ANNUAL
REPORT
YEAR ENDED 30 JUNE 2017
GENERAL
Chairman's Review
Chief Executive Officer’s Review
Our Business
Our Projects
Our Board
Our Management
Corporate Social Responsibility
Our Workplace
FINANCIAL STATEMENTS
Independent Auditor's Report
Income Statement
Statement of Comprehensive Income
Balance Sheet
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Reconciliation of Normalised Results
to Reported Results
4
8
12
16
18
21
23
29
34
38
39
40
41
42
43
69
CORPORATE GOVERNANCE STATEMENT
AND OTHER DISCLOSURES
Corporate Governance Statement
Shareholder Information
Bondholder Information
Director and Employee Remuneration
Directors’ Disclosures
Company Disclosures
Other Information
Directory
ANNUAL MEETING
71
84
86
87
89
91
92
94
The 2017 annual meeting of SKYCITY Entertainment
Group Limited will be held on Friday 20 October 2017
in the SKYCITY Theatre, Level 3, SKYCITY Auckland,
Corner of Wellesley and Hobson Streets, Auckland,
commencing at 10.00am (New Zealand time).
This annual report is dated 9 August 2017 and is signed
on behalf of the board of directors of SKYCITY
Entertainment Group Limited by:
Chris Moller
Chairman
Bruce Carter
Deputy Chairman
Unless otherwise stated, all dollar amounts in this annual report are expressed in New Zealand dollars. An electronic copy of
this annual report is available in the Investor Centre section of the company’s website at www.skycityentertainmentgroup.com.
3
INTRODUCTION
In my final annual report as Chairman
of SKYCITY it is appropriate to use the
opportunity to reflect on some of the
company’s accomplishments in recent times
and acknowledge the role played by the
directors in delivering those achievements.
CHIEF EXECUTIVE OFFICER
During the year, the directors were delighted
to secure the services of Graeme Stephens
as Chief Executive Officer. Graeme was
previously Chief Executive Officer of publicly
listed South African based company
Sun International, a gaming and hospitality
group operating in six countries and
employing more than 13,000 people. Like
SKYCITY, its core business is integrated
entertainment complexes with casinos
generating the bulk of the revenue from long-
term licences.
Graeme has 25 years of experience in the
gaming and hotel industries. He is a Chartered
Accountant by training and has been involved
in investment banking in London and
Johannesburg. Educated in South Africa,
Graeme was born in Zimbabwe.
4
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
CHRIS MOLLER
CHAIRMAN
CHAIRMAN’S REVIEW
The appointment of a Chief Executive Officer
is the single most important decision made by
any board. Graeme has already impressed the
SKYCITY directors with the contribution he
is making to the company and the board is
very confident that he will prove to
shareholders he is the right person to lead
SKYCITY into the future.
Given the importance of the Chief Executive
Officer appointment, I want to acknowledge
the significant contribution made by
Brent Harman, Chairman of our Remuneration
and Human Resources Committee, in leading
the global search which culminated in this
appointment. Through his intellect and
dedication to the cause, Brent makes a highly
valuable contribution to SKYCITY and as the
company pilots its strategic way forward, his
deep knowledge and institutional knowledge of
the company will provide a critical balance to
the decision-making process.
Further I thank and acknowledge
John Mortensen for his efforts as Interim
Chief Executive Officer ahead of Graeme
taking up his position in April 2017.
TRANSFORMATIONAL PROJECTS
AND LICENCE EXCLUSIVITY
The New Zealand International Convention
Centre (NZICC), when completed, will
further enhance the transformation of the
SKYCITY entertainment precinct in
Auckland. This follows the already-significant
changes to Federal Street since 2011 to create a
key entertainment hub and tourism destination
for the city. Importantly, the extension of the
Auckland casino licence to 2048 as part of the
NZICC transaction provides the company
with certainty of tenure in respect of our key
gaming asset.
Despite recent challenges faced by the builder,
SKYCITY is confident of its contractual
position and the progress of this vital project
is closely monitored by a committee of the
SKYCITY board, which actively draws on the
extensive property and development capability
of directors Richard Didsbury and
Murray Jordan.
The approval of the long-awaited Adelaide
Casino and hotel development was announced
on 26 July 2017 following completion of
negotiations regarding gaming concessions
with the South Australian Government.
The SKYCITY board believes this is an
exciting and truly transformational project for
the company as it is positioned in the middle
of the Riverbank Precinct in the heart of
Adelaide, alongside the new Adelaide
Convention Centre and the Festival Hall.
It is also across the Torrens River from the
magnificent Adelaide Oval, with its walking
bridge landing virtually on our doorstep. The
directors are confident the precinct will in due
course become Adelaide’s entertainment hub.
Adelaide-based Deputy Chairman Bruce Carter
was instrumental over several years in bringing
this project to fruition and I am very grateful to
him and our board committee, which includes
Richard Didsbury, Jennifer Owen and
Murray Jordan.
STRATEGIC REFRESH
The SKYCITY board has tasked Graeme with
the top priority of reviewing SKYCITY’s
strategic direction to sustain a superior
performance in these fast-changing times.
The directors are conscious of trends and the
future impact of millennial expectations such
as the increased digitisation of online gaming
and the advent of e-sports and skills-based
gaming machines. During the year, the board
visited Silicon Valley with management,
including Graeme, to acquaint itself first-hand
with the potential changes likely to impact the
gaming and entertainment sectors in the
coming years.
Much of the drive for these initiatives is
championed by director Sue Suckling and
stems from her exposure to digital disruption
and resultant opportunities as the Chair of
Callaghan Innovation. Sue’s knowledge in
enabling New Zealand businesses to succeed
through technology is invaluable to SKYCITY
in general and to the SKYCITY board and
management in particular.
CORPORATE SOCIAL
RESPONSIBILITY
Being a socially responsible business is at the
heart of everything we do at SKYCITY.
We fully recognise that we must earn our
social licence to operate from the communities
in which we conduct our business. A core
component of social responsibility is the
acknowledgement that not everyone is able
5
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CHAIRMAN’S REVIEW
to game or consume alcohol safely; we are
therefore committed to striking the right
balance between excitement, reward and
responsibility.
The directors are acutely aware that board
decisions can have a profound effect on our
local communities. This is particularly true
when there is potential for harm to either
people or the environment. Our challenge as a
board has, and continues to be, to ensure our
strategic decisions strengthen the communities
within which we operate. The directors are
therefore proud that SKYCITY is a leader in
social responsibility.
Host responsibility is a vitally important part of
our business and the board is pleased that our
New Zealand casinos were recently recognised
by the sector’s regulator, the Department of
Internal Affairs, as the best in the gaming
industry. In its public report, the Department
praised SKYCITY for cultivating “a culture of
care within their casinos” and maintaining a
very high standard of host responsibility in our
gaming activities.
This is the highest praise we have ever received
from any regulator and is testimony to our
world-class Host Responsibility Programme
and to all staff, who ensure it is carried out to
exemplary standards. Their work enables us
to claim, with complete justification, that
SKYCITY is the safest place in which to game
in New Zealand. Further, we use very similar
programmes in Adelaide and Darwin.
The board’s Corporate Social Responsibility
Committee oversees SKYCITY’s
Host Responsibility Programme and its
numerous environmental initiatives. These
include the minimisation of food waste, the use
of fresh local produce, management of energy
consumption and the recycling of paper, plastic
and glass, including even used hotel soap bars.
This Committee is passionately chaired by
board member Sue Suckling with enthusiastic
support from director Richard Didsbury. Sue is
also the board’s champion with management in
respect of health and safety matters across the
SKYCITY Group.
The company is similarly committed to
diversity in terms of gender, ethnicity, sexual
orientation, pay equality and unconscious bias
training. Company activities in the diversity
space include participation in the
Rainbow Tick, Champions for Change and
TupuToa - Ma¯ori and Pasifika Corporate
Pathways programmes. These matters are
overseen by the board’s Remuneration and
Human Resources Committee.
GOVERNANCE
The first and second pillars of ESG
(environmental, social and governance) have
been covered in the previous section of this
review. The third, and arguably most
important, pillar of ESG is governance.
An important priority for the SKYCITY board
is planned renewal and, after an external search,
the board has secured an experienced
Auckland-based chairman to succeed me.
The directors are pleased that Rob Campbell has
agreed to join the board and has subsequently
been elected Chairman effective 1 January 2018.
Rob is the current Chairman of two well-
regarded listed companies, namely Summerset
Group Holdings Limited and Tourism Holdings
Limited. He was also a director of many
organisations, including (currently) Precinct
Properties New Zealand Limited and
(previously) Bank of New Zealand, New
Zealand Post, Ports of Auckland, Accident
Compensation Corporation and Freightways.
An economist by training, Rob’s career includes
academic, trade unionist and consulting roles.
He currently advises a number of private equity
and hedge funds globally. Rob also brings
considerable diversity to the SKYCITY board
in terms of his background and thinking.
