group operating surplus
Total share of net assets employed in joint venture
37.continGencies
2006
$000
2005
$000
2006
$000
2005
$000
31,721
(27,550)
4,171
38,454
29,615
(25,444)
4,171
12,047
–
–
–
–
–
–
–
–
The contingent liability previously reported in respect of a guarantee for a loan facility utilised by Village Cinemas SA Argentina,
an associate company, has been settled with no cost to SKyCITy. In addition, the option to Village Roadshow Limited to acquire
40% of SKyCITy’s interest in Village Cinemas SA Argentina has lapsed. Village Cinemas SA Argentina is no longer an associate
of SKyCITy.
1 0 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
38.commitments
capitalcommitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
consolidated
parent
Property, plant and equipment
2006
$000
2005
$000
10,888
23,563
2006
$000
–
2005
$000
–
operatingleasecommitments
The Group leases various offices and other premises under non-cancellable operating leases. The leases have varying terms,
escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
consolidated
parent
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2006
$000
2005
$000
2006
$000
2005
$000
7,335
26,759
259,039
293,133
11,794
41,430
261,849
315,073
–
–
–
–
2
–
–
2
39.reconciliationofprofitafterincometaxtonetcashinfloW
fromoperatinGactivities
consolidated
parent
Profit for the year
Minority interest
depreciation and amortisation
Interest expense
Current period employee share entitlement
Current period share options expense
Unrealised gain on investments
dividend from subsidiary
Fair value adjustment to investment property
Fair value adjustment on financial assets at fair value
through profit or loss
Subsidiary funding transactions
Share of profits of associates not received as
dividends or distributions
Change in operating assets and liabilities
decrease/(increase) in receivables and prepayments
decrease/(increase) in inventories
Increase in future income tax benefit
Increase in payables and accruals
Increase in provision for deferred income tax
decrease in provision for income taxes receivable
Capital items included in working capital movements
2006
$000
120,129
(381)
65,016
74,838
3,818
874
–
–
166
(4,107)
–
(1,239)
6,355
141
(10,283)
3,771
22,319
(34,533)
3,891
Net cash inflow from operating activities
250,775
259,689
2005
$000
2006
$000
2005
$000
106,414
1,111
58,783
81,035
788
569
(1,488)
–
(572)
–
–
(26)
15,986
(2,391)
(1,739)
4,153
9,344
(2,906)
(9,372)
71,871
–
131
9,033
3,818
874
–
(106,251)
–
106,893
–
14
13,444
788
569
–
(130,000)
–
–
(97,909)
–
(424,699)
–
–
(31,242)
–
–
129,480
–
–
–
(20,195)
139,063
–
–
286,285
–
–
–
(7,643)
1 0 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
40.eventsoccurrinGafterthebalancesheetdate
businesscombination
Subsequent to year end, SKyCITy Entertainment Group Limited acquired all of Village Roadshow Limited’s interest in the Village
SKyCITy joint ventures for cash consideration of $52,000,000.
details of net assets acquired and goodwill are as follows:
Purchase consideration
Cash paid
direct costs relating to the acquisition
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$000
52,000
250
52,250
(19,905)
32,345
The financial effects of the above transaction have not been brought to account at 30 June 2006. The operating results and
assets and liabilities of the company will be consolidated from 1 July 2006.
profitdistributionplan
On 21 August 2006, the directors resolved to make a pro-rata issue of bonus shares in respect of a final distribution of profits
of 14 cents per share for the year ended 30 June 2006. The bonus shares will be issued to all shareholders on the company’s
register at the close of business on Friday, 8 September 2006. The number of bonus shares to be issued is calculated as 14
cents per share divided by the strike price. The strike price will be set as the weighted average price of shares traded on the
NZSx during the five days from 11 to 15 September inclusive, less a 2.5% discount. Shareholders will be able to elect to have
the company buy back some or all of their bonus shares on the day of issue at the strike price. The proceeds received by
shareholders as a result of having elected to sell some or all of their bonus shares will be treated as dividends and will be fully
imputed by the company.
The bonus shares will be issued and buyback proceeds paid to shareholders on Friday, 6 October 2006.
1 0 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
41.explanationoftransitiontoneWZealandequivalentstoifrs
(1) Reconciliation of equity Reported under previous New Zealand Generally Accepted Accounting principles (NZ GAAp)
to equity under New Zealand equivalents to IFRs (NZ IFRs)
(a) atthedateoftransitiontonZifrs:1July2004
consolidated
assets
currentassets
Inventories
Current tax receivables
Receivables and prepayments
Cash and bank balances
totalcurrentassets
non-currentassets
Property, plant and equipment
Investment properties
Intangible assets
deferred tax assets
Other investments
Investments in subsidiaries
Investments in associates
totalnon-currentassets
totalassets
liabilities
currentliabilities
Interest-bearing liabilities
Payables
Subordinated debt – capital notes
totalcurrentliabilities
non-currentliabilities
Interest-bearing liabilities
deferred tax liabilities
Convertible notes
PREVIOUS
NZ GAAP
$000
EFFECT OF
TRANSITION
NZ IFRS
$000
NZ IFRS
$000
PREVIOUS
NZ GAAP
$000
3,017
9,999
53,106
53,272
119,394
750,267
–
212,373
14,645
78,025
–
255
–
–
–
–
–
3,017
9,999
53,106
53,272
–
–
141,987
2
119,394
141,989
(16,137)
51,900
4,428
–
–
–
–
734,130
51,900
216,801
14,645
78,025
–
255
245
