SkyCity Entertainment Group Annual Report 2007

Plain-text annual report

ANNUAL REPORT 2007 NOTES FROM THE BOARDROOM DISTRIBUTION Total distributions for the 2006/07 year are 21.0 cents per share. The ﬁ nal 2006/07 distribution of 12.0 cents per share will be made on 5 October 2007 to those shareholders on the SKYCITY register as at 5.00pm on 10 September 2007. ANNUAL MEETING The 2007 annual meeting of SKYCITY Entertainment Group Limited will be held in the New Zealand Room, SKYCITY Auckland Convention Centre, 88 Federal Street, Auckland, on Friday 26 October 2007, commencing at 10.00am. The notice of meeting, including the agenda, will be mailed to shareholders on 10 October 2007. This report is dated 20 September 2007 and is signed on behalf of the board of directors of SKYCITY Entertainment Group Limited by: R H McGEOCH CHAIRMAN 20 September 2007 E TOIME EXECUTIVE DIRECTOR 2 I SKYCITY PERFORMANCE 2007 CHAIRMAN’S REPORT EXECUTIVE DIRECTOR’S REPORT BLUEPRINT FOR FUTURE SUCCESS BOARD OF DIRECTORS EMPOWERING OUR PEOPLE REVITALISING OUR CUSTOMER EXPERIENCE CARING FOR CUSTOMER WELFARE CONNECTING WITH OUR COMMUNITIES CORPORATE GOVERNANCE FINANCIALS OTHER INFORMATION AND DISCLOSURES DIRECTORY 5 6 10 16 20 22 34 46 52 64 76 130 143 SKYCITY I 3 “Over the next 12 to 18 months, SKYCITY’s success will be determined by its ability to streamline and reinvigorate the business for growth. We’ve made a good start: we have refreshed our leadership talent, concentrated on our core strengths, and have a clear understanding on what we must do to deliver growth. The result is a simpliﬁ ed, revitalised and focused business. We are committed to drive this change and momentum. We know to whom it matters: our shareholders, our customers, our people and the communities in which we work. Whilst the job is far from complete, I am conﬁ dent SKYCITY is well placed to continue its place as a strong and dynamic leader in gaming and entertainment. ”ELMAR TOIME EXECUTIVE DIRECTOR 4 I SKYCITY 4 I SKYCITY PERFORMANCE 2007 GROUP SUMMARY Earnings before Interest, Tax, Depreciation and Amortisation 2007 $m 2006 $m Movement % Auckland Hamilton Other New Zealand Operations Adelaide Darwin Corporate/Unallocated Total Group EBITDA Depreciation and Amortisation Funding Tax Minority Interests Net Proﬁ t after Tax 209.1 19.6 23.5 A$25.4 A$35.3 (24.7) 297.2 72.3 93.4 33.1 - 98.4 -7.9% 12.6% 63.2% -7.0% 5.1% -5.0% -1.3% 11.2% 11.3% 227.0 17.4 14.4 A$27.3 A$33.6 (26.0) 301.2 65.0 83.9 32.6 0.4 120.1 -18.1% NZ$m NET PROFIT AFTER TAX cps* DISTRIBUTIONS/DIVIDENDS 150 120 90 60 30 0 m 1 . 0 2 1 $ m 4 . 8 9 $ m 2 . 7 0 1 $ m 4 . 6 0 1 $ m 2 . 0 0 1 $ m 3 . 8 6 $ m 2 . 7 5 $ 01 02 03 04 05 06 07 30 25 20 15 10 5 0 c 5 . 6 2 c 0 . 6 c 2 0 . 4 2 c 5 . 3 2 c 0 . 1 2 c 0 . 9 1 c 8 . 5 1 01 02 03 04 05 06 07 * cents per share SKYCITY I 5 The board acknowledges that 2006/07 has been a disappointing year for shareholders in terms of SKYCITY’s ﬁ nancial performance. The company has faced a range of challenges and is currently engaged in a restructuring programme designed to better position the business for improved returns in 2007/08 and beyond. ROD McGEOCH CHAIRMAN 6 I SKYCITY CHAIRMAN’S REPORT 2006/07 In Retrospect Whilst a number of SKYCITY’s operations performed well during the 2006/07 ﬁ nancial year, the key driver of the Group’s overall outcome, the Auckland business, signiﬁ cantly under performed against previous years. The Cinemas business also disappointed due to ﬂ at revenues but against an expanded cost base. The board is actively engaged with management in developing and conﬁ rming actions to ensure that the company’s net proﬁ t outcome for 2007/08 and thereafter shows improvement on 2006/07. SKYCITY shareholders have enjoyed sustained growth in distributions from start-up in 1996 through until 2004 (26.5 cents per share:cps) although, in the most recent three years, returns to shareholders have been mixed with 26cps maintained in 2006 but lower distributions of 24cps and 21cps in 2005 and 2007, respectively. The company’s proﬁ t distribution plan, introduced in February 2006, has proved popular with New Zealand retail shareholders. However, due to the higher than expected take-up rate by shareholders and the accumulating effect on the number of shares on issue, the board has, in the interests of all shareholders, decided to remove the 2.5% discount incorporated within the strike price calculation from the ﬁ nal FY07 distribution of 12cps payable on 5 October and from future distributions under the plan. As a new company in a new sector in New Zealand, SKYCITY experienced strong growth during its ﬁ rst ten year period but is now at a stage in its development cycle where the priority during the next 12 month period is to see the business consolidate its position, strengthen its core business activities, rebuild its internal capabilities, and put in place the initiatives that will achieve renewal in the company’s revenues and earnings streams, with a particular emphasis on the Auckland property. The board is conﬁ dent that return to growth can be achieved given the strength of the company’s markets, operations and assets, and its strong licensed positions in New Zealand, South Australia and the Northern Territory of Australia. Chief Executive Position Following the departure of SKYCITY’s founding chief executive Evan Davies in late June 2007, the board was fortunate in being able to place non-executive director Elmar Toime into the role of Executive Director during the period between the departure of Mr Davies and the appointment of a new chief executive. Just as importantly, the board was able to ensure, through Mr Toime’s appointment, a continuing momentum to the company’s restructuring imperatives and to maintain close contact with the existing and emerging issues within the key business units. Elmar Toime brings to the role the experience of having been the chief executive of a large commercial organisation (New Zealand Post) and the knowledge acquired as a SKYCITY non-executive director since 1996. Mr Toime has been mandated by the board to ensure that the restructuring plan announced in May 2007 is implemented effectively and expeditiously and to SKYCITY I 7 ensure that the business is placed on a sound footing prior to the arrival of the new chief executive. One of the most important decisions a board makes is the selection of the company’s chief executive. The best available candidate must be identiﬁ ed and recruited to implement board policy, develop and recommend the strategic direction of the business, ensure operational and ﬁ nancial efﬁ ciency, interact effectively with government, regulators and the community, and to lead and inspire management and staff. The board is currently in interview phase for a new chief executive and is conﬁ dent a candidate of high quality will be able to be secured to continue the company’s consolidation programme and to guide the business back onto a sustained growth path for the future. The board expects to be in a position to announce a high calibre appointment within a relatively short timeframe. 2007/08 Proﬁ t Guidance Guidance for the 2007/08 year has been provided in conjunction with the 2006/07 ﬁ nancial result and conﬁ rms the board’s conﬁ dence in the resumption of a growth path for the business. Based on the existing business model being continued (refer asset reviews in the following section of this report) and the company’s current and planned strategies being effective in the competition for the discretionary entertainment dollar, reported tax-paid earnings have been projected to increase by between 10- 12% in the forthcoming year. This proﬁ t projection remains conditional upon international rebate business being at normalised outcomes, main gaming ﬂ oor construction disruption being no worse than has been experienced to date (until expected completion by March 2008) and smoking bans in Adelaide during the post-implementation period (from 1 November 2007) being no worse than experienced in New Zealand during the corresponding post-implementation period. Given that international rebate business is less than 5% of total revenues, this business sector is not, under normal circumstances, expected to generate signiﬁ cant volatility in terms of the overall 2007/08 outcome. Asset Reviews: Adelaide and Cinemas SKYCITY’s existing business model comprises gaming entertainment facilities in Auckland, Hamilton and Queenstown, a 40.5% share in Christchurch Casino, Adelaide and Darwin in Australia, and cinema exhibition operations in New Zealand. Subsequent to the strategic asset review process announced in May 2007, the company has advised that it is interested in receiving offers for its SKYCITY Adelaide and cinema exhibition businesses. During the 2006/07 year, the SKYCITY Metro Centre in downtown Auckland was sold for $55 million, with the sale proceeds used to fully fund the acquisition of the 50% Village Roadshow share of the Village/SKYCITY Cinemas joint venture. Darwin Casino Licence A key achievement during 2006/07 was the extension of the Darwin casino licence term beyond 2015. A fully exclusive casino licence extension, negotiated with the Northern Territory Government, provides SKYCITY Darwin with an effective 15/20 year renewable licence term. As part of the license negotiation, SKYCITY has agreed to commit A$30 million of capital works which will accommodate the strong growth trends projected for this business. Board of Directors Following the retirement of Rob McLeod and the resignation of Evan Davies, both in June 2007, the board was reduced in size from six non-executive directors plus the Managing Director to four non-executive directors plus Elmar Toime as Executive Director. 8 I SKYCITY Acknowledgement: Evan Davies On behalf of the board, I would like to formally acknowledge the contribution made by SKYCITY’s founding chief executive Evan Davies to the growth and development of the company. During Mr Davies’ tenure SKYCITY has grown from a concept plan to a multi-site (New Zealand and Australia) and dual-listed (NZX and ASX) major scale corporate with an enterprise value in excess of NZ$3 billion and employing more than 4,500 people. Annual Report Shareholders will be aware that, for the ﬁ rst time this year, the primary reference for the company’s annual report is at the Investor Centre section of the company’s website, with shareholders who wish to continue to receive a printed copy able to nominate that preference. SKYCITY encourages shareholders to give consideration to receiving the annual report via electronic format as this will result in production cost savings and reduced consumption of physical resources. 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 Friday 26 October 2007, commencing at 10:00am. ROD McGEOCH CHAIRMAN The directors are actively seeking to appoint two additional non-executive directors to rebuild the board complement. Those appointments are expected to be conﬁ rmed, subject to regulatory approval processes, within the next few months. Regulatory approval can be an extended process and somewhat difﬁ cult to predict as to timing but, in the interim, the new directors to be appointed will be invited to attend the company’s board meetings. Bill Trotter and myself retire by rotation at this year’s annual meeting and offer ourselves for re-election. SKYCITY’s board charter requires that where a director has completed two terms in ofﬁ ce since ﬁ rst being appointed by shareholders, they must be formally invited by the board to stand for re-election. At its August 2007 meeting, the board unanimously invited Bill Trotter and myself to stand for re-election. Bill Trotter is standing for re-election for a further term of one year in order to ensure that the board maintains an appropriate structure during its transition process. Mr Trotter intends to retire at the 2008 annual meeting by which time new directors will have been appointed and board strength will have been renewed. The directors conﬁ rm that Bill Trotter and Rod McGeoch are effective board and committee members and the board unanimously supports both directors standing for re-election at the company’s annual meeting in October. Corporate Governance SKYCITY has in place an extensive and comprehensive set of governance protocols and procedures which align closely with the corporate governance principles of both the New Zealand and Australian stock exchanges. Details of the governance standards and the company’s compliance therewith are included in this annual report. SKYCITY I 9 EXECUTIVE DIRECTOR’S REPORT I am pleased to make this report to shareholders on the performance and status of the business. In late June 2007 I was asked by the board to take up the role of Executive Director in order to provide ongoing leadership during a critical phase of the company’s operations. As a non-executive director, I had been involved at the strategic and stewardship levels in the opportunities and challenges of the various SKYCITY businesses. Accordingly, I had a clear understanding of the issues and risks facing the company and during my tenure to date have acted, with the board’s decisive support, to address these. I will report on these matters later in this review and more detail about them and their impact on the future prospects for SKYCITY is provided throughout the commentary included in this annual report. Earnings Performance Although overall revenues were up 7% to $816 million, the SKYCITY Group disappointed at the earnings lines, with operating earnings (as measured by EBITDA: earnings before interest, tax, depreciation and amortisation) down 1.3% on the prior year from $301 million to $297 million and reported net proﬁ t after tax down 18% from $120.1 million to $98.4 million. Among the issues to be addressed there were some speciﬁ c challenges which warrant comment in this report in order to facilitate shareholder understanding of the company’s ﬁ nancial performance and its future direction. These issues included the following: • restructuring of senior management for greater effectiveness • allocating and embedding the announced cost reduction programme into management budgets to ensure ownership and commitment • advancing the asset review process • reviewing and assessing at an in-depth level the performance and challenges of the Auckland property increasing the depth of disclosure of some key business elements within the company’s public reporting. • The 2006/07 result reﬂ ected organic revenue growth in most business units and cost reductions in Auckland and corporate ofﬁ ce, offset by reduced gaming revenues and earnings in Auckland, reduced income from the international rebate business across the Group, and lower than expected cinema earnings as the result of lower performing ﬁ lm product coupled with a higher cost base due to an increase in the number of sites. Darwin, Adelaide, Hamilton, Queenstown, and the Auckland attractions operations (hotel, convention, restaurants and bars, Sky Tower, parking) all increased EBITDA in the 2006/07 year and corporate costs were reduced. However, these increased earnings and reduced costs were more than offset by reduced earnings from SKYCITY Auckland’s gaming operations and from Cinemas. 10 I SKYCITY Key Factors Affecting the 2006/07 Result The key factors affecting the 2006/07 ﬁ nancial result included the following: • signiﬁ cant disruption to the customer experience as a consequence of the main gaming ﬂ oor refurbishment project in Auckland (commenced September 2006 and programmed through to March 2008) strong attractions revenues in Auckland in hotels, convention, and food and beverage reduced overhead costs: Auckland and corporate ofﬁ ce • • • continued revenue growth in Hamilton and Darwin with revenues up 14% and 9% respectively static performance in Adelaide, and ﬂ at cinema revenues but from a higher cost base (more sites, increased number of screens). • • Underlying or Normalised Earnings Whilst reported net proﬁ t was down 18% on prior year, underlying or normalised net proﬁ t was up 7%. Reported net proﬁ t includes transactions which are not expected to recur and/or which relate to non-trading activities and these can be removed to better identify the underlying trading performance of the business. At the operating earnings (EBITDA) line , underlying or normalised Group earnings for the gaming entertainment operations (excluding cinema operations) produced a 4% improvement in the year ended 30 June 2007, up from $273 million in FY06 to $285 million in FY07. It should be noted that Cinema operations have been excluded from this assessment given that this was the ﬁ rst year in which the Group had 100% ownership of that business, up from 50% in the previous year. The focus on EBITDA (representing the underlying operating performance of the business) is important because it reﬂ ects business operations and removes the impact of ﬁ nancing, tax and other transactions. A proper understanding of the trends of the business involves evaluating the underlying EBITDA year on year movements. Further clarity in the company’s reporting has been provided in the 2006/07 annual result SKYCITY I 11 through separation of corporate or central costs from those of the Auckland business and identiﬁ cation of the international rebate business (IRB) sector as a subset within table games. IRB performance is clearly identiﬁ ed within the 2006/07 result and it is proposed that IRB will be reported as a separate business segment in the 2007/08 year. The principal adjustments to derive underlying or normalised earnings from reported earnings included the following: • adjustment of IRB to theoretical/normalised • elimination of gains on sale of properties • removal of one-off restructuring costs • elimination of ﬁ nancial restructuring gains/ losses and tax rate changes. Share Price SKYCITY’s current share price does not show any signiﬁ cant gain since mid 2004. The board and management are resolved to improve the earnings performance of the business so that can then be reﬂ ected in improved share price. The disappointing share price performance, despite a strong yield from continuation of the company’s 90% proﬁ t distribution policy, is due to a combination of both internal and external factors. During the last three years some signiﬁ cant constraints have affected the earnings potential of the New Zealand businesses, including the $20 note acceptor limitation in March 2004, a new regulatory environment from July 2004, smoking bans from December 2004, the Auckland main gaming ﬂ oor refurbishment project since September 2006, and sustained higher interest rates during the last 12 months which have inevitably restricted the discretionary spending power of the New Zealand customer base. Looking Forward Looking forward, we expect the following: Hamilton and Darwin to continue their revenue growth and cost management progress, Auckland gaming to progressively regain lost ground as the main ﬂ oor refurbishment and other initiatives start to take effect, Adelaide earnings to be held back by smoking bans from 1 November 2007, and cinema earnings to improve on the back of better performing ﬁ lm product. Future investment in Adelaide and Cinemas will depend on the outcome of the market testing processes currently under way, as to retention or sale of these assets. Christchurch Casino offers scope for enhanced earnings once the proposed refurbishment of that property has been completed. Finally, the company looks forward to developing closer working relationships with government, regulators, police, service providers and other community agencies in a collaborative effort to mitigate customer risk and to help ensure a continuing safe environment for customers. Performance Summary Set out below are summary comments relating to each of the SKYCITY operations for the 2006/07 year. The full SKYCITY FY07 result presentation, dated 20 August 2007, can be found on the company’s website at www. skycitygroup.co.nz under the section header ‘Investor Centre’. The result presentation included on the website provides more extensive detail on the FY07 result than can be accommodated in this review summary. Auckland SKYCITY Auckland’s 2006/07 ﬁ nancial result shows an 8% gross margin reduction in local gaming operations, partially offset by increased attractions (non-gaming) gross margin performance in hotels (occupancies and room rates up), conventions, and food and beverage, and through reduced overhead costs. 12 I SKYCITY EBITDA performance for the local business operations (exclusive of international rebate business) was down 2.9%, or $6.3 million, compared to the previous year. Whilst machine play kept pace with growth in the broader gaming market, up 3.5%, this was offset by local table games and food and beverage revenues down 2.6% and 3.6% respectively. Auckland gaming performance is the primary contributor to the overall SKYCITY Group result. As a consequence, management attention has been focused on how to reverse the FY07 downturn in local Auckland gaming revenue and enhance the gaming customer experience. Once completed, the new main ﬂ oor renovation will add signiﬁ cantly to that experience (with early indications positive that this will be achieved) and a range of supporting initiatives will be deployed during the next 12 months. The in-depth Auckland gaming operations review, conducted in July 2007, identiﬁ ed ﬁ ve key focus areas for performance improvement which are listed below: • change the mix of machine game product to better reﬂ ect the preferences of the Auckland market • create zones within the gaming ﬂ oor layout to better serve higher value players to retain and grow this segment • • optimise the remaining components of the main gaming ﬂ oor refurbishment project improve customer communications and service, and relaunch the ACTION customer loyalty programme. • Management is focused on ensuring that the Auckland business provides a superior total customer experience in conjunction with completion of the gaming ﬂ oor renewal. Adelaide SKYCITY Adelaide’s 2006/07 local gaming and international rebate revenues were up marginally but were offset by reduced non-gaming revenues and a 2% increase in expenses, leading to a contraction in operating earnings of 7% compared to prior year. The extended delay in obtaining approval from the South Australian Government for the carpark component of the redevelopment project has seriously hampered the company’s ability to optimise the potential of its Adelaide business by extending the property’s competitive disadvantage against the pub and club market. South Australia continues to be a difﬁ cult region for business growth and development, and the delays experienced in the redevelopment project now make it difﬁ cult for the company to mitigate the impact of the smoking bans which are being introduced from 1 November. As a consequence of the challenging investment and operating environment in South Australia, SKYCITY is testing market interest in its Adelaide property with formal bids invited from interested parties. A comprehensive strategic plan for the Adelaide property has been developed based around the redevelopment options for the property. This plan, if delivered successfully, will have the potential to add substantive value to SKYCITY’s Adelaide business. However, if another party is of the view that it can achieve signiﬁ cantly greater value than SKYCITY’s strategic value, then the board will consider divestment of its Adelaide business. The board will be careful to evaluate the various options to make sure that shareholder interests will be best served. Darwin SKYCITY Darwin continues to perform well, having added signiﬁ cant value to SKYCITY’s asset portfolio since acquisition in July 2004. During this three year period, Darwin has delivered strong revenue and earnings growth, with all sectors of the business mix contributing. The Darwin expansion project (gaming, restaurant, SKYCITY I 13 bar and outdoor facilities), due to commence in October 2007 with completion scheduled for December 2008, will allow the Darwin business to continue on its growth path. entertainment footprint. As a consequence, we have announced that the SKYCITY Cinemas business is available for sale with interested parties invited to submit formal offers. Worth noting during the 2006/07 year were the successful negotiation of the casino licence extension with the Northern Territory Government and purchase of the adjoining Little Mindil land. This acquisition will increase the Darwin property’s entertaining capacity, with outdoor events at SKYCITY Darwin being a mainstay of the Darwin social calendar and a signiﬁ cant contributor to the business’s food and beverage revenues. Hamilton SKYCITY Hamilton has achieved consistent revenue and earnings growth since opening in September 2002, with growth trends projected to continue. Gaming revenues for 2006/07 were up strongly on the prior year, complemented by growth in food and beverage revenues as the new bar and restaurant facilities came on stream. Cinemas SKYCITY Cinemas disappointed during 2006/07 on the back of low performing ﬁ lm product and a less than satisfactory initial operating performance by the new nine screen Queensgate multiplex in Lower Hutt. The cyclical nature of cinema product quality and the high demand for capital expenditure to keep pace with competitive pressures has led to an unsatisfactory outcome in terms of return on assets employed. This downward trend in return on investment has eroded the beneﬁ ts that the company anticipated would ﬂ ow from customer synergies and a broadening of the SKYCITY Other Operations Christchurch and Queenstown casinos both performed well during the 2006/07 year, with signiﬁ cant upside potential anticipated from Christchurch Casino once the intended renovations to this property have been introduced. Customer Welfare and Regulatory There has been considerable public interest in recent months in how casinos deal with a range of customer welfare issues including problem gambler identiﬁ cation, elimination of loan- sharking activity from casino premises, potential money laundering, and the detection and elimination of other undesirable activity. SKYCITY is highly committed to ensuring that its casino operations have the conﬁ dence of the general public and the regulatory agencies in each of its jurisdictions and to a proactive and co-operative approach to these challenges. Detecting suspicious and/or undesirable activity is a signiﬁ cant challenge. In addition to the company’s own observations and monitoring, we also rely on information provided to us by others and, with more than 30,000 visitors per day on average to our ﬁ ve casino properties, most of which are operating on a full 24/7 basis, it is not possible to achieve a 100% detection rate at all times. However, SKYCITY and its staff, in conjunction with other agencies and interested parties, will continuously strive to ensure that a 14 I SKYCITY very high detection percentage is achieved and that, in all instances, an appropriate response is made to each situation identiﬁ ed by and/or reported to us. As a matter of policy and good governance, SKYCITY does not see any inherent conﬂ ict in its desire to maintain public conﬁ dence in its operations and the creation of shareholder wealth over time. Occasional external commentary that suggests there is a conﬂ ict is not warranted and not well founded. The main difﬁ culty for the company and its staff arises at the practical level when intervention is sometimes required in an environment of