Jennifer Owen was appointed to the SKYCITY
board in December 2016. Based in Sydney,
Jennifer has more than 30 years’ experience in
the areas of accountancy, audit, treasury and
equities research. This includes as director of
Equities Research at Citigroup Global Markets
with a specialist focus on the Australasian
gaming sector and as Equities Research Analyst
at Macquarie Group where she concentrated on
the tourism/leisure sector. Jennifer is also a
former board member of Racing NSW.
Jennifer’s knowledge of the New Zealand and
Australian gaming and entertainment sectors is
valuable to SKYCITY as are her insights in
respect of investor relations. Jennifer’s financial
skills augment the existing capability of the
board’s Audit and Financial Risk Committee.
Murray Jordan was appointed to the SKYCITY
board at the same time as Jennifer and is a
6
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CHAIRMAN’S REVIEW
I retire from the SKYCITY board after
nine years as a director, proud in the
knowledge that I leave the company in a better
position than when I joined. I am confident
that SKYCITY has a strong future under the
leadership of my successor, Rob Campbell,
all of the other directors and Graeme Stephens
as Chief Executive Officer.
CHRIS MOLLER
CHAIRMAN
director of NZX-listed Chorus Limited and
ASX-listed Metcash Limited. Prior to
embarking on a governance career in 2015,
Murray was Managing Director of Foodstuffs
North Island, one of New Zealand’s largest
supermarket chains. His early career was spent
in the property sector, where his roles included
General Manager of Telecom NZ’s property
business and General Manager of AMP Capital
Investors NZ’s property portfolio. Murray
brings to the board excellent FMCG (fast
moving consumer goods) and property
expertise pertinent to SKYCITY’s retail and
property portfolios. Like Jennifer, he
understands the New Zealand and Australian
listed environments, which is beneficial to
SKYCITY’s dual listing.
FAREWELL
It has been an honour to serve as Chairman
of SKYCITY for the past five years. I want to
publicly thank Deputy Chairman Bruce Carter
and the wider SKYCITY board for all their
support, in particular the longer-serving
directors, Bruce Carter, Richard Didsbury,
Brent Harman and Sue Suckling, who, in their
different ways, have made and continue to
make significant contributions to the
governance of SKYCITY. I also thank
SKYCITY’s management and all the fantastic
staff, without whom there would be no
SKYCITY.
The SKYCITY Entertainment Group is in a
transformational phase. We face significant
short term challenges across a number of our
properties as our cities, and our properties, build
for the needs of our communities into the
future. The significant development underway
in Auckland and recently announced for
Adelaide will position the Group for greater
earnings growth in future years, but have come
at some cost to near term earnings given the
disruption from construction. The leadership
of the organisation has also been undergoing
change. My recent appointment as
Chief Executive Officer comes with a firm
mandate to deliver on the current major
projects and, more importantly, set the strategy
to ensure that the company remains well
positioned and relevant for the medium and
long term. The SKYCITY board has
simultaneously transitioned to new leadership
with the appointment of three new directors
since December 2016, including Rob Campbell
who will assume the role of Chair when
Chris Moller retires at the end of 2017.
We have some great projects currently
underway and the new members of the team at
executive and board level are bringing fresh
ideas that will ensure we capitalise on the
opportunities created by the existing business,
which is a very solid platform from which to
continue growing.
KEY FEATURES OF ANNUAL RESULT
• Normalised NPAT was $154.6 million, up
1.3% on the previous corresponding period.
Normalised EBITDA was down 2.6% to
$321.5 million and normalised revenue
down 4.9% to $1.03 billion.
GRAEME STEPHENS
CHIEF EXECUTIVE OFFICER
8
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
CHIEF EXECUTIVE OFFICER'S REVIEW
• Reported NPAT was down 69.2% to
$44.9 million, primarily due to an
A$95 million impairment of the goodwill
relating to SKYCITY Darwin. Reported
EBITDA was down 8.1% to $307.0 million
and reported revenue including gaming
GST down 7.2% to $1.02 billion.
Normalised earnings per share fell 8.6%
to 23.3 cents per share, largely due to
increased shares on issue during the period
compared to the prior period, partially
offset by reduced net interest expense due
to the equity capital raising completed in
June 2016 and increased capitalised interest
on major growth projects. Reported EPS
was down 72.0% to 6.8 cents per share
(impacted by the Darwin goodwill
impairment).
• A final dividend of 10.0 cents per share has
been declared, resulting in total dividends
for FY17 of 20.0 cents per share, which is
consistent with our existing dividend policy.
• Excluding our International Business and
adjusting for a constant currency, Group
EBITDA was up 2.3% on the previous
corresponding period highlighting the
resilience of our local businesses, especially
in New Zealand.
• Our New Zealand properties delivered
earnings growth, but this was partly offset
by weak trading conditions in Australia and
negative regulatory change in Darwin.
Turnover in International Business fell
significantly due to increased currency
restrictions and the detention of Crown
Resorts employees in China, leading to
fewer customer visits, particularly in the
second half of the year.
• Performance recovered in 2H17 with
normalised EBITDA up slightly (0.5%) on
the previous corresponding period and
normalised NPAT up 5.3%.
PROPERTY RESULTS IN SUMMARY
SKYCITY Auckland revenue (excluding
International Business) was up 1.6% to
$566.7 million (with revenue up 3.5% on a
like-for-like basis adjusting for discontinued
operations and an extra trading day during
FY16) and EBITDA was up 3.5% to
$259.8 million relative to a record
corresponding period. Record local gaming
revenue was achieved despite visitation being
flat on the previous corresponding period due
to various capital works programmes across
the city continuing to impact access to our
precinct, and recent changes required by the
health regulators to our smoking decks which
impacted premium gaming areas.
SKYCITY Hamilton revenue (excluding
International Business) was up 10.2% to
$59.4 million and EBITDA was up 15.3%
to $26.4 million. The strong result was due
to increased gaming activity (particularly in
gaming machines), investment in a new tenpin
bowling alley and robust local macroeconomic
conditions.
Our Queenstown operations remain relatively
immaterial to the Group’s results. Our two
Queenstown casino venue licences represent
an opportunity for future development rather
than meaningful current contribution.
Adelaide Casino revenue (excluding
International Business) was down 2.5% to
A$148.0 million and EBITDA was down
16.8% to A$21.3 million. Adelaide’s
performance declined due to reduced visitation
and early works disruption adversely impacting
revenue. However, due to increased marketing
and promotions, we have modestly grown our
share of the local gaming market. A new
General Manager was appointed for the
Adelaide property during the period and he
has initiated strategies to manage the impact
of construction disruption while the local
precinct and our own property are being
transformed.
SKYCITY Darwin revenue (excluding
International Business) was down 3.4% to
A$112.2 million and EBITDA was down
20.1% to A$27.1 million. The number of
club and pub gaming machines within the
catchment area of the casino has increased by
75% since 1 July 2015 due to a decision by the
Northern Territory administration to allow
more gaming in local venues. The resultant
permanent increase in competition has led to
the A$95 million write-off of Darwin’s
acquisition goodwill. An internal review has
commenced to consider strategic options for
the property.
Despite a strong Chinese New Year period,
International Business turnover for the full-year
was down 30.0% to $8.7 billion and normalised
EBITDA was down 41.6% to $19.6 million.
9
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CHIEF EXECUTIVE OFFICER'S REVIEW
This business segment was adversely impacted
by increased restrictions on funds transfers and
a reduced number of visits by larger customers
during the period, particularly in 2Q17
following the arrests and detainment of Crown
Resorts employees in China. Operating
margins improved in 2H17 following a cost
review, but were negatively impacted overall
by the operating leverage in the business.
International Business has been a driver of
growth across the Group in recent years and we
firmly believe in the longer-term prospects of
this business. A new President of International
Business was appointed in May 2017.
MAJOR GROWTH PROJECTS
AND FOCUS AREAS
The New Zealand International Convention
Centre (NZICC) and Hobson Street hotel
projects remain on-budget and good progress
has been made during the year. Practical
completion is now expected by mid-2019,
previously guided at 1Q19, but well within the
timeframe required to be operational as the
NZICC sales team has only started taking
large conference bookings from early 2020.
Early demand for the new facility is
encouraging and SKYCITY remains
comfortable with its contractual position with
Fletcher Construction as well as their focus on
the projects, which will deliver world-class
tourism infrastructure for Auckland and
New Zealand.
We completed a range of developments at
SKYCITY Auckland during the period,
including the opening of the ‘Grand Horizon’
gaming salons, a major refurbishment of the
Main Atrium area and the opening in July
2017 of Huami, a new Chinese restaurant.
Huami has been extremely well received by
customers, will complement the world-class
Federal Street dining precinct and should drive
further visitation to the Auckland property.
SKYCITY has now formally committed to
proceeding with the development of an
integrated casino resort in Adelaide following
the signing of a development agreement with
the South Australian Government in July 2017.