–
–
–
–
211,660
–
1,055,565
40,191 1,095,756
211,905
1,174,959
40,191 1,215,150
353,894
parent
EFFECT OF
TRANSITION
NZ IFRS
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NZ IFRS
$000
–
–
141,987
2
141,989
245
–
–
–
–
211,660
–
211,905
353,894
101,000
93,619
149,644
344,263
579,967
27,216
8,910
–
(767)
–
101,000
92,852
149,644
–
1,891
149,644
–
(704)
–
–
1,187
149,644
(767)
343,496
151,535
(704)
150,831
–
(1,165)
–
579,967
26,051
8,910
–
–
–
–
–
–
–
–
–
–
–
–
totalnon-currentliabilities
616,093
(1,165)
614,928
totalliabilities
netassets
equity
Share capital
Reserves
Retained earnings
Shareholders’ equity
Minority interest
totalequity
960,356
(1,932)
958,424
151,535
(704)
150,831
214,603
42,123
256,726
202,359
704
203,063
225,871
(7,510)
(7,274)
211,087
3,516
380
12,870
28,873
42,123
–
226,251
5,360
21,599
253,210
3,516
225,871
6,662
(30,174)
202,359
–
214,603
42,123
256,726
202,359
380
(1,302)
1,626
704
–
704
226,251
5,360
(28,548)
203,063
–
203,063
1 0 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
(b)attheendofthelastreportingperiodunderpreviousnZGaap:30June2005
consolidated
assets
currentassets
Inventories
Receivables and prepayments
Cash and bank balances
totalcurrentassets
non-currentassets
Property, plant and equipment
Investment properties
Intangible assets
deferred tax assets
Other financial assets
Other investments
Future income tax benefit
Investments in associates
PREVIOUS
NZ GAAP
$000
EFFECT OF
TRANSITION
NZ IFRS
$000
NZ IFRS
$000
PREVIOUS
NZ GAAP
$000
5,382
37,158
62,849
105,389
932,658
–
357,402
13,675
–
79,539
12,905
281
–
–
–
–
(14,691)
52,500
19,614
–
–
–
–
–
5,382
37,158
62,849
105,389
917,967
52,500
377,016
13,675
–
79,539
12,905
281
–
2,924
3
2,927
788
–
–
–
598,950
–
–
–
totalnon-currentassets
1,396,460
57,423 1,453,883
599,738
1,501,849
57,423 1,559,272
602,665
parent
EFFECT OF
TRANSITION
NZ IFRS
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NZ IFRS
$000
–
2,924
3
2,927
788
–
–
–
598,950
–
–
–
599,738
602,665
totalassets
liabilities
currentliabilities
Interest-bearing liabilities
Payables
totalcurrentliabilities
non-currentliabilities
Interest-bearing liabilities
deferred tax liabilities
Subordinated debt – capital notes
100,758
97,297
198,055
–
(292)
100,758
97,005
–
287,755
–
(283)
–
287,472
(292)
197,763
287,755
(283)
287,472
956,795
32,741
121,510
–
12,697
–
956,795
45,438
121,510
–
–
121,510
–
–
–
–
–
–
121,510
121,510
totalnon-currentliabilities
1,111,046
12,697 1,123,743
121,510
totalliabilities
netassets
equity
Share capital
Reserves
Retained profits
Shareholders’ equity
Minority interest
totalequity
1 0 6 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
1,309,101
12,405 1,321,506
409,265
(283)
408,982
192,748
45,018
237,766
193,400
283
193,683
225,777
(17,948)
(17,925)
189,904
2,844
949
12,789
31,280
45,018
–
226,726
(5,159)
13,355
225,777
4,653
(37,030)
234,922
2,844
193,400
–
192,748
45,018
237,766
193,400
949
(1,383)
717
283
–
283
226,726
3,270
(36,313)
193,683
–
193,683
41.explanationoftransitiontoneWZealandequivalentstoifrs(continued)
(2) Reconciliation of profit for the year ended 30 June 2005
revenue
Other income
Share of net profits of associates
Employee benefits expense
depreciation and amortisation expense
Other expenses
directors’ fees
Finance costs
profitbeforeincometax
Income tax expense
profitbeforeminorityinterest
Profit attributable to minority interest
profitattributabletoshareholders
ofthecompany
consolidated
EFFECT OF
TRANSITION
NZ IFRS
$000
NZ IFRS
$000
PREVIOUS
NZ GAAP
$000
parent
EFFECT OF
TRANSITION
NZ IFRS
$000
–
572
–
(963)
3,908
–
–
–
669,928
13,055
26
(186,753)
(58,783)
(211,179)
(978)
(79,713)
3,517
(1,110)
145,603
(38,078)
2,407
–
107,525
(1,111)
–
138,625
–
(10,985)
(14)
(5,413)
(966)
(13,445)
107,802
–
107,802
–
–
–
–
(909)
–
–
–
–
(909)
–
(909)
–
NZ IFRS
$000
–
138,625
–
(11,894)
(14)
(5,413)
(966)
(13,445)
106,893
–
106,893
–
PREVIOUS
NZ GAAP
$000
669,928
12,483
26
(185,790)
(62,691)
(211,179)
(978)
(79,713)
142,086
(36,968)
105,118
(1,111)
104,007
2,407
106,414
107,802
(909)
106,893
1 0 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
41.explanationoftransitiontoneW
Zealandequivalentstoifrs(continued)
(3) Reconciliation of cash Flow statement for the year
ended 30 June 2005
The impact of adopting NZ IFRS on the Cash Flow Statement
is to reclassify both interest paid within operating activities
and capitalised interest paid within investment activities to
financing activities.
(4) Notes to the Reconciliations
(a) foreigncurrencytranslationreserve:cumulative
translationdifferences
The Group has elected to apply the exemption in NZ
IFRS 1 First-time Adoption of New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS 1). The
cumulative translation differences for all foreign operations
represented in the foreign currency translation reserve are
deemed to be zero at the date of transition to NZ IFRS. The
effect is as below.
At 1 July 2004 and 30 June 2005
The balance of the $14,172,000 debit in the foreign currency
translation reserve is reduced to zero and retained earnings
are decreased by this amount.
There is no effect on the parent entity.
(b)businesscombinations
The Group acquired a 100% interest in SKyCITy darwin with
effect from 22 July 2004. NZ IFRS 3 Business Combinations
requires all assets and liabilities to be recognised at fair
value and deferred tax calculated. The fair values previously
reported have not changed under NZ IFRS with the exception
of a deferred tax liability recognised with a resulting increase
in goodwill of $12,752,000. The quantification of this
adjustment to deferred tax is detailed in 41 (4) (i).