uncertainty relating to the interpretation of observed behaviours. SKYCITY’s training and refresher programmes are designed to develop and then enhance the observation, detection and appropriate response skills in its employees at all levels. People I would like to take the opportunity of this annual report to acknowledge the efforts of all SKYCITY people during 2006/07 in what has been a challenging year. We look forward to their continued enthusiasm and commitment to the challenges and opportunities that the 2007/08 year will present. SKYCITY relies on the efforts and skills of its more than 4,500 employees in New Zealand and Australia who are committed to customer service delivery on a 24/7 basis. Because SKYCITY delivers an experience to its customers rather than a physical product, the service ethos of our staff is critical to the enjoyment of their experience by our customers and, as a consequence, their propensity to spend and return again. In 2007/08 management plans to be fully engaged with customer-facing staff at all levels of the operation, with the objective of further enhancing service attitude and delivery, customer satisfaction ratings and, in turn, the earnings potential of the business. As sometimes occurs in a company whose history has been one of sustained growth, costs and organisational structures evolve into forms not necessarily best suited to a more challenging business environment. Since late June the senior management structure has been simpliﬁ ed and a number of executives and support staff have left the business. While it is never pleasing to let good people go, falling proﬁ t margins have necessitated a rethink of the company’s cost base and a reprioritisation of support activities. Conclusion SKYCITY continues to be a strong business, notwithstanding its relatively weaker performance in FY07. Whilst I am pleased with the direction the business is heading, that is not to say things will be easy, but the tremendous creativity and dedication of the many people in the company augurs well. ELMAR TOIME EXECUTIVE DIRECTOR SKYCITY I 15 SKYCITY has a blueprint for performance: we are focused on the action we need to take to improve the business. • working with machine vendors to broaden the mix of gaming product to better reﬂ ect New Zealand gaming preferences, and • personalising our offering to high value customers, to ensure they get a premium service and experience. In the past nine months, we have undertaken a comprehensive review and restructure of our operations. Our focus has been to put in place the systems, the resources and the people to maximise our efﬁ ciency and effectiveness. Progress has been good to date: we have identiﬁ ed $33 million in cost savings, and streamlined both systems and structures for greater efﬁ ciency. We will continue to look for improvement; our priorities for the year ahead are very clear. Consolidate our core business Gaming is the centre of SKYCITY’s entertainment offering. While by no means the only facet of our activities, it remains the pivotal element of our business. With its world-class gaming ﬂ oor, our Auckland casino, SKYCITY Auckland, is our ﬂ agship operation. SKYCITY’s performance was disappointing in 2007. While Auckland remains strongly proﬁ table, operating earnings were down 2.9% in the 2006/7 year. It was evident that the renovation programme for the main gaming ﬂ oor, had a greater impact on customers than had been expected. Customer visits were relatively ﬂ at against the previous year, but spending fell. Our priorities for Auckland gaming now, following a fresh look at our offering, will be to add value to the customer experience by: • redesigning our gaming environment, customising playing areas and offering a broader range of experiences Results to date show positive progress. Our customers have provided us with great feedback to Auckland’s new Baccarat Room and our enhanced VIP amenities. We have conﬁ dence that we are injecting new excitement and energy into the SKYCITY experience and, in return, will deliver stronger results. Enhance the customer experience and customer welfare Our vision is to do the best we can to give customers a happy, safe and entertaining time when they visit our properties. We have been building an in-depth understanding of what our customers want today as well as how their needs and tastes are evolving. We are investing in new systems and tools to provide that insight and we are upgrading our Action loyalty programme and marketing to recognise these needs. Providing a safe and enjoyable entertainment environment for customers is a priority for us. Not only does it enhance the customer experience, but it creates sustainable shareholder value. We are continuing to evolve our policies and programmes through: • an external review of practices and procedures • enhanced training programmes in host • responsibility, and leading a working party with government agencies to continually improve information- sharing practices. 18 I BLUEPRINT FOR FUTURE SUCCESS Cost reduction programme for greater efﬁ ciency and effectiveness SKYCITY as a business cannot stand still – our leadership depends on our ability to innovate, anticipate change and respond quickly. To this end, we are streamlining the business. We have reviewed and simpliﬁ ed our leadership and management structures, providing clear reporting lines and accountability for better decision making. We have reviewed our underperforming assets to determine their long term value for shareholders. A review of our back ofﬁ ce systems and processes means we have been able to centralise a number of Group functions. In addition, we are introducing smart sourcing strategies and a shared services operating model. These cost saving activities commenced in the second quarter of the FY07 ﬁ nancial year and have continued. Collectively these changes will have removed $33 million in costs from the business when the programme concludes in 2008. This will assist to recover our performance levels. However, we are committed to ensuring we do not lower the standard of customer service or welfare, both of which remain of paramount importance to us. Encourage and reward high performance We know that our people are at the heart of a great SKYCITY experience. Service industries face signiﬁ cant competition for employees and SKYCITY is no exception. While we have a strong base of talented, hard-working and committed staff, employee turnover levels are unacceptably high in some of our front of house areas. We will be revisiting employee climate surveys so that we can better understand the factors that might be inhibiting peak performance. To encourage people we are recognising talent by promoting from within where we can. Our leaders are being asked to create work environments that encourage and reward high performance and so keep SKYCITY as an employer of choice. Future growth SKYCITY has much to be proud of, as a well- established, proﬁ table trans-Tasman business. There is strong leadership energy. We are connecting with our customers in new ways. We have clarity about what we must do to deliver performance and growth from our existing businesses. In short, we understand that to earn our reputation as a leading company in our sector, we will create value for our shareholders through attention to customer service, community welfare and employee development. BLUEPRINT FOR FUTURE SUCCESS I 19 BOARD OF DIRECTORS Rod McGeoch Chairman of Directors Chairman of the Nomination Committee and member of the Governance and Remuneration Committee Rod McGeoch was appointed a director in September 2002 and Chairman of the company on 1 April 2004. Mr McGeoch is an independent non-executive director based in Sydney, Australia. He is a director of Telecom Corporation of New Zealand Limited, LIPA Pharmaceuticals Limited and Ramsay Health Care Limited, and chairman of Saatchi & Saatchi’s Trans-Tasman Advisory Board and Vantage Private Equity Growth Limited. Mr McGeoch is an Australian Prime Ministerial appointment to the Australia and New Zealand Leadership Forum and a trustee of the Sydney Cricket and Sports Ground Trust. Elmar Toime Executive Director Member of the Audit and Risk Committee and member of the Nomination Committee Former chief executive of New Zealand Post and credited with leading New Zealand Post through its transformation into one of the top-rated postal services internationally, Elmar Toime has extensive international experience in running large companies. His experience at both management and board level serves to provide the company with sound guidance while the global search for a new chief executive is undertaken. Mr Toime was appointed a director in February 1996 and Executive Director on 25 June 2007. 20 I BOARD OF DIRECTORS Patsy Reddy Deputy Chairperson of Directors Chairperson of the Governance and Remuneration Committee and member of the Nomination Committee Patsy Reddy is an independent non-executive director and was appointed in 1994. Ms Reddy is also a director of Telecom Corporation of New Zealand Limited and Active Equities Limited and is a member of NZX Discipline. She is a trustee of the New Zealand International Festival of the Arts, Victoria University of Wellington Art Collection Trust, SKYCITY Auckland Community Trust and a member of the Adam Art Gallery Advisory Board. Sir Dryden Spring Chairman of the Audit and Risk Committee and member of the Nomination Committee Sir Dryden Spring is an independent non-executive director and was appointed in October 2003. He is chairman of ANZ National Bank Limited and certain subsidiaries. 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. Bill Trotter Member of the Governance and Remuneration and Nomination Committees Bill Trotter was appointed a director in March 2000. Mr Trotter is an independent non-executive director under the NZX Corporate Governance Best Practice Code and a non-executive director under the ASX Corporate Governance Principles and Best Practice Recommendations. Mr Trotter is executive chairman of First NZ Capital Holdings Limited and FNZ Holdings Limited and certain subsidiaries. Other Information Evan Davies resigned as Managing Director and Chief Executive Ofﬁ cer on 25 June 2007 and Rob McLeod retired as a director on 30 June 2007. The company is in the process of identifying two new directors for appointment to the board and also a new Chief Executive Ofﬁ cer. Announcement of these appointments will be made later this year, subject to regulatory approval processes. Following the retirement of Mr McLeod on 30 June 2007, Mr McGeoch was appointed a member of the Audit and Risk Committee and Sir Dryden Spring was appointed chairperson of that committee. BOARD OF DIRECTORS I 21 Our people bring the SKYCITY experience to life. We deﬁ ne, evolve, and drive the SKYCITY brand through our recruitment and development practices; ﬁ nding great people and encouraging them to stay and grow with the company gives us a distinct advantage as we focus on building an energetic, adaptable company. We are proud to be one of Australasia’s most diverse workplaces, comprising over 4,500 employees from 80 nationalities. We work in over 800 different types of jobs and 10% of us have been part of SKYCITY since the day we opened, moving and growing with the business. In all our diversity, we share a common purpose: to understand our customers, to engage and provide them with great service. To support this, we are: • making our structures simpler, our systems more efﬁ cient and offering new challenges and targets to our management teams • enhancing our commitment to fair and consistent employment by providing strong leadership and developing our people to their full potential, and • continuing to recognise and reward superior individual and team performance. Simpliﬁ ed structure, stronger leadership One of the ﬁ rst changes we have made is to streamline our senior management structure. We have removed layers and reduced duplication which means we are more focused and efﬁ cient. We expect our managers to lead with clear purpose and accountability, and to have the right tools and authority to do their job. Communication is more open and simple. Staff initiatives from different parts of the business are better able to complement and support each other. And there is greater transparency - people know where the company is going, and how they contribute to that progress. EMPOWERING OUR PEOPLE I 25 SKYCITY EXECUTIVE TEAM We are building the right team of senior executives: leaders who will direct the progress of SKYCITY in the coming years. The current team provides a depth of internal and industry expertise with a breadth of international experience and best practice. Jane Hastings, General Manager Group Marketing and Sales Jane is an internationally experienced marketer who joined SKYCITY in early 2007. Jane understands the societies and business cultures of Australasia - SKYCITY’s business backyard. She also understands what motivates customers and keeps them loyal in the highly competitive entertainment industry. Jane is focused on growing business revenues for the group by enhancing the customer experience with a fresh range of broad sales and marketing initiatives. Jane is a recognised force in the Asia-Paciﬁ c marketing industry and brings extensive experience from the service sector as well as leading listed and Fortune 500 global brands, including AIG, American Express, Shell and Singapore Airlines. David Sullivan, Chief Financial Ofﬁ cer David has been leading SKYCITY’s ﬁ nancial operations since October 2006. He holds a crucial role as the company goes through its streamlining process of shared services to drive greater efﬁ ciencies and improve operational performance. David is well respected in the ﬁ nancial community with a truly international background, having worked extensively in China, Australia, the UK and Europe as well as in New Zealand. He leads a management team responsible for ﬁ nance strategy and operations as well as information services across the group. He became a director of the Christchurch Casino Limited in August 2007. Before joining SKYCITY, David was Vodafone New Zealand’s ﬁ nance director and prior to that held senior positions at Baycorp Advantage and Lion Nathan. 26 I EMPOWERING OUR PEOPLE Alistair Ryan, General Manager Corporate Alistair joined SKYCITY in 1995 and has extensive knowledge of the company’s development as a leading NZX and ASX- listed corporate. As General Manager Corporate and Company Secretary for the SKYCITY Group, he is responsible for the regulatory and corporate compliance functions including the company’s stock exchange listings in New Zealand and Australia, business protection and risk management, customer welfare and host responsibility, government and regulatory relationships and policy, and for the company’s corporate governance regime. Alistair is also a director of Christchurch Casinos Limited, Christchurch Hotels Limited (the owner of the Christchurch Crowne Plaza Hotel), Queenstown Casinos Limited and other SKYCITY subsidiary companies. Prior to joining SKYCITY, Alistair was a ﬁ nancial services partner with international accounting ﬁ rm Ernst and Young. Gillian Gibson, General Manager Group Human Resources Gillian Gibson has ultimate responsibility for SKYCITY’s people - attracting and retaining the best people, and remunerating and rewarding them in the right way while giving them the right tools and incentives - empowering them to perform. She has been a driving force behind human resources at SKYCITY since 1998, most recently as General Manager of Human Resources for the SKYCITY Group. Gillian has previously held senior human resources roles with Telecom New Zealand, Lion Nathan and KFC. EMPOWERING OUR PEOPLE I 27 SKYCITY GENERAL MANAGEMENT TEAM David Christian, General Manager SKYCITY Auckland David Christian took up SKYCITY Auckland’s management in mid-2006. He has a broad understanding of the Auckland business and community, having previously held responsibility for gaming at SKYCITY Auckland. His extensive SKYCITY experience includes the general management of SKYCITY Hamilton. David has more than 20 years experience in hospitality, hotel and casino management including working in several Australian states and in Singapore. David was previously General Manager of the Wrest Point Hotel Casino and General Manager Operations of the Country Club Casino, both in Tasmania. Geoff Hogg, General Manager SKYCITY Hamilton Geoff has been with SKYCITY since 1996. He has a wealth of experience and knowledge of the industry and SKYCITY’s operations. He developed his skills in operations, business development and management of the SKYCITY business and the New Zealand gaming industry over the last decade. Geoff’s SKYCITY experience has seen him gain considerable expertise in managing staff teams for both table and machine gaming, at SKYCITY Auckland and previously at Christchurch Casino. Mary Whelan, General Manager SKYCITY Queenstown Mary has been General Manager of SKYCITY Queenstown Casino since May 2006. Mary commenced in the gaming industry over 20 years ago and has since built a strong career including senior positions in many Australian casinos. She joined SKYCITY as VIP Services Manager for SKYCITY Adelaide in 2004, going on to manage the international business team in Melbourne where she established the SKYCITY ofﬁ ce. 28 I EMPOWERING OUR PEOPLE Andrew Wilson, General Manager SKYCITY Darwin Andrew has managed the Darwin property since 2001 when it was owned by MGM Mirage. Since being purchased by SKYCITY in 2004, Andrew has been directly responsible for the day to day operations and performance of SKYCITY Darwin as well as overseeing growth and development plans for the property. He has a strong background in hospitality and casino management including 15 years with Burswood International Resort Casino in Perth where he was chief operating ofﬁ cer. Andrew is a board member of the Northern Territory Chamber of Commerce and Industry and the Australian Technical College. Matthew Liebmann, General Manager SKYCITY Cinemas Matthew has been General Manager of SKYCITY Cinemas since October 2006, and brings more than 12 years experience in the entertainment and media industry to the position, including six years in a variety of roles in cinema exhibition for Village Roadshow. Prior to SKYCITY, Matthew was a Director in the Entertainment and Media practice at PricewaterhouseCoopers in Sydney, where he was a specialist entertainment and media consultant. SKYCITY Adelaide Kevin Brewer was the General Manager of SKYCITY Adelaide effective to 10 September 2007. Simon Jamieson is acting as General Manager whilst the business recruits a suitable candidate to lead the Adelaide property. With over 25 years of commercial experience, Simon brings a wealth of corporate and operational skills to SKYCITY. Simon became director of food and beverage in Penang, Malaysia and Christchurch, New Zealand for the Parkroyal Group. He then moved into General Manager roles for the Duxton and Aroma Groups in New Zealand prior to joining SKYCITY. EMPOWERING OUR PEOPLE I 29 PLANNING FOR PERFORMANCE SKYCITY is focused on maintaining the right competencies, skills and experience for the success of business today, and for our future performance and growth. We have long specialised in developing talent and promoting people from within the organisation, while attracting and retaining people with speciﬁ c expertise from outside the SKYCITY Group. This combination of ongoing recruitment of outside talent and upskilling and continual development of internal resources gives us a distinct edge in our growth planning. We are creating new collaborative opportunities to share ideas and best-practice examples across our business. We have introduced an internal peer review process focused on the gaming areas of our business and we have established a think tank of gaming unit leaders from all SKYCITY casinos. Fast-tracking a young leader’s development Entering the trainee programme with a Bachelor degree, Kate Lilly underwent hands-on exposure to all parts of the SKYCITY business. In her second year Kate joined SKYCITY Adelaide where she spent eight months in Human Resources, followed by a six-month placement with VIP Services. Kate discovered a passion for gaming service and on returning to SKYCITY Auckland was appointed Area Manager on the main gaming ﬂ oor. Kate now has responsibility for 12 people on any given shift. “These two years have given me a breadth of training and experience which helps me focus on the right career path,” says Kate. 30 I EMPOWERING OUR PEOPLE Training for success SKYCITY’s commitment is to help people realise their potential. We do this by providing targeted learning and development initiatives and supporting personal career goals. SKYCITY’s programmes focus on training and assessing our people within their workplace, in parallel with the work they undertake. This allows learning to be delivered efﬁ ciently, in familiar surroundings with colleagues and managers. Developing great careers in hospitality From fast food to ﬁ ne dining, from gaming to housekeeping, SKYCITY’s development programmes are playing a big role in the career growth of many young New Zealanders in the hospitality industry. In 2006/07 we enhanced the SKYCITY Leadership Trainee Programme to meet the changing needs of the business, aiming to provide trainees with broad experience of SKYCITY and develop operational managers within two years. Training and development - a focus on realising potential • Senior managers across the business are exposed to world-class leadership training through Mercer Delta Consulting. The focus is on balancing leaders’ personal aspirations with the evolving needs of the company. • The New Zealand Modern Apprenticeship Scheme continues to provide a balance of practical and academic experience for the young apprentices entering the business. SKYCITY has recruited seven front-line apprentices under this scheme. • SKYCITY is seeing the beneﬁ ts of the literacy programme piloted in Auckland in 2006/07. In the coming year we will make this opportunity available to even more Auckland staff. • SKYCITY has introduced the Level 3 NZQA qualiﬁ cation for security ofﬁ cers. To date, ﬁ ve people have completed the qualiﬁ cation and a further 77 ofﬁ cers will complete the qualiﬁ cation over the next 12 months. • SKYCITY trains all new employees to Level 3 NZQA qualiﬁ cations for table games. We intend to assess and train all existing employees against this standard so that they can gain formal recognition for their competency and achieve a nationally recognised qualiﬁ cation. • SKYCITY’s ‘Total Rewards’ strategy was revised in 2007 to ensure our internal development programmes are aligned with our business strategy and organisational values. The key principles include attraction, retention and motivation of employees, driving and recognising improved performance, and building talent within the business. EMPOWERING OUR PEOPLE I 31 EMPOWERING OUR PEOPLE I 31 SKYCITY Dining for a Difference 2007 Opportunity for apprentice chefs second to none SKYCITY had the privilege of being the main sponsor for Peter Gordon’s gourmet extravaganza to raise money for the Leukaemia and Blood Foundation. Twelve world-renowned chefs joined Peter Gordon for the fabulous dinner that raised $200,000. The event - SKYCITY Dining for a Difference - was also used as the platform to launch the Foundation’s initiative ‘Every Day Counts’. The event also gave 13 SKYCITY apprentice chefs a once in a lifetime experience working with world-class culinary specialists. A total of 39 chefs, sous chefs and apprentice chefs prepared 1,080 dishes for the 270 guests. SKYCITY, in conjunction with the government, launched the ﬁ rst Modern Apprentice chef programme in New Zealand. It has been a hugely successful programme and has continued to grow since the concept was launched in 2000. The SKYCITY Modern Apprentice Chef Programme is a way for trainee chefs to avoid student debt by offering a full-time paid three year in-house culinary apprenticeship. “What an unbelievable opportunity for us to work with the likes of Wellington’s Al Brown, Australian Christine Manﬁ eld and Californian Govind Armstrong.” Chris Williams, apprentice to LA celebrity chef and Table 8 restaurant owner Govind Armstrong. 