The conditions required by the SKYCITY
board for proceeding with the expansion have
been satisfied, including improved access for
premium gaming customers and certainty
that Walker Corporation’s car park
10
development (adjacent to our Adelaide
property) will proceed.
The Riverbank Precinct surrounding
Adelaide Casino is being transformed with
major investments in the Adelaide Oval and
Adelaide Convention Centre and the
renovation of the theatres. Coupled with these
attractions (all within comfortable walking
distance from our Adelaide property) is the
ease of access through public transport as well
as the new parking facilities to be constructed.
SKYCITY will contribute the final piece of
the precinct plan by delivering a world-class
destination for Adelaide, including its top
hotel, function rooms, bars and restaurants.
The South Australian gaming market
demonstrates that residents and visitors enjoy
gaming as much as all other Australians, but
the Adelaide Casino has always struggled to
attract patronage as it lacks basic amenities such
as safe and convenient car parking and
appropriate hotel facilities. Our research shows
that we have a significant opportunity to win
back local gamers with a superior offering
above local venues and through becoming the
home of entertainment in Adelaide by
connecting people better into the main
gaming areas as well as our bars and
restaurants. In finalising the project design we
have focused on aspects of the old heritage
building as well as the new, such that we will
have two radically different but equally iconic
buildings and a seamless integration of the
existing casino with the new extension and
hotel. In addition to new entertainment
offerings and footfall drivers, we have reduced
reliance on International Business in our
feasibility study and increased the number of
rooms in the new hotel from 86 to 123 with
the addition of another floor, which also
provides much needed function/meeting room
space. We have accordingly increased the
development budget to A$330 million, which
includes appropriate contingencies. The project
is now a much better balanced product,
focused on a more predictable market and
forecast to generate reasonable returns above
our cost of capital. The early works for the
Riverbank Precinct redevelopment are
progressing well and are expected to be
completed by late 2017. SKYCITY expects
to undertake a tender process for its main
construction works over the next few months
and, following the procurement of a
construction partner, we expect to commence
our main works in 1Q18 and to complete these
by 3Q20.
In addition to the two major projects outlined
above, I can certainly see more potential in our
existing properties. Strategically, we will be
seeking to ensure that we are maximising what
we have before we go looking for more.
Our Auckland precinct offers further
opportunity for development as does our
property in Hamilton, which has a fast growing
local economy. I also believe we should derive
more from our licence opportunities in
Queenstown. In assessing development
potential we are acutely conscious of our
available debt capacity, the most appropriate use
of our capital and deriving an appropriate risk
related return on any investment made.
Another area of keen focus for me is ensuring
that SKYCITY adapts to the fast pace of
technology growth that we are seeing across the
world. We now have a team solely focused on
innovation to ensure that the experience at
SKYCITY remains world-class and that
SKYCITY becomes a leader in how we engage
with our customers via social and digital
platforms. There is some exciting work being
done in this space and I am very much looking
forward to helping drive these projects forward.
Following the change in the regulatory
environment, we are evaluating a number of
strategic options for our Darwin property.
MANAGEMENT APPOINTMENTS
I have been impressed with the high calibre
of the management team at SKYCITY.
John Mortensen, the Interim Chief Executive
Officer immediately prior to my appointment,
has now stepped into the newly created role of
Group Chief Operating Officer and has also
resumed direct responsibility for SKYCITY’s
flagship property in Auckland. Although John
is nearing retirement, he is a very safe pair of
hands to transition me into the business and
allow time for succession planning.
Other key management appointments during
the period include Luke Walker, our new
General Manager Adelaide Casino, and
Stewart Neish, our new President of
International Business. We are confident that
Luke and Stewart will add significant
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CHIEF EXECUTIVE OFFICER'S REVIEW
experience and capability to our strong and
diverse senior management team.
United States private placement to refinance a
US$75 million maturity in March 2018.
FINAL DIVIDEND
OUTLOOK FOR FY18
The SKYCITY board has declared a fully
imputed final dividend of 10.0 cents per share
payable on 15 September 2017. The SKYCITY
Dividend Reinvestment Plan will be available
for this dividend, with a 2% discount applying,
in line with prior periods. Elections to
participate in the company’s Dividend
Reinvestment Plan for the final dividend close
at 5.00pm (NZ time) on 1 September 2017.
SKYCITY has declared a total dividend for
FY17 of 20.0 cents per share, which is
consistent with our existing dividend policy of
distributing at least 80% of normalised NPAT
to shareholders each year subject to a
minimum of 20 cents per share per annum.
The SKYCITY board confirms that the payout
calculation for future dividends from FY18
will be adjusted to reflect the post-tax
accounting impact of capitalised interest
incurred on our major growth projects.
This change will not impact other elements
of our existing dividend payout policy, but is
considered prudent given the increasing
amount of capitalised interest expected out
to FY20. This change is unlikely to have a
material impact on actual dividends paid over
this period.
We continue to believe that our dividend
policy offers shareholders an attractive yield.
FUNDING
Following the equity raising completed in
June 2016, SKYCITY remains well positioned
to fund its major growth projects out to FY20
and retain its investment grade BBB- credit
rating with Standard & Poor’s during peak
gearing periods. Consistent with previous
market guidance, we expect total debt to peak
during FY20 at around $1 billion.
Total committed facilities (at hedged exchange
rates) as at 30 June 2017 were $965 million
of which $361 million have been drawn.
We recently extended the maturity of
A$280 million of our senior bank facilities out
to March 2022, beyond the completion of our
major growth projects. We are also considering
further debt issuances during FY18, including
a second New Zealand bond issue and another
Overall, we anticipate SKYCITY’s Group
EBITDA for FY18 to show modest growth
on the previous corresponding period.
Key contributors to this outlook are
expected to be growth from our combined
New Zealand businesses and a recovery in
our International Business, offset by further
weakness in SKYCITY Darwin. Corporate
costs are expected to increase on a like-for-like
basis as the company invests in technology and
innovation designed to position the Group
better for the future of entertainment.
One of the major attractions of the job for me
is that SKYCITY is currently in an exciting
period of development with a number of major
projects underway. This is a well established
business with limited downside risk and
offering great opportunities beyond the short
term disruption that we face during this period
of transformation. Our investments in
Auckland will lift the visitation to the precinct
and position the city as a leader in the regional
convention market. Adelaide Casino will be a
major, relevant entertainment destination
located in the hub of a vibrant convention and
leisure precinct, which is forecast to see a
significant increase in visitor numbers.
We continue to focus on further longer term
opportunities to grow our entertainment and
leisure businesses. Our strong brand and
first-world regulatory environment position us
well to leverage into further entertainment
offerings outside the casinos that will deliver
increased visitation to our properties and new
earnings streams to the Group.
I would like to thank Chris Moller and the
SKYCITY board for the opportunity they
have given me. I am also looking forward to
working alongside the Chairman-Elect,
Rob Campbell, once he takes over the reins
in 2018 - together we need to build on the
platform that has been created.
I would also like to thank the SKYCITY
management team and staff and the many
stakeholders and shareholders I have met – all
of whom have warmly welcomed me. We are
challenged to ensure we continue to offer
relevant forms of entertainment and hospitality
to customers increasingly spoilt for choice and
with increasingly divergent interests. I believe
we have real potential for future development
and growth. I am very passionate about this
company and what we can achieve, and I’m
looking forward to the challenges and
opportunities that lie ahead.