There is no effect on the parent entity.
(c) carryingvalueoflandandotherfixedassets
Under NZ IFRS 1 entities are permitted to adjust the carrying
value of selected fixed assets to their fair value and use that
fair value as deemed cost at the date of transition. SKyCITy
has elected to revalue certain land and buildings within its
Auckland complex. These assets were valued with an effective
date of 1 July 2004 by dTZ New Zealand Limited, registered
valuers and members of the New Zealand Property Institute.
The basis of valuation is fair value being the estimated
amount for which an asset should exchange on the date of
valuation between a willing buyer and a willing seller in an
arm’s-length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion. The impact of this is as below.
(i) At 1 July 2004
An increase in both retained earnings and property, plant and
equipment of $40,191,000. There is no effect on the parent
entity.
(ii) At 30 June 2005
An increase in both retained earnings and property, plant and
equipment of $42,697,000. There is no effect on the parent
entity.
(iii) For the year ended 30 June 2005
A decrease in depreciation expense of $808,000. There is no
effect on the parent entity.
(d)investmentproperties
The SKyCITy Metro Centre in Auckland is classified under
NZ IFRS as an investment property (previously part of
property, plant and equipment). Investment properties are
not depreciated and are required to be fair valued each year.
SKyCITy Metro was valued with effective dates of 1 July 2004
and 30 June 2005 by dTZ New Zealand Limited, registered
valuers and members of the New Zealand Property Institute.
The basis of valuation is fair value being the estimated
amount for which an asset should exchange on the date of
1 0 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
valuation between a willing buyer and a willing seller in an
arm’s-length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion. The effect of this is as below.
(i) At 1 July 2004
Increase investment property and reduce property, plant
and equipment by $51,900,000. There is no effect on the
parent entity.
(ii) At 30 June 2005
Increase (following revaluation as at 30 June 2005) in
investment property by $52,500,000 and reduction in
property, plant and equipment by $51,900,000. There is no
effect on the parent entity.
(iii) For the year ended 30 June 2005
Reduction in depreciation expense by $1,726,000 and
recognition of a gain on revaluation in the Income Statement
of $572,000. There is no effect on the parent entity.
(e)share-basedpayments
Under NZ IFRS 2 Share-based Payment, from 1 July 2004
the company is required to recognise an expense for
options and share rights that were granted to employees
under the company’s various option and share right plans
after 7 November 2002 and which had not vested by
1 January 2005. In addition, the company is required to
recognise the cost of its salaried personnel incentive plan over
the relevant vesting period. This was previously recognised
within one financial year. The effect of this is as below.
(i) At 1 July 2004
Increase in share capital of $380,000, reduction in the
employee share entitlement reserve of $1,302,000, reduction
in payables of $767,000 and an increase in retained profits
of $1,689,000. The effect is substantially the same for the
parent entity.
(ii) At 30 June 2005
Increase in share capital of $949,000, reduction in the
employee share entitlement reserve of $1,383,000, reduction
in payables of $292,000 and an increase in retained profits of
$726,000. The effect is substantially the same for the parent
entity.
(iii) For the year ended 30 June 2005
For the Group and the parent entity there has been an
increase in employee benefits expense of $963,000 and
$909,000 respectively.
(f)financialinstruments
The Group has elected to apply the exemption from
restatement of comparatives for NZ IAS 32 Financial
Instruments: Disclosure and Presentation and NZ IAS 39
Financial Instruments: Recognition and Measurement. It
has therefore continued to apply the previous NZ GAAP
rules to derivatives, financial assets and financial liabilities
and also to hedging contracts for the year ended 30 June
2005. The adjustments required for differences between
previous NZ GAAP and NZ IAS 32 and NZ IAS 39 have been
determined and recognised at 1 July 2005. Refer to section (5)
of this note for further details.
(g)reclassificationofsoftware
Under NZ IFRS, software is classified as part of intangible
assets rather than property, plant and equipment. This has
resulted in intangible assets increasing and property, plant
and equipment decreasing as at 1 July 2004 and 30 June
2005 by $4,428,000 and $5,488,000 respectively. While the
amount previously depreciated on software is unchanged it is
now classified as amortisation.
There is no effect on the parent entity.
1 0 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
noTes To The
fInancIal sTaTeMenTs ( c o n T I n u e d )
f o r T h e y e a r e n d e d 3 0 j u n e 2 0 0 6
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
41.explanationoftransitiontoneW
Zealandequivalentstoifrs(continued)
(h)amortisationofgoodwill
Goodwill is no longer amortised under NZ IFRS but is
reviewed on an annual basis for impairment. SKyCITy has
reviewed its goodwill balances and determined there is no
impairment. The effect of the adjustment to amortisation is
as below.
(i) At 1 July 2004
No effect on the Group or the parent entity.
(ii) At 30 June 2005
Increase in goodwill and retained profits by $1,374,000.
There is no effect on the parent entity.
(iii) For the year ended 30 June 2005
Reduction in amortisation expense by $1,374,000. There is no
effect on the parent entity.
(i)deferredtaxliability
Under previous NZ GAAP income tax expense was calculated
by reference to the accounting profit after allowing for
permanent differences. The adoption of NZ IFRS has resulted
in a change in accounting policy. The application of NZ IAS
12 Income Taxes has resulted in the recognition of deferred
tax liabilities on revaluations of non-current assets as well as
deferred tax balances arising during the year in relation to fair
value adjustments on the acquisition of a business.
The effects on the deferred tax liability of the adoption of NZ IFRS are as follows:
1July2004
30June2005
Adjustments arising from adoption of NZ IAS 12
Application of NZ IAS 12 to adjustments arising
from adoption of other NZ IFRS:
Revaluation of certain assets
Share-based payments
Acquisition of SKyCITy darwin
(decrease)/increase in deferred tax liability
There is no effect on the parent entity.