32 I EMPOWERING OUR PEOPLE Commitment to a culture of safety In 2006/07 we developed and implemented the Group-wide health and safety policy to enhance our commitments to this area as part of everyday work-life. Our health and safety audit tool, KEA (Key Elements Assessment), was launched across the Group. Managers and supervisors from all parts of the business have worked together to enhance an organisational culture built around this. This has seen a reduction in lost time injuries and associated claims costs. The ACC Partnership Programme audit was completed in Hamilton and Queenstown, with the retention of ACC partnership accreditation at a secondary level. Elected health and safety representatives are offered training that enables them to gain NZQA credits towards a National Certiﬁ cate in Occupational Health and Safety. EMPOWERING OUR PEOPLE I 33 SKYCITY Entertainment Group entertains more than 30,000 people every day, in our casinos, cinemas, hotels, restaurants and attractions. The diversity is vast: our guests are drawn from many countries, cultures, age groups and backgrounds. Through our Las Vegas-based design partners, we are creating an environment that is opulent and warm, with more than a dash of Las Vegas glamour. We are shifting from a general décor to one of themed and customised ‘zones’, offering tailored gaming experiences. Each one has their own view of what will attract, excite and entertain them. And it is resonating with customers in Auckland: we have had a great response to our new Aces and Deli bars, and the Baccarat Room. The work will be completed by March 2008. It is a best-in-class design by international casino standards and we are proud of the experience it will deliver. “We are proud to be involved with this major refurbishment of SKYCITY Entertainment Group’s main gaming ﬂ oor in Auckland that will see the biggest casino in New Zealand transformed and modernised to the highest international standards. “The concept design we created will provide a range of more intimate and tailored customer experiences across the ﬂ oor. ” Main gaming ﬂ oor architects: Friedmutter Group Architecture and Design Yet, for all the diversity, we’d like to share with our customers a common goal: an entertainment experience that lives beyond the moment. Bringing new excitement and a more personal sense of customer engagement are essential elements of our plans. Every point of customer contact is being reviewed and modiﬁ ed: what we offer, how we work together and the way we reach our guests. We want to enrich our unique range of entertainment options to meet the breadth of our customers’ personal, professional, leisure and family entertainment needs. Our aim is to have our customers return at a regular frequency that is comfortable for them. That means our priority is to continually enhance our offering, to make each visit memorable. Enhancing our gaming areas The $40 million redesign of Auckland’s main gaming ﬂ oor is giving our customers greater choice in what they play, how they play and where. REVITALISING CUSTOMER EXPERIENCES I 37 Bellota, SKYCITY Auckland Lifting our game We have been working with vendors to broaden our mix of gaming product, whilst ensuring their compliance with new regulations. Along with greater product diversity, we are undertaking new communication efforts to help customers understand which new product complements that style. This fresh focus on individual customers’ needs means we are also engaging them in new ways. We are developing new and rewarding customer experiences across different times of the day and different days of the week. We want our customers in each of our properties to feel as if they have a relevant experience waiting for them. • Some examples of this in Auckland include a very popular daytime bingo programme introduced in the Atrium, and a new ‘Corporate Table’ programme for company nights out, where staff can square off against the boss in a game of poker or learn table games as a group. No money is involved – it is just an entertaining way of learning something new. and games are most popular by time of day and how machines are performing – a living ‘heatmap’ of activity. This window into customer behaviour helps us to ﬁ ne tune what we do and make better use of our facilities • new customer relationship management software is, for the ﬁ rst time, creating a single Group-wide database of all customer contact data and associated behaviour. This detailed insight into how our customers use all our entertainment offerings across all SKYCITY’s properties helps us understand customer proﬁ tability and develop more appealing and relevant marketing campaigns integral to this is our plan to launch an upgrade to the ACTION loyalty programme in early 2008. The focus for this is on rewarding the various entertainment experiences and enhancing the recognition of our high-value customers. Caring for the customer In providing a safe and enjoyable entertainment environment for customers we are creating sustainable shareholder value. We are introducing new tools and programmes to help us lift our game. • new award-winning software by Compudigm allows us to track, in real-time, activity on the gaming ﬂ oor. We can see what areas There are many strategies employed by SKYCITY to provide for customer welfare, including our leading host responsibility and harm minimisation programmes. As part of that, we are improving how we use customer loyalty data to assess risk 38 I REVITALISING CUSTOMER EXPERIENCES SKYCITY Darwin and harm. The challenge is how to mine that data so that it supports our harm minimisation programme in a meaningful way. We are seeking international advice on this to ensure our offering is best in class. By exploring new ways of applying this data, we can help support our customers in having a great time in a manner that is safe and responsible. SKYCITY Darwin’s A$30 million makeover We are bringing a fresh face to SKYCITY Darwin, with a $30 million upgrade and extension of our existing building and facilities. Work on the 12 month programme begins in October 2007, and is designed to open up and maximise SKYCITY Darwin’s beachfront position and spectacular views over the Arafura Sea. The extensions include new decks, new restaurants and bars, and upgraded gaming facilities. “The refurbishment will ensure SKYCITY Darwin is a world-class resort destination that attracts tourists in its own right, as well as appealing to your regular customers. The Buchan Group is delighted to work on this project and we’re conﬁ dent SKYCITY’s customers and guests will enjoy a fresh, stylish and contemporary gaming and entertainment experience.” Connie Kontogiannis Associate, The Buchan Group, Melbourne Winning loyal cinema fans SKYCITY Cinemas’ loyalty programme, Film Squad, leads the industry and was a winner at the Marketing 2006 New Zealand Post RSVP Awards. As an indication of its popularity, Film Squad is set to welcome its 100,000th member following its launch in May 2006. The SKYCITY Cinemas’ website is New Zealand’s leading ﬁ lm site, with 100,000 page impressions and 33,000 unique visitors per week. “Film Squad has given us the ability to foster a strong community built around a shared love of the movies. From watchlists through to ratings and reviews, My Film Squad encourages movie-goers to start and ﬁ nish their SKYCITY Cinemas experience online in a way that encourages the next cinema visit. “It allows our customers to expand their movie- going experience beyond the time they spend in the cinema. It allows us to treat them as individuals, offering them the kind of features and beneﬁ ts that make them want to visit our cinemas more frequently.” Matthew Liebmann General Manager SKYCITY Cinemas REVITALISING CUSTOMER EXPERIENCES I 39 SHOWCASING OUR ASSETS Sky Tower’s 10th birthday celebration This year our Sky Tower held a 10th birthday party that was celebrated right across New Zealand. We expected 3,500 friends and families – over 10,000 came. People of every age and nationality, many of them locals, ﬂ ocked to share together the unparalleled 360° views of Auckland’s skyline. Photographers published stylish, inspirational and often quirky photos of the Sky Tower in its many moods and colours. We threw open our doors to the community, offering children free entrance to the Tower. “..The Sky Tower is a familiar friend. The ﬁ rst sight of it after trips away is comforting – like turning the key in your door after a holiday.” Greg Roughan, Sunday Star-Times, 5 August 2007 “The Tower has made itself more than the top of the Auckland skyline. Never failing to dress for the occasion and erupt in ﬁ reworks at the right moment, it has become a beacon of the city’s events, a thermometer of its moods, a focus for celebrations, a point of pride. “After ten years it would be hard to imagine Auckland without it … it has become an icon, a generous one to the city whenever something should be celebrated.” Editorial, NZ Herald, 4 August 2007 This celebration of SKYCITY underscores who we are and what we have become: a true emblem of Auckland and New Zealand, and an integral part of the community. The New Zealand Herald Photo Essay Competition winner Amateur photographer Mark Rosser’s striking Sky Tower night- time reﬂ ection photo was named winner of the Sky Tower 10th birthday (August 2007) photo competition. 40 I REVITALISING CUSTOMER EXPERIENCES Living life on the edge In late 2007, SKYCITY is launching a heart- stopping challenge to all thrill seekers: to walk the circumference of the Sky Tower on a narrow platform 190 metres above the ground and just 1.2 metres wide, with only a harness to keep them on track. SkyWalk 360 will be SKYCITY Auckland’s latest urban adventure, offering 100% exhilaration in 100% safety. SkyWalk 360 customers will be dressed in protective clothing and harnessed to an overhead railing. It means SkyWalkers can move freely and experience the adrenalin of being part of the Auckland skyline but in absolute security. “SkyWalk 360 was one of the most daunting challenges I’ve faced to date! It’s a pretty nerve-wracking experience, stepping out on to a narrow causeway, suspended high above ground, with no rails, nothing to hang on to, just a safety harness. But the views are spectacular and the sheer sense of exhilaration and liberty is deﬁ nitely worth the pacing and sweaty palms beforehand.” Dominic Bowden, New Zealand Television Personality SKYCITY’s a winner! Our leadership in entertainment has continued to be recognised and awarded across all of our properties – our restaurants, our accommodation and our staff SKYCITY Auckland SKYCITY Auckland has been voted the city’s favourite attraction by visitors. • Winner: SKYCITY Grand Hotel, Best Hotel in New Zealand award, HotelClub Australia and New Zealand Hotel Awards 2007 • Winner: Auckland’s favourite attraction/activity, Arrival Magazine Traveller’s Choice Award. • Winner: Bellota Tapas Bar, Urbis Architectural Award • Winner: dine by Peter Gordon, ‘Best Dessert’ and ﬁ nalist in Metro Magazine Restaurant of the Year Awards • Finalist: dine by Peter Gordon in Cuisine Restaurant of the Year Awards 2007 • Finalist: Orbit Restaurant, M2 Restaurant of the Year Awards • 2006 TVNZ and the New Zealand Herald Sponsorship Awards • Winner: Best Provincial Sports Sponsorship Award, for SKYCITY’s sponsorship of Auckland Rugby • Finalist: ‘Best Provincial Sports Sponsorship’, SKYCITY sponsorship of Auckland Racing Club • Finalist: ‘Best First Year’, SKYCITY sponsorship of Auckland Racing Club World Travel Awards • Finalist: Australasia/New Zealand’s Leading Business Hotel - SKYCITY Grand Hotel • Finalist: Australasia/New Zealand’s Leading Conference Hotel - SKYCITY Grand Hotel • Finalist: New Zealand’s Leading Suite - The Grand Suite • Finalist: Australasia’s Leading Casino Resort - SKYCITY Auckland • Finalist: Australia’s Leading Casino Resort - SKYCITY Adelaide and SKYCITY Darwin SKYCITY Darwin • Winner: Best Hotel in the Northern Territory award, HotelClub Australia and New Zealand Hotel Awards 2007 • Winner: Territory Cuisine Challenge 2006 • Winner: Best Luxury Accommodation, Northern Territory’s Brolga Awards • Winner: Best Tourism Restaurant and Catering Services • Winner: Best Superior Accommodation: Australia Hotel Association Awards for Excellence 2006 SKYCITY Adelaide • Winner: New York International Advertising Awards, for SKYCITY World Cup Soccer • Bronze medal: 2007 Nestle Golden Chefs Hat Awards, South Australia. SKYCITY Hamilton • Winner: Excellence in Food Safety Awards 2006 REVITALISING CUSTOMER EXPERIENCES I 41 REVITALISING CUSTOMER EXPERIENCES I 41 Development for growth • SKYCITY Hamilton expanded, with the launch of the sports bar, Zone, in October, and restaurant, Rebo, in May. • Also in Hamilton, SKYCITY Cinemas launched its new complex, Chartwell, in May 2007. This has tapped into demand from one of New Zealand’s biggest cinema-going regions. • In November, our new sophisticated tapas bar, Bellota, opened in Auckland to rave reviews and awards. • We announced plans for a new urban adventure for thrill seekers – SkyWalk 360 – to the international tourism industry at TRENZ. • At SKYCITY Adelaide, we won long-sought approval to develop an underground carpark. The carpark will greatly improve the amenities the property provides and will increase convenience tremendously. High-quality carparking facilities are fundamental to any successful entertainment facility. • Finally, we took our ﬁ rst steps in the expansion and upgrade of our Darwin property, in response to strong, sustained tourist demand and economic growth. Unrivalled excellence on a Grand scale The ﬁ ve star SKYCITY Grand Hotel is an oasis of luxury in the heart of Auckland City, and was recently named as one of the top three hotels in New Zealand, as voted by consumers in the 2007 HotelClub Awards. Conceived by some of the best architectural and interior design minds in the Paciﬁ c Rim, the SKYCITY Grand Hotel has a commitment to service and excellence that is unrivalled. 42 I REVITALISING CUSTOMER EXPERIENCES From top left: Zone Bar, SKYCITY Hamilton; Bellota, SKYCITY Auckland; SKYCITY Adelaide; Foyer, SKYCITY Grand Hotel Darwin becomes Australia’s Belle of the Ball SKYCITY Darwin has emerged as Australasia’s unmatched leader in memorably grand-scale events. In August 2007, we hosted more than 2,800 guests at the prestigious Qantas Darwin Turf Club Gala Ball. This is Australia’s largest outdoor seated event, generating attention and stature surpassing many of the top social calendar events. This climax to SKYCITY Darwin’s Season of Sunsets and Stars saw guests enjoy a sumptuous buffet prepared by SKYCITY Darwin’s award-winning chefs, an incredible ﬁ reworks display and entertainment under the stars amidst the tropical beachside gardens at SKYCITY Darwin. And this was just one of the great grand-scale events of the year. Others included: • • the V8 Supercars convoy the Sunset Jazz series, which this year included jazz legend James Morrison the Ninth Annual Winemakers Dinner series • • a return engagement for the Acrobatic • Troupe of Imperial China the Arafura Games, featuring a spectacular closing ceremony. SKYCITY Darwin Belle of the Ball, August 2007 Adelaide hosts World Series of Poker Satellite tournaments SKYCITY Adelaide has long been known as the capital of poker in Australia, and is the only South Australian venue in which poker can be played with cash. Players and enthusiasts ﬂ ock in from all over the country for the various tournaments and events held at the casino. In recognition of the passion for the game, the Adelaide property has, for the last two years held the World Series of Poker Satellite (WSOP) tournaments. The WSOP is the world’s richest poker tournament, with prize winnings of up to US$12 million. It is open to qualiﬁ ers from around the world, and Adelaide’s ofﬁ cial tournament serves as a feeder for the event. SKYCITY Adelaide is widely regarded by many as the original ‘Home of Australian Poker’ since the Adelaide Casino ﬁ rst introduced Texas Hold’em to Australia in 1987. The venue has hosted many of Australia’s top international players during major tournaments, including Joe Hachem. Since then, the sport has seen enormous growth. In response to customer interest and demand, the casino has been busy with further enhancements, expanding its Poker Zone playing area and introducing an array of new tournaments, including a ‘Ladies Only’ Series, all in response to the ever-growing poker craze in the country and around the world. REVITALISING CUSTOMER EXPERIENCES I 43 REVITALISING CUSTOMER EXPERIENCES I 43 Auckland offers World Class Convention Centre SKYCITY has world-class facilities – and we want to make sure the world knows about it. SKYCITY Auckland Convention Centre is the most advanced in New Zealand – our exhibition, conference and banqueting facility cannot be matched for the scale and range of facilities. We are now actively marketing the convention centre internationally, and this year won several 500-plus corporate and association conferences, with more in the pipeline. Examples in 2007 included: • The ‘Big Boat Dinner’ 1,000 passengers from the visiting QE2 ship • The Westpac Halberg Awards - New Zealand’s premier sporting awards - 800 guests • Assorted real estate conferences: Harcourts - 900 guests, Bayleys - 550 guests, Barfoot & Thompson - 1700 guests, Harveys - 300 guests, Ray White - 750 guests • Microsoft Tech Ed (third year with SKYCITY) – 1,900 guests • Intel Solutions Summit - 700 guests • Bakers Delight event for 1,000 Australian and New Zealand delegates DID YOU KNOW Since opening in 2004, SKYCITY Auckland Convention Centre staff have served more than 60,000 kilograms of beef ﬁ llet, 240,000 litres of mineral water, used 339,000 linen tablecloths, and spent more than 9,000 hours polishing cutlery and glassware. This year, we have proactively marketed our outcatering service, which has resulted in catering for international performing arts troupe Cirque du Soleil and securing the Auckland Museum events contract. 44 I REVITALISING CUSTOMER EXPERIENCES • Allstate Insurance Canada - 250 Canadian conference delegates on their ﬁ rst trip to New Zealand • Harley Davidson POT Group ‘private ofﬁ cer training’ conference for 250 Harley owners, with new bikes on display • SKYCITY Dining for a Difference - 270 guests, 13 chefs cooking four courses for two tables each, over $200,000 raised for the Leukaemia and Blood Foundation • Starship Ball - 450 guests, over $100,000 raised for the Starship Children’s Hospital Foundation • In the Pink - 660 guests, over $100,000 raised for the NZ Breast Cancer Foundation • MEETINGS 07 - the leading New Zealand conference and incentives industry forum • Retail and media launches of the new second generation BMW X5 which included craning two cars seven storeys into the air, up and over the Convention Centre and on to the Level 7 Terrace of the SKYCITY Grand Hotel. From top right: The New Zealand Room; The Starship Charity Ball; Dining for a Difference REVITALISING CUSTOMER EXPERIENCES I 45 SKYCITY is committed to providing a safe and enjoyable environment for its customers. We work hard to be a successful, sustainable and socially responsible business that provides popular entertainment choices without harm. Preventing and minimising gambling and alcohol- related harm is a critical part of SKYCITY’s focus on caring for our customers’ welfare. Our business is highly regulated and carries strong social responsibilities. We will continue to prioritise this part of the business and to enhance our practices. We believe we must demonstrate leadership in meeting, and exceeding, our obligations for the future of our business, our brand, and our communities. sharking behaviour and the need for collaborative solutions, which SKYCITY wholeheartedly supports. SKYCITY is proactive in this area with a formal policy and procedures to follow when illegal or undesirable activity is suspected or identiﬁ ed. We will promptly investigate any such activity and seek a close working relationship with DIA’s casino inspectors and the police on these issues. In 2007/08 we will be undertaking a review of security and surveillance practices so that we can identify opportunities to keep improving our effectiveness in this area. We welcome the chance to work more closely with the sector so we can all do better. And our efforts are working. At a recent hearing of the New Zealand Gambling Commission, it was noted that the Auckland Host Responsibility Programme is “impressive” and, by national and international comparison, “the best they’ve seen”. We have been working behind the scenes to create a solid foundation of policies, and to get a range of new initiatives under way that assist customers to gamble and consume alcohol safely and to ensure they receive appropriate assistance if they are experiencing problems. Providing a safe and enjoyable entertainment environment To ensure customers enjoy themselves in a safe environment considerable effort goes on behind the scenes to deliver the right training and support for employees, to provide effective security and surveillance with follow-up investigations when required, and to operate an effective host responsibility programme. Loan-sharking has been identiﬁ ed as a broader community problem which needs a greater focus through closer co-operation between government agencies, problem gambling treatment services, communities, and the gaming industry. The Department of Internal Affairs (DIA) has highlighted the challenge of identifying loan The Harm Minimisation Framework The Harm Minimisation Framework is SKYCITY’s statement of our commitment to preventing and minimising gambling and alcohol-related harm, and how this is to be achieved through a strategic, co-ordinated approach over the long term. The Framework draws on the latest research and international public health models and extends well beyond the company’s legal obligations. It has been developed with extensive input from across the business and from external stakeholders. The emphasis is on both preventing harm from occurring in the ﬁ rst place so customers are able to gamble responsibly, and minimising harm when it is occurring through early identiﬁ cation and effective host responsibility interactions. Measuring and demonstrating the success of these initiatives is critical. This year SKYCITY commissioned an independent evaluation of its Adelaide host responsibility programme by external research agency Evolution Research. Their report identiﬁ ed some opportunities for improvement (which will be addressed), as well as a number of strengths as referred to below: “…the service has enhanced the organisation’s credibility as a responsible host. In addition, the staff in the programme are highly regarded by internal and external stakeholders.” CARING FOR CUSTOMER WELFARE I 49 “Host responsibility contributes to sustainable business.” New developments in host responsibility As part of its Harm Minimisation Framework, SKYCITY has developed a tool that provides a more systematic way of assessing the level of risk or harm that a customer may be experiencing. This assessment is then matched with a timely and appropriate response from host responsibility. This could be something quite informal such as speaking with the customer on a one to one basis – often this is all that is required and customers appreciate the enquiry – to an escalated response when the concern is more serious. This could lead to the customer acknowledging there is a problem and agreeing to be excluded for a period of up to two years. • • follow sound policies and processes train staff, particularly on how to identify the warning signs • provide useful information for customers and staff, and • evaluate what we do so we can always do better. Staying at the cutting edge The key projects within the Harm Minimisation Framework for the coming year include: • loyalty data is being reviewed by international experts who will provide advice about how we can apply this information more proactively and accurately to assess whether a customer is at risk of experiencing harm • staff training will be increased – both the theory in the classroom and on-the-job practice • new and better information resources about The company’s Escalation Response Model clearly identiﬁ es the components we need to have in place in order to get host responsibility right: • collect the right information to make informed responsible gambling and seeking help will be developed and provided through a range of channels, for customers and staff, and • an integrated, incident noting and tracking assessments system will be implemented. 50 I CARING FOR CUSTOMER WELFARE New developments regarding responsible service of alcohol Responsible service of alcohol continues to be a key area of focus within the business. This year we collaborated on a range of inter- sectoral initiatives, with positive feedback from customers and the relevant agencies and a special award. Highlights included: • SKYCITY Hamilton’s introduction of ‘yellow and red penalty cards’ into the Zone sports bar • SKYCITY Adelaide’s active participation in the local Central Business District Liquor Accord the ‘designated driver campaign’ for SKYCITY customers in Auckland, and • • SKYCITY Darwin won the Northern Territory award for Responsible Service of Alcohol. “Life’s sweet - Drive sober” In this campaign for the Auckland community, SKYCITY encouraged designated drivers to stay sober by offering them free non-alcoholic drinks while on SKYCITY’s premises over the Christmas, Easter and Queen’s Birthday periods. SKYCITY worked with Auckland City Council, Auckland Police and Coca-Cola to create a campaign connecting staff and customers with positive host responsibility messages. The success of the Auckland campaign has inspired similar initiatives at other SKYCITY sites in New Zealand. “Working together to give people a ‘Drive Sober’ message was paramount. SKYCITY Auckland has over 18 bars and restaurants plus convention facilities and large CBD car parks, so they created huge momentum behind this campaign. We look forward to partnering with SKYCITY on future projects.” Claire Dixon Senior Road Safety Co-ordinator Auckland City Council CARING FOR CUSTOMER WELFARE I 51 SKYCITY Starlight Symphony volunteer SKYCITY believes in sharing the excitement and spirit of our customer experiences with our communities. We create opportunities for celebration. Whether it is a winning game for SKYCITY- sponsored rugby teams in Auckland and Waikato, lighting up the community for Diwali, or cheering on the winner of the SKYCITY Adelaide Cup, we are there - supporting, sharing, and creating memorable experiences. Along with the celebrations, we are listening, identifying, and contributing to areas of need. SKYCITY is ﬁ nding meaningful ways to support important causes that make a difference in our communities. We are also making a difference at a grassroots level, which we do through the SKYCITY Community Trusts and our local community relations programmes. In 2006/07 SKYCITY’s three independent Trusts in New Zealand made 253 grants, totalling $2,907,207. Trust contributions to date total $19.5 million excluding problem gambling levies. Through Community Trusts in Auckland, Hamilton and Queenstown, SKYCITY provides grassroots support for many causes important to our local communities and through local community work in Adelaide and Darwin. SKYCITY Partnerships in 2006/07 Auckland Air NZ New Zealand Screen Awards Auckland Festival AK07 Auckland Rugby Union - Air NZ Cup and Super 14 Auckland Rugby Union SKYCITY Cheer team Celebrity Joker Poker Chinese Singing Idol Diwali Festival of Lights Kidz First Children’s Hospital Miss Chinese NZ Pageant New Zealand Breast Cancer Foundation People’s Choice Awards SKYCITY Auckland Cup SKYCITY Starlight Symphony SPCA Starship Children’s Hospital The Lantern Festival The Leukaemia and Blood Foundation Tourism Rendezvous New Zealand V8 Supercars Vodafone Warriors Women in Film and Television Awards Hamilton New Zealand Breast Cancer Foundation Te Rapa Raceway Waikato Rugby Union - Air NZ Cup and Super 14 Adelaide Adelaide Crows AFL team Flinders Medical Research Foundation McGuiness McDermott Foundation Port Power AFL team SKYCITY Adelaide Cup SKYCITY Magic Millions Darwin AFL Northern Territory Arafura Games Darwin Turf Club Gala Ball SKYCITY Challenge - NBL - Perth Wildcats SKYCITY NT Derby Day SKYCITY Sunset and Stars SKYCITY V8 Supercar Triple Crown Darwin Queenstown National Rugby Sevens Queenstown Gay Ski Week Queenstown Jazz Festival Queenstown Winter Festival Rocky Horror Picture Show, Rent and Cabaret Productions Cinemas Walking School Bus Programme Te Omanga Hospice CONNECTING WITH COMMUNITIES I 55 All Black Doug Howlett and party goer, Kidz First Christmas Party SKYCITY Community Trust Grants 2006/07 Kidz First – Auckland Rugby collaboration SKYCITY is a founding sponsor of Kidz First Children’s Hospital through the South Auckland Health Foundation. Since 2000 we have worked alongside Kidz First to tackle signiﬁ cant community challenges, including burns prevention and the improvement of oral health in the South Auckland community. SKYCITY’s support for Kidz First includes the annual Kidz First Patient Christmas Party, special fundraising projects and grants from the SKYCITY Auckland Community Trust. SKYCITY is long-term partner of Auckland Rugby, a partnership that has helped increase visitation and revenue to the business while supporting the development of rugby at all levels. SKYCITY’s relationship with Auckland Rugby was recently recognised as the Best Provincial Sports Sponsorship at the 2006 TVNZ/NZ Herald Sponsorship Awards. We identiﬁ ed and facilitated an opportunity for collaboration between these two great partnerships: SKYCITY works with Auckland 56 I CONNECTING WITH COMMUNITIES Rugby to support Kidz First through combined events and initiatives including Auckland Rugby players acting as mentors for Kidz First ‘Centre for Youth Health’ teenagers, ‘Kick for Cash’ match events and SKYCITY staff collecting on behalf of Kidz First during home games. Giving kids the chance to be kids Funding from the SKYCITY Auckland Community Trust assisted the Starship Foundation in purchasing insulin pumps, a relatively new way of administering insulin to children with type one diabetes. Twenty-ﬁ ve children have been given a chance to lead healthy, active lives, free from the constraints imposed by their condition. The pumps provide more effective control of their condition and lead to a better quality of life. “The insulin pump means Oliver can live like a normal eight year old. It’s much easier for him to be away from us and stay with friends, like other boys his age are able to