GRAEME STEPHENS
CHIEF EXECUTIVE OFFICER
11
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
Creating value for our stakeholders by delivering world-class casino entertainment
OUR CUSTOMERS
ANNUAL VISITATION AND NORMALISED REVENUE (INCLUDING GAMING GST) IN FY17
GAMING
HOTELS
RESTAURANTS
AND BARS
APPROX
MILLION
9.5
0.5
MILLION
MAIN GAMING FLOOR
CUSTOMER VISITS
PREMIUM/VIP/
INTERNATIONAL BUSINESS
GAMING CUSTOMER VISITS
$500MILLION
$300
MILLION
243,000
HOTEL ROOMS OCCUPIED
$55
MILLION
6.2
MILLION
RESTAURANT AND BAR COVERS
$108
MILLION
PARKING
2.1MILLION
CARS PARKED
$8
MILLION
CONFERENCES
400,000
CONFERENCE DELEGATES
$25
MILLION
SKY TOWER
530,000
SKY TOWER VISITORS
$17
MILLION
12
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
OUR BUSINESS
Creating value for our stakeholders by delivering world-class casino entertainment
OUR OPERATING FACILITIES
AS AT 1 AUGUST 2017
DISTRIBUTIONS
TO OUR STAKEHOLDERS IN FY17
4,146
305
TABLES
ELECTRONIC
GAMING MACHINES
GOVERNMENTS
$165
IN TAXES
MILLION
787ROOMS
13
16
SIGNATURE
RESTAURANTS
OTHER
RESTAURANTS
21
BARS
3,600 PARKING BAYS
7,500
M2 OF
CONFERENCE ROOMS
EMPLOYEES
COMMUNITIES
SUPPLIERS
$307
IN SALARIES AND WAGES
MILLION
$20
MILLION
IN COMMUNITY CONTRIBUTIONS,
LEVIES AND SPONSORSHIPS
$251
MILLION
IN PAYMENTS TO SUPPLIERS
$159 MILLION
OF CAPITAL INVESTED
LENDERS
$31MILLION
IN INTEREST PAID
SHAREHOLDERS
$132 MILLION
OF DIVIDENDS DECLARED IN
RELATION TO THE FY17 PERIOD
13
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM OUR BUSINESS
OUR PROPERTIES
PROPERTY
OPENED/ACQUIRED
CASINO VENUE LICENCE/
LICENSING AGREEMENT
RUNS UNTIL
ENTERTAINMENT ACTIVITIES
SKYCITY AUCKLAND
Opened in 1996
2048*
SKYCITY HAMILTON
Opened in 2002
2027*
Increased ownership
from 70% to 100% in
2005
• Gaming
• Hotels
• Food and beverage
• Entertainment
• Conventions
• Out-catering
• Car parking
• Sky Tower
• Gaming
• Food and beverage
• Entertainment
• Conventions
• Car parking
• Tenpin bowling
FY17 REVENUE (INCLUDING
GAMING GST AND NORMALISED
INTERNATIONAL BUSINESS)
$649
MILLION
$60
MILLION
SKYCITY QUEENSTOWN AND
SKYCITY WHARF
Opened Queenstown
in 2000
2025* (Queenstown)
2024* (Wharf)
Increased ownership
of Queenstown from
60% to 100% in 2012
Acquired Wharf
in 2013
• Gaming
• Food and beverage
• Entertainment
• Conventions
$18
MILLION
ADELAIDE CASINO
Acquired in 2000
2085
• Gaming
• Food and beverage
• Entertainment
A$169
MILLION
SKYCITY DARWIN
Acquired in 2004
2031
(currently seeking to
extend to 2036)
• Gaming
• Hotels
• Food and beverage
• Entertainment
• Conventions
• Car parking
A$117
MILLION
*Each New Zealand casino venue licence can be renewed for a further period of 15 years pursuant to sections 134–138 of the New Zealand Gambling Act 2003.
14
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 OUR BUSINESS
OUR FINANCIAL PERFORMANCE (FY13–FY17)
GROUP REVENUE (including gaming GST)
948
948
927
903
1,008 1,009
1,084 1,101
1,031 1,022
FY13
FY14
FY15
FY16
FY17
Normalised
Reported
GROUP EBITDA
303
294
288
257
305
304
330
334
322
307
FY13
FY14
FY15
FY16
FY17
Normalised
Reported
EARNINGS PER SHARE AND DIVIDEND PER SHARE
23.6
20.0
21.3
20.0
22.9
20.0
25.5
21.0
23.3
20.0
n
o
i
l
l
i
m
$
Z
N
n
o
i
l
l
i
m
$
Z
N
e
r
a
h
s
r
e
p
s
t
n
e
C
1,200
1,000
800
600
400
200
0
400
350
300
250
200
150
100
50
0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
FY13
FY14
FY15
FY16
FY17
Normalised EPS
Declared DPS
15
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NZICC AND HOBSON STREET HOTEL
SKYCITY is investing approximately
$700 million in Auckland to deliver the
New Zealand International Convention
Centre (NZICC), a new 300 room five-star
hotel on Hobson Street, a retail laneway and
1,300 additional car parking spaces.
The NZICC is expected to generate $90 million
in economic benefits for New Zealand annually,
in addition to being a significant driver of
visitation for the accommodation, retail,
commercial and entertainment precincts in
Auckland’s central business district.
The overall development programme remains
on-budget, with practical completion expected
in mid-2019.
ADELAIDE CASINO
In July 2017, SKYCITY committed to proceeding
with the A$330 million expansion of the
Adelaide Casino by signing a development
agreement with the South Australian
Government.
The project includes an expansion of the main
gaming floor (allowing for a 30% increase in
gaming product), new VIP gaming facilities,
a 123 room all-suite hotel, new function spaces
and meeting rooms, three new bars and three
additional signature restaurants. The main works
are due to commence in early 2018 and to be
completed in the third quarter of 2020.
SKYCITY’s project is part of a wider development
across the Riverbank Precinct and is a significant
investment in creating a world-class entertainment
precinct for Adelaide. Early works on the
Riverbank Precinct are already underway to
prepare the area for the developments, including
a new 1,500 space car park (of which SKYCITY
has agreed to lease 750 spaces).
16
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
ARTIST'S IMPRESSION OF NZICC AND HOBSON STREET HOTEL
OUR PROJECTS
SKYCITY AUCKLAND
SKYCITY has continued to invest in its
Auckland property over the last financial year
to enhance the customer experience and drive
further growth. In July 2017, we opened
Huami - the ninth addition to our
award-winning Federal Street dining precinct.
Huami boasts contemporary, authentic
Chinese cuisine, world-class design, impressive
ambience and traditional cuisine with a
modern twist. Well-known New Zealand
chef Nic Watt (of MASU by Nic Watt on
Federal Street and Madame Hanoi in Adelaide)
collaborated with SKYCITY on the project
and together with executive chef Jeff Tan, who
has an impressive career running some of the
finest restaurant kitchens in Asia and the
Middle East, will deliver Huami’s incredible
food offering.
We are currently undertaking a master
planning exercise for our Auckland property
with the aim of maximising the long-term
potential of our existing facilities and the
broader precinct following the opening of the
NZICC.
SKYCITY HAMILTON
In December 2016, SKYCITY Hamilton
celebrated the opening of Bowl and Social -
a new and improved bowling and
entertainment hub, boasting world-class
bowling technology and equipment and a high
quality food and beverage offering. The new
facility completely transforms the traditional
bowling experience - allowing customers to
compete multi-player while enjoying an
exciting audio visual experience.
Like Auckland, we have also recently
commenced a master planning exercise for our
Hamilton property to ensure we benefit fully
from the Hamilton City River Plan and the
favourable outlook for the Waikato region.
ARTIST'S IMPRESSION OF ADELAIDE CASINO EXPANSION
HUAMI CHINESE RESTAURANT AND BAR
BOWL AND SOCIAL
17
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM BRUCE CARTER - Deputy Chairman
Chair of the Audit and Financial Risk Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in October 2010
BRENT HARMAN - Director
Chair of the Remuneration and Human Resources Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in December 2008
Based in Adelaide, Australia, Bruce Carter is
a Consultant to Ferrier Hodgson in Adelaide
and was one of the founding partners of the
Adelaide practice in 1992. He was formerly a
partner at Ernst & Young and has more than
30 years’ experience in corporate restructuring
and insolvency.
Bruce is currently Chairman of ASC Pty Ltd
(Australian Submarine Corporation) and
Aventus Capital Limited and a director of Bank
of Queensland Limited as well as a number of
private companies and government bodies.
He is a Fellow of Chartered Accountants
Australia and New Zealand.
Brent Harman has chaired SKYCITY’s
Remuneration and Human Resources
Committee since 2010. His governance
experience of more than 25 years includes
executive directorships of two London-based
FTSE-listed companies, executive and
non-executive directorships of two ASX-listed
companies and directorships of a number of
listed and unlisted New Zealand companies,
most recently including Metlifecare Limited
and Mediaworks NZ Limited.
Brent’s previous career in management in
New Zealand included developing and
launching the Newstalk radio format as
General Manager of Newstalk ZB and after
that as Chief Executive Officer of TVNZ.
He is a chartered member of the New Zealand
Institute of Directors.
CHRIS MOLLER - Chairman
Member of the Audit and Financial Risk Committee
Member of the Remuneration and Human Resources Committee
Member of the Corporate Social Responsibility Committee
Chair of the Governance and Nominations Committee
Appointed a Director of SKYCITY in December 2008
Chris Moller is currently Chairman of Meridian
Energy Limited and the New Zealand
Transport Agency and a director of Westpac
New Zealand Limited. In his previous role as
Chief Executive Officer of the New Zealand
Rugby Union, Chris jointly led New Zealand’s
successful bid to host the 2011 Rugby World
Cup. Chris’ career has included senior posts
with the New Zealand Dairy Board, including
global Chief Financial Officer and Managing
Director of NZMP, the international
ingredients business of the New Zealand Dairy
Board and subsequently Fonterra, where he also
held the position of Deputy Chief Executive of
Fonterra. His early career was in the finance
and banking sectors. He is a Fellow of
Chartered Accountants Australia and New
Zealand and was appointed as a Companion of
the New Zealand Order of Merit in January
2015 for services to business and sport.
As previously announced to the market in
June 2017, Chris Moller will retire from the
board effective 31 December 2017.
18
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
OUR BOARD
SUE SUCKLING - Director
Chair of the Corporate Social Responsibility Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in May 2011
RICHARD DIDSBURY - Director
Member of the Corporate Social Responsibility Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in July 2012
JENNIFER OWEN - Director
Member of the Audit and Financial Risk Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in December 2016
Sue Suckling is an independent director and
consultant with over 25 years in commercial
corporate governance. She is recognised for her
leadership in the technology innovation
space and her deep governance experience.