(j) retainedprofits
consolidated
$000
PARENT
$000
consolidated
$000
PARENT
$000
7,318
(9,166)
683
–
(1,165)
–
–
–
–
–
8,513
(8,141)
553
11,772
12,697
–
–
–
–
–
The effect on retained profits of the changes set out above are as follows:
1July2004
30June2005
consolidated
$000
PARENT
$000
consolidated
$000
PARENT
$000
(14,172)
40,191
1,689
1,165
–
–
28,873
–
–
1,626
–
–
–
1,626
(14,172)
40,997
726
57
2,298
1,374
31,280
–
–
717
–
–
–
717
Foreign currency translation reserve
Property, plant and equipment
Share-based payments
deferred tax
Investment properties
Amortisation of goodwill
Total adjustment
1 1 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
41.explanationoftransitiontoneW
Zealandequivalentstoifrs(continued)
(5) Other effects of the transition to NZ IFRs
derivatives
until30June2005
The Group has taken the exemption available under NZ IFRS 1
to apply NZ IAS 32 and NZ IAS 39 from 1 July 2005. Previous
NZ GAAP has been applied in the comparative information
on financial instruments within the scope of NZ IAS 32 and
NZ IAS 39.
interestrateswaps
Under previous NZ GAAP, the net amount receivable or
payable under interest rate swap agreements is progressively
brought to account over the period to settlement. The amount
recognised is accounted for as an adjustment to interest
and finance charges during the period and included in other
debtors or other creditors at each reporting date.
adjustmentsontransitiontonZias39:1July2005
The nature of the main adjustments to make this information
comply with NZ IAS 32 and NZ IAS 39 are that derivatives are
recognised at fair value. Changes in fair value are either taken
to the Income Statement or an equity reserve (refer below).
At the date of transition (1 July 2005) the carrying amounts
of derivatives were taken to retained earnings or reserves,
depending on whether the criteria for hedge accounting were
satisfied at the transition date. There has been no material
impact on either basic or diluted earnings per share in the
prior year.
from1July2005
derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value. The method of recognising
the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument and, if so, the nature
of the item being hedged. The Group designates certain
derivatives as either hedges of the fair value of recognised
assets or liabilities or a firm commitment (fair value hedge)
or hedges of exposures to variability in cash flows associated
with recognised assets or liabilities or a highly probable
forecast transactions (cash flow hedges).
The Group documents at the inception of the transaction
the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy
for undertaking various hedge transactions. The Group also
documents its assessment, both at hedge inception and on
an ongoing basis, of whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes
in fair values or cash flows attributable to the hedged risk of
hedged items.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recorded in the Income
Statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged
risk.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in equity in the hedging reserve. The gain or loss
relating to the ineffective portion is recognised immediately in
the Income Statement.
Amounts accumulated in equity are recycled in the Income
Statement in the periods when the hedged item will affect
profit or loss (for instance, when the forecast sale that is
hedged takes place).
When a hedging instrument expires or is sold, or when a
hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast
transaction is ultimately recognised in the Income Statement.
When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is
immediately transferred to the Income Statement.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge
accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are
recognised immediately in the Income Statement.
1 1 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
coMpany
dIsclosures
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
disclosure
stockexchanGelistinGs
SKyCITy Entertainment Group Limited is listed on both the
New Zealand and Australian stock exchanges.
subsidiarycompanies
The changes to subsidiary company directorships during the
12 month period ended 30 June 2006 are set out below.
On 1 July 2005, R h McGeoch resigned as a director and
M J Silberling was appointed 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, as set out below.
•
•
•
•
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 directors of the amalgamated
company, SKyCITy Auckland Limited.
Cine-Force Limited and SKyCITy Cinemas (Whangarei)
Limited were 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 directors of the amalgamated
company, SKyCITy Cinemas Limited. P J holdaway was
appointed an alternate director for each director.
SKyCITy Leisure Limited was 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 an alternate director
for each director.
Riverside Fund Limited, SKyCITy Investments Limited and
SKyCITy Investments Auckland Limited were 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 directors of the amalgamated
company, SKyCITy Entertainment Group Limited.
1 1 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
On 7 September 2005, SKyCITy Investments Australia Limited
was incorporated as a wholly-owned New Zealand subsidiary
of SKyCITy Entertainment Group Limited. E W davies,
R h McGeoch, R A McLeod, P L Reddy, d T Spring, E Toime
and W R Trotter were appointed as directors.
SKyCITy Victoria Pty Limited was incorporated on 6 October
2005 as a wholly-owned Australian subsidiary of SKyCITy
Entertainment Group Limited. E W davies, A B Ryan and
M J Silberling were appointed as directors. On 14 May 2006,
SKyCITy Victoria Pty Limited was removed from the Australian
companies register at the request of SKyCITy.
On 30 June 2006, SKyCITy hamilton Construction Limited
was amalgamated with SKyCITy hamilton Limited. E W davies
and A B Ryan were directors of both companies prior to
the amalgamation and were appointed directors of the
amalgamated company, SKyCITy hamilton Limited.
The following people held office as directors of subsidiaries
of SKyCITy Entertainment Group Limited as at the end of the
2006 financial year, being 30 June 2006.
SKyCITy Auckland holdings Limited, SKyCITy Auckland
Limited, SKyCITy Casino Management Limited, SKyCITy
hamilton Limited, SKyCITy Management Limited, Sky Tower
Limited, SKyCITy Wellington Limited, SKyCITy International
holdings Limited, SKyCITy Investments Christchurch
Limited, SKyCITy Action Management Limited and SKyCITy
Investments queenstown Limited
Directors: E W Davies, A B Ryan.
SKyCITy Adelaide Pty Limited, SKyCITy Australia Finance Pty
Limited, SKyCITy Australia 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 is alternate director for E W Davies.
queenstown Casinos Limited
Directors: E W Davies, P J Hensman, A B Ryan, B C Thomas.
SKyCITy Investments Australia Limited
Directors: E W Davies, R H McGeoch, R A McLeod, P L Reddy,
D T Spring, E Toime, W R Trotter.