do…” Hilary Van Lent, mother of Oliver, an eight year old with type one diabetes Moko Hamiora and his daughter Hemohaere Bishop, Volunteering Waikato Improving the lives of the young Art therapy helps Hospice Waikato SKYCITY Hamilton Community Trust helped to fund a father and daughter’s efforts to steer at-risk school students in the right direction. The Trust grant to Volunteering Waikato funded the main prize for Moko Hamiora and his daughter Hemohaere Bishop for dedication to improving the lives of young people. They were nominated for the Volunteer Excellence Awards by Hamilton’s Fraser High School, where they work, unpaid, every day. “The funding from SKYCITY Hamilton Community Trust has enabled us to ensure that our unsung heroes are recognised, volunteers carry out numerous tasks in many parts of Hamilton, simply because they enjoy helping others…” Carol Anderson, Manager of Volunteering Waikato Last year Hospice Waikato cared for 500 patients who were living with a terminal illness. As part of Hospice philosophy, holistic care is provided to help families deal with the loss of a signiﬁ cant person in their lives. Art therapy is a method used to help patients and families express their concerns, share anxieties and work through the grieving process. Hospice Waikato offers regular art workshops, where patients and their families, no matter how ill, work together on projects such as mosaics and paintings. SKYCITY Hamilton Community Trust provided a boost to the arts programme with a grant of $7,500, which went towards arts supplies. “We are extremely grateful to SKYCITY as their grant has meant that we can continue to support Hospice patients and their families throughout their illness…” Elizabeth Bang, CEO of the Waikato Community Hospice Trust CONNECTING WITH COMMUNITIES I 57 the long-term health problems created from childhood obesity. The clinic’s nutritionists, physiotherapists, psychologists and nursing staff offer an eight-week programme which educates the whole family on healthy lifestyle, food options and exercise programmes, and includes ongoing monitoring and support. For SKYCITY Adelaide, this represents a proud and important investment in the future of its community. V8 Supercar ceremony fulﬁ ls special wish Two young men had their boyhood dream become reality, when SKYCITY Darwin invited them to join the welcoming celebrations for the V8 Supercar Championship series. Tim and Derek, who both have life-threatening conditions, are passionate about V8 Supercars, which is the highlight of the Northern Territory’s sporting calendar. Through the Make a Wish Foundation, they were able to form part of the welcoming SKYCITY Triple Crown Convoy as it drove through the streets of Darwin, driving alongside their sporting heroes in the SKYCITY Darwin limousine. SKYCITY Massed Choir, SKYCITY Starlight Symphony Closing the learning gap of autism Funding from the SKYCITY Queenstown Casino Community Trust gave a positive boost to learning programmes for children with autism. The Central and Southern Autism Support Group assists families with autistic children, sharing resources and ideas. A grant of $3,200 went towards registered psychologists designing and developing individual learning programmes for eight children in the Queenstown district area. “The funding provided by SKYCITY has given us invaluable professional learning and development support for our kids…” Jo Wright, parent and member of The Central and Southern Autism Support Group A new approach to childhood obesity A new Children’s Weight Management Clinic has been launched at the Flinders Medical Centre in South Australia, supported by a $100,000 sponsorship from SKYCITY Adelaide. The clinic, which is the ﬁ rst of its kind in South Australia, is seeking to intervene early to prevent 58 I CONNECTING WITH COMMUNITIES Gahu, Queenstown Jazz Festival Queenstown Jazz Festival Canine guides and companions With a $6,000 grant from the SKYCITY Queenstown Community Trust, this long-running live music event was expanded by ten extra days, beneﬁ ting thousands of listeners and musicians. The Festival is organised and run by a local charitable trust with the objective of involving, encouraging, entertaining and inspiring through live music. “The grant meant we could keep ticket prices down so that thousands more people from Queenstown and the wider community were able to enjoy the 2006 festival…” David Cole, Festival Organising Committee SKYCITY Auckland Community Trust granted over $40,000 to two organisations which train a special group of dogs and who provide guidance, support, help and friendship to members of our community. Over $22,000 was given to the Royal New Zealand Foundation of the Blind to breed, train and match guide puppies to clients. Guide dogs assist blind people to get around independently, conﬁ dently and safely. Over $18,000 was awarded to the Mobility Assistance Dogs Trust for a vehicle for transporting puppies in training. This Trust provides mobility dogs for people with physical disabilities and they train the puppies and then match clients with a suitable dog. The dogs learn great skills including opening doors, getting the phone, activating an alarm if required and even turning on the washing machine. CONNECTING WITH COMMUNITIES I 59 SKYCITY Auckland Community Trust Grants 2006/07 SKYCITY Auckland Community Trust $2.3 million to 109 diverse local community groups Grants included: • $50,000 to the Foundation for Youth Development to set up a Project K programme in low-decile schools around the central Auckland area • $115,000 to the Starship Foundation towards the cost of rebuilding the Oncology Unit at Starship Children’s Hospital • $70,000 to The Museum of Transport and Technology (MOTAT) towards the upgrade of the Museum’s science exhibition • • • • • • • • • • • • • • • • • • • • • • • • • Adventure Specialties Trust Age Concern Counties Manukau Age Concern Mid North Allergy New Zealand Amitabha Hospice Service Trust Amputee Society of Auckland and Northland Arthritis New Zealand Asthma New Zealand - The Lung Association Auckland Children’s Christmas Parade Trust Auckland Dance Festival Trust Auckland Gay and Lesbian Welfare Group Auckland Land Search and Rescue Auckland Malaysian Society Auckland Somali Community Association Autism NZ - Auckland Branch Awataha Marae Bailey Road Primary and Intermediate School Bay of Islands Vintage Railway Trust Bring It On C.A.R.E. Waitakere Trust Cantonese Opera Society of NZ Carlson School for Cerebral Palsy CCS Auckland Central Auckland Parent Centre City of Manukau Education Trust 60 I CONNECTING WITH COMMUNITIES • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Classic Yacht Charitable Trust Communicare CMA Computer Clubhouse Trust Far North Palliative and Cancer Care Charitable Trust Foundation for Alcohol and Drug Education Foundation for Youth Development Friendship Centre Trust Girl Guides Association of NZ Grey Lynn Primary School Hearing Dogs for Deaf People New Zealand Herne Bay Play Centre Home and Family Society Island Child Charitable Trust NZ Jane Gifford Restoration Trust Kaitaia Gymnastic Club Kerikeri Community Toy Library Kerikeri Retirement Village KidsCan Charitable Trust Leukaemia and Blood Foundation of New Zealand Life Education Trust - South East Auckland LifeLine Auckland Lopdell House Society Manaia School Mercy Missions Trust Mobility Assistance Dogs Trust Monte Cecilia Housing Trust Motutapu Outdoor Education Trust Mt Richmond Special School Multiple Sclerosis Auckland New Zealand National Maritime Museum New Zealand Parent Teacher Association New Zealand Sign Language Teachers Association New Zealand Taishan Chinese Association North Shore Hospice Trust North Shore Hospital Foundation North Shore LIFE Centre North Shore Multiple Sclerosis Society Opera in the Park Limited Opononi Area School Outward Bound Trust of New Zealand Paciﬁ c Culture and Arts Exchange Centre Papakura Toy Library Parent Aid Waitakere Parents Inc. SKYCITY Hamilton Community Trust Grants 2006/07 • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Play and Learn Education Trust Refugees as Survivors New Zealand Relationship Services Royal New Zealand Plunket Society (Thames Valley) Sir Peter Blake Marine Education and Recreation Centre South Auckland Rangers Association Football and Sports Club SPELD Manukau City St. Patrick’s Cathedral Heritage Foundation Starship Foundation Storylines Children’s Literature Charitable Trust of New Zealand Surf Life Saving Northern Region TaPaseﬁ ka Health Trust Te Au Vaine Takitumu Trust Te Kotuku Ki Te Rangi Charitable Trust Teenadders Thames Womens Resource Centre The Brain Injury Association of Auckland The Centre at Kerikeri The House of Bethany The MARCO Trust The Museum of Transport and Technology (MOTAT) The NBR New Zealand Opera The Neurological Foundation of New Zealand The Northern Cochlear Implant Trust The Operating Theatre Trust The RNZYS Youth Training Programme The South Auckland Health Foundation The Southern Cross Korean Performing Arts Group TYLA Trust Unitec New Zealand Waikowhai Scouts Waipu Playcentre Waitakere Branch of the New Zealand Society of Genealogists Waitakere Community Outreach Wellsford Plunket Toy Library West Auckland Hospice Homecare Western Refuge Society Wings Trust 1986 Women’s Refuge Auckland WONS: Nursing, Education and Health SKYCITY Hamilton Community Trust $492,022 to 120 diverse local community groups Grants included: • $25,000 to Pohlen Foundation Trust for the purchase of a new endoscope machine • $10,000 to Waikato River Trails Trust for the construction of a bridge to improve accessibility to the Waikato River Trails by disabled persons • $10,000 to Taiohi Toa Trust for their Big Brother Big Sister programme to reduce youth offending Promotion Services Age Concern Hamilton Aotearoa Maori Tennis Association Arya Samaj Waikato Autism NZ Waikato Branch Awhina Society Balloons over Waikato Charitable Trust Birthright (Waikato) Business and Professional Women Huntly and District Club Cambridge Brass Band Campus Services Ltd, University of Waikato Cochlear Implant Foundation of NZ Coromandel Flying Club Society Counselling Services North King Country Country Section NZ Indian Assoc Drury Lane Youth in Performance Group Eastern Bay of Plenty Scout District Endometriosis Waikato ESOL Home Tutors (Waikato) Fairﬁ eld Amateur Swimming Club Future Te Aroha Goldﬁ elds Railway Society Habitat for Humanity (Waikato) Hamilton Abuse Intervention Project Hamilton BMX Club Hamilton Budgeting Advisory Trust • • • • • • • • • • • • • • • • • • • • • • • • • CONNECTING WITH COMMUNITIES I 61 SKYCITY Hamilton Community Trust Grants 2006/07 continued • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Hamilton Floral Art Club Hamilton Gardens Summer Festival Foundation Hamilton Multicultural Services Trust Hamilton Operatic Society Hamilton Refuge and Support Services Hamilton Rowing Club Hamilton Yacht Club Healing and Rape Crisis Centre Huntly Community Advice Centre Invitation to a Voyage Trust Kawerau Blue Light Venture Kawhia Tourism Kihikihi Waikato Eventing King Country Search & Rescue Organisation Lifeline Waikato Link House Agency Mairoa History Committee Maori Women’s Welfare League Matamata Community Resource Trust McKenzie Centre Morrinsville Community House Multiple Sclerosis Waikato Trust Nga Mana Toopu o Kirikiriroa Trust Ngaruawahia Community Care and Crisis Support North Waikato Blue Light Venturers Northern Daffodil Club Order of St John Midland Otorohanga Zoological Society Overdale Community Centre Parenting with Conﬁ dence Parentline Charitable Trust Philips Search and Rescue Trust Piako Brass Band Piopio College Pohlen Foundation Trust Pokuru School Positive Paeroa Pride in Putaruru Prisoner’s Aid and Rehabilitation Society of the Waikato District Project Kiwiana Festival Rahui Pokeka Maatua Whangai Trust Raglan Community Arts Council • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Raglan Community Vehicle Trust Riverlea Theatre Rostrevor House Sri Lankan Friendship Society Waikato Synergy Trust Tainui Waka Cultural Trust Taiohi Toa Trust Tairua Information and Community Services Society Taranaki Safer Family Trust Taupo Budget Advisory Services Te Araroa Waikato Te Aroha & District Museum Society Te Aroha & Districts Riding for the Disabled Te Aroha Mountain Railway Society Te Aroha Springs Community Trust Te Awamutu Competitions Society of the Performing Arts Te Kohango Reo o Nga Kuaka Te Kuiti Swimming Pool Te Puru School Te Runanga o Kirikiriroa Te Whakaruruhau Refuge Te Whare o Te Ata/Fairﬁ eld Chartwell Community House The Altrusa Club of Hamilton The Bush Tramway Club The Institute of Child Protection Studies The Paciﬁ c Rose Festival Trust The Refugee Orientation Centre Trust True Colours Charitable Trust United Nations Association of NZ (Waikato) United Youth Orchestra Victoria Battery Tramway Society Volunteering Waikato Waihi Beach Life Guard Service Waihi Community Resource Centre Waihi Drama Society Waihi Summer Festival Waikato Asthma and Respiratory Society Waikato Community Broadcasting Charitable Trust Waikato Community Hospice Trust Waikato Family Centre Trust Waikato Hospital Chaplains 62 I CONNECTING WITH COMMUNITIES SKYCITY Queenstown Community Trust Grants 2006/07 • • • • • • • • • • • Waikato Orchestral Society Waikato Paraplegic and Physically Disabled Association Waikato River Trails Trust Waikato Rowing Club Waikato Society of Arts Waikato Winter Show Association Whakatane Astronomical Society Whiritoa Rural Volunteer Fire Force Whitianga Community Services Trust Xtreme Waste Society Young Women’s Christian Association of Hamilton SKYCITY Queenstown Casino Community Trust. $95,022 to 24 diverse local community groups Grants included: • $10,530 to Wakatipu Search and Rescue to equip their team with highly visible Goretex jackets and pants • $2,500 to the Arrowtown Village Association to rebuild the historic Sawpit Gully walking track • $6,000 to the Queenstown JazzFest Trust for its 2006 community festival • • • • • • • • • • • • • • • • • • • • • • • • Alzheimers Society Southland Arrowtown Village Association Barnardos Southland Central and Southern Autism Support Group Destination Queenstown (Winter Festival) Frankton Volunteer Fire Brigade Happiness House Makarora Valley Community Public Sculpture Trust of Queenstown Queenstown Lakes Family Centre Queenstown Playcentre Southern Lakes Arts Festival Trust Southern Lakes Diabetes Youth St John Wakatipu The Gibbston Community Association The Queenstown JazzFest Trust Upper Clutha Women’s Support Group Wakatipu Abuse Prevention Network Wakatipu District Youth Trust Wakatipu Kindergarten Wakatipu Performance Festival Wakatipu Search and Rescue Wakatipu Toy Library Wakatipu Victim Support CONNECTING WITH COMMUNITIES I 63 SKYCITY’s corporate governance framework is fully detailed in the investor centre section of the company’s website at www.skycitygroup.co.nz The board charter is the principal speciﬁ cation of the governance framework within which SKYCITY conducts its affairs. The board charter and its supporting charters and policy documents (refer below) combine together to comprise SKYCITY’s governance framework. These documents can be accessed on the company’s website. • 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 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 and on the following pages, reﬂ ect 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 SKYCITY’s procedures are designed to: • 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, and • ensure a balance of authority so that no single individual has unfettered powers. 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 deﬁ ned, 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 beneﬁ t of its shareholders and other stakeholders. The board also oversees management’s risk proﬁ ling and business continuity plans. The board has responsibility for the affairs and activities of the company, which in practice is achieved through delegation to the chief executive ofﬁ cer 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 chief executive ofﬁ cer 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 deﬁ nes the responsibilities which are delegated to the chief executive ofﬁ cer 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. CORPORATE GOVERNANCE I 67 2. STRUCTURE THE BOARD TO BE EFFECTIVE IN DISCHARGING ITS RESPONSIBILITIES AND DUTIES Board effectiveness requires the efﬁ cient discharge of the duties imposed by law on the directors and 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. 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 and are subject to re-election by shareholders in accordance with the rotation requirements of the NZX and the ASX. The non-executive directors elect the chairpersons of the board and its committees. 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. The company’s constitution also requires all potential directors to have satisﬁ ed the extensive probity requirements of each jurisdiction in which the company holds gaming licences. Director independence The board charter requires that the board contains a majority of its number who are independent directors. SKYCITY also supports the separation of the role of board chairperson from the chief executive ofﬁ cer position. In determining the independence of directors, the board has adopted the deﬁ nition 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 21 June 2007 meeting, the board reviewed the status of each director in accordance with the independence speciﬁ cation of the NZX Code and determined that all current directors are independent. On 25 June 2007 Elmar Toime was appointed Executive Director and is not independent under the NZX and ASX deﬁ nitions. At its 21 June meeting, the board noted that, under the ASX Independence Guidelines, each of the non-executive directors except Mr Trotter (and subsequently Mr Toime) 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. 68 I CORPORATE GOVERNANCE 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 with respect to any aspect of the company’s affairs, provided they have previously notiﬁ ed 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. 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 are subject to formal review by the board on an annual basis. The following table shows attendances at board and committee meetings by directors during the year ended 30 June 2007. 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, ofﬁ cers and employees who have the opportunity to materially inﬂ uence the integrity, strategy and operation of the business and its ﬁ nancial performance) and encouraging the observance of those standards, and • communicating the requirements relating to trading in company’s securities by directors and employees. 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, community groups and employees. Board Audit & Risk Governance & Remuneration Nomination Number of meetings held Rod McGeoch Patsy Reddy Sir Dryden Spring Elmar Toime Bill Trotter Evan Davies (resigned 25/6/07) Rob McLeod (retired 30/6/07) 8 8 8 8 7 8 8 8 4 4 4 4 3 3 3 3 1 1 1 1 1 1 1 1 CORPORATE GOVERNANCE I 69 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. 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 notiﬁ ed 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. Ofﬁ cers of the company (currently comprising 14 senior executives) must formally disclose their SKYCITY shareholdings and other securities holdings to the NZX within ﬁ ve business days of any change in their holding of such securities. 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. 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 conﬁ dence in the integrity of the company’s ﬁ nancial reporting. The board has established an Audit and Risk Committee. This committee comprises three directors, two of whom are independent non- executive directors and Mr Toime who is an executive director on a temporary basis until a new chief executive ofﬁ cer has been appointed. All members of the Audit and Risk Committee are ﬁ nancially literate. The Audit and Risk Committee has responsibility for oversight of the quality, reliability, and accuracy of the company’s internal and external ﬁ nancial 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 sufﬁ cient inquiry of the company’s management and the company’s internal and external auditors in order to enable them to be satisﬁ ed as to the validity and accuracy of the company’s ﬁ nancial reporting. 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. The Committee has formally reviewed the independence status of PricewaterhouseCoopers and is satisﬁ ed that its objectivity and independence is not compromised as a consequence of other than audit work undertaken for the company. PricewaterhouseCoopers has conﬁ rmed 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 2006/07 year are set out in note 6 to the ﬁ nancial statements. Fees for audit and tax compliance work in the 2006/07 year represent 55% of total PricewaterhouseCoopers fees. 5. ENSURE TIMELY AND BALANCED DISCLOSURE The board is committed to ensuring timely and balanced disclosure of all material matters 70 I CORPORATE GOVERNANCE 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 ﬁ nancial 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 ﬁ nancial 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. Alistair Ryan, General Manager Corporate, is Company Secretary and the Disclosure Ofﬁ cer 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. 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. 7. RECOGNISE AND MANAGE RISK The company maintains a programme for the identiﬁ cation, 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. SKYCITY maintains an independent, centrally- managed internal audit function which evaluates and reports on ﬁ nancial, operational and management controls across the Group. The function is resourced jointly by SKYCITY and Ernst and Young. The Audit and Risk Committee approve the internal audit programme, with results and performance of the control environments regularly reviewed by both the committee and the external auditors. 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. 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 board and committee charters require an evaluation of the board and the committee CORPORATE GOVERNANCE I 71 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 performance review of the board for 2006 was conducted by the chairman of the board (Rod McGeoch) during the November/December 2006 period. The review involved a formal response/feedback process with a one on one meeting involving the chairman and each director individually. The chairman reported the ﬁ ndings of the review to the December Nomination Committee and board meetings. The Governance and Remuneration Committee undertakes the performance review of the chief executive ofﬁ cer and those reporting directly to that position in accordance with the company’s performance review procedures. These performance reviews are reported to the board for ﬁ nal approval. 9. REMUNERATE FAIRLY AND RESPONSIBLY The Governance and Remuneration Committee’s responsibilities include the review of SKYCITY’s remuneration policies and procedures. 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 signiﬁ cant at-risk component of total remuneration which drives performance to achieve company goals and strategy • • to manage remuneration within levels of cost efﬁ ciency and affordability, and to align remuneration for senior executives with the interests of shareholders. Non-Executive Director remuneration Shareholders at the annual meeting determine the total remuneration available to non- executive directors. At the 2006 annual meeting, shareholders approved, effective from 1 July 2006, a total remuneration amount for non-executive directors of $750,000 per annum (plus GST if any). Fees are currently $90,000 for non-executive directors, $200,000 for the chairperson of the board, an additional $20,000 for Audit and Risk, and Governance and Remuneration committee chairpersons and an additional $10,000 for members of those two committees. For those directors who were in ofﬁ ce 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. Retirement allowances for SKYCITY directors were discontinued at 30 June 2004 with retirement allowances accrued to that date frozen as to amount. Retirement allowances accrued as at 30 June 2004 will not carry any interest entitlement between 1 July 2004 and the date of payment. Managing Director/Executive Director remuneration Remuneration details for Evan Davies, Managing Director until 25 June 2007, and Elmar Toime, Executive Director from 25 June 2007, are included in the disclosures section of this annual report at page 132. 72 I CORPORATE GOVERNANCE 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 speciﬁ c business needs. This process ensures internal equity between roles and allows comparison with the overall market. Remuneration ranges are reviewed annually to reﬂ ect market movements. The Governance and Remuneration Committee approves remuneration increases for the senior executive group. Performance Pay Incentive Plan (PPI) SKYCITY operates an at-risk component of total remuneration for all salaried employees titled Performance Pay Incentive (PPI). To enable payment of any at-risk incentive component, the business must achieve minimum ﬁ nancial targets. If those targets are not met no bonus incentive is paid. In addition to overall ﬁ nancial 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 ﬁ nancial targets and increase according to the degree by which the company performs relative to these ﬁ nancial 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 shares components of a PPI bonus are issued in three equal tranches over a two year period. For the 2006/07 year, a total of 325 SKYCITY salaried personnel received PPI bonuses totalling $1.95 million (an average bonus payment of $5,985 per bonus-earning participant). Customer Experience Incentive (CEI) SKYCITY also has an incentive remuneration plan for waged staff, titled Customer Experience Incentive (CEI). This scheme reﬂ ects the company’s commitment to providing favourable experiences for customers. Waged staff can earn additional bonus remuneration depending on the achievement of ﬁ nancial 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 ﬁ nancial and customer service targets have been met. For the 2006/07 year 2,160 waged employees received total CEI bonuses of $853,200 (an average bonus payment of $395 per bonus- earning participant). Equity-based executive remuneration: Long-term incentive 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 25 senior executives. Rights are issued as a long-term incentive to encourage retention and value creation. The number of rights issued to executives is determined based on a rights valuation calculated by CORPORATE GOVERNANCE I 73 Deloitte Corporate Finance using the binomial methodology. The Deloitte valuation is subject to independent review by the company’s auditor, PricewaterhouseCoopers. reduced number of shares being issued for the equivalent beneﬁ t. The Rights Plan, which was approved by the board in December 2004, is for a three year period to 30 June 2008. 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 ﬁ fth anniversary of their date of issue. The exercise price of executive share rights is structured so that the employee beneﬁ ts 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 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 proﬁ le and prospects of SKYCITY Entertainment Group Limited. 