Sue is currently the Chair of the
New Zealand Qualifications Authority,
Callaghan Innovation Research Limited,
Jacobsen Holdings Limited, the Lincoln Hub
Establishment Board, ECL Group Limited
and Jade Software Corporation Limited.
Previous governance roles include chairing
NIWA, AgriQuality Limited, and as a
director of Restaurant Brands Limited,
Westpac Investments Limited and the
New Zealand Dairy Board. She holds an OBE
for her contribution to New Zealand business.
Sue is an inaugural Fellow of the New Zealand
Institute of Directors and a Companion of the
Royal Society of New Zealand.
Richard Didsbury graduated as an Engineer
from Auckland University and has enjoyed a
distinguished career in property investment
and development.
Richard founded, and is currently a director of,
Kiwi Property Group Limited, which is now
the largest property vehicle listed on the NZX.
He is a director of Auckland International
Airport Limited and Chairman of NX2 (the
private sector consortium involved in the Puhoi
to Warkworth motorway project, a Private
Public Partnership). He is well known for his
work as a past president of the Property Council
of New Zealand and was previously Chairman
of Committee for Auckland Limited.
His previous governance roles include being
a director of Infrastructure Auckland and
Tourism Auckland.
Jennifer Owen is a Principal of Owen Gaming
Research, an independent research firm
specialising in the gaming and wagering
markets. She has more than 30 years’ experience
in the areas of accountancy, audit, finance,
treasury and equities research.
Jennifer has specific specialist knowledge of the
New Zealand and Australian gaming and
entertainment sectors through her roles as
Director of Equities Research at Citigroup
Global Markets, with a specialist focus on the
Australasian gaming sector, and as Equities
Research Analyst at Macquarie Group focussing
on the tourism/leisure sector. She has been
engaged in research, analysis, and more recently,
consulting in the sector since 1996, and has a
wide network within the gaming industry and
a strong understanding of industry and investor
issues. Her previous governance roles include
serving on the board of Racing NSW and the
Investment Committee of the Salvation Army.
Jennifer holds a Bachelor of Business from
the Queensland Institute of Technology, a
Masters in Business Administration from the
University of Queensland, is a graduate of the
Australian Institute of Company Directors’
Diploma course and is a member of
Chartered Accountants Australia and
New Zealand.
19
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM OUR BOARD
ROB CAMPBELL - Director and
Chairman-Elect
Member of the Audit and Financial Risk Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in June 2017
Rob Campbell is currently the Chair of
Summerset Group Holdings Limited, Tourism
Holdings Limited and WEL Networks Limited
and a director of Precinct Properties
New Zealand Limited. Rob has over 30 years’
experience in capital markets and is a director
of or advisor to a range of investment fund
and private equity groups in New Zealand,
Australia, Hong Kong and the United States
of America.
Rob holds a Bachelor of Arts with First Class
Honours in Economic History and Political
Science and a Masters of Philosophy in
Economics.
Rob will succeed Chris Moller as Chairman
of the board from 1 January 2018 following
Chris’ retirement from the board on
31 December 2017.
MURRAY JORDAN - Director
Member of the Remuneration and Human Resources Committee
Member of the Governance and Nominations Committee
Appointed a Director of SKYCITY in December 2016
Murray Jordan is currently a director of Chorus
Limited and Metcash Limited, an ASX listed
wholesale distributor specialising in food,
grocery and hardware based in Australia, a
director of Stevenson Group Limited, a family
owned New Zealand business specialising in
building products and quarrying, and a trustee
of the Starship Foundation. Prior to embarking
on a governance career in 2015, he held various
senior management roles at Foodstuffs Limited
from 2004 to 2015, including Managing
Director of Foodstuffs North Island and
Managing Director and General Manager
Retail, Sales and Performance of Foodstuffs
Auckland Limited. In 2013, he led the merger
of the Auckland and Wellington businesses of
Foodstuffs to create what is now known as
Foodstuffs North Island and established and
oversaw the integration program.
His early career was in the property sector,
including as General Manager of Telecom NZ’s
property business and General Manager of
AMP Capital Investors NZ Limited’s property
portfolio. Murray has a Masters degree in
Property Administration from the University
of Auckland.
20
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 SENIOR LEADERSHIP TEAM
1 GRAEME STEPHENS
Chief Executive Officer
2 ROB HAMILTON
Chief Financial Officer
3 JOHN MORTENSEN
Group Chief Operating Officer
(with direct responsibility for
SKYCITY Auckland)
4 CLAIRE WALKER
Group General Manager
Human Resources
5 SONYA CROSBY
Chief Innovation Officer
6 PETER TREACY
Group General Manager Corporate
Affairs and Chief Risk Officer
7 JO WONG
General Counsel and
Company Secretary
1
2
5
3
6
6
4
7
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
21
OUR MANAGEMENT
SITE AND BUSINESS GENERAL MANAGERS
8
10
12
22
9
11
13
8 MICHELLE BAILLIE
General Manager
SKYCITY Hamilton
9 JONATHAN BROWNE
General Manager
SKYCITY Queenstown/
SKYCITY Wharf
10 LUKE WALKER
General Manager
Adelaide Casino
11 DAVID CHRISTIAN
General Manager
SKYCITY Darwin
12 SIMON JAMIESON
Group General Manager
New Zealand International Convention
Centre Development and Tourism
13 STEWART NEISH
President International Business
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 OUR CORPORATE SOCIAL RESPONSIBILITY PLATFORM
OUR PILLARS AND GOALS
At our core, SKYCITY is a provider of casino entertainment.
Our challenge is to ensure that our business provides entertaining and
profitable, yet safe and responsible, experiences and environments for
our customers and staff. It is also imperative that we are ethical and
transparent in our engagement with suppliers, our local communities
and other important stakeholders as we grow our business.
Part of being a responsible business is understanding the impacts arising
from our operations. The aim of this understanding is to enable positive
impacts to be fostered and negative impacts to be at the very least
mitigated and ideally abated. This is particularly true when there is
potential for harm to either people or the environment.
In December 2016, after undertaking research with both internal and
external stakeholders on which sustainability issues are most relevant to
our business, SKYCITY adopted our first set of corporate social
responsibility goals, priority actions and targets. These goals and targets
are outlined on the following pages and are directly aligned to our most
material issues, what really matters, and will allow us to measure our
progress in a transparent way.
More detailed information about our corporate social responsibility
platform can be found in SKYCITY’s Corporate Social Responsibility
Reports (available in the Corporate Responsibility section of the
company’s website at www.skycityentertainmentgroup.com).
OUR CORPORATE SOCIAL RESPONSIBILITY MISSION
As a cornerstone enterprise at the heart of our communities, the
communities in which SKYCITY operates are better off for our
involvement.
Responsible Gaming
The Environment
Community Development
and Investment
Fair Operating Practices
Labour Practices and
Human Rights
Operate as a trusted, safe,
transparent and responsible
casino and entertainment
provider
Reduce our environmental
footprint every year
Create value to ensure our
communities are better off for
our involvement
Lead by example and promote
sustainability in our supply
chain
Be the leading employer in
hospitality and casino
entertainment in Australasia
Labour
Practices
& Human
Rights
Responsible
Gaming
SKYCITY
CSR
PILLARS
Environment
Fair Operating
Practices
Community
Development
& Investment
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
23
CORPORATE SOCIAL RESPONSIBILITY
OUR PRIORITIES AND TARGETS
Having finalised our goals, through organisation-wide workshops and consultation we developed priorities and targets, which set out what we
intend to do both in our business and in our communities. These priorities and targets are intended to challenge the business and staff and provide
a dedicated framework for measuring progress over the next few years.
The following tables outline SKYCITY’s goal, priorities and targets for each of the five pillars outlined earlier with some highlights of progress
made over the past financial year.
RESPONSIBLE GAMING
Goal
• Operate as a trusted, safe, transparent and responsible casino and entertainment provider
Priorities
• Gain external accreditation through listing on the Dow Jones Sustainability Index
• Continue to deliver a comprehensive and world-leading Host Responsibility Programme in all of our sites
• Improve the effectiveness of our Host Responsibility Programme and training by undertaking independent reviews
of both the programme and training approach across all sites
Targets
• 100% rating in “Promoting Responsible Gaming” on the Dow Jones Sustainability Index assessment
• 100% regulatory compliance in host responsibility and positive trend/improvement in regulator audits
• Achieve independent evaluation of host responsibility programmes and training resources at all sites by the end
of the financial year ending 30 June 2018
• Maintaining or improving on our 2016 financial year baseline for staff rating of SKYCITY as a ‘responsible host’
Highlights
At SKYCITY, we take our responsibilities to minimise risk and harm
from problem gambling very seriously. We invest more than $5 million
a year on host responsibility, including training all staff in problem
gambling indicators, and we have a team of Customer Service
Ambassadors trained to interact with customers and to report any
concerns to our security and host responsibility teams so preventative
action can be taken.