SKyCITy Leisure holdings Limited, SKyCITy Cinemas Limited,
Directors: E W Davies, A B Ryan.
P J Holdaway is alternate director for each director.
SKyCITy Metro Limited, Planet hollywood
(Civic Centre) 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.
SKyCITy Cinemas Limited purchased 75% of the shares
in Toptown Cinemas Limited on 17 July 2006. On 21 July
2006 J E Carr, J W Coxhead, S W Green, P J holdaway and
P J young resigned as directors. On the same date E W davies
and A B Ryan were appointed directors and P J holdaway was
appointed alternate director to each of the directors.
Toptown Nominees Limited became a wholly-owned
subsidiary of SKyCITy Cinemas Limited on 17 July 2006.
On 21 July 2006, h N Chapman and S W Green resigned
as directors. On the same date E W davies and A B Ryan
were appointed directors and P J holdaway was appointed
alternate director to each of the directors.
Village SKyCITy Cinemas Limited became a wholly-owned
subsidiary of SKyCITy Cinemas Limited on 8 September
2006 and changed its name to SKyCITy Cinemas Nominees
Limited on the same date. d I Kennedy, J R Kirby, S Kirk and
h R Shotter ceased to be directors on 8 September 2006.
E W davies and A B Ryan were appointed as directors, and
P J holdaway was appointed their alternate, on the same
date.
At 30 June 2006, in addition to the above subsidiary
companies SKyCITy also has an interest in, and is represented
by SKyCITy executives on the boards of these companies
as below.
Christchurch Casinos Limited
SKYCITY representatives on the board: E W Davies, A B Ryan.
Christchurch hotels Limited, Premier hotels Limited, Victoria
hotels (Christchurch) Limited
SKYCITY representatives on the board: E W Davies (A B Ryan
alternate).
Subsequent to 30 June 2006 A B Ryan has been appointed
director and E W davies has resigned as director and been
appointed as A B Ryan’s alternate.
1 1 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
dIrecTors’
dIsclosures
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
interestsreGister
disclosureofdirectors’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 included in the company’s Interests Register as at 30 June 2006. Notices
given by directors during the year ended 30 June 2006 marked with an asterisk.
eWdavies
Anglican Trust for Women and Children
Melanesian Mission Trust
rhmcGeoch
Aon Risk Services Limited
Frontiers Group (Australasia) Limited
Frontiers Group (UK) Limited
Gullivers Travel Group Limited
LIPA Pharmaceuticals Limited
McGeoch holdings Limited
Pacific healthcare Australia 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
ramcleod
ANZ National Bank Limited
Aotearoa Fisheries Limited
Gullivers Travel Group Limited
Kura Limited*
Raukura Moana Fisheries Limited
Sealord Group Limited*
Tainui Group holdings Limited and certain subsidiaries
Telecom Corporation of New Zealand Limited
Te Ohu Kaimoana Limited
Trustee
Trustee
Member NSW Board of Advice
Chairman
director
director
director
director
Chairman
director
Chairman
Trustee
director
Chairman
director
director
director
director
director
director
director
director
director
1 1 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
plreddy
Active Equities Limited
Infinity Group Limited
SKyCITy Auckland Community Trust
TeamTalk Limited
Telecom Corporation of New Zealand Limited
The New Zealand Exchange Limited
The New Zealand International Festival of the Arts
sirdrydenspring
ANZ National Bank Limited
Asia 2000 Foundation of New Zealand
Fletcher Building Limited
New Zealand APEC Business Advisory Council
New Zealand Business and Parliamentary Trust
Northport Limited*
Port of Tauranga Limited
etoime
Blackbay Limited, London*
deutsche Post A.G., Germany*
Maltapost plc, Malta*
Wrtrotter
director and Shareholder
Associated Person of Shareholder
Trustee
Associated Person of Shareholder
director
Member NZx discipline
Trustee
Chairman
Chairman
director
Chairman
Trustee
director
director
director
director
director
First NZ Capital Group Limited and certain subsidiaries
Executive Chairman
The following details included in the Interests Register as at 30 June 2005, or entered during the year ended 30 June 2006, have
been removed during the year ended 30 June 2006.
•
•
R A McLeod is no longer a director of Arthur Andersen (NZ) Limited.
P L Reddy is no longer an associated person of a shareholder of MobilefoneRepair.com Limited.
Subsequent to 30 June 2006 Messrs McGeoch and McLeod have ceased to be directors of Gullivers Travel Group Limited, and
Mr Toime has ceased to be a director of Maltapost plc.
directors’andofficers’indemnities
Indemnities have been given to directors and senior managers of the company and its subsidiaries to cover acts or omissions of
those persons in carrying out their duties and responsibilities as directors and senior managers.
1 1 5 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
dIrecTors’
dIsclosures ( c o n T I n u e d )
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
disclosureofdirectors’interestsinsharetransactions
directors disclosed, pursuant to section 148 of the Companies Act 1993 and Rule 10.5.3 of the NZx Listing Rules, the following
acquisitions and disposals of relevant interests in SKyCITy shares during the period to 30 June 2006, as set out below.
E W davies
R h McGeoch
R A McLeod
P L Reddy
Sir dryden Spring
E Toime
W R Trotter
dATE OF
ACqUISITION/dISPOSAL
dURING PERIOd CONSIdERATION
13 March 20061
28 April 20062
7 April 20063
25 October 20054
7 April 20063
7 April 20063
$313,000
$2,054,680
$381,875
$2,705,300
$48,005
$34,600
$1,203
$1,921
7 April 20063
$17,721
ShARES
ACqUIREd/
(dISPOSEd)
400,000
(400,000)
500,000
(500,000)
9,820
10,000
246
393
3,625
31 August 2005
$66,672
14,000
7 October 20055
7 April 20063
7 April 20063
$17,945
$18,400
$78,803
3,778
3,764
16,120
(1) The transaction shown relates to the exercise of 100,000 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 relates to the exercise of 125,000 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.
(3) The transaction shown represents the issue of bonus shares under the SKyCITy Profit distribution Plan.