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 to the NZX and the ASX for the ﬁ nancial year to 30 June. The base exercise price is escalated 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 beneﬁ t of the share right is calculated and then the required number of shares are issued. The Rights Plan provides the same incentive for the senior executive group as the Options Plan (refer below) but results in a 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. 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. 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. SKYCITY is aware that its business may be associated with gambling and alcohol-related harm for some customers. Effective and pro-active customer care are the cornerstone principles of SKYCITY’s approach to host responsibility which and is discussed in the Caring for Customer Welfare section of this annual report. COMPLIANCE SKYCITY conﬁ rms that, other than as set out below, it has complied with the NZX Corporate Governance Best Practice Code and the ASX Corporate Governance Principles and Best Practice Recommendations during the 2006/07 year. 74 I CORPORATE GOVERNANCE • The company does not disclose the remuneration of its ﬁ ve 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 ASX Corporate Governance Principles and Best Practice Recommendations and NZX Corporate Governance Best Practice Code recommend that all members of the Audit and Risk Committee be non- executive directors. Mr Toime, who has been a member of the Audit and Risk Committee since 1996 was appointed Executive Director on 25 June 2007 on a temporary basis until a new chief executive ofﬁ cer is appointed. The company believes Mr Toime’s experience is valuable to the committee and that his temporary appointment as Executive Director does not affect the operation or independence of the committee. Mr Toime is not the chairman of the Audit and Risk Committee and the other two members are non-executive directors. • 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, is a preferred structure in that the number of new shares that will be issued (for the same beneﬁ t to executives) will be signiﬁ cantly reduced. The Executive Share Rights Plan continues to impose a three year restriction before beneﬁ ts under the Plan can be realised by participants. CORPORATE GOVERNANCE I 75 SUMMARY EARNINGS STATEMENTS YEARS ENDED 30 JUNE SKYCITY Auckland Gaming revenue Non-gaming revenue Total revenue Earnings before interest, tax, depreciation and amortisation Depreciation and amortisation expenses Earnings before interest and tax 2007 $000 2006 $000 MOVEMENT % 315,238 102,382 417,620 209,073 334,761 92,685 427,446 227,095 (41,259) (39,472) 167,814 187,623 -5.8% +10.5% -2.3% -7.9% +4.5% -10.6% Auckland ﬁ gures exclude corporate/unallocated costs. The 2006 ﬁ gures have been restated to be consistent with the 2007 presentation. Corporate/unallocated costs net of interest received were $25.0 million (FY06 $26.3 million). SKYCITY Hamilton Gaming revenue Non-gaming revenue Total revenue Earnings before interest, tax, depreciation and amortisation Depreciation and amortisation expenses Earnings before interest and tax Other New Zealand Operations Gaming revenue Non-gaming revenue Total revenue Earnings before interest, tax, depreciation and amortisation Depreciation and amortisation expenses Earnings before interest and tax 2007 $000 2006 $000 MOVEMENT % 33,298 6,398 39,696 19,568 (4,835) 14,733 29,749 5,160 34,909 17,368 (4,318) 13,050 +11.9% +24.0% +13.7% +12.7% +12.0% +12.9% 2007 $000 2006 $000 MOVEMENT % 6,459 85,518 91,977 23,549 (6,766) 16,783 4,909 44,022 48,931 14,405 +31.6% +94.3% +88.0% +63.5% (3,365) +101.1% 11,040 +52.0% Other New Zealand Operations include SKYCITY Queenstown, Christchurch Casino and SKYCITY Cinemas. 78 I FINANCIALS SUMMARY EARNINGS STATEMENTS YEARS ENDED 30 JUNE SKYCITY Adelaide Gaming revenue Non-gaming revenue Total revenue Earnings before interest, tax, depreciation and amortisation Depreciation and amortisation expenses Earnings before interest and tax SKYCITY Darwin Gaming revenue Non-gaming revenue Total revenue Earnings before interest, tax, depreciation and amortisation Depreciation and amortisation expenses Earnings before interest and tax 2007 A$000 2006 A$000 MOVEMENT % 117,175 16,229 133,404 25,358 (9,905) 15,453 114,368 16,787 131,155 27,335 (10,215) 17,120 +2.5% -3.3% +1.7% -7.2% -3.0% -9.7% 2007 A$000 2006 A$000 MOVEMENT % 75,205 19,354 94,559 35,255 (6,694) 28,561 72,161 16,817 88,978 33,650 (5,628) 28,022 +4.2% +15.1% +6.3% +4.8% +18.9% +1.9% FINANCIALS I 79 FIVE YEAR SUMMARY CONSOLIDATED INCOME STATEMENTS YEARS ENDED 30 JUNE Revenue Other income/revenue Total revenue Operating expenses 2007 $000 2006 $000 2005 $000 2004 $000 2003 $000 798,575 752,369 669,928 590,479 556,493 17,522 12,207 13,081 3,678 7,820 816,097 764,576 683,009 594,157 564,313 (518,954) (463,257) (398,910) (334,492) (310,395) Earnings before interest, tax, depreciation and amortisation 297,143 301,319 284,099 259,665 253,918 Depreciation and amortisation expenses (72,227) (65,016) (58,783) (47,677) (46,032) Earnings before interest and tax 224,916 236,303 225,316 211,988 207,886 Funding costs Proﬁ t before income tax Income tax expense (Proﬁ t)/loss attributable to minority interests Proﬁ t after tax & minority interest before non-recurring items Non-recurring items (1) Net proﬁ t after tax (93,361) (83,965) (79,713) (48,563) (49,266) 131,555 152,338 145,603 163,425 158,620 (33,125) (32,590) (38,078) (40,400) (51,117) (28) 381 (1,111) (1,899) (286) 98,402 120,129 106,414 121,126 107,217 - - - (20,904) - 98,402 120,129 106,414 100,222 107,217 The above income statements have been prepared to show the key features of the operating performance achieved. They are not the ﬁ nancial statements of SKYCITY Entertainment Group Limited and therefore do not contain all the details and disclosures which are included in the company’s ﬁ nancial statements. In the ﬁ nancial statements interest received and gains on some ﬁ nancial transactions are included as other revenue. In previous ﬁ ve year summaries these items have been netted off against funding costs to identify the net cost of the company’s funding arrangement. To avoid the differential with the ﬁ nancial statements the above summaries now include these items in other revenue. The ﬁ ve year income statement is based on NZ IFRS (2005 to 2007) and on previous NZ GAAP (2003 to 2004). (1) Non-recurring item relates to the write-off of investment in Canbet Limited. 80 I FINANCIALS CONSOLIDATED BALANCE SHEETS AS AT 30 JUNE ASSETS Current assets Cash and bank balances Inventories Receivables and prepayments Tax receivables Derivative ﬁ nancial instruments Assets classiﬁ ed 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 ﬁ nancial assets Tax receivables Deferred tax assets Derivative ﬁ nancial instruments Other non-current assets Total non-current assets Total assets LIABILITIES Current liabilities Payables Interest-bearing liabilities Derivative ﬁ nancial instruments Total current liabilities Non-current liabilities Interest-bearing liabilities Subordinated debt - capital notes Subordinated debt - SKYCITY ACES Deferred tax liabilities Derivative ﬁ nancial instruments Convertible notes Other term liabilities Total non-current liabilities Total liabilities Net assets EQUITY Share capital Reserves Retained proﬁ ts Shareholders’ equity Minority interests Total equity FIVE YEAR SUMMARY 2007 $000 2006 $000 2005 $000 2004 $000 2003 $000 71,537 5,523 30,996 25,971 334 - 134,361 940,106 8,845 80,831 433,469 2,514 - 15,978 26,865 - 1,508,608 1,642,969 74,098 5,241 30,803 - 1,477 52,400 164,019 935,123 8,593 78,304 426,011 2,622 47,438 26,667 37,055 - 1,561,813 1,725,832 62,849 5,382 37,158 - - - 105,389 917,967 52,500 79,820 377,016 - 12,905 13,675 - - 1,453,883 1,559,272 53,272 3,017 53,106 - - - 109,395 750,267 - 78,280 212,373 - 9,999 - - 14,645 1,065,564 1,174,959 119,501 - - 119,501 100,776 - 25 100,801 97,005 100,758 - 197,763 753,002 123,756 161,410 52,992 50,774 - - 1,141,934 1,261,435 381,534 950,904 123,720 177,956 60,596 3,072 - - 1,316,248 1,417,049 308,783 956,795 121,510 - 45,438 - - - 1,123,743 1,321,506 237,766 364,068 (16,069) 31,044 379,043 2,491 381,534 281,735 (8,171) 32,756 306,320 2,463 308,783 226,726 (5,159) 13,355 234,922 2,844 237,766 93,619 101,000 - 194,619 579,967 149,644 - - - 8,910 27,216 765,737 960,356 214,603 225,871 (7,510) (7,274) 211,087 3,516 214,603 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 - 65,836 437,116 149,266 - - - 13,365 24,680 624,427 690,263 246,565 246,518 1,932 (7,492) 240,958 5,607 246,565 The balance sheet set out above is based on NZ IFRS (2005 to 2007) and on previous NZ GAAP (2003 to 2004). FINANCIALS I 81 FIVE YEAR SUMMARY FINANCIAL RATIOS EBITDA/Revenue Proﬁ t after tax/Revenue Revenue/Total assets Return on total assets Earnings per share(1) 2007 2006 2005 2004 2003 36.4% 12.1% 49.7% 6.0% 39.4% 15.7% 44.3% 7.0% 41.6% 15.6% 43.8% 6.8% 43.7% 16.9% 50.6% 8.5% 45.0% 19.0% 60.2% 11.4% 22.3cps 28.5cps 25.5cps 24.0cps 25.5cps Net tangible assets per share(1) ($0.12) ($0.28) ($0.33) $0.01 $0.09 Dividends/Distributions paid(2) 21.0cps 26.0cps 24.0cps 26.5cps 33.5cps Interest coverage 3.2x 3.6x 3.6x 5.3x 5.2x (1) Weighted average number of shares on issue used. Adjusted for 1 for 1 share split in November 2003 (2) The dividend paid in the 2002/03 year of 33.5cps included a special additional dividend of 10.0cps The ﬁ nancial ratios have been restated to be consistent with the presentation of the ﬁ ve year income statements and balance sheets. 82 I FINANCIALS AUDITOR’S REPORT TO THE SHAREHOLDERS OF SKYCITY ENTERTAINMENT GROUP LIMITED We have audited the ﬁ nancial statements on pages 84 to 129. The ﬁ nancial statements provide information about the past ﬁ nancial performance and cash ﬂ ows of the Company and Group, comprising SKYCITY Entertainment Group Limited and its subsidiaries for the year ended 30 June 2007 and their ﬁ nancial position as at that date. This information is stated in accordance with the accounting policies set out on pages 88 to 94. DIRECTORS’ RESPONSIBILITIES The Company’s Directors are responsible for the preparation and presentation of the ﬁ nancial statements which give a true and fair view of the ﬁ nancial position of the Company and Group as at 30 June 2007 and their ﬁ nancial performance and cash ﬂ ows for the year ended on that date. AUDITOR’S RESPONSIBILITIES We are responsible for expressing an independent opinion on the ﬁ nancial statements presented by the Directors and reporting our opinion to you. BASIS OF OPINION An audit includes examining, on a test basis, evidence relevant to the amounts and disclosures in the ﬁ nancial statements. It also includes assessing: (a) the signiﬁ cant estimates and judgements made by the Directors in the preparation of the ﬁ nancial 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 sufﬁ cient evidence to give reasonable assurance that the ﬁ nancial 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 ﬁ nancial statements. We have no relationship with or interests in the Company or any of its subsidiaries other than in our capacity as auditors, tax and accounting advisors. UNQUALIFIED OPINION We have obtained all the information and explanations we have required. In our opinion: (a) proper accounting records have been kept by the Company as far as appears from our examination of those records; and (b) the ﬁ nancial statements on pages 84 to 129: (i) comply with generally accepted accounting practice in New Zealand; (ii) comply with International Financial Reporting Standards; and (iii) give a true and fair view of the ﬁ nancial position of the Company and Group as at 30 June 2007 and their ﬁ nancial performance and cash ﬂ ows for the year ended on that date. Our audit was completed on 20 August 2007 and our unqualiﬁ ed opinion is expressed as at that date. Chartered Accountants Auckland FINANCIALS I 83 INCOME STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTES Revenue Other income Share of net proﬁ ts of associates Employee beneﬁ ts expense Depreciation and amortisation expense Other expenses Marketing and communications Direct consumables and ﬁ lm hire costs Gaming taxes Directors’ fees Restructuring costs Finance costs Proﬁ t before income tax Income tax expense Proﬁ t before minority interest (Proﬁ t)/loss attributable to minority interest Proﬁ t attributable to shareholders of the company Earnings per share for proﬁ t attributable to the shareholders of the company Basic earnings per share (cents) Diluted earnings per share (cents) 3 4 16 5 5 5 5 7 8 8 CONSOLIDATED PARENT 2007 $000 2006 $000 798,575 752,369 2007 $000 - 2006 $000 - 13,068 4,454 7,891 4,316 111,097 109,353 - - (230,701) (225,049) (15,904) (15,941) (72,227) (65,016) (121,219) (105,512) (55,959) (55,709) (50,326) (718) (4,322) (93,361) 131,555 (33,125) 98,430 (28) (44,509) (39,468) (48,134) (585) - (83,965) 152,338 (32,590) 119,748 381 (254) (12,255) (3,878) - - (718) (4,322) (10,127) 63,639 - (157) (6,388) (4,427) - - (585) - (9,983) 71,871 - 63,639 71,871 - - 98,402 120,129 63,639 71,871 22.3 22.1 28.5 26.9 14.4 13.9 17.1 16.1 The above income statements should be read in conjunction with the accompanying notes. 84 I FINANCIALS AS AT 30 JUNE 2007 ASSETS Current assets Cash and bank balances Receivables and prepayments Inventories Tax receivables Derivative ﬁ nancial instruments Assets classiﬁ ed as held for sale Total current assets Non-current assets Property, plant and equipment Investment properties Investment in subsidiaries Intangible assets Available-for-sale ﬁ nancial assets Investments in associates Tax receivables Deferred tax assets Derivative ﬁ nancial instruments Total non-current assets Total assets LIABILITIES Current liabilities Payables Derivative ﬁ nancial instruments Total current liabilities Non-current liabilities Interest-bearing liabilities Subordinated debt-capital notes Subordinated debt-SKYCITY ACES Deferred tax liabilities Derivative ﬁ nancial instruments Total non-current liabilities Total liabilities Net assets EQUITY Share capital Reserves Retained proﬁ ts Shareholders’ equity Minority interest Total equity BALANCE SHEETS CONSOLIDATED 2007 $000 2006 $000 PARENT 2007 $000 2006 $000 NOTES 9 10 11 12 13 14 15 16 21 10 17 10 18 19 20 22 10 24 25(a) 25(b) 26 71,537 30,996 5,523 25,971 334 - 74,098 30,803 5,241 - 1,477 52,400 2 2 31,395 34,166 - - - - - - - - 134,361 164,019 31,397 34,168 940,106 8,845 - 935,123 8,593 1,533 - 1,961 - - 724,949 724,949 433,469 426,011 156 147 2,514 80,831 - 15,978 26,865 2,622 78,304 47,438 26,667 37,055 - - - - - - - - - - 1,508,608 1,642,969 1,561,813 1,725,832 726,638 758,035 727,057 761,225 119,501 100,776 369,290 416,952 - 25 - - 119,501 100,801 369,290 416,952 753,002 123,756 161,410 52,992 50,774 1,141,934 1,261,435 381,534 364,068 (16,069) 31,044 379,043 2,491 381,534 950,904 123,720 177,956 60,596 3,072 1,316,248 1,417,049 308,783 281,735 (8,171) 32,756 306,320 2,463 308,783 - - 123,756 123,720 - - - 123,756 493,046 264,989 364,068 3,526 (102,605) 264,989 - - - - 123,720 540,672 220,553 281,735 4,948 (66,130) 220,553 - 264,989 220,553 The above balance sheets should be read in conjunction with the accompanying notes. FINANCIALS I 85 STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007 NOTES Total equity at the beginning of the year Restatement on adoption of NZ IAS 39 CONSOLIDATED 2007 $000 2006 $000 PARENT 2007 $000 2006 $000 308,783 237,766 220,553 193,683 - (4,073) - - Restated total equity at the beginning of the year 308,783 233,693 220,553 193,683 Available for sale ﬁ nancial assets Movement in cash ﬂ ow hedge reserve Exchange differences on translation of foreign operations Net income recognised directly in equity Proﬁ t for the year Total recognised income and expense for the year 25 25 25 Exercise of share options Shares issued under proﬁ t distribution plan Buyback of shares under proﬁ t distribution plan Buyback and cancellation of shares under proﬁ t distribution plan Share rights issued for employee services Employee share entitlements issued Shares issued under dividend reinvestment plan Distributions to owners Movement in employee share entitlement reserve Change in minority interest Amalgamations Total equity at the end of the year 24 27 25 26 154 27,400 (34,030) (6,476) 98,402 91,926 5,956 (21,246) (5,403) 786 2,126 - (69) (22,161) 21,552 (678) 120,129 119,451 10,009 50,450 - (14,894) 874 2,139 6,431 - - - - 63,639 63,639 5,956 100,114 (21,246) (5,403) 786 2,126 - - - - - 71,871 71,871 10,009 50,450 - (14,894) 874 2,139 6,431 (100,114) (100,667) (100,114) (100,667) (1,422) 28 - (19,175) 381,534 1,678 (381) - (44,361) 308,783 (1,422) - - (19,203) 264,989 1,678 - (1,021) (45,001) 220,553 24 100,114 The above statements of changes in equity should be read in conjunction with the accompanying notes. 86 I FINANCIALS FOR THE YEAR ENDED 30 JUNE 2007 Cash ﬂ ows from operating activities Receipts from customers Payments to suppliers and employees Dividends received Interest received Other taxes paid Income taxes paid Net cash ﬂ ows from operating activities Cash ﬂ ows from investing activities Purchase of business, net of cash acquired Purchase of/proceeds from property, plant and equipment Payments for investment property Payments for intangible assets Proceeds from sale of available for sale assets Dividends from subsidiaries Net cash ﬂ ows from investing activities Cash ﬂ ows from ﬁ nancing activities Exercise of share options Proceeds from borrowings Cash ﬂ ows associated with closed derivatives Buyback and cancellation of shares Repayment of borrowings Advances from subsidiaries Dividends paid to company shareholders Interest paid Net cash ﬂ ows from ﬁ nancing activities CASH FLOW STATEMENTS CONSOLIDATED 2007 $000 2006 $000 PARENT 2007 $000 NOTES 798,393 758,729 (467,925) (418,559) 330,468 340,170 4,429 6,336 (53,000) (20,750) 3,444 3,583 (50,884) (45,538) - (33,523) (33,523) - 208 - - 2006 $000 - (21,166) (21,166) - 971 - - 36 267,483 250,775 (33,315) (20,195) 31 (34,285) (69,307) (252) (14,790) 52,400 - - (57,851) (8,593) (14,527) - - (66,234) (80,971) - 273 - - - - (1,452) - - - 100,311 100,584 106,251 104,799 5,956 - - (5,403) (93,052) - (21,246) (90,065) 10,009 157,550 8,098 (14,890) (182,754) - (43,790) (92,773) (203,810) (158,550) (2,561) 74,098 - 11,254 62,849 (5) 5,956 - - 10,009 2,210 - (5,403) (14,890) - (36,648) (21,246) (9,928) (67,269) - (29,111) (43,790) (9,033) (84,605) - 2 - 2 (1) 3 - 2 FINANCIALS I 87 Net (decrease)/increase in cash and cash equivalents Cash and bank balances at the beginning of the year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year 71,537 74,098 The above cash ﬂ ow statements should be read in conjunction with the accompanying notes. NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION 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 and Australia. The company is a limited liability company incorporated and domiciled in New Zealand. The address of its registered ofﬁ ce is Federal House, 86 Federal Street, Auckland. The company has its primary listing on the New Zealand stock exchange. These consolidated ﬁ nancial statements have been approved for issue by the board of directors on 20 August 2007. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These general-purpose ﬁ nancial statements for the year ended 30 June 2007 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) Basis of Preparation The principal accounting policies adopted in the preparation of the ﬁ nancial 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 ﬁ nancial statements of SKYCITY also comply with International Financial Reporting Standards (IFRS). Entities Reporting The consolidated ﬁ nancial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2007 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 ﬁ nancial statements as the Group. The ﬁ nancial statements of the ‘Parent’ are for the company as a separate legal entity. The Parent company and the Group are designated as proﬁ t-oriented entities for ﬁ nancial 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 ﬁ nancial statements have been prepared in accordance with the requirements of the Financial Reporting Act 1993 and the Companies Act 1993. Historical Cost Convention These ﬁ nancial statements have been prepared under the historical cost convention, as modiﬁ ed by the revaluation of available-for-sale ﬁ nancial assets, ﬁ nancial assets and liabilities (including derivative instruments) at fair value through proﬁ t or loss and investment property. Critical Accounting Estimates The preparation of ﬁ nancial 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) Principles of Consolidation (i) Subsidiaries Subsidiaries are all those entities (including special- purpose entities) over which the company has the power to govern the ﬁ nancial 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. 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. Identiﬁ able 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 identiﬁ able 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. 88 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 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 signiﬁ cant inﬂ uence 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 ﬁ nancial statements using the cost method, and in the consolidated ﬁ nancial 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) identiﬁ ed on acquisition. The Group’s share of its associates’ post-acquisition proﬁ ts 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 ﬁ nancial 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. 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 ﬁ nancial statements under the appropriate headings. (c) Segment Reporting 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) Foreign Currency Translation (i) Functional and Presentation Currency Items included in the ﬁ nancial statements of each of the company’s operations are measured using the currency that best reﬂ ects the economic substance of the underlying events and circumstances relevant to that operation (‘functional currency’). The consolidated and Parent ﬁ nancial statements are presented in New Zealand dollars, which is the Group’s 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 ﬂ ow hedges and qualifying net investment hedges. Translation differences on non-monetary items, such as equities held at fair value through proﬁ t or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classiﬁ ed as available-for-sale ﬁ nancial assets, are included in the fair value reserve in equity. (iii) Foreign Operations The results and ﬁ nancial position of foreign entities (none of which has the currency of a hyperinﬂ ationary FINANCIALS I 89 NOTES TO THE FINANCIAL STATEMENTS 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) Revenue Recognition 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. 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 proﬁ t or taxable proﬁ t 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. The Group is the Lessee (g) Leases (i) Leases in which a signiﬁ cant portion of the risks and rewards of ownership are retained by the lessor are classiﬁ ed 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. Income Tax (f) 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 ﬁ nancial statements, and changes in unused tax losses. (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. 90 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS (h) Impairment of Assets Intangible assets that have an indeﬁ nite 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 identiﬁ able cash ﬂ ows (cash-generating units). (i) Cash and Bank Balances Cash and bank balances include cash on hand, deposits held at call with ﬁ nancial 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 insigniﬁ cant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Balance Sheet. (j) Trade Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. and re-evaluates this designation at each reporting date. (i) Financial Assets at Fair Value Through Proﬁ t or Loss This category has two subcategories: ﬁ nancial assets held for trading, and those designated at fair value through proﬁ t or loss on initial recognition. A ﬁ nancial asset is classiﬁ ed 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 ﬁ nancial asset at fair value through proﬁ t 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 classiﬁ ed 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 ﬁ nancial assets with ﬁ xed 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 classiﬁ ed as non-current assets. Loans and receivables are included in receivables in the Balance Sheet. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible 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. (iii) Held-to-Maturity Investments Held-to-maturity investments are non-derivative ﬁ nancial assets with ﬁ xed or determinable payments and ﬁ xed maturities that the Group has the positive intention and ability to hold to maturity. Inventories (k) Inventories, all of which are ﬁ nished goods, are stated at the lower of cost and net realisable value determined on a ﬁ rst in, ﬁ rst out basis. (l) Investments and Other Financial Assets The Group classiﬁ es its investments in the following categories: ﬁ nancial assets at fair value through proﬁ t or loss, loans and receivables, held-to-maturity investments, and available-for-sale ﬁ nancial assets. The classiﬁ cation depends on the purpose for which the investments were acquired. The company determines the classiﬁ cation of its investments at initial recognition (iv) Available for Sale Financial Assets Available or sale ﬁ nancial assets, comprising principally marketable equity securities, are non-derivative assets that are either designated in this category or not classiﬁ ed 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 ﬁ nancial assets and ﬁ nancial assets at fair value through proﬁ t 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 ﬁ nancial assets at FINANCIALS I 91 NOTES TO THE FINANCIAL STATEMENTS fair value through proﬁ t 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 classiﬁ ed as available for sale are recognised in equity in the available for sale investments revaluation reserve. When securities classiﬁ ed 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 ﬁ rm commitment (fair value hedges) or hedges of exposures to variability in cash ﬂ ows associated with recognised assets or liabilities or highly probable forecast transactions (cash ﬂ ow 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 ﬂ ows 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 ﬂ ow 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 proﬁ t 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-ﬁ nancial asset (for example, inventory) or a non- ﬁ nancial 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, Plant and Equipment 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 ﬂ ow 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 beneﬁ ts associated with the item will ﬂ ow 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 ﬁ nancial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate 92 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS their cost, net of their residual values, over their estimated useful lives, as follows: • Buildings • Building ﬁ t-out • Plant and equipment • Vehicles • Fixtures and ﬁ ttings 5-75 years 10 years 2-75 years 3 years 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. (o) Investment Property 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) Intangible Assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identiﬁ able 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 ﬁ nite 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 indeﬁ nite 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 speciﬁ c 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. Borrowings are classiﬁ ed 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) Borrowing Costs 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) Employee Beneﬁ ts (i) Wages, Salaries and Annual Leave Liabilities for wages and salaries, including non-monetary beneﬁ ts 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 share rights 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 share rights or shares granted, excluding the impact of any non- FINANCIALS I 93 NOTES TO THE FINANCIAL STATEMENTS market vesting conditions (for example, proﬁ tability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of share rights or shares that are expected to be distributed. At each balance sheet date, the entity revises its estimates of the number of 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. (t) Share Capital Ordinary shares are classiﬁ ed 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. (u) Dividends/Distributions Provision is made for the amount of any dividend/ distribution declared on or before the end of the ﬁ nancial year but not distributed at balance date. (v) Earnings Per Share (i) Basic Earnings Per Share Basic earnings per share is calculated by dividing the proﬁ t attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the ﬁ nancial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted Earnings Per Share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account the after-income-tax effect of interest and other ﬁ nancing 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. (w) Standards, Interpretations and Amendments to Published Standards that are Not Yet Effective Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group’s accounting periods beginning on or after 1 July 2007 or later periods but which the Group has not early adopted: • NZ IFRIC 13, Customer loyalty programmes (effective from annual periods beginning on or after 1 July 2008). NZ IFRIC 13 requires SKYCITY to allocate a portion of gaming revenue to the loyalty points scheme as a liability. Currently the Group treats this amount as an expense. There is not expected to be a signiﬁ cant impact on net proﬁ t. The Group will apply NZ IFRIC 13 from 1 July 2007. • NZ IFRS 7, Financial Instruments: Disclosures and a complementary Amendment to NZ IAS 1, Presentation of Financial Statements Capital Disclosures (effective from annual periods beginning on or after 1 January 2007). NZ IFRS 7 introduces new disclosures to improve the information about ﬁ nancial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from ﬁ nancial instruments, including speciﬁ ed minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces NZ IAS 30, Disclosures in the Financial Statements of Banks and Similar Financial Institutions, and disclosure requirements in NZ IAS 32, Financial Instruments: Disclosure and Presentation. The amendment to NZ IAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital. The Group assessed the impact of NZ IFRS 7 and the amendment to NZ IAS 1 and concluded that the main additional disclosures will be the sensitivity analysis to market risk and the capital disclosures as required by the amendment of NZ IAS 1. The Group will apply NZ IFRS 7 and the amendment to NZ IAS 1 from 1 July 2007. (x) Changes in Accounting Policies There have been no signiﬁ cant changes in accounting policies during the current year. Accounting policies have been applied on a basis consistent with prior years. Certain comparatives have been restated in order to conform to current year presentation. The nature of these changes is to increase the level of disclosure around expenses, to align ﬁ xed asset classiﬁ cations between years and to amend 2006 segmental disclosures. There is no impact on net proﬁ t. 94 I FINANCIALS 3. REVENUE Gaming Non-gaming NOTES TO THE FINANCIAL STATEMENTS CONSOLIDATED 2007 $000 576,023 222,552 798,575 2006 $000 578,391 173,978 752,369 PARENT 2007 $000 - - - 2006 $000 - - - Non-gaming revenue includes revenues from hotels, cinemas, food and beverage, convention centre, car parking, property rentals and Sky Tower. 4. OTHER INCOME Interest income Dividend income Net gain on disposal of property, plant and equipment Transfer from foreign currency translation reserve Fair value gains on ﬁ nancial assets at fair value through proﬁ t or loss Fair value adjustment to investment property (note 13) Other income Dividends from wholly-owned entities CONSOLIDATED PARENT 2007 $000 6,336 4 3,383 3,345 - - - - 2006 $000 3,583 367 - - 4,107 (166) - - 13,068 7,891 2007 $000 208 - - - - - 2006 $000 971 - - - - - 10,578 100,311 111,097 2,131 106,251 109,353 FINANCIALS I 95 NOTES TO THE FINANCIAL STATEMENTS 5. EXPENSES Proﬁ t before income tax includes the following speciﬁ c expenses: Depreciation Buildings Plant and equipment Other Furniture and ﬁ ttings Motor vehicles Total depreciation Amortisation Casino licences Software Total amortisation Finance costs CONSOLIDATED 2007 $000 2006 $000 PARENT 2007 $000 18,704 39,200 25 5,968 256 18,081 33,889 57 6,534 275 - 155 - - - 2006 $000 - 131 - - - 64,153 58,836 155 131 2,452 5,622 8,074 2,341 3,839 6,180 - 99 99 - 26 26 Interest and ﬁ nance charges paid/payable Exchange losses/(gains) on foreign currency borrowings 93,295 66 94,263 (10,298) 10,128 (1) 9,983 - Total ﬁ nance costs 93,361 83,965 10,127 9,983 Rental expense relating to operating leases Lease payments Total rental expense relating to operating leases Other expenses Utilities, insurance and rates Community funding and gaming levies Property expenses Other Total other expenses Restructuring costs Restructuring costs 14,331 14,331 21,257 8,715 32,207 59,040 8,076 8,076 19,580 8,467 21,591 55,874 121,219 105,512 - - 262 - - - - 219 - - 15,871 16,133 10,597 10,816 4,322 - 4,322 - Restructuring costs relate to redundancy and other payments. 96 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 6. REMUNERATION OF AUDITORS 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 ﬁ rms: CONSOLIDATED 2007 $000 2006 $000 PARENT 2007 $000 (a) Assurance Services Audit services PricewaterhouseCoopers Compliance audit fees Statutory audit fees Other audit ﬁ rms for the audit or review of ﬁ nancial 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 66 721 9 796 116 - 39 25 184 364 36 619 55 710 242 382 68 73 223 988 Total remuneration for assurance services 1,160 1,698 (b) Other Services PricewaterhouseCoopers Taxation advisory services Business process and efﬁ ciency review Total other services 459 170 629 1,429 - 1,429 66 125 - 191 112 - - - - 112 303 - 170 170 2006 $000 36 111 - 147 242 - 68 73 42 425 572 617 - 617 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 other circumstances other external advisers are used. FINANCIALS I 97 NOTES TO THE FINANCIAL STATEMENTS 7. INCOME TAX EXPENSE (a) Income Tax Expense Current tax Deferred tax Under/(over) provided in prior years Income tax expense Deferred income tax/(revenue) expense included in income tax expense comprises: Decrease/(increase) in deferred tax assets (note 21) (Decrease)/increase in deferred tax liabilities (note 22) (b) Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable Proﬁ t from continuing operations before income tax expense CONSOLIDATED 2007 $000 2006 $000 PARENT 2007 $000 2006 $000 40,999 (8,234) 360 33,125 1,919 (10,153) (8,234) 22,880 10,218 (508) 32,590 (5,744) 15,962 10,218 - - - - - - - - - - - - - - 131,555 152,338 63,639 71,871 Tax at the New Zealand tax rate of 33% (2006: 33%) 43,413 50,272 21,001 23,717 Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income: Inter-company eliminations Expenditure not deductible for tax Share of net proﬁ t of associates Change in NZ corporate tax rate (refer below) Foreign exchange rate differences (refer below) Non-taxable income Exempt dividends received Share of partnership expenditure Non-taxable gain on disposal of ﬁ xed assets Other Difference in overseas tax rates Under/(over) provision in prior years Income tax expense - 1,964 (1,470) (3,681) 4,591 (417) - (3,640) (3,890) (1,050) 35,820 (3,150) 455 (2,695) 33,125 - 2,034 (1,424) - (8,781) (58) - (3,639) - (754) 37,650 (4,651) (409) (5,060) 32,590 11,969 133 11,147 199 - - - - - - - - (33,103) (35,063) - - - - - - - - - - - - - - - - The weighted average applicable tax rate was 25.2% (2006: 21.4%). The increase in tax rate from 2006 to 2007 was primarily due to movements in the New Zealand dollar against the Australian dollar which resulted in tax assessable items but no associated proﬁ t before tax impact, partially offset by accounting for the lowering of the New Zealand corporate tax rate effective from 1 July 2008. 98 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 8. EARNINGS PER SHARE (a) Reconciliations of Earnings Used in Calculating Earnings Per Share Basic earnings per share Proﬁ t attributable to the ordinary equity holders of the company used in calculating basic earnings per share Diluted earnings per share Proﬁ t attributable to the ordinary equity holders of the company used in calculating basic earnings per share Interest on capital notes Interest on SKYCITY ACES Tax on the above Proﬁ t attributable to the ordinary equity holders of the company used in calculating diluted earnings per share CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 98,402 120,129 63,639 71,871 98,402 10,064 10,253 (6,705) 120,129 9,892 6,379 (5,369) 63,639 10,064 - 71,871 9,892 - (3,321) (3,264) 112,014 131,031 70,382 78,499 (b) Weighted Average Number of Shares Used as the Denominator 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 2007 NUMBER 2006 NUMBER 440,556,530 421,218,240 33,939,147 33,942,891 6,945,011 9,207,463 24,382,354 22,937,474 505,823,042 487,306,068 (c) Information Concerning the Classiﬁ cation of Securities (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 20. (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 29. (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 19. FINANCIALS I 99 NOTES TO THE FINANCIAL STATEMENTS 9. RECEIVABLES AND PREPAYMENTS CONSOLIDATED PARENT Trade receivables 2007 $000 6,921 2006 $000 6,330 Advance to Christchurch Hotels Limited 16,415 16,422 Sundry receivables Prepayments Amounts due from subsidiaries 5,298 2,362 - 5,933 2,118 - 30,996 30,803 2007 $000 - - 34 691 2006 $000 - - 92 170 30,670 31,395 33,904 34,166 10. DERIVATIVE FINANCIAL INSTRUMENTS Current assets Interest rate swaps - cash ﬂ ow hedges Total current derivative ﬁ nancial instrument assets Non-current assets Interest rate swaps - cash ﬂ ow hedges Cross-currency interest rate swaps - cash ﬂ ow hedges Cross-currency interest rate swaps - fair value hedges Total non-current derivative ﬁ nancial instrument assets Current liabilities Forward foreign currency contracts Total current derivative ﬁ nancial instrument liabilities Non-current liabilities Interest rate swaps - cash ﬂ ow hedges Cross-currency interest rate swaps - cash ﬂ ow hedges Cross-currency interest rate swaps - fair value hedges Total non-current derivative ﬁ nancial instrument liabilities FAIR VALUE NOTIONAL PRINCIPAL 2007 $000 334 334 2006 $000 1,477 1,477 2007 $000 2006 $000 48,006 120,000 48,006 120,000 26,865 2,089 622,529 - - 33,071 1,895 - - 313,236 365,028 21,592 26,865 37,055 622,529 699,856 - - - 47,861 2,913 50,774 25 25 7,701 7,701 12,195 12,195 3,072 - 264,958 - - 3,072 365,028 21,592 386,620 - - 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 ﬁ nancial risks, the board of directors has approved policy guidelines and authorised the use of various ﬁ nancial instruments. The policies approved and the ﬁ nancial instruments being utilised at balance date are outlined on the following page. 100 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 10. DERIVATIVE FINANCIAL INSTRUMENTS (continued) Currency Risk Currency risk arises from movements in foreign exchange rates and can impact cash ﬂ ows. 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 signiﬁ cant committed expenditure it is the Group’s policy to enter into forward foreign exchange contracts to manage the exposure to ﬂ uctuations in currency rates. There were no forward foreign exchange contracts hedging expenditure commitments as at 30 June 2007 (2006: 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. Credit Risk 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 2007 is the fair value of the ﬁ nancial asset/ liability. The Group and parent company’s cash equivalents and short-term deposits are placed with high credit quality ﬁ nancial 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. Interest Rate Risk To ensure the Group’s cost of funds is reasonably predictable from year to year, it is the Group’s policy that ﬂ oating rate debt does not exceed 50% of total debt. Furthermore, of ﬁ xed rate debt 30% to 70% must re-price within one to ﬁ ve years, 30% to 70% in ﬁ ve to ten years and 0% to 20% in ten to ﬁ fteen 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 ﬁ xed to ﬂ oating or ﬂ oating to ﬁ xed 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 ﬂ ow hedging relationship are recognised in the cash ﬂ ow hedge reserve. The balance in the reserve is expected to be released to the Income Statement over the maturity proﬁ le of the underlying debt as detailed in note 18. Refer to note 18 for the Group’s exposure to interest rate risk. 11. ASSETS CLASSIFIED AS HELD FOR SALE SKYCITY Metro Centre On 11 June 2007 SKYCITY sold the SKYCITY Metro Centre. CONSOLIDATED PARENT 2007 $000 - 2006 $000 52,400 2007 $000 - 2006 $000 - FINANCIALS I 101 NOTES TO THE FINANCIAL STATEMENTS 12. PROPERTY, PLANT AND EQUIPMENT CONSOLIDATED At 30 June 2005 Cost LAND $000 BUILDINGS $000 PLANT & EQUIPMENT $000 FIXTURES & FITTINGS $000 MOTOR VEHICLES $000 CAPITAL WORK IN PROGRESS $000 TOTAL $000 163,146 627,829 225,981 82,044 811 98,494 1,198,305 Accumulated depreciation - (92,523) (144,377) (42,989) (449) - (280,338) Net book value 163,146 535,306 81,604 39,055 362 98,494 917,967 Movements in the year ended 30 June 2006 Opening net book value 163,146 535,306 81,604 39,055 362 98,494 917,967 Exchange differences Net additions Depreciation charge Transfers 1,564 6,354 12,027 81,917 2,705 48,118 - - (18,081) (33,889) - - 457 (2,860) (6,534) - Closing net book value 171,064 611,169 98,538 30,118 At 30 June 2006 Cost 171,064 723,882 278,122 80,172 Accumulated depreciation - (112,713) (179,584) (50,054) 40 3,216 20,009 318 - 133,847 (275) - 445 1,207 (762) (57) (58,836) (77,864) (77,864) 23,789 935,123 23,789 1,278,236 - (343,113) Net book value 171,064 611,169 98,538 30,118 445 23,789 935,123 Movements in the year ended 30 June 2007 Opening net book value 171,064 611,169 Exchange differences (1,477) (10,875) 98,538 (3,486) 30,118 445 23,789 935,123 (653) (26) (258) (16,775) Net additions (3,421) 21,649 44,657 2,047 108 20,871 85,911 Depreciation charge - (18,704) (39,200) Closing net book value 166,166 603,239 100,509 (5,968) 25,544 (256) 271 (25) (64,153) 44,377 940,106 At 30 June 2007 Cost 166,166 718,792 307,831 76,738 1,246 44,377 1,315,150 Accumulated depreciation - (115,553) (207,322) (51,194) Net book value 166,166 603,239 100,509 25,544 (975) 271 - (375,044) 44,377 940,106 102 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 12. PROPERTY, PLANT AND EQUIPMENT (continued) PARENT At 30 June 2005 Cost Accumulated depreciation Net book value Movements in the year ended 30 June 2006 Opening net book value Additions Depreciation charge Closing net book value At 30 June 2006 Cost Accumulated depreciation Net book value Movements in the year ended 30 June 2007 Opening net book value Net additions Depreciation charge Closing net book value At 30 June 2007 Cost Accumulated depreciation Net book value PLANT & EQUIPMENT $000 CAPITAL WORK IN PROGRESS $000 520 (244) 276 276 493 (131) 638 988 (350) 638 638 136 (155) 619 1,105 (486) 619 512 - 512 512 811 - 1,323 1,323 - 1,323 1,323 (409) - 914 914 - 914 TOTAL $000 1,032 (244) 788 788 1,304 (131) 1,961 2,311 (350) 1,961 1,961 (273) (155) 1,533 2,019 (486) 1,533 Borrowing costs in relation to the funding of the Auckland Main Gaming Floor refurbishment, cinema construction and car park building purchases (2006: car park building purchases) have been capitalised to these projects, $1,141,522 (2006: $1,223,659). Total capitalised interest and facility fees included in the cost of land and buildings at 30 June 2007 is $47,903,810 (2006: $46,762,288). 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 car parking and a vehicle tunnel. The encumbrance is to notify any transferee of the council’s interest as lessor of the sub soil areas. FINANCIALS I 103 NOTES TO THE FINANCIAL STATEMENTS 12. PROPERTY, PLANT AND EQUIPMENT (continued) The Hamilton site is subject to the normal rights that the Crown reserves in respect of minerals and mining in relation to the subsoil 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. 13. INVESTMENT PROPERTIES At fair value Balance at the beginning of the year Acquisitions Capitalised subsequent expenditure Net (loss) from fair value adjustment Transfer to assets held for sale Balance at the end of the year CONSOLIDATED 2007 $000 8,593 - 252 - - 8,845 2006 $000 52,500 8,593 66 (166) (52,400) 8,593 Rental income Direct operating expenses from property that generated rental income CONSOLIDATED 2007 $000 406 2006 $000 4,663 2 953 PARENT 2007 $000 - - On 29 June 2006 the Group purchased 97-101 Hobson Street in Auckland for $8,593,000 (including costs). Investment properties are not depreciated and are required to be accounted for at fair value each year. 97-101 Hobson Street was valued as at 30 June 2007 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 arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion. The SKYCITY Metro Centre in Auckland was originally classiﬁ ed as an investment property. In 2006 SKYCITY announced its intention to sell the SKYCITY Metro Centre and as a result this building was transferred to assets held for sale in 2006. 104 I FINANCIALS PARENT 2007 $000 2006 $000 - - - - - - - - - - - - 2006 $000 - - 14. INTANGIBLE ASSETS CONSOLIDATED At 30 June 2005 Cost Accumulated depreciation Net book amount Movements in the year ended 30 June 2006 Opening net book amount Exchange differences Additions Amortisation charge Closing net book amount At 30 June 2006 Cost Accumulated amortisation Net book amount Movements in the year ended 30 June 2007 Opening net book amount Exchange differences Additions Amortisation charge Closing net book amount At 30 June 2007 Cost Accumulated amortisation Net book amount NOTES TO THE FINANCIAL STATEMENTS GOODWILL $000 CASINO LICENCES $000 COMPUTER SOFTWARE $000 TOTAL $000 153,655 232,610 - (14,737) 153,655 217,873 153,655 217,873 12,180 25,326 2,608 44 - (2,341) 168,443 240,902 168,443 259,926 - (19,024) 168,443 240,902 21,008 (15,520) 5,488 5,488 189 14,828 (3,839) 16,666 38,043 (21,377) 16,666 407,273 (30,257) 377,016 377,016 37,695 17,480 (6,180) 426,011 466,412 (40,401) 426,011 168,443 240,902 16,666 426,011 (11,452) (23,817) 37,659 - - (2,452) (391) 13,533 (5,622) (35,660) 51,192 (8,074) 194,650 214,633 24,186 433,469 194,650 234,120 51,260 - (19,487) (27,074) 194,650 214,633 24,186 480,030 (46,561) 433,469 FINANCIALS I 105 NOTES TO THE FINANCIAL STATEMENTS 14. INTANGIBLE ASSETS (continued) PARENT Movements in the year ended 30 June 2006 Opening net book amount Additions Amortisation charge Closing net book amount At 30 June 2006 Cost Accumulated amortisation and impairment Net book amount Movements in the year ended 30 June 2007 Opening net book amount Additions Amortisation charge Closing net book amount At 30 June 2007 Cost Accumulated amortisation Net book amount COMPUTER SOFTWARE $000 TOTAL $000 - 173 (26) 147 173 (26) 147 147 108 (99) 156 227 (71) 156 - 173 (26) 147 173 (26) 147 147 108 (99) 156 227 (71) 156 Impairment Tests for Intangibles with Indefinite Lives (a) Goodwill and licences with indeﬁ nite lives are allocated to the Group’s cash-generating units (CGUs) identiﬁ ed below. REST OF NEW ZEALAND $000 SKYCITY DARWIN $000 90,578 104,072 - 34,912 90,578 138,984 52,919 115,524 - 38,798 52,919 154,322 TOTAL $000 194,650 34,912 229,562 168,443 38,798 207,241 2007 Goodwill Casino licence 2006 Goodwill Casino licence 106 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 14. INTANGIBLE ASSETS (continued) The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash ﬂ ow 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 surplus between the carrying values of indeﬁ nite life assets and value-in-use calculation. (b) Key Assumptions Used for Value-in-Use Calculations of Cash-Generating Units Rest of New Zealand SKYCITY Darwin GROSS MARGIN GROWTH RATE DISCOUNT RATE 2007 % 44.4 49.9 2006 % 49.4 47.4 2007 % 3.0 3.0 2006 % 3.0 3.0 2007 % 8.7 8.7 2006 % 8.6 8.6 15. AVAILABLE-FOR-SALE FINANCIAL ASSETS CONSOLIDATED PARENT Balance at the beginning of the year 2007 $000 2,622 2006 $000 - Adjustment on adoption of NZ IAS 32 and NZ IAS 39 - 2,578 Exchange differences Revaluation surplus transfer to equity Balance at the end of the year (262) 154 113 (69) 2,514 2,622 - - - - - 2007 $000 2006 $000 Listed equity securities Unlisted equity securities CONSOLIDATED PARENT 2007 $000 1,492 1,022 2,514 2006 $000 1,600 1,022 2,622 2007 $000 - - - Transition to NZ IAS 32 and NZ IAS 39 The Group had 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 (1 July 2005) the Group reclassiﬁ ed the investments in Christchurch Hotels Limited and International All Sports Limited previously recognised as other investments. FINANCIALS I 107 - - - - - 2006 $000 - - - NOTES TO THE FINANCIAL STATEMENTS 16. INVESTMENTS IN ASSOCIATES (a) Carrying Amounts Information relating to associates is set out below. NAME OF COMPANY Unlisted Vista Entertainment Solutions Limited Christchurch Casinos Limited PRINCIPAL AC- TIVITY OWNERSHIP INTEREST CONSOLIDATED PARENT 2007 % 2006 % 2007 $000 2006 $000 2007 $000 2006 $000 Ticket software systems Casino operator 50 41 25 41 2,903 254 77,928 80,831 78,050 78,304 - - - - - - Vista Entertainment Solutions Limited is incorporated in New Zealand and has a 31 December balance date. The directors are not aware of any signiﬁ cant 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 signiﬁ cant events or transactions since Christchurch Casinos Limited’s balance date. (b) Movements in Carrying Amounts Balance at the beginning of the year Share of proﬁ ts after income tax Elimination of inter-entity proﬁ ts Christchurch Casinos Limited Purchase of a further 25% interest in Vista Entertainment Solutions as part of the Village acquisition Dividends received/receivable Carrying amount at the end of the ﬁ nancial year (including goodwill $55,269,000 (2006: $53,127,000)) (c) Summarised Financial Information of Significant Associates 2007 $’000 78,304 4,661 (209) 2006 $’000 281 4,316 - - 76,784 2,500 - (4,425) (3,077) 80,831 78,304 GROUP’S SHARE OF ASSETS $000 LIABILITIES $000 REVENUES $000 PROFIT $000 16,236 16,236 16,774 16,774 1,118 1,118 1,712 1,712 22,743 22,743 19,803 19,803 4,200 4,200 4,316 4,316 2007 Christchurch Casinos Limited 2006 Christchurch Casinos Limited 108 I FINANCIALS 17. PAYABLES Trade payables Accrued expenses Employee beneﬁ ts Amounts due to subsidiaries NOTES TO THE FINANCIAL STATEMENTS CONSOLIDATED PARENT 2007 $000 19,165 71,579 28,757 - 2006 $000 11,995 58,295 30,486 - 119,501 100,776 2007 $000 - 5,288 - 2006 $000 - 3,061 - 364,002 369,290 413,891 416,952 18. NON-CURRENT LIABILITIES - INTEREST BEARING LIABILITIES CONSOLIDATED PARENT Secured Bank loans - SKYCITY Cinemas Group Unsecured United States private placement Syndicated bank facility Deferred funding expenses 2006 $000 2007 $000 2006 $000 2007 $000 - 52 534,639 640,408 221,000 314,007 (2,637) (3,563) - - - - - - - - - - - - Total unsecured non-current interest-bearing borrowings 753,002 950,852 Total non-current interest-bearing liabilities 753,002 950,904 SKYCITY Cinemas Group At balance date, SKYCITY Rialto JV had a bank facility of $250,000 (2006: $500,000) which was undrawn, secured by registered mortgage debenture over Rialto Cinemas Limited. SKYCITY has a 50% interest in Rialto Cinemas Limited. Syndicated Bank Facility At 30 June 2007, SKYCITY had in place a $500,000,000 (2006: $500,000,000) 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 2007, the undrawn amount was $279,000,000 (2006: $186,000,000). United States Private Placement On 15 March 2005, SKYCITY borrowed NZ$96,571,000, A$74,900,000 and US$274,500,000 with maturity between 2012 and 2020 from private investors (primarily US based) on an unsecured basis. The movement in the US Private Placement debt from 2006 relates to foreign exchange movement. The US Private Placement ﬁ xed rate US dollar borrowings have been converted to New Zealand dollar ﬂ oating rate borrowings by use of cross-currency interest rate swaps. FINANCIALS I 109 NOTES TO THE FINANCIAL STATEMENTS 18. NON-CURRENT LIABILITIES - INTEREST BEARING LIABILITIES (continued) Interest Rate Risk The following table sets out the Group’s exposure to interest rate risk, including the contractual repricing dates and the effective weighted average interest rate. PRINCIPAL - INTEREST RATE REPRICING 2007 Bank Borrowings Capital notes IRS/CCIRS* Repricing gap 2006 Bank Borrowings Capital notes SKYCITY ACES 6.03 (165,035) - 298,858 (48,007) (27,506) 8.00 43,764 7.90 (398,960) 8.00 - 1 YEAR OR LESS $000 1-2 YEARS $000 2-3 YEARS $000 3-4 YEARS $000 % - - - - - - - - - - (123,860) - - 4-5 YEARS $000 - OVER 5 YEARS $000 TOTAL $000 - 43,764 (260,525) (96,154) (755,639) - - - - (123,860) (165,035) (42,979) (180,366) - (221,373) (48,007) (27,506) (123,860) (303,504) (276,520) (1,000,770) PRINCIPAL - INTEREST RATE REPRICING 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 7.26 42,624 7.65 (502,098) 8.00 - - - - - - - - - - - (123,860) - SKYCITY ACES 5.75 (183,195) IRS/CCIRS* Repricing gap - 191,576 (51,639) (15,000) (24,426) (451,093) (51,639) (15,000) (148,286) * Interest rate swaps and cross-currency interest rate swaps. Notional principal amounts. - - - - - - - 42,624 (452,369) (954,467) - - (123,860) (183,195) (100,511) - (552,880) (1,218,898) For both 2007 and 2006 capital notes are the only interest-bearing debt within the parent entity. The parent entity is not party to any derivatives. Fair Values The fair value of interest-bearing liabilities, capital notes and SKYCITY ACES is not materially different from the carrying values. 