In 2016, we received a 100% rating on the Dow Jones Sustainability
Index category “Promoting Responsible Gaming” for our efforts.
The results of our 2017 assessment are due out in September 2017.
Success is also measured through regulatory compliance. In late 2016,
the Department of Internal Affairs conducted a ‘mystery shopping’
exercise across all casinos and 120 pubs and clubs (Class 4 venues)
around New Zealand. SKYCITY’s four casinos in Auckland, Hamilton
and Queenstown came out top in the exercise. The Department
reported that “the results from SKYCITY casinos show what can be
done when more dedicated resource is directed at minimising harmful
gambling within a culture that puts a clear focus on a high standard of
harm minimisation practice” and that “the overall results also show
that SKYCITY casinos have cultivated a culture of care within
their casinos”.
24
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE SOCIAL RESPONSIBILITY
THE ENVIRONMENT
Goal
• Reduce our environmental footprint every year
Priorities
• Begin measuring and reporting on our environmental footprint (eg carbon, energy, water and waste)
• Seek energy savings through design of infrastructure and technology improvements
• Introduce improved recycling, including food waste composting
• Embed environmentally-friendly purchasing options into supply chain
• Continue donation of reusable goods (eg excess edible food and hotel items)
Targets*
GENERAL
• Measure and establish baseline data for the 2015–2017 financial years for emissions, energy, waste and water by the
end of the financial year ending 30 June 2018
• Improve staff perception of SKYCITY as being responsible with respect to the environment
CARBON:
• Measure carbon footprint (Scope 1 and 2) for the SKYCITY Group by the end of the financial year ending 30 June 2018
• Measure carbon footprint (Scope 3) by the end of the financial year ending 30 June 2020
• 10% reduction in Scope 1 and 2 emissions by the end of the financial year ending 30 June 2018 (from the 2015
financial year baseline)
• 30% reduction in total emissions by the end of the financial year ending 30 June 2025
ENERGY:
• 3% energy reduction per year per dollar revenue (from the 2015 financial year baseline)
WASTE:
• 40% reduction of waste to landfill by the end of the financial year ending 30 June 2025 (from the 2015 financial year
baseline)
• 7% reduction per year per dollar revenue
• Zero waste by the end of the financial year ending 30 June 2030
WATER:
• 3% water use reduction per year per dollar revenue
* These targets are subject to change once a baseline is established by SKYCITY.
Highlights
Whilst we are in the final stages of gathering our three-year set of
baseline data to confirm our environmental footprint, we have taken
significant steps in the interim to reduce our energy, water and waste
to landfill.
In April 2017, we introduced an improved set of recycling services at
our Auckland site, including a new food waste separation and
composting system. Food waste from our 21 kitchens and restaurants in
Auckland is now being diverted to EnviroNZ, where it is composted
into a fertiliser product for horticulture. We plan to expand this system
to other sites in the SKYCITY Group where composting options exist.
CHEFS AND KITCHEN STAFF GET IN BEHIND OUR NEW FOOD WASTE
COMPOSTING SYSTEM
25
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CORPORATE SOCIAL RESPONSIBILITY
COMMUNITY DEVELOPMENT AND INVESTMENT
Goal
• Create value in the communities in which we operate
Priorities
• Measure and evaluate SKYCITY’s social impact (eg inputs, outputs, impact on our communities and impact
on other key stakeholders)
• Quantify economic value creation from new developments, including return on investment, job creation,
economic development and tourism
• Develop and implement a new group wide community engagement strategy
• Develop a deeper connection with iwi and predominant ethnicities in the communities in which we operate
• Leverage our business and assets to support community economic development goals
• Continue investing in communities through the SKYCITY Community Trusts in New Zealand and through
meaningful key charity partnerships
Targets
• Improve community perception of SKYCITY as a valuable cornerstone enterprise – measured through regular
perception insights, research and community engagement feedback across our communities
• Improve level of staff awareness of, and pride in, SKYCITY being a responsible part of the community
Highlights
Over the past financial year, the three SKYCITY Community Trusts distributed a total of $4,020,771 in the Auckland, Waikato and Queenstown
Lakes regions. SKYCITY also made considerable contributions to our local communities through a large variety of sponsorships and charitable
partnerships.
One highlight for the SKYCITY Auckland Community Trust was a $1 million grant ($200,000 per annum over a 5-year period) made to the
Auckland City Mission towards their site redevelopment and Housing First Central Auckland project. The Housing First model involves providing
centralised housing and support using a proven approach for people experiencing chronic homelessness. SKYCITY is further supporting the
Auckland City Mission through our ‘Change for Good’ programme in the SKYCITY Grand Hotel and SKYCITY Hotel in Auckland, where
customers are invited to leave their spare change with donations matched by SKYCITY, and through donations of reusable furniture and other
items. Our Auckland staff also participated in the Auckland City Mission’s 2017 ‘Winter Appeal’ through donations of food and winter clothing.
26
LEUKAEMIA AND BLOOD CANCER FOUNDATION
FIREFIGHTER SKY TOWER STAIR CHALLENGE
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE SOCIAL RESPONSIBILITY
FAIR OPERATING PRACTICES
Goal
• Lead by example in promoting corporate responsibility and sustainability in our supply chain
Priorities
• Engage our supply chain through the distribution of SKYCITY’s Ethical Sourcing Code
• Further embed sustainability considerations into purchasing and procurement
• Further development of a sustainability assessment process, rating and vendor audit and improvement approach
Targets
• Increased Dow Jones Sustainability Index rating for Supply Chain Management year-on-year
• All new vendors (from January 2017) have signed up to and are meeting the requirements of SKYCITY’s Ethical
Sourcing Code
• Vendor sustainability questionnaire and assessment process agreed across all SKYCITY sites, and vendors covering
70% of total spend to have completed the sustainability questionnaire and assessment, by the end of the financial year
ending 30 June 2019
• 100% of vendors have signed and comply with the Ethical Sourcing Code by the end of the financial year ending
30 June 2019
Highlights
SKYCITY actively seeks out ways to incorporate sustainability criteria into our supply chain. In the past financial year, we developed new hotel
amenity bottles made from fully recycled plastic from our recycled milk bottles in New Zealand, which are scheduled for roll out to the
SKYCITY Grand Hotel and SKYCITY Hotel in Auckland in late 2017. We also began distributing an Ethical Sourcing Code against which
we will begin auditing our suppliers in the 2018 financial year.
27
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CORPORATE SOCIAL RESPONSIBILITY
LABOUR PRACTICES AND HUMAN RIGHTS
Goal
• Be the leading employer in hospitality and casino entertainment in Australasia
Priorities
• Focused investment in staff care and development, including health, safety and wellbeing
• Achieve a self-sustaining safety culture by preventing harm and building wellness
• Enable opportunities for career progression for SKYCITY staff
• Foster an environment that celebrates and leverages the diversity of our workforce
• Zero tolerance for pay inequality and continuation of unconscious bias training
Targets
• Increase our reinvestment of revenue in staff development from 0.6% (for the financial year ended 30 June 2016) to
1% by the end of the financial year ending 30 June 2020
• Year-on-year growth in:
- near miss reporting
- employee participation and engagement in wellness initiatives
- worker collaboration, communication and participation through active safety committees
• By the end of the financial year ending 30 June 2017, 60% of management and specialist roles (with a base salary of
$50,000 and above) will be filled by internal applicants
• Extend Rainbow Tick certification to all New Zealand sites and identify an equivalent Australian certification
programme for our Darwin and Adelaide sites
• Develop an approach to working with underrepresented minorities to identify opportunities for employment and
career development
• All pay inequality issues identified and corrected through use of the annual remuneration review tool and
unconscious bias training
Highlights
With a large and diverse workforce, SKYCITY is recognised for taking
a lead in staff development and care. In May 2017, SKYCITY was
awarded two Platinum LearnX Awards from the LearnX Foundation
(an independent non-profit agency) – a Platinum award for Best
Blended Learning Model for the SKYCITY Emerging Leaders
Programme, which is designed to accelerate the development of our best
front-line talent across the organisation, and a Platinum award for Best
Behavioural Change Project for SKYCITY’s new customer service
initiative “SHINE”, which was developed to encourage SKYCITY staff
to deliver exceptional customer service. Customer feedback on our
SHINE initiative has reflected a clear improvement in customer
service delivery.
Further details on our labour and human rights practices are set out in
the Corporate Governance Statement and Other Disclosures section in
this annual report.
28
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 SKYCITY AUCKLAND STAFF LAUNCH RAINBOW CONFETTI CANNONS, IN TURN SETTING OFF
THE RAINBOW LIGHTS ON THE SKY TOWER, TO CELEBRATE AUCKLAND'S PRIDE FESTIVAL
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
29
OUR WORKPLACE
DIVERSITY AND INCLUSION
SKYCITY is proud to have a diverse
workforce and believes this diversity of
thought offers an opportunity to enhance the
company’s competitive advantage and provide
long term sustainable business success.