(4) The transaction shown relates to the exercise of 5,000 options granted to Mr McGeoch pursuant to the Non-Executive director Share Option Plan
approved by shareholders at the annual meeting of the company held on 26 October 2000.
(5) The transaction shown represents the issue of shares under the SKyCITy dividend reinvestment plan (discontinued January 2006).
1 1 6 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
disclosureofdirectors’interestsinshares,optionsandcapitalnotes
directors disclosed, pursuant to Rule 10.5.3 of the NZx Listing Rules, the following relevant interests in SKyCITy shares, options
and capital notes as at 30 June 2006, 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
BENEFICIALLy
hELd
OPTIONS
BENEFICIALLy
hELd
409,821
10,246
16,393
143,708
24,000
157,086
672,788
2,488,530
15,964
–
20,964
–
–
20,964
In addition to the 143,708 shares identified above, Ms Reddy has also disclosed 7,511 shares non-beneficially held.
No directors held any interest in the capital notes of the company as at 30 June 2006.
Options issued to Mr davies are issued pursuant to the Executive Share Option Plan approved by shareholders at the annual
meeting of the company held on 28 October 1999, and the Managing director Share Option Plan approved by shareholders at the
annual meeting of the company held on 30 October 2002. Mr davies has, subsequent to 30 June 2006, exercised 150,000 options
issued in 2001.
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 Share Option 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 Share Option 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.
1 1 7 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
dIrecTor and eMployee
reMuneraTIon
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
remunerationofdirectors
employeeremuneration
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 2006 was as
listed below.
E W davies (Managing director)
R h McGeoch (Chairman)
R A McLeod
P L Reddy
Sir dryden Spring
E Toime
W R Trotter
$1,339,231
$160,000
$80,000
$92,500
$92,500
$80,000
$80,000
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 2006, are
as listed below.
Remuneration includes salary and incentive payments under
the SKyCITy performance pay incentive plan and where
applicable the value of executive share options that have
vested during the year ended 30 June 2006.
REMUNERATION
EMPLOyEES
20
10
17
6
10
2
6
4
3
3
1
1
3
3
1
1
2
1
1
1
1
1
1
2
1
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 during the
year ended 30 June 2006 comprised salary of $949,231 plus a
performance-related incentive payment of $390,000 relating
to the 2004/05 financial year.
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 2005/06 financial year or reimbursement of expenses
incurred in relation to company matters, or as is disclosed
elsewhere in this annual report.
Remuneration paid to directors of queenstown Casinos
Limited (qCL) during the year ended 30 June 2006 was
$7,500 to each of E W davies, P J hensman, A B Ryan and
B C Thomas. 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.
Christchurch Casinos Limited, in which SKyCITy has a 40.5%
interest, paid directors’ fees of $40,000 each for E W davies
and A B Ryan. These directors’ fees 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.
$100,000 – $109,999
$110,000 – $119,999
$120,000 – $129,999
$130,000 – $139,999
$140,000 – $149,999
$150,000 – $159,999
$160,000 – $169,999
$170,000 – $179,999
$180,000 – $189,999
$190,000 – $199,999
$200,000 – $209,999
$210,000 – $219,999
$220,000 – $229,999
$230,000 – $239,999
$240,000 – $249,999
$270,000 – $279,999
$280,000 – $289,999
$290,000 – $299,999
$310,000 – $319,999
$320,000 – $329,999
$430,000 – $439,999
$440,000 – $449,999
$530,000 – $539,999
$550,000 – $559,999
$650,000 – $659,999
1 1 8 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
shareholder and
noTeholder InforMaTIon
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
tWentylarGestshareholdersasat17auGust2006
Promina Group
1 UBS Global Asset Management Group*
Investors Mutual Limited
2
3
State Street Global Advisors Group
4 Columbia Wanger Asset Management
5 Brook Asset Management
6 AxA Group
7
8 Barclays Global Investors Group
9 AMP Capital Investors
10 Accident Compensation Corporation
11 PM Capital Limited
12 Tower Asset Management
13 First NZ Securities (Private Clients)
14 UBS AG Custodian Group*
15 herschel Asset Management
16
17 Commonwealth Bank Group/Colonial First State Global Asset Management
18 ABN AMRO Craigs Ltd (Private Clients)
19 Fidelity Institutional Group
20 Government Superannuation Fund
ING (NZ) Limited
NUMBER
OF ShARES
% OF ShARES
34,238,168
29,671,340
14,057,726
12,545,398
12,207,643
12,172,414
10,257,250
10,142,162
8,618,274
8,187,740
7,938,673
7,553,206
6,324,908
4,731,259
4,533,709
4,386,024
4,175,609
4,014,496
3,729,191
3,183,907
7.98%
6.91%
3.27%
2.92%
2.84%
2.84%
2.39%
2.36%
2.01%
1.91%
1.85%
1.76%
1.47%
1.10%
1.06%
1.02%
0.97%
0.94%
0.87%
0.74%
total
202,669,097
47.21%
* Refer to UBS substantial security holder information on the following page.
The analysis as set out above has been compiled based upon information provided by Thomson Financial Pty Limited. Total
shares on issue as at 17 August 2006 were 429,287,177. Additional shares have been issued subsequent to 17 August 2006
pursuant to SKyCITy’s Profit distribution Plan, Executive Share Option Plan and Performance Pay Incentive Plan.
distributionofordinarysharesandreGisteredshareholdinGsasat17auGust2006
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
>100,000
total
NUMBER OF
ShAREhOLdERS
NUMBER
OF ShARES
3,200
12,390
3,535
3,495
145
1,433,091
31,193,126
24,076,699
73,201,617
299,382,644
22,765 429,287,177
As at 17 August 2006 there were 545 holdings of less than 114 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 less than $A500.
1 1 9 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
shareholder and
noTeholder InforMaTIon ( c o n T I n u e d )
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
substantialsecurityholders
In accordance with section 26(1) of the Securities Markets Act 1988, the following persons had given notice as at 17 August
2006 that they were substantial security holders in the company and held a relevant interest in the number of ordinary shares
shown below.