110 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 19. SUBORDINATED DEBT - CAPITAL NOTES CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 Balance at the beginning of the year 123,860 121,688 123,860 121,688 Reissued during the year Balance at the end of the year Deferred expenses at cost Accumulated amortisation Balance at the end of the year - 2,172 - 2,172 123,860 123,860 123,860 123,860 178 (74) 104 178 (38) 140 178 (74) 104 178 (38) 140 Net capital notes at the end of the year 123,756 123,720 123,756 123,720 In May 2000, SKYCITY Entertainment Group Limited issued 150 million unsecured subordinated capital notes at an issue price of $1.00 per note. On 16 May 2005, the capital notes were reissued for a new term of ﬁ ve 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%). Prior to the next election date (15 May 2010), 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 modiﬁ cations 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. As at 30 June 2007, there were 150,000,000 (2006: 150,000,000) capital notes on issue, of which 123,859,750 (2006: 123,859,750) are issued with 26,140,250 (2006: 26,140,250) held as treasury stock by SKYCITY Entertainment Group Limited. FINANCIALS I 111 NOTES TO THE FINANCIAL STATEMENTS 20. SUBORDINATED DEBT - SKYCITY ACES SKYCITY ACES Deferred expenses CONSOLIDATED PARENT 2007 $000 2006 $000 165,035 183,195 (3,625) (5,239) 161,410 177,956 2007 $000 - - - 2006 $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$100.00 per note. The SKYCITY ACES offer holders a fully franked variable rate coupon until the ﬁ rst reset date of 15 December 2010. The coupon is reset quarterly at the Australian 90-day bank bill rate (BBSW) plus 2.25%, net of the Australian corporate tax rate (30%) with franking credits attached. On any reset date (the ﬁ rst being 15 December 2010 and every ﬁ ve 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 satisﬁ ed. 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. The movement in the SKYCITY ACES debt from 2006 relates to foreign exchange movements and is offset by changes in the foreign currency translation reserve. 112 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 21. DEFERRED TAX ASSETS THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO: Amounts recognised in proﬁ t or loss Provision and accruals Fixed assets Foreign exchange differences Tax rate change Tax losses Other Amounts recognised directly in equity Cash ﬂ ow hedges Deferred tax assets MOVEMENTS 11,205 14,096 263 (2,788) (808) 7,120 525 26 (4,322) - 6,510 1,889 15,517 18,199 461 8,468 15,978 26,667 Balance at the beginning of the year 26,667 13,675 Under provided in prior years Credited (charged) to the income statement (note 7) Credited to equity Change in NZ corporate tax rate Foreign exchange differences Balance at the end of the year EXPECTED SETTLEMENT Within 12 months In excess of 12 months (190) (1,111) (8,468) (808) (112) - 5,744 8,468 - (1,220) 15,978 26,667 3,309 12,669 15,978 4,237 22,430 26,667 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - FINANCIALS I 113 NOTES TO THE FINANCIAL STATEMENTS 22. DEFERRED TAX LIABILITIES THE BALANCE COMPRISES TEMPORARY DIFFERENCES ATTRIBUTABLE TO: Amounts recognised in proﬁ t or loss Provisions and prepayments Depreciation Tax rate change Foreign exchange Amounts recognised directly in equity Cash ﬂ ow hedges Deferred tax liabilities MOVEMENTS Balance at the beginning of the year Charged to the income statement (note 7) Credited to equity Change in NZ corporate tax rate Foreign exchange differences Balance at the end of the year EXPECTED SETTLEMENT Within 12 months In excess of 12 months 23. IMPUTATION CREDITS 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 CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 1,173 2,314 55,783 54,818 (4,635) (2,097) - 4,869 50,224 62,001 2,768 (1,405) 52,992 60,596 60,596 (5,518) 3,842 (4,635) (1,293) 45,438 15,962 (1,405) - 601 52,992 60,596 329 52,663 52,992 2,891 57,705 60,596 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CONSOLIDATED 2007 $’000 (2,663) 9,341 (8,676) (1,998) 2006 $’000 (17,325) 36,499 (21,837) (2,663) As required by relevant tax legislation, the imputation credit account had a credit balance as at 31 March 2007. The current debit balance is a result of imputation credits attached to the interim distribution paid in April 2007. 114 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 24. SHARE CAPITAL 2007 SHARES 2006 SHARES 2007 $000 2006 $000 Opening balance of ordinary shares issued 429,287,177 417,613,974 281,735 226,726 Shares issued under dividend reinvestment plan Shares issued under proﬁ t distribution plan - 1,353,016 - 21,421,910 10,320,187 100,114 Exercise of share rights/options Issue of share rights/options 650,667 2,785,202 - Shares issued under employee bonus scheme 480,583 479,704 Shares repurchased and not cancelled - 5,956 786 2,126 (21,246) - - 6,431 50,450 10,009 874 2,139 - Shares repurchased and cancelled (1,131,250) (3,264,906) (5,403) (14,894) Closing balance of ordinary shares issued 450,709,087 429,287,177 364,068 281,735 All ordinary shares rank equally with one vote attached to each fully-paid ordinary share. Repurchase and Cancellation of Shares There has been no on-market share buyback programme in the current year. 25. RESERVES AND RETAINED PROFITS (a) Reserves Available-for-sale investments revaluation reserve Hedging reserve - cash ﬂ ow hedges Foreign currency translation reserve Employee share entitlement reserve AVAILABLE-FOR-SALE INVESTMENTS REVALUATION RESERVE Movements Balance at the beginning of the year Revaluations Balance at the end of the year CONSOLIDATED PARENT 2007 $000 85 2006 $000 (69) 1,227 (26,173) (20,907) 13,123 3,526 4,948 (16,069) (8,171) 2007 $000 - - - 3,526 3,526 2006 $000 - - - 4,948 4,948 CONSOLIDATED PARENT 2007 $’000 2006 $’000 2007 $’000 2006 $’000 (69) 154 85 - (69) (69) - - - - - - FINANCIALS I 115 NOTES TO THE FINANCIAL STATEMENTS 25. RESERVES AND RETAINED PROFITS (continued) CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 - - - - - - - - - - - - - - - - - - - - - - HEDGING RESERVE - CASH FLOW HEDGES Movements Balance at the beginning of the year (26,173) - Adjustment on adoption of NZ IAS 32 and NZ IAS 39 - (4,012) Revaluation Transfer to net proﬁ t Deferred tax Balance at the end of the year FOREIGN CURRENCY TRANSLATION RESERVE Movements (62,179) 24,048 101,755 (56,082) (12,176) 9,873 1,227 (26,173) Balance at the beginning of the year 13,123 (8,429) Exchange difference on translation of overseas subsidiaries Effect of hedging the net investment of overseas subsidiaries Release to income statement Balance at the end of the year EMPLOYEE SHARE ENTITLEMENT RESERVE Movements Balance at the beginning of the year Less value of shares issued during the year Plus value of share entitlements for the year Balance at the end of the year (36,820) 29,953 6,135 (3,345) (8,401) - (20,907) 13,123 4,948 (2,126) 704 3,526 3,270 (2,139) 3,817 4,948 4,948 (2,126) 704 3,526 3,270 (2,139) 3,817 4,948 (i) Available-for-Sale Investments Revaluation Reserve Changes in the fair value of investments, such as equities, classiﬁ ed as available-for-sale ﬁ nancial assets, are taken to the available-for-sale investments revaluation reserve, as described in note 2(l). Amounts are recognised in proﬁ t 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 ﬂ ow hedge that are recognised directly in equity, as described in note 2(m). Amounts are recognised in the income statement when the associated hedged transaction affects the income statement. (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 the income statement when the net investment is disposed of. The release to income statement relates to a restructure of the capital structure of certain foreign operations which is deemed to be a partial disposal. 116 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 25. RESERVES AND RETAINED PROFITS (continued) (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 ﬁ nancial years ending 30 June 2000 through 30 June 2007. 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 2005 through 30 June 2007. Shares are issued at the average closing price of SKYCITY Entertainment Group Limited’s shares on the New Zealand Stock Exchange on the ten business days following the release to the New Zealand Stock 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. Shares under the PPI are issued in three equal instalments, being one-third of the shares on the bonus declaration date, and provided eligibility criteria continue to be met, one-third on the next entitlement date (approximately 12 months later) and one third on the ﬁ nal entitlement date (approximately 24 months later). (b) Retained Proﬁ ts Movements in retained proﬁ ts were as follows: Balance at the beginning of the year Net proﬁ t for the year Distributions/dividends Adjustment on adoption of NZ IAS 39 Amalgamations accounted for at cost Balance at the end of the year CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 32,756 13,355 (66,130) (36,313) 98,402 120,129 63,639 71,871 (100,114) (100,667) (100,114) (100,667) - - (61) - - - - (1,021) 31,044 32,756 (102,605) (66,130) FINANCIALS I 117 NOTES TO THE FINANCIAL STATEMENTS 26. MINORITY INTEREST Balance at the beginning of the year Share of surpluses of subsidiaries Balance at the end of the year CONSOLIDATED 2007 $000 2,463 28 2,491 2006 $000 2,844 (381) 2,463 The minority interest relates to the 40% of Queenstown Casinos Limited which is not owned by SKYCITY Entertainment Group Limited. 27. DISTRIBUTIONS/DIVIDENDS Prior year’s ﬁ nal distribution/dividend Interim distribution/dividend Total distribution/dividends CONSOLIDATED PARENT 2007 $000 60,292 39,822 2006 $000 50,217 50,450 2007 $000 60,292 39,822 2006 $000 50,217 50,450 100,114 100,667 100,114 100,667 On 28 February 2007, the directors resolved to make a pro rata issue of bonus shares in respect of the six month period ended 31 December 2006. The bonus shares were issued to all shareholders on the company’s register at the close of business on Wednesday, 14 March 2006. The number of bonus shares issued was calculated as 9.0 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 ﬁ ve days from 15 to 21 March inclusive, less a 2.5% discount. Shareholders were able to elect to have the company buy back some or all of the 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 the bonus shares were fully imputed by the company. The bonus shares were issued and buyback proceeds paid to shareholders on Friday, 13 April 2007. Of the interim distribution shareholders retained $26,358,194 in shares. On 20 August 2007, the directors resolved to make a pro rata issue of bonus shares in respect of the year ended 30 June 2007 (refer to note 37 for further details). 118 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 28. SEGMENT INFORMATION (a) Description of Segments Geographic Segments 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, carparking and Sky Tower. Rest of New Zealand Rest of New Zealand includes the Corporate Ofﬁ ce and the Group’s interest in SKYCITY Hamilton, SKYCITY Queenstown Casino, Christchurch Casino and SKYCITY Cinemas. SKYCITY Adelaide SKYCITY Adelaide includes casino operations and food and beverage. SKYCITY Darwin SKYCITY Darwin includes casino operations, food and beverage, and hotel. Business Segments Although the Group is managed on a geographical basis, it operates in the following business segments: Gaming machines A gaming machine is a device where the outcome is electronically determined, totally or partly mechanically or electronically operated and designed for use in casino gaming. Table games Table games are card, dice, tiles, roulette or money wheel games typically played on a table or like station rather than on a gaming machine or other like device. Cinemas New Zealand and Fiji cinema operations including any associated buildings. Other Other includes hotels, food and beverage, convention centre, car parking, property rentals and Sky Tower. FINANCIALS I 119 NOTES TO THE FINANCIAL STATEMENTS 28. SEGMENT INFORMATION (continued) (b) Primary Reporting Format - Geographic Segments 2007 Revenue from external customers Shares of net proﬁ ts of associates Other revenue/income Total segment revenue/income Segment result Finance costs Proﬁ t before income tax Income tax expense Minority interest Net proﬁ t for the year Segment assets* Segment liabilities* Investments in associates Acquisitions of property, plant and equipment, intangibles and other non-current segment assets Depreciation and amortisation expense 2006 Revenue from external customers Shares of net proﬁ ts of associates Other revenue Total segment revenue/income Segment result Finance costs Proﬁ t before income tax Income tax expense Minority interest Net proﬁ t for the year Segment assets* Segment liabilities* Investments in associates SKYCITY AUCKLAND REST OF NEW ZEALAND SKYCITY ADELAIDE SKYCITY DARWIN $000 $000 $000 $000 TOTAL $000 417,915 118,164 153,712 108,784 798,575 - 4,454 - - 4,454 (295) 13,903 (385) (155) 13,068 417,620 136,521 153,327 108,629 816,097 167,814 6,425 17,911 32,766 224,916 (93,361) 131,555 (33,125) (28) 98,402 900,515 237,433 166,053 338,968 1,642,969 121,671 1,104,466 12,747 22,551 1,261,435 - 80,831 - - 80,831 48,582 41,621 65,933 7,051 9,485 131,051 11,552 11,374 7,680 72,227 SKYCITY AUCKLAND REST OF NEW ZEALAND SKYCITY ADELAIDE SKYCITY DARWIN $000 $000 $000 $000 TOTAL $000 427,444 78,438 146,889 99,598 752,369 - 4,316 2 7,889 - - - - 4,316 7,891 427,446 90,643 146,889 99,598 764,576 187,623 (2,192) 19,348 31,524 236,303 (83,965) 152,338 (32,590) 381 120,129 809,129 333,186 272,195 311,322 1,725,832 65,239 1,299,092 20,184 32,534 1,417,049 - 78,304 - - 78,304 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 100,010 20,372 41,154 11,676 173,212 Depreciation and amortisation expense 40,174 7,504 11,045 6,293 65,016 * The difference between segment assets and segment liabilities does not reﬂ ect the Group’s net investment in each segment. 120 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 28. SEGMENT INFORMATION (continued) (c) Secondary Reporting Format - Business Segments SEGMENT REVENUES FROM EXTERNAL CUSTOMERS SEGMENT ASSETS ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLES AND OTHER NON-CURRENT SEGMENT ASSETS 2007 $000 353,986 222,037 74,605 147,947 798,575 2006 $000 345,865 232,526 2007 $000 27,972 10,529 37,669 106,430 2006 $000 36,225 3,999 90,357 136,309 1,498,038 1,595,251 2007 $000 8,608 919 58,731 62,793 752,369 1,642,969 1,725,832 131,051 2006 $000 26,446 1,972 9,583 135,211 173,212 Gaming machines Table games Cinemas Other 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. 29. SHARE-BASED PAYMENTS Executive Share Option Plan 1999 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 ﬁ ve years of issue. Executive Share Option Plan 2002 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 ﬁ ve 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 deﬁ ned in the plans), adjusted for the company’s estimated cost of equity and dividends/distributions 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 converted 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 2005 options convert to one share upon exercise. FINANCIALS I 121 NOTES TO THE FINANCIAL STATEMENTS 29. SHARE-BASED PAYMENTS (continued) Executive Share Rights Plan 2005 The Executive Share Rights Plan (Rights Plan) was approved by the 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 ﬁ ve 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 dividends/distributions between the issue date and the exercise date of the rights. 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: GRANT DATE EXPIRY DATE EXERCISE PRICE BALANCE AT START OF THE YEAR NUMBER GRANTED DURING THE YEAR NUMBER EXERCISED DURING THE YEAR NUMBER EXPIRED DURING THE YEAR NUMBER BALANCE AT END OF THE YEAR NUMBER EXERCISABLE AT END OF THE YEAR NUMBER Consolidated and Parent - 2007 04/09/01 04/09/06 $11.61 150,000 10/09/02 10/09/07 $7.05 2,678,530 09/09/03 09/09/08 $8.83 617,000 09/09/03 09/09/08 $4.42 450,000 08/09/04 08/09/09 $4.42 1,331,167 05/09/05 05/09/10 $4.81 1,466,000 - - - - - - 04/09/06 04/09/11 $5.15 - 2,528,970 (150,000) - - - (105,500) (39,000) 2,534,030 2,534,030 (94,000) (75,000) 448,000 448,000 (450,000) - - (22,667) (443,333) 865,167 - - (639,333) 826,667 (412,000) 2,116,970 - - - - Total 6,692,697 2,528,970 (822,167) (1,608,666) 6,790,834 2,982,030 Weighted average exercise price per share $4.39 $5.15 $4.47 $5.04 $4.75 $4.12 GRANT DATE EXPIRY DATE EXERCISE PRICE BALANCE AT START OF THE YEAR NUMBER GRANTED DURING THE YEAR NUMBER EXERCISED DURING THE YEAR NUMBER EXPIRED DURING THE YEAR NUMBER BALANCE AT END OF THE YEAR NUMBER EXERCISABLE AT END OF THE YEAR NUMBER Consolidated and Parent - 2006 04/09/01 04/09/06 $11.61 459,000 10/09/02 10/09/07 $7.05 3,238,863 09/09/03 09/09/08 $8.83 865,667 09/09/03 09/09/08 $4.42 450,000 08/09/04 08/09/09 $4.44 1,824,500 - - - - - (309,000) (560,333) - - 150,000 150,000 2,678,530 2,678,530 (133,334) (115,333) 617,000 - - 450,000 (149,333) (344,000) 1,331,167 - - - - 05/09/05 05/09/10 $4.81 - 1,585,000 - (119,000) 1,466,000 Total 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 The weighted average exercise price at the date of exercise of options exercised during the year ended 30 June 2007 was $4.47 (2006: $3.80). The weighted average remaining contractual life of options outstanding at the end of the period was 2.16 years (2006: 2.40 years). 122 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 29. SHARE-BASED PAYMENTS (continued) Fair Value of Share Rights Granted The assessed fair value at grant date of share rights granted during the year ended 30 June 2007 was 34.0 cents per share right (2006: 38.0 cents). 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-tradeable 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. The model inputs for share rights granted during the year ended 30 June 2007 included: share price at grant date: $5.20 (2006: $4.95) (a) rights are granted for no consideration (b) exercise price: $5.15 (2006: $4.81) (c) grant date: 4 September 2006 (2006: 5 September 2005) (d) expiry date: 4 September 2011 (2006: 5 September 2010) (e) (f) expected price volatility of the company’s shares: 19% (2006: 20%) (g) expected dividend yield: 5.0% (2006: 4.6%) (h) risk-free interest rate: 6.2% (2006: 5.6%). The expected price volatility is derived by analysing the historic volatility over a recent historical period similar to the term of the right. Non-Executive Director Share Options Pursuant to the Non-Executive Directors’ Share Option Plan (2000), approved by shareholders at the annual meeting of the company on 26 October 2000, 57,892 options (issued in September 2002) remain on issue to non-executive directors as at 30 June 2007 (2006: 57,892). Options lapse if not exercised within ﬁ ve years of issue. The exercise price of the options issued under the Plan is the relevant base exercise price of the option (as deﬁ ned 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. GRANT DATE EXPIRY DATE EXERCISE PRICE Consolidated and Parent - 2007 BALANCE AT START OF THE YEAR NUMBER GRANTED DURING THE YEAR NUMBER EXERCISED DURING THE YEAR NUMBER EXPIRED DURING THE YEAR NUMBER BALANCE AT END OF THE YEAR NUMBER EXERCISABLE AT END OF THE YEAR NUMBER 10/09/02 10/09/07 $7.05 57,892 Total Weighted average exercise price per share 57,892 $3.78 - - - - - - 57,892 57,892 57,892 57,892 $3.93 $3.93 FINANCIALS I 123 NOTES TO THE FINANCIAL STATEMENTS 29. SHARE-BASED PAYMENTS (continued) GRANT DATE EXPIRY DATE EXERCISE PRICE Consolidated and Parent - 2006 BALANCE AT START OF THE YEAR NUMBER GRANTED DURING THE YEAR NUMBER EXERCISED DURING THE YEAR NUMBER EXPIRED DURING THE YEAR NUMBER BALANCE AT END OF THE YEAR NUMBER EXERCISABLE AT END OF THE YEAR NUMBER 10/09/02 10/09/07 $7.05 62,892 Total Weighted average exercise price per share 62,892 $3.65 - - (5,000) (5,000) $3.64 - - 57,892 57,892 57,892 57,892 $3.78 $3.78 There were no non-executive director options exercised during the year. The weighted average exercise price at the date of exercise of options exercised regularly during the year ended 30 June 2006 was $3.64. The weighted average remaining contractual life of share options outstanding at the end of the period was 0.20 years (2006: 1.20 years). As a result of the one-for-one share split 14 November 2003, the 2002 options will convert to two shares, when exercised. Performance Pay Incentive Plan (PPI) Salaried employees are eligible for performance-related bonus partially paid in shares. Details of this Plan are provided in note 25. Expenses Arising from Share-Based Payment Transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee beneﬁ t expense were as below. Rights issued under the Executive Share Rights Plan Value of shares entitlements for the year under employee incentive share plan CONSOLIDATED PARENT 2007 $’000 786 704 1,490 2006 $’000 684 4,007 4,691 2007 $’000 786 202 988 2006 $’000 684 1,733 2,417 30. RELATED PARTY TRANSACTIONS (a) Key Management and Personnel Compensation Key management personnel compensation for the years ended 30 June 2007 and 2006 is set out below. The key management personnel are all the directors of the company and the direct reports to the Managing Director. REMUNERATION $ TERMINATION PAYMENTS $ SHARE-BASED PAYMENTS $ TOTAL $ 5,812,762 3,568,954 717,310 10,099,026 5,614,741 - 1,617,072 7,231,813 2007 2006 124 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 30. RELATED PARTY TRANSACTIONS (continued) (b) Other Transactions with Key Management Personnel or Entities Related to Them Information on transactions with key management personnel or entities related to them, other than compensation, is set out below. Key management personnel exercised options previously granted as part of their compensation. Fees in the amount of $5,540 (2006: $82,503) were paid to First NZ Capital Group Limited (FNZC) on normal commercial terms. W R Trotter, who is a director of SKYCITY Entertainment Group Limited, is executive chairman of FNZC. Certain directors have relevant interests in a number of companies with which SKYCITY has transactions in the normal course of business. A number of SKYCITY directors are also non-executive directors of other companies. Any transactions undertaken with these entities have been entered into on an arm’s-length commercial basis. (c) Subsidiaries Interests in subsidiaries are set out in note 32. 31. BUSINESS COMBINATIONS Summary of the Effect of Acquisition of Significant Subsidiaries With effect from 1 July 2006, SKYCITY Entertainment Group Limited acquired all of Village Roadshow Limited’s interest in the Village SKYCITY joint venture. Purchase consideration Cash paid Payable to the vendor Direct costs relating to the acquisition Total purchase consideration Fair value of net identiﬁ able assets acquired Goodwill (note 14) The assets and liabilities arising from the acquisition are as follows: Property, plant and equipment Working capital Investment in associate Other investments Net identiﬁ able assets acquired $000 32,925 21,300 135 54,360 18,545 35,815 FAIR VALUE $000 17,138 (1,360) 2,500 267 18,545 FINANCIALS I 125 NOTES TO THE FINANCIAL STATEMENTS 32. SUBSIDIARIES The consolidated ﬁ nancial 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 signiﬁ cant partly-owned subsidiaries have balance dates of 30 June. NAME OF ENTITY COUNTRY OF INCORPORATION CLASS OF SHARES EQUITY HOLDING Queenstown Casinos Limited SKYCITY Action Management Limited SKYCITY Auckland Holdings Limited SKYCITY Auckland Limited SKYCITY Casino Management Limited SKYCITY Cinemas Holdings Limited SKYCITY Cinemas Limited SKYCITY Cinemas New Plymouth Limited SKYCITY Cinemas Nominees Limited New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary 2007 % 60 100 100 100 100 100 100 100 100 SKYCITY Hamilton Construction Limited (amalgamated) New Zealand Ordinary - SKYCITY Hamilton Limited SKYCITY International Holdings Limited SKYCITY Investments (Australia) Limited SKYCITY Investments (Christchurch) Limited SKYCITY Management Limited SKYCITY Metro Limited SKYCITY Queenstown Investments Limited SKYCITY Wellington Limited Sky Tower Limited Toptown Nominees Limited SKYCITY Adelaide Pty Limited SKYCITY Australia Finance Pty Limited SKYCITY Australia Limited Partnership SKYCITY Australia Pty Limited New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary Australia Ordinary Australia Ordinary Australia Ordinary Australia Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 SKYCITY Darwin Holdings Pty Limited (amalgamated) Australia Ordinary - SKYCITY Darwin Pty Limited Territory Property Trust (amalgamated) SKYCITY International ApS SKYCITY Cinemas (Fiji) Limited Australia Ordinary 100 Australia Ordinary - Denmark Ordinary Fiji Ordinary 100 100 2006 % 60 100 100 100 100 100 100 - 50 100 100 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 126 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 33. INTERESTS IN JOINT VENTURES Name of entity Village SKYCITY Cinemas JV* Rialto Cinemas JV Principal activities Cinema owner/operator Cinema owner/operator Damodar Village SKYCITY Fiji Cinemas JV Cinema owner/operator INTERESTS HELD BY THE GROUP 2007 % - 50 67 2006 % 50 25 33 Share of partnership’s revenue, expenses and results Revenues Expenses Net contribution to Group operating surplus Total share of assets employed in joint venture CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 8,576 (8,123) 453 8,539 31,721 (27,550) 4,171 38,454 - - - - - - - - * With effect from 1 July 2006, SKYCITY Entertainment Group Limited purchased Village Roadshow Limited’s interest in the above joint venture. As a result the Village SKYCITY Cinemas joint venture became part of a subsidiary company. 34. CONTINGENCIES There are no signiﬁ cant contingences at year end. 35. COMMITMENTS Capital Commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Property, plant and equipment CONSOLIDATED PARENT 2007 $000 2006 $000 70,643 10,888 2007 $000 - 2006 $000 - Operating Leases The Group leases various ofﬁ ces 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. FINANCIALS I 127 NOTES TO THE FINANCIAL STATEMENTS 35. COMMITMENTS (continued) 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 ﬁ ve years Later than ﬁ ve years CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 16,583 55,603 316,691 388,877 7,335 26,759 259,039 293,133 - - - - - - - - 36. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES Proﬁ t for the year Minority interest Depreciation and amortisation Interest expense Current period employee share entitlement Current period share options expense Gain on sale of ﬁ xed assets Release from foreign currency translation reserve Dividend from subsidiary Fair value adjustment to investment property Fair value adjustment on ﬁ nancial assets at fair value through proﬁ t or loss Subsidiary funding transactions Share of proﬁ ts of associates not received as dividends or distributions Change in operating assets and liabilities (Increase)/decrease in receivables and prepayments (Increase)/decrease in inventories Increase/(decrease) in future income tax beneﬁ t Increase/(decrease) in payables and accruals CONSOLIDATED PARENT 2007 $000 2006 $000 2007 $000 2006 $000 98,402 120,129 63,639 71,871 28 72,226 92,633 704 786 (3,383) (3,345) - - - - (381) 65,016 74,838 3,818 874 - - - 166 (4,107) - 254 9,964 704 786 - - - 131 9,033 3,818 874 - - (100,311) (106,251) - - - - - 36,540 (97,909) (24) (1,239) - - (193) (282) 6,355 141 10,689 (10,283) 2,771 (31,242) - - - - 18,725 3,771 (47,662) 129,480 (Decrease)/increase in provision for deferred income tax (7,604) 22,319 21,467 (34,533) (33,346) 3,891 267,483 250,775 (33,315) (20,195) - - - - - - Decrease/(increase) in provision for income taxes receivable Capital items included in working capital movements Net cash inﬂ ow from operating activities 128 I FINANCIALS NOTES TO THE FINANCIAL STATEMENTS 37. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE Proﬁ t Distribution Plan On 20 August 2007, the directors resolved to make a pro-rata issue of bonus shares in respect of the year ended 30 June 2007. The bonus shares will be issued to all shareholders on the company’s register at the close of business on Monday, 10 September 2007. The number of bonus shares to be issued is calculated as 12 cents per share divided by the strike price. The strike price is set as the weighted average price of shares traded on the NZSX during the ﬁ ve days from 11 to 17 September. Shareholders will be able to elect to have the company buy back some or all of the 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 the bonus shares will be fully imputed by the company. The bonus shares will be issued and buyback proceeds paid to shareholders on Friday, 5 October 2007. FINANCIALS I 129 SHAREHOLDER INFORMATION TWENTY LARGEST SHAREHOLDERS AS AT 20 AUGUST 2007 1 2 3 UBS Global Asset Management Group* Investors Mutual Limited AXA Group 4 Westpac Equity Investments NZ Limited 5 6 7 8 9 AMP Capital Investors Barclays Global Investors Group State Street Global Advisors Group Accident Compensation Corporation Tyndall Investment Management NZ Limited 10 Commonwealth Bank Group/Colonial First State Global Asset Management 11 Brook Asset Management Limited 12 Columbia Wanger Asset Management 13 ABN AMRO Craigs Ltd (Private Clients) 14 Nomura Asset Management 15 First NZ Securities (Private Clients) 16 Tower Asset Management 17 ING Group 18 PM Capital Limited 19 Sumitomo Mitsui Asset Management Co Limited 20 UBS Wealth Management (Private Clients)* TOTAL NUMBER OF SHARES 34,791,849 31,749,220 14,344,548 14,062,000 11,013,263 10,387,763 10,104,616 9,565,891 9,105,618 8,437,387 8,084,332 7,873,349 7,696,619 7,386,190 6,928,785 6,788,846 5,870,184 5,533,320 4,085,471 3,565,928 % OF SHARES 7.72% 7.04% 3.18% 3.12% 2.44% 2.30% 2.24% 2.12% 2.02% 1.87% 1.79% 1.75% 1.71% 1.64% 1.54% 1.51% 1.30% 1.23% 0.91% 0.79% 217,375,179 48.22% * Refer to UBS substantial security holder information on the following page. The analysis as set out above has been compiled based on information provided by Thomson Financial Pty Limited. As at 20 August 2007 SKYCITY was the holder of 3,822,119 ordinary shares, as treasury stock. The shares held by SKYCITY are not included in the table above. On 5 September 2007, E W Davies exercised options issued under the Managing Director Share Option Plan 2002, and as at 14 September 2007 beneﬁ cially held 5,129,725 shares. Total shares on issue as at 20 August 2007 were 450,709,087. Additional shares have been issued subsequent to 20 August 2007 pursuant to the Managing Director Share Option Plan 2002, Non-Executive Director Share Option Plan 2002, Executive Share Option Plan and the SKYCITY Performance Pay Incentive Plan. All treasury stock held by the company as at 20 August 2007 has since been applied to the issue of shares under the Performance Pay Incentive and Option plans. The number of shares on issue as at 14 September 2007 is 452,414,831. 130 I OTHER INFORMATION AND DISCLOSURES SHAREHOLDER INFORMATION DISTRIBUTION OF ORDINARY SHARES AND REGISTERED SHAREHOLDINGS AS AT 20 AUGUST 2007 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 >100,000 TOTAL NUMBER OF SHAREHOLDERS NUMBER OF SHARES 3,761 11,442 3,438 3,233 172 22,046 1,561,387 29,899,538 24,259,248 71,606,130 323,382,784 450,709,087 As at 20 August 2007 there were 1,036 holdings of less than 137 shares, being the minimum marketable parcel of shares under ASX Listing Rules. The ASX Listing Rules deﬁ ne the minimum parcel as having a value of less than A$500. SUBSTANTIAL SECURITY HOLDERS In accordance with section 26(1) of the Securities Markets Act 1988, the following persons had given notice as at 20 August 2007 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 UBS Nominees Pty Limited and its related body corporate 3 July 2007 49,993,089 Investors Mutual Limited 16 April 2007 35,152,244 % OF SHARES HELD AT DATE OF NOTICE 11.09% 7.28% The UBS substantial security holder notice relates to shares held by UBS Global Asset Management Group, UBS AG Custodian Group, UBS Wealth Management Group, UBS Fund Management Group and UBS Private Client/Private Banking Group. No further substantial security holder notices had been received as at 14 Septemebr 2007. OTHER INFORMATION AND DISCLOSURES I 131 DIRECTOR AND EMPLOYEE REMUNERATION REMUNERATION OF DIRECTORS Non-Executive Directors Remuneration paid to non-executive directors for services in their capacity as non-executive directors of SKYCITY Entertainment Group Limited during the year ended 30 June 2007 was as listed below. R H McGeoch (Chairman) P L Reddy Sir Dryden Spring E Toime W R Trotter R A McLeod (resigned 30 June 2007) $200,000 $110,000 $102,500 $98,352 $100,000 $107,500 No other non-executive director of the Group or parent company has, since the end of the ﬁ nancial year, received or become entitled to receive a beneﬁ t other than director’s fees for the 2006/07 ﬁ nancial year or reimbursement of expenses incurred in relation to company matters, or as is disclosed elsewhere in this annual report. Executive Directors On 25 June 2007 Evan Davies resigned as Managing Director of the company. During the 2006/07 year Mr Davies was paid a salary of $1,002,885. In October 2006 Mr Davies was paid variable remuneration relative to the 2005/06 ﬁ nancial year in the amount of $1,045,000. In accordance with the Managing Director Share Rights Terms and the issue of Restricted Shares, as approved by shareholders at the company’s 2005 annual meeting, this variable component in respect of the 2005/06 year was paid 50% in cash and 50% in equity, comprising 25% as restricted shares and 25% as share rights. No performance incentive was paid to Mr Davies in respect of the 2006/07 ﬁ nancial year. On his departure from the company, Mr Davies was paid three months salary in lieu of notice ($250,000) plus a settlement payment of $1,769,230, calculated in accordance with the terms of his employment contract. Elmar Toime was a non-executive director of the company until his appointment as Executive Director on 25 June 2007. Mr Toime’s appointment as Executive Director is for an initial term of three months on a salary of $100,000 gross per month, with accommodation on a full board basis and reasonable other costs to be met by the company. During this period Mr Toime will not receive director’s fees. The amount shown next to his name (under Non-Executive Directors - refer table) represents non-executive director fees paid to Mr Toime prior to his appointment as Executive Director. Other Directorships Christchurch Casinos Limited, in which SKYCITY has a 40.5% interest, paid direcor’s fees of $40,000 each for E W Davies and A B Ryan. These director’s fees were paid to SKYCITY and were not recieved personally by either Messrs Davies and Ryan. No director remuneration was received by the directors of Queenstown Casinos Limited or by the directors of SKYCITY subsidiary companies during the year ended 30 June 2007. 132 I OTHER INFORMATION AND DISCLOSURES DIRECTOR AND EMPLOYEE REMUNERATION EMPLOYEE REMUNERATION The numbers of employees or former employees of the company and its subsidiaries, not being directors of the company, who received remuneration and other beneﬁ ts in their capacity as employees, the value of which was in excess of $100,000 and was paid to those employees during the ﬁ nancial year ended 30 June 2007, 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 2007. Remuneration shown below also includes settlement payments nd payments in lieu of notice with respect to certain employees upon their departure from the company. REMUNERATION $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 $240,000 – $249,999 $250,000 – $259,999 $260,000 – $269,999 $270,000 – $279,999 $300,000 – $309,999 $310,000 – $319,999 $320,000 – $329,999 $330,000 – $339,999 $340,000 – $349,999 $350,000 – $359,999 $380,000 – $389,999 $400,000 – $409,999 $430,000 – $439,999 $440,000 – $449,999 $800,000 – $809,999 $870,000 – $879,999 EMPLOYEES 23 12 13 6 8 5 4 6 3 3 2 1 1 1 2 2 1 2 1 1 1 1 1 1 1 2 1 1 1 107 OTHER INFORMATION AND DISCLOSURES I 133 DIRECTORS’ DISCLOSURES INTERESTS REGISTER Disclosure of directors’ interests Section 140(1) of the Companies Act 1993 requires a director of a company to disclose certain interests. Under subsection (2) a director can make disclosure by giving a general notice in writing to the company of a position held by a director in another named company or entity. The following are particulars included in the company’s Interests Register as at 30 June 2007. Notices given by directors during the year ended 30 June 2007 are marked with an asterisk. R H McGeoch Aon Risk Services Limited LIPA Pharmaceuticals Limited McGeoch Holdings Pty 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 P L Reddy Active Equities Limited Inﬁ nity 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 Sir Dryden Spring ANZ National Bank Limited Fletcher Building Limited New Zealand Business and Parliamentary Trust Northport Limited Port of Tauranga Limited E Toime Blackbay Limited, London Deutsche Post A.G., Germany W R Trotter Member NSW Board of Advice Director Director Director Chairman Trustee Director Chairman Director and Shareholder Associated Person of Shareholder Trustee Associated Person of Shareholder Director Member NZX Discipline Trustee Chairman Director Trustee Director Director Non-Executive Director Non-Executive Director First NZ Capital Group Limited and certain subsidiaries FNZ Holdings Limited and certain subsidiaries* Executive Chairman Executive Chairman The following details included in the Interests Register as at 30 June 2006, or entered during the year ended 30 June 2007, have been removed during the year ended 30 June 2007. • R H McGeoch is no longer chairman of Frontiers Group (Australia) Limited or a director of Frontiers Group (UK) Limited, Gullivers Travel Group Limited and Paciﬁ c Healthcare Australia Limited • Sir Dryden Spring is no longer the chairman of Asia 2000 Foundation of New Zealand or of New Zealand APEC Business Advisory Council. • E Toime is no longer a director of Maltapost plc. Subsequent to 30 June 2007 Sir Dryden Spring has been appointed to the Advisory Board of Visy Industries Limited. 134 I OTHER INFORMATION AND DISCLOSURES DIRECTORS’ DISCLOSURES DIRECTORS’ AND OFFICERS’ 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. DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARE TRANSACTIONS Directors disclosed, pursuant to section 148 of the Companies Act 1993 and Rule 10.5.3 of the NZX Listing Rules, the following acquisitions and disposals of relevant interests in SKYCITY shares during the period to 30 June 2007, as set out below. R H McGeoch P L Reddy Sir Dryden Spring E Toime W R Trotter E W Davies (resigned 25 June 2007) R A McLeod (retired 30 June 2007) DATE OF ACQUISITION/ DISPOSAL DURING PERIOD CONSIDERATION SHARES SHARES ACQUIRED/ (DISPOSED) 6 October 2006(1) 13 April 2007(1) 6 October 2006(1) 13 April 2007(1) 6 October 2006(1) 6 October 2006(1) 13 April 2007(1) 6 October 2006(1) 13 April 2007(1) 31 August 2006(2) 6 October 2006(1) 30 November 2006(3) 13 April 2007(1) 6 October 2006(1) 8 March 2007 13 April 2007(1) $1,438 $950 $20,123 $13,315 $3,367 $21,995 $14,555 $94,191 $62,328 $1,896,000 $3,090,000 $57,384 $159,363 $52,647 $2,297 $95,108 $3,322 301 210 4,213 2,942 705 4,605 3,216 19,720 13,772 600,000 (600,000) 12,014 31,808 11,633 481 20,000 734 (1) The transaction shown represents the issue of bonus shares under the SKYCITY Proﬁ t Distribution Plan. (2) The transaction shown relates to the exercise of 150,000 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. These options converted on a 1:4 basis into ordinary shares consequent upon the 1:2 share splits by the company in November 2001 and November 2003. (3) The transaction shown relates to the issue of restricted shares under the Managing Director’s incentive remuneration for the year ended 30 June 2006 as approved by shareholders at the annual meeting of the company held on 28 October 2005. OTHER INFORMATION AND DISCLOSURES I 135 DIRECTORS’ DISCLOSURES DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARES, OPTIONS AND CAPITAL NOTES Directors disclosed pursuant to Rule 10.5.3 of the NZX Listing Rules, the following relevant interests in SKYCITY shares, options and rights as at 30 June 2007, as set out below. R H McGeoch P L Reddy Sir Dryden Spring E Toime W R Trotter SHARES BENEFICIALLY HELD OPTIONS BENEFICIALLY HELD SHARE RIGHTS BENEFICIALLY HELD 10,757 150,863 24,705 164,907 706,280 15,964(1) 20,964(1) - - 20,964(1) - - - - - E W Davies (resigned 25 June 2007) R A McLeod (retired 30 June 2007) 462,665(2) 2,338,530(3) 687,970(4) 37,608 - - (1) Options held by non-executive directors as at 30 June 2007 have all been exercised subsequent to that date. As a result, as at 14 September 2007, Mr McGeoch now holds 42,685 shares, Ms Reddy 192,791 shares and Mr Trotter 748,208 shares. (2) The 462,665 shares identiﬁ ed above includes 31,808 restricted shares issued to Mr Davies on 30 November 2006. Of the restricted shares issued to Mr Davies, 16,564 cannot be sold prior to 4 September 2008 and 15,244 cannot be sold prior to 4 September 2009. (3) On 5 September 2007 Mr Davies exercised all 2,338,530 options and as at that date held 5,129,725 shares (4) Following cessation of employment the share rights issued to Mr Davies under the Managing Director Share Rights Terms lapse if not exercised within six months after their vesting date. The share rights vest, 303,780 on 4 September 2008 and 384,190 on 4 September 2009. In addition to the 150,863 shares identiﬁ ed above, Ms Reddy has also disclosed 7,887 shares non-beneﬁ cially held. No directors held any interest in the capital notes of the company as at 30 June 2007. Options issued to the non-executive directors in 2002 were 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 to Mr Davies were issued pursuant to the Managing Director Share Option Plan approved by shareholders at the annual meeting of the company held on 30 October 2002. Share Rights issued to Mr Davies are issued pursuant to the Managing Director Share Rights Terms approved by shareholders at the annual meeting of the company held on 28 October 2005. 136 I OTHER INFORMATION AND DISCLOSURES NOTEHOLDER INFORMATION Capital Notes In May 2000, SKYCITY Entertainment Group Limited issued 150 million unsecured subordinated capital notes for a ﬁ ve year term at an issue price of $1.00. In May 2005 the capital notes were reissued for a new term of ﬁ ve years. The capital notes offer holders a ﬁ xed interest rate of 8.0% until the next election/maturity date, being 15 May 2010. For further information refer note 19 of the ﬁ nancial statements. As at 20 August 2007 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. TWENTY LARGEST CAPITAL NOTEHOLDERS AS AT 20 AUGUST 2007 1 2 3 4 5 6 7 8 Private Nominees Limited Investment Custodial Services Limited Custodial Services Limited - A/c 3 Forsyth Barr Custodians Limited - A/c 1M FNZ Custodians Limited Custodial Services Limited - A/c 2 Forsyth Barr Custodians Limited - A/c 1L Citibank Nominees (New Zealand) Limited 9 Guardian Trust Investment Nominees (RWT) Limited 10 Custodial Services Limited - A/c 4 11 Forsyth Barr Custodians Limited - A/c 1H 12 Morrow Plastics Limited 13 Public Trust 14 University of Otago 15 Waikimihia Farm Limited 16 Custodial Services Limited - A/c 1 17 Knox Home Trust Board Incorporated 18 Forsyth Barr Custodians Limited - A/c 1E 19 Colin Alfred Carran & Patricia Anne Carran 20 Sargood Bequest Nominee Limited TOTAL NUMBER OF CAPITAL NOTES 12,075,000 6,192,000 4,900,500 3,219,000 2,364,000 1,751,000 1,673,000 1,362,000 748,000 612,000 579,000 500,000 500,000 500,000 500,000 453,000 400,000 395,000 300,000 300,000 % OF SHARES CAPITAL NOTES 8.05% 4.13% 3.27% 2.15% 1.58% 1.17% 1.12% 0.91% 0.50% 0.41% 0.39% 0.33% 0.33% 0.33% 0.33% 0.30% 0.27% 0.26% 0.20% 0.20% 39,323,500 26.23% DISTRIBUTION OF CAPITAL NOTE HOLDINGS AS AT 20 AUGUST 2007 NUMBER OF NOTEHOLDERS NUMBER OF CAPITAL NOTES 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 >100,000 TOTAL - 372 725 1,996 83 3,176 - 1,856,925 6,741,250 65,584,575 75,817,250 150,000,000 OTHER INFORMATION AND DISCLOSURES I 137 SKYCITY ACES INFORMATION SKYCITY ACES 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 ﬁ rst reset date on 15 December 2010. For further information refer note 20 of the ﬁ nancial statements. TWENTY LARGEST SKYCITY ACES HOLDERS AS AT 20 AUGUST 2007 1 2 3 4 5 6 7 8 9 J P Morgan Nominees Australia Limited UBS Nominees Pty Limited Brispot Nominees Pty Limited RBC Dexia Investor Services Australia Nominees Pty Limited – GSENIP A/c ANZ Nominees Limited AMP Life Limited National Nominees Limited RBC Dexia Investor Services Australia Nominees Pty Limited – BKCUST A/c Cogent Nominees Pty Limited – SMP Accounts 10 Goldman Sachs JB Were Capital Markets Limited 11 UBS Wealth Management Australia Nominees Pty Limited 12 Citicorp Nominees Pty Limited 13 Cogent Nominees Pty Limited 14 ANZ Trustees Limited 15 Citicorp Nominees Pty Limited – A/c 14 16 Citicorp Nominees Pty Limited – A/c 5 17 MF Custodians Limited 18 Bond Street Custodians Limited 19 Citicorp Nominees Pty Limited – Australia A/c 20 RPG Management Pty Limited TOTAL DISTRIBUTION OF SKYCITY ACES HOLDINGS AS AT 20 AUGUST 2007 NUMBER OF SKYCITY ACES 282,950 191,861 102,500 86,924 81,651 71,101 65,000 62,775 52,546 42,380 42,100 40,660 32,285 19,636 18,162 18,000 11,137 10,000 6,000 5,180 % OF SKYCITY ACES 18.86% 12.80% 6.83% 5.79% 5.44% 4.74% 4.33% 4.19% 3.50% 2.83% 2.81% 2.71% 2.15% 1.31% 1.21% 1.20% 0.74% 0.67% 0.40% 0.35% 1,242,848 82.86% 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 >100,000 TOTAL NUMBER OF SKYCITY ACES HOLDERS NUMBER OF SKYCITY ACES 700 41 4 14 3 762 162,691 89,282 26,359 644,357 577,311 1,500,000 138 I OTHER INFORMATION AND DISCLOSURES COMPANY DISCLOSURES STOCK EXCHANGE LISTINGS SKYCITY Entertainment Group Limited is listed on both the New Zealand and Australian stock exchanges. SKYCITY ENTERTAINMENT GROUP LIMITED E W Davies resigned as Managing Director of SKYCITY Entertainment Group Limited on 25 June 2007 and R A McLeod resigned as a director effective 30 June 2007. SUBSIDIARY COMPANIES The changes to subsidiary company directorships during the 12 month period ended 30 June 2007 are set out below. On 8 December 2006, M J Silberling resigned as a director and secretary and R H McGeoch was appointed a director and secretary of SKYCITY Adelaide Pty Limited, SKYCITY Australia Finance Pty Limited and SKYCITY Australia Pty Limited. In relation to the following companies, E W Davies resigned as a director effective 25 June 2007 and E Toime was appointed as a director effective 26 June 2007. Planet Hollywood (Civic Centre) Limited; Queen Street Operations Limited; Sky Tower Limited; SKYCITY Action Management Limited; SKYCITY Adelaide Pty Limited; SKYCITY Auckland Holdings Limited; SKYCITY Auckland Limited; SKYCITY Australia Finance Pty Limited; SKYCITY Australia Pty Limited; SKYCITY Casino Management Limited; SKYCITY Cinema Holdings Limited; SKYCITY Cinemas Limited; SKYCITY Cinemas New Plymouth Limited; SKYCITY Cinemas Nominees Limited; SKYCITY Cinemas Queen Street Nominees Limited; SKYCITY Darwin Pty Limited; SKYCITY Hamilton Limited; SKYCITY International ApS; SKYCITY International Holdings Limited; SKYCITY Investments Christchurch Limited; SKYCITY Investments Queenstown Limited; SKYCITY Management Limited; SKYCITY Metro Limited; SKYCITY Wellington Limited; Toptown Nominees Limited; Queenstown Casinos Limited. E W Davies resigned as a director, effective 25 June 2007, from SKYCITY Investments Australia Limited, Fernbank Pty Limited and SKYCITY Darwin Holdings Pty Limited, and as an alternate director effective 25 June 2007 from the following companies: Victoria Hotels (Christchurch) Limited, Christchurch Hotels Limited, Premier Hotels (Christchurch) Limited and Christchurch Casinos Limited. R A McLeod resigned as a director of SKYCITY Investments Australia Limited, effective 30 June 2007. The following held ofﬁ ce as directors of subsidiaries of SKYCITY Entertainment Group Limited as at the end of the 2007 ﬁ nancial year, being 30 June 2007. Sky Tower Limited; SKYCITY Action Management Limited; SKYCITY Auckland Holdings Limited; SKYCITY Auckland Limited; SKYCITY Casino Management Limited; SKYCITY Hamilton Limited; SKYCITY International Holdings Limited; SKYCITY Investments Christchurch Limited; SKYCITY Investments Queenstown Limited; SKYCITY Management Limited; SKYCITY Wellington Limited; Toptown Nominees Limited. Directors: A B Ryan, E Toime. SKYCITY Adelaide Pty Limited; SKYCITY Australia Finance. Pty Limited; SKYCITY Australia Pty Limited. Directors: R H McGeoch, A B Ryan, E Toime. SKYCITY Darwin Pty Limited. Directors: A B Ryan, E Toime, T A K Wilson. SKYCITY Darwin Holdings Pty Limited; Fernbank Pty Limited. Directors: A B Ryan, T A K Wilson. SKYCITY International ApS. Directors: B Kreiborg, E Toime, J van Rijn. A B Ryan is an alternate director for E Toime. OTHER INFORMATION AND DISCLOSURES I 139 COMPANY DISCLOSURES Queenstown Casinos Limited. Directors: A B Ryan, E Toime (both SKYCITY representatives on the board), P J Hensman, B C Thomas. At 30 June 2007 SKYCITY also had an interest in, and was represented by SKYCITY executives on the boards of the companies listed below. SKYCITY Investments Australia Limited. Directors: R H McGeoch, P L Reddy, Sir Dryden Spring, E Toime, W R Trotter. Christchurch Casinos Limited. SKYCITY representatives on the board: A B Ryan. D A Sullivan was appointed a director on 6 August 2007. Planet Hollywood (Civic Centre) Limited; Queen Street Operations Limited; SKYCITY Cinema Holdings Limited; SKYCITY Cinemas Limited; SKYCITY Cinemas New Plymouth Limited; SKYCITY Cinemas Nominees Limited; SKYCITY Cinemas Queen St Nominees Limited; SKYCITY Metro Limited; Toptown Nominees Limited. Directors: A B Ryan, E Toime. P J Holdaway is an alternate director for each of A B Ryan and E Toime. SKYCITY Cinemas (Fiji) Limited. Directors: D Damodar, P J Holdaway. Subsequent to balance date, the following change occurred in the directorships of the Group companies. On 24 July 2007, J van Rijn resigned as a director and C U B Birger-Christensen was appointed a director of SKYCITY International ApS. Christchurch Hotels Limited; Premier Hotels Limited; Victoria Hotels (Christchurch) Limited. SKYCITY representative on the boards: A B Ryan. Force Location Limited. SKYCITY representatives on the board: P J Holdaway, E Toime. Rialto Cinemas Limited. SKYCITY representatives on the board: K V Brewer, P J Holdaway. K V Brewer resigned as a director on 10 September 2007. Vista Entertainment Solutions Limited. SKYCITY representatives on the board: K V Brewer, A B Ryan. K V Brewer resigned as a director on 10 September 2007. 140 I OTHER INFORMATION AND DISCLOSURES WAIVERS FROM THE NEW ZEALAND EXCHANGE (NZX) LISTING RULES The following waivers from the NZX Listing Rules were either granted and published by NZX within, or relied upon by the company during, 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 (general provisions relating to the issue of securities requiring NZX approval/waiver) in respect of the company’s 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 H R Shotter in the company’s (renewed) Performance Pay Incentive Plan 2005. 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 OPTION AND SHARE RIGHTS HOLDERS As at 14 September 2007, options and share rights on issue were as detailed below. • 1,278,834 options issued under the Executive Share Option Plan approved by directors of the company in August 2002, held by 14 holders. The options have no voting rights but 448,000 of the options entitle the holders to two shares on exercise of each option and the balance of 830,834 entitle the holders to one share on exercise of each option. As at 14 September 2007, the exercise price per option (which escalates by the cost of equity less distributions) was $10.34 ($5.17 per share) for 448,000 options and $4.96 for 830,834 options. • 2,536,970 share rights issued under the Executive Share Rights Plan approved by directors of the company in December 2004, held by 24 holders. The OTHER INFORMATION 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). As at 14 September 2007, the exercise value per right (which escalates by the cost of equity less distributions) was $5.23 for 766,000 rights and $5.33 for 1,770,970 rights. LIMITATIONS ON ACQUISITION OF ORDINARY SHARES 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. 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 signiﬁ cant inﬂ uence or control over SKYCITY or its business activities without obtaining any necessary statutory or regulatory approvals in those jurisdictions. • Accordingly, the constitution contains the following provisions restricting the acquisition of shares in the company to achieve this. TRANSFER OF SHARES Clause 12.11 of the constitution provides that if a transfer of shares results in the transferee, and the persons associated with that transferee: • holding more than 5% of the shares in SKYCITY, or • increasing their combined holding further beyond 5% if – they already hold more than 5% of the shares in SKYCITY, and the transferee has not been approved by the – OTHER INFORMATION AND DISCLOSURES I 141 OTHER INFORMATION 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 following paragraphs. Other than the provisions noted on page 141, the only signiﬁ cant restrictions or limitations in relation to the acquisition of securities are those imposed by New Zealand laws relating to takeovers, overseas investment and competition. 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 satisﬁ ed that registration of the proposed transfer will not prejudice any casino licence, or the transferee and the persons associated with that transferee dispose of such number of SKYCITY 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 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. DONATIONS Donations of $13,898 ($235,518) were made by the company during the 12 month period ended 30 June 2007. OTHER LEGISLATION/REQUIREMENTS General limitations on the acquisition of the securities imposed by the jurisdiction in which SKYCITY is incorporated (i.e. New Zealand law) are outlined in the 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 Ofﬁ ce is likely to be required when an ‘overseas person’ acquires shares or an interest in shares in SKYCITY Entertainment Group Limited that amount to more than 25% of the shares issued by the company, or if the overseas person already holds 25% or more, the acquisition increases that holding. The New Zealand Commerce Act 1986 is likely to prevent a person from acquiring shares in SKYCITY if the acquisition would have, or would be likely to have, the effect of substantially lessening competition in a market. OTHER DISCLOSURES SKYCITY Entertainment Group Limited has no securities subject to an escrow arrangement. SKYCITY Entertainment Group Limited is incorporated in New Zealand and is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act (Australia). There are no material differences between NZX Appendix 1 and ASX Appendix 4E issued by SKYCITY Entertainment Group Limited on 20 August 2007 in respect of the year ended 30 June 2007 and this annual report. 142 I OTHER INFORMATION AND DISCLOSURES REGISTERED OFFICE AUDITOR DIRECTORY SKYCITY Entertainment Group Limited Level 6 Federal House 86 Federal Street PO Box 6443 Wellesley Street Auckland New Zealand Telephone +64 9 363 6141 Facsimile +64 9 363 6140 Email sceginfo@skycity.co.nz Website www.skycitygroup.co.nz 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 Featherstone 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 PricewaterhouseCoopers 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 9 377 7300 Facsimile +64 9 377 7470 OTHER INFORMATION AND DISCLOSURES I 143 The materials used in the making of this document comply with environmentally sustainable practices and principles.

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