The company is committed to an inclusive
workplace that enhances and promotes
workplace diversity across the business.
The company recognises that to deliver
outstanding service and breakthrough solutions
to its diverse customer community, it too must
be diverse. SKYCITY values and respects the
contributions, ideas and experiences of people
from all backgrounds.
The company has a Diversity and Inclusion
Policy (available in the Governance
section of the company’s website at
www.skycityentertainmentgroup.com) that
provides a framework for SKYCITY’s current
and future diversity and inclusion initiatives.
The company is committed to providing
opportunities and initiatives that assist all to
reach their potential on merit, unhindered
by other individual differences, and regularly
benchmarks and reports on its diversity
position, policy and objectives.
The Diversity and Inclusion Policy sets out
several objectives to advance diversity and
inclusion in the workplace. These include:
• continuing to build a workforce that
reflects the diversity of the markets in
which the company operates;
• continuing to strive to ensure strong
female candidates are identified in the
recruitment process for all board and
senior executive roles;
•
implementing an annual audit of gender
pay parity as a core function of the
company’s annual remuneration review
cycle; and
•
inclusiveness training for all management.
At SKYCITY, we have a strong representation
of minority groups who are often
underrepresented in the wider workforce.
Encouraging diversity of thought in our
workforce allows us to strategically reflect our
diverse customer base and draw people with
different backgrounds to our business.
In addition to reporting on diverse groups, our
focus over the past financial year has been to
support a culture of inclusion that has enabled
us to leverage diversity of thought, ensuring
a sustainable competitive advantage and
strengthening our market-leading
employment brand.
CHAMPIONS FOR CHANGE AND
GENDER PAY EQUALITY
SKYCITY is proud of its commitment to a
voluntary diversity reporting framework
which is being led by the Champions for
Change, a group convened by Global Women
of New Zealand chief executive officers and
chairs from across the public and private sector
who are committed to raising the value of
diversity and inclusiveness throughout the
wider business community.
Chief Executive Officer, Graeme Stephens,
is SKYCITY’s Champion for Change and,
together with the chief executive officers and
chairs of other large New Zealand companies,
has agreed to contribute SKYCITY’s data to
the newly developed diversity and ethnicity
reporting tool over the next two years.
Global Women co-Chair, Dame Jenny
Shipley, describes the Champions for Change
as “holding themselves accountable to an
agreed set of consistent reporting standards and
in doing so benchmarking their efforts and
progress amongst their peer group as they
strive towards achieving truly diverse and
inclusive leadership in their organisations”.
One of SKYCITY’s key objectives is to review
gender pay equality and deliver an organisation
wide programme that removes any risk of bias
or inequality. In this regard, we continue to
review the results of the company’s annual
remuneration review in terms of outcomes
based on gender. Our 2016 remuneration
review saw a higher average increase for
females versus males.
SKYCITY continues its sponsorship of the
YWCA Equal Pay Awards as a way of
encouraging other organisations to share their
success stories and inspire others. SKYCITY’s
Group General Manager Human Resources,
Claire Walker, is a member of the judging
panel and while sponsors are not permitted to
enter the awards, we complete the application
30
process to ensure we remain competitive in
our commitment to equal pay.
WHITE RIBBON PROGRAMME
Acknowledging that domestic violence is
prevalent in society and often has a detrimental
impact on employment, this year we developed
a programme which assists employees impacted
by domestic violence.
SKY TOWER LIT IN RAINBOW LIGHTS
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 OUR WORKPLACE
In conjunction with the New Zealand
Women’s Refuge, we have developed a policy,
manager training programme and referral
channels. The policy provides for SKYCITY
employees to access paid leave, should they
require it, to attend legal proceedings, medical
appointments and/or access support services.
BRINGING OUR ‘WHOLE SELVES’
TO WORK
We are proud to have maintained a Rainbow
Tick for the third year at our Auckland
property and to have achieved this
accreditation at our Hamilton and
Queenstown properties for the first time.
Being a Rainbow Tick employer means
SKYCITY has been acknowledged as being a
safe, supportive and welcoming workplace by
the Rainbow community.
ATEED YOUTH EMPLOYER OF
THE YEAR
This year, SKYCITY Auckland was
recognised as ATEED Youth Employer of the
Year for achievements in building and
delivering youth related education,
development and employment.
We have maintained our commitment as a
Mayor’s Youth Employment Pledge Partner
and continue our work experience
programmes with secondary and tertiary
schools to provide a pathway for young people
into a hospitality career.
DEVELOPING UNDERREPRESENTED
GROUPS – NEW PARTNERSHIPS
During the past financial year, we have
continued our focus on delivering targeted
programmes that support employees from
underrepresented groups to thrive at
SKYCITY by entering into three new
strategic partnerships:
• The TupuToa Ma¯ori and Pasifika
Corporate Pathways programme provides
tertiary students with work experience
opportunities within SKYCITY in areas
aligned to their studies;
• SKYCITY will provide one four-year
scholarship to the First Foundation, which
includes financial support for an
academically talented student entering
tertiary study from a low income family
and low decile school; and
• provide unconscious bias training for
directors and senior executives.
• We have partnered with Indigenous
Growth Limited to assist in developing
and delivering a bespoke leadership
programme for Ma¯ori at SKYCITY, which
will be offered during 2018 to employees
who identify as Ma¯ori and are either an
emerging or established leader.
LOOKING AHEAD
SKYCITY is a diverse workplace with over
80 cultures and five generations represented in
our employee community and we value the
diversity of thought this brings.
Over the coming year, we aspire to be a leader
amongst our peers in unlocking the value of
diversity and have set the following measurable
objectives for the financial year ending
30 June 2018:
• continue to strive to ensure strong
female candidates are identified in the
recruitment process for all board and
senior executive roles;
• continue to review gender pay equality
and deliver an organisation wide
programme that removes any risk of
bias or inequality;
• maintain Rainbow Tick certification for
our all New Zealand sites and membership
of Pride in Diversity in Australia to
reiterate our commitment to our lesbian,
gay, bi-sexual, trans-sexual and intersex
employees;
• monitor the participation of
underrepresented groups in our leadership
training and talent programmes;
• deliver talent and development
programmes that assist underrepresented
groups to maximise their potential;
• establish a diversity council structure and
encourage the formation of a range of
diverse communities who may identify
areas of opportunity or need and develop
appropriate solutions to support such
communities;
• undertake a programme of cultural
intelligence assessment and training for
senior executives and managers;
• deliver a programme which educates
employees and management in supporting
mental health awareness; and
HEALTH AND SAFETY AT WORK
During the past financial year, we have worked
to shift the emphasis of our health and safety
activities and reporting to the lead indicators
that will drive proactive and safety focused
thinking and behaviour along with
identification, monitoring and mitigation of
workplace risks. We strive to shift our health
and safety performance from good to great and
to create a culture of continuous improvement
in managing the health, safety and wellbeing
of our staff, contractors and customers.
Due to the customer and retail focus of our
business, our key risks are strains, sprains,
contusions and lacerations resulting from the
manual nature of work processes. We mitigate
these risks by automating activities where
possible and by training staff and contractors
in correct manual handling practices.
All of our New Zealand properties are
Accident Compensation Corporation (ACC)
Partnership Programme certified at a tertiary
level and our Adelaide site is a registered
self-insured employer. We are responsible for
managing work injuries in accordance with
the New Zealand Accident Compensation
Corporation Act 2001 and the Return to
Work Act 2014 in South Australia through
ensuring we have appropriate work health and
safety systems in place to minimise the
incidence of work injuries.
Each property within the SKYCITY Group
must demonstrate compliance with our group
policy and standards for safety. We conduct
internal audits annually and external audits as
required for registration and certification.
Findings from these audits are monitored and
tracked for continuous improvement.
Our Lost Time Injury Frequency Rate
(LTIFR) is measured by calculating the
number of injuries resulting in at least one full
work day lost per million hours worked. In the
past financial year, the LTIFR was 9.9 resulting
from 78 injuries across our business – a
significant reduction against the previous year
(for the financial year ended 30 June 2016)
where the LTIFR was 12.1 resulting from
98 injuries.
31
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM OUR WORKPLACE
CELEBRATING RAINBOW TICK ACCREDITATION AT SKYCITY AUCKLAND
Our Total Reportable Incident Frequency
Rate (TRIFR) is measured by calculating the
number of medical treatment cases and lost
time injuries per million hours worked.
During the year under review, the TRIFR
was 28.9 resulting from 230 injuries across our
business – a slight increase against the previous
year (for the financial year ended 30 June
2016) where the TRIFR was 24.4 resulting
from 201 injuries.
SKYCITY’s wellness programme continues to
be strongly supported by our staff. The “Play
Well” programme aims to encourage healthier
behaviours and personal responsibility for
health outcomes by providing support,
information and skills training. The
programme goals include improving staff
health habits, increasing physical activity,
reducing absenteeism and improving
productivity.