ShAREhOLdER
dATE OF
SUBSTANTIAL
SECURITy
NOTICE
RELEVANT
INTEREST IN
NUMBER OF
ShARES
% OF ShARES
hELd AT
dATE OF
NOTICE
UBS Nominees Pty Limited and its related body corporate
Investors Mutual Limited
14 August 2006
1 June 2005
42,396,223
30,337,928
9.88%
7.26%
The UBS substantial security holder notice relates to shares held by UBS Global Asset Management Group, UBS AG Custodian
Group, UBS Wealth Management Group and UBS Private Client/Private Banking Group.
On 15 February 2006 Commonwealth Bank of Australia Group gave notice that it was no longer a substantial security holder in
the company.
capitalnotes
In May 2000, SKyCITy Entertainment Group Limited issued 150 million unsecured subordinated capital notes for a five-year
term at an issue price of $1.00. In May 2005 the capital notes were reissued for a new term of five years. The capital notes offer
holders a fixed interest rate of 8.0% until the next election/maturity date, being 15 May 2010. For further information refer note
22 of the financial statements.
As at 17 August 2006 SKyCITy was the holder of 26,140,250 capital notes, as treasury stock. The capital notes held by SKyCITy
are not included in the table below.
tWentylarGestcapitalnoteholdersasat17auGust2006
Forbar Custodians Limited – PPM Low A/c
Private Nominees Limited – Residents A/c
Investment Custodial Services Limited
Forbar Custodians Limited – PPM Medium A/c
First NZ Capital Custodians Limited
1
2
3
4
5 Custodial Services Limited – A/c 3
6
7 Citibank Nominees (New Zealand) Limited – NZCSd A/c
8 Custodial Services Limited – A/c 2
9 Guardian Trust Investment Nominees (RWT) Limited – NZCSd A/c
10 Forbar Custodians Limited – PPM high A/c
11 Private Nominees Limited – Non-Resident A/c
12 Forbar Custodians Limited – Residents 33% A/c
13 Morrow Plastics Limited
14 Public Trust
15 University Of Otago
16 Waikimihia Farm Limited
17 Forbar Custodians Limited – Resident 19.5% A/c
18 Knox home Trust Board Inc
19 Shona Margaret Auton & Robert Joseph Auton
20 Colin Alfred Carran & Patricia Anne Carran
NUMBER
OF CAPITAL
NOTES
% OF
CAPITAL
NOTES
10,976,500
5,294,000
3,292,000
1,954,000
1,852,000
1,625,000
857,000
849,000
573,000
567,000
520,000
501,000
500,000
500,000
500,000
500,000
410,000
400,000
300,000
300,000
7.32%
3.53%
2.20%
1.30%
1.24%
1.08%
0.57%
0.57%
0.38%
0.38%
0.35%
0.33%
0.33%
0.33%
0.33%
0.33%
0.27%
0.27%
0.20%
0.20%
total
32,270,500
21.51%
1 2 0 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
distributionofcapitalnoteholdinGsasat17auGust2006
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
>100,000
total
skycityaces
NUMBER OF
NUMBER OF
NOTEhOLdERS CAPITAL NOTES
–
1
598
2,661
177
–
2,000
3,445,250
66,772,000
79,780,750
3,437 150,000,000
In October 2005, SKyCITy Investments Australia Limited issued in Australia 1.5 million unsecured subordinated perpetual
reset exchangeable securities (SKyCITy ACES) at an issue price of A$100 per note. SKyCITy ACES offer holders a fully franked
variable coupon until the first reset date of 15 december 2010. For further information refer note 23 of the financial statements.
tWentylarGestskycityacesholdersasat17auGust2006
Share direct Nominees Pty Limited
J P Morgan Nominees Australia Limited
1
2 UBS Nominees Pty Limited
3
4 National Nominees Limited
5 AMP Life Limited
6 ANZ Nominees Limited
7 UBS Wealth Management Australia Nominees Pty Limited
8 Cogent Nominees Pty Limited – SMP Accounts
9 Brispot Nominees Pty Limited
10 RBC dexia Investor Services Australia Nominees Pty Limited – BKCUST A/c
11 Cogent Nominees Pty Limited
12 Citicorp Nominees Pty Limited – A/c 14
13 Citicorp Nominees Pty Limited – A/c 5
14 Citicorp Nominees Pty Limited
15 Westpac Custodian Nominees Limited
16 Bourne Nominees Proprietary Limited
17 Mrs Lea Maree Gattorna
18 RBC dexia Investor Services Australia Nominees Pty Limited – JBENIP A/c
19 Citicorp Nominees Pty Limited – Australia A/c
20 ANZ Executors & Trustee Company Limited
NUMBER
OF SKyCITy
ACES
% OF
SKyCITy
ACES
342,950
191,861
107,380
77,000
71,101
67,441
62,050
52,546
50,450
42,025
32,285
18,162
18,000
16,355
13,669
10,200
10,000
8,300
6,000
5,179
22.86%
12.80%
7.16%
5.13%
4.74%
4.50%
4.14%
3.50%
3.36%
2.80%
2.15%
1.21%
1.20%
1.09%
0.91%
0.68%
0.67%
0.55%
0.40%
0.35%
total
1,202,954
80.20%
As at 17 August 2006, 1,500,000 SKyCITy ACES (each having an issue value of A$100.00) were on issue.
1 2 1 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
shareholder and
noTeholder InforMaTIon ( c o n T I n u e d )
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
distributionofskycityacesholdinGsasat17auGust2006
NUMBER OF
SKyCITy ACES
hOLdERS
NUMBER OF
SKyCITy ACES
801
45
4
13
3
191,548
105,498
29,479
531,284
642,191
866
1,500,000
exerciseofpoWersunderlr5.4.2
On 14 October 2005 NZx delivered a Statement of Case to
the company alleging that on 6 October 2005 the company
breached LR 10.1.1 when a director of the company disclosed
information to the public prior to disclosing the information
to NZx. The information in question related to the company’s
participation in a sale process for the Australian company
Taverner hotel Group Pty Limited. The Statement of Case was
referred to NZx discipline. NZx discipline determined that
the company had not breached LR 10.1.1.
optionandshareriGhtsholders
As at 1 September 2006, options and share rights on issue
were as detailed below.
•
•
•
57,892 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 holders 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.
2,790,500 options issued under the Executive Share
Option Plan approved by directors of the company in
August 2002, held by 18 holders. The options have no
voting rights but 964,000 of the options entitle the holders
to two shares on exercise of each option and the balance
of 1,826,500 entitle the holders to one share on exercise
of each option.
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
>100,000
total
WaiversfromtheneWZealandexchanGe(nZx)
listinGrules
The following waivers from the NZx Listing Rules were
either granted and published by NZx within, or relied upon
by the company in, the 12 month period preceding the date
two months before the date of this annual report.
On 5 September 2002, 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).
On 24 June 2005, 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. On 24 June 2005, NZx granted
a waiver from compliance with LR 7.3.6 in respect of the
participation by Ms Shotter in the Executive Share Rights
Plan 2005.
On 16 March 2006, 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.
On 22 March 2006 NZx granted an approval under LR 7.3.7A
to make certain amendments to the Non-Executive director,
Managing director and Executive Share Option Plans and
the Managing director 2002 Option Terms to reflect the
company’s adoption of a profit distribution plan whereby
profit is distributed by way of bonus shares rather than by way
of dividends to shareholders.
All other waivers granted prior to the 12 month period
preceding the date two months before the date of this annual
report had ceased to have effect or were not relied upon
during the period.
Full details of the waivers referred to above can be obtained
from the Investor Centre/NZx ASx Announcements subsection
of the company’s website at www.skycitygroup.co.nz
1 2 2 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
•
•
•
•
–
the transferee has not been approved by the relevant
regulatory authority as an associated casino person
of any casino licence holder;
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; or
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; or
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.
•
1,519,000 share rights issued under the Executive Share
Rights Plan approved by directors of the company in
december 2004, held by 21 holders. The share rights have
no voting rights but each share right entitles the holder
to a number of shares on exercise calculated according
to a formula set out in the Plan, based on the difference
between the market price for the company’s shares on the
NZSx and the exercise value for the share right (calculated
in accordance with the Plan).
limitationsonacquisitionofordinaryshares
The company’s constitution contains various provisions which
are included to take into account the application of:
•
•
•
•
the Gambling Act 2003 (New Zealand)
the Casino Act 1997 (South Australia)
the Gaming Control Act (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; and
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.
transferofshares
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
1 2 3 I s k y c i t y 1 0 - y e a r a n n I v e r s a r y
oTher
dIsclosures
s k y c I T y e n T e r Ta I n M e n T g r o u p l I M I T e d
donations
donations of $235,518 were made by the company during the
12-month period ended 30 June 2006.
otherleGislation/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 on page 123, 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 2005 and the
Overseas Investment Regulations 2005 regulate certain
investments in New Zealand by overseas persons. In
general terms, the consent of the New Zealand Overseas
Investment Office 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.
otherdisclosures
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).
There are no material differences between NZx Appendix
1 and ASx Appendix 4E issued by SKyCITy Entertainment
Group Limited for 30 June 2006 and this annual report.
1 2 4 I s k y c i t y a n n u a l r e p o r T 2 0 0 6
REGISTERED OFFICE
AUDITOR
SKYCITY Entertainment Group Limited
PricewaterhouseCoopers
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
sceginfo@skycity.co.nz
email
Website www.skycitygroup.co.nz
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
SOLICITORS
Bell Gully
HP tower
171 Featherston street
Po Box 1291
Wellington
Minter Ellison Rudd Watts
Lumley centre
88 shortland street
Po Box 3798
Auckland
Finlaysons
81 Flinders street
GPo Box 1244
Adelaide
south Australia
188 Quay street
Auckland city
Private Bag 92162
Auckland
BANKERS
ANZ National Bank
Commonwealth Bank of Australia
Bank of New Zealand
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
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
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
c o n t e n t s
Financial Summary
chairman’S report
managing Director’S review
2005/06 objectiveS anD progreSS
10-year timeline
SKycity aucKlanD
SKycity aDelaiDe
SKycity Darwin
SKycity hamilton / SKycity QueenStown
SKycity cinemaS
3
4
8
13
14
16
18
20
22
24
hoSt reSponSibility
our people
our communitieS
boarD oF DirectorS
corporate governance
earningS anD Five-year trenD StatementS
Financial StatementS
DiScloSureS
ShareholDer anD noteholDer inFormation 119
Directory
125
26
30
34
38
40
51
57
112
DISTRIBUTIONTotal distributions for the 2005/06 year are 26.0 cents per share. The final 2005/06 distribution of 14 cents per share will be made on 6 October 2006 to those shareholders on the SKYCITY register as at 5.00pm on 8 September 2006.During 2006 SKYCITY implemented a profit distribution plan whereby profits are distributed by way of non-taxable bonus shares, with an option to have the bonus shares bought back for cash. Further information on the final 2005/06 profit distribution was mailed to shareholders on 20 September 2006.ANNUAL MEETINGThe 2006 annual meeting of SKYCITY Entertainment Group Limited will be held in the Auckland Room, SKYCITY Auckland Convention Centre, 88 Federal Street, Auckland on Friday 27 October 2006, commencing at 11.00am.The notice of meeting, including the agenda, will be mailed to shareholders on 10 October 2006.ANNUAL REPORTThe board of directors is pleased to present the annual report of SKYCITY Entertainment Group Limited for the year ended 30 June 2006.ROD McGEOCh EvAN DAvIESChairman Managing Director27 September 2006 A skycityPERFORMANcE27 SEPTEMBER 200610 YEARS OF ENTERTAINMENTCurrent and historiCal finanCial information, governanCe statements, news releases and other Corporate information are available online at www.skycitygroup.co.nzdirectory I
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SKYCITY Entertainment Group Limited
Annual Report 2006