During the past financial year, our Darwin
property received the Australian Hotels
Association Best Workplace Health and Safety
Venue award and our Adelaide property is
again a finalist in the Restaurant and Catering
South Australia safety awards.
SKYCITY also continues its involvement in
the New Zealand Health and Safety Business
Leaders Forum.
32
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 AND NOTES
For the year ended 30 June 2017
INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT
to the shareholders of SKYCITY Entertainment Group Limited.
The consolidated financial statements comprise:
•
•
•
•
•
•
the balance sheet as at 30 June 2017;
the income statement for the year then ended;
statement of comprehensive income for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the financial statements, which include the significant accounting policies.
OUR OPINION
In our opinion, the consolidated financial statements of SKYCITY Entertainment Group Limited (the Company), including
its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 30 June 2017,
its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and International
Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for
Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International
Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, accounting assistance, IT risks
review and executive remuneration benchmarking. The provision of these other services has not impaired our independence as
auditor of the Group.
OUR AUDIT APPROACH
Overview
An audit is designed to obtain reasonable assurance whether the financial statements are free from
material misstatement.
Our audit approach
Overview
Materiality
Overall group materiality: $9.7 million, which represents 5% of profit before tax, excluding the impact
of the impairment charge of $99.5 million made in relation to Darwin goodwill.
We chose profit before tax as the benchmark because, in our view, it is the benchmark against which
the performance of the Group is most commonly measured by users, and is a generally accepted
benchmark. The impact of the impairment charge was excluded from our materiality assessment as a
one-off, non-cash expense which does not impact the underlying performance of the Group and
therefore would not be considered by users in measuring the performance of the Group.
Audit Scope
Key Audit
matters
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall group materiality: $9.7 million, which represents 5% of profit before
tax, excluding the impact of the impairment charge of $99.5 million made in
relation to Darwin goodwill.
We chose profit before tax as the benchmark because, in our view, it is the
benchmark against which the performance of the Group is most commonly
measured by users, and is a generally accepted benchmark. The impact of the
impairment charge was excluded from our materiality assessment as ao ne-off,
non-cash expense which does not impact the underlying performance of the
Group and therefore would not be considered by users in measuring the
performance of the Group.
34
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 INDEPENDENT AUDITOR'S REPORT
Key audit matter
• Consideration of the carrying value of goodwill and intangibles.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
Group materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative
considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial statements and our
application of materiality. As in all of our audits, we also addressed the risk of management override of internal controls
including among other matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the
industry in which the Group operates. The structure of the Group means the majority of audit work for the Group is
performed by the New Zealand Group audit team. We also utilise audit teams in Australia for specified procedures, as directed
by the New Zealand Group audit team where local knowledge of the trading environment or the legal and regulatory
environment is required.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current year. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
35
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM INDEPENDENT AUDITOR'S REPORT
Key audit matter
How our audit addressed the key audit matter
Consideration of carrying value of goodwill and casino
licence intangible assets
We performed our own assessment of the discounted cash
flow models used in the impairment assessment.
The Group has goodwill and casino licence intangible assets
totalling $793 million.
In relation to the forecast cash flows we performed the
following procedures:
As noted in note 15 to the consolidated financial statements
an assessment of the value in use of the goodwill and
indefinite life casino licence intangible assets was made using
discounted cash flow forecasts (DCF) for each cash
generating unit (CGU).
In preparing the DCFs management have made a number of
judgements that can influence the value. The most significant
of these judgements are disclosed within note 15 to the
consolidated financial statements.
In addition, as disclosed within note 15 of the consolidated
financial statements an impairment assessment was also
performed in relation to the Adelaide CGU which includes a
definite life casino licence intangible asset using a DCF
model.
The assessments performed resulted in an impairment charge
being made in relation to the Darwin CGU of $99.5 million.
For all other CGUs the recoverable amount was assessed as
being higher than the current carrying value of net assets
within each CGU.
• compared the forecast cash flows used to the Board
approved business plan;
• understood the processes undertaken, controls over and
basis for preparing the forecasts;
• considered key assumptions, in particular the estimated
future growth rates, by agreeing to supporting evidence
from a mix of internal and external sources;
• compared historical performance against budget,
investigated material differences and considered the
impact on future cash flow forecasts; and,
• performed a sensitivity analysis on the cash flows to
determine whether a reasonably possible change in
assumptions could lead to a conclusion the asset is
impaired.
In relation to the Adelaide forecast we also performed the
following:
• understood and assessed the commercial prospects of
achieving future plans by agreeing these to detailed
supporting analyses prepared by management and
comparing these against historic information for the
Adelaide casino and industry.
In relation to Darwin we assessed the range of possible
outcomes as prepared by management, comparing forecast
growth rates to historic performance and taking account of
external information relevant to the Darwin CGU such as
regulatory changes and macro-economic conditions. The
impairment charge made fell within the range of possible
outcomes we considered.
We also considered the appropriateness of disclosures in
relation to the valuation of intangible assets and associated
impairment testing performed.
36
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 INDEPENDENT AUDITOR'S REPORT
INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR’S REPORT
The Directors are responsible for the annual report. Our opinion on the consolidated financial statements does not cover
the other information included in the annual report and we do not express any form of assurance conclusion on the other
information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work
we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that
there is a material misstatement of this other information, we are required to report that fact.We have nothing to report in
this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the consolidated
financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
NZ and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the External Reporting
Board’s website at: https://xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our auditor’s report.
WHO WE REPORT TO
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might
state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Leopino (Leo) Foliaki.
For and on behalf of:
Chartered Accountants
8 August 2017
Auckland
37
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2017
Total receipts including GST
Less non‑gaming GST
Gaming win plus non‑gaming revenue
Less gaming GST
Revenue
Other income
Employee benefits expense
Other expenses
Directors' fees
Restructuring costs
Gaming taxes
Direct consumables
Marketing and communications
Community contributions, levies and sponsorships
Earnings before interest, taxes, depreciation
and amortisation expenses (EBITDA)
Impairment of goodwill
Depreciation and amortisation expense
Earnings before interest and tax (EBIT)
Net finance costs
Profit before income tax
Income tax expense
Profit for the year attributable to shareholders of the company
Earnings per share for profit attributable to the
shareholders of the company
Attributable to continuing operations:
Basic earnings per share
Diluted earnings per share
The above income statement should be read in conjunction with the accompanying notes.
CONSOLIDATED
NOTES
2017
$’0 0 0
2016
$’0 0 0
3
3
3
3
3
4
5
15
5
8
11
6
6
1,052,145
(30,886)
1,021,259
(93,959)
927,300
767
(306,513)
(152,486)
(1,161)
–
(41,860)
(69,155)
(29,453)
(20,429)
307,010
(99,486)
(95,049)
112,475
(16,712)
95,763
(50,901)
44,862
1,131,526
(31,314)
1,100,212
(101,519)
998,693
954
(315,189)
(178,708)
(1,124)
(1,553)
(44,750)
(76,987)
(27,970)
(19,439)
333,927
–
(104,070)
229,857
(32,588)
197,269
(51,597)
145,672
CENTS
CENTS
6.8
6.7
24.3
24.3
38
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of overseas subsidiaries
Cash flow hedges – revaluations of derivative financial instruments
Cash flow hedges – transfer to finance costs
Cash flow hedges – income tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to shareholders of the company
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
CONSOLIDATED
2017
$’0 0 0
2016
$’0 0 0
44,862
145,672
2,154
(11,092)
10,952
89
2,103
46,965
(22,952)
(16,833)
11,950
1,256
(26,579)
119,093
39
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
BALANCE SHEET
AS AT 30 JUNE 2017
ASSETS
Current assets
Cash and bank balances
Receivables and prepayments
Derivative financial instruments
Inventories
Current tax receivables
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Derivative financial instruments
Total non‑current assets
Total assets
LIABILITIES
Current liabilities
Payables
Interest‑bearing liabilities
Current tax liabilities
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest‑bearing liabilities
Provisions
Derivative financial instruments
Deferred tax liabilities
Deferred licence value
Total non‑current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained earnings
Total equity
The above balance sheet should be read in conjunction with the accompanying notes.
40
CONSOLIDATED
NOTES
2017
$’0 0 0
2016
$’0 0 0
17
16
20
14
15
20
18
9
20
10
20
12
15
19
56,727
17,363
8,097
7,037
2,068
91,292
1,324,577
819,025
43,417
2,187,019
2,278,311
136,570
102,375
13,741
2,554
255,240
289,404
2,943
24,307
80,021
555,459
952,134
1,207,374
1,070,937
1,100,792
(63,370)
33,515
1,070,937
90,309
36,538
1,943
7,705
6,915
143,410
1,223,062
923,257
65,189
2,211,508
2,354,918
137,918
38,028
–
1,471
177,417
389,032
4,125
38,218
78,688
554,396
1,064,459
1,241,876
1,113,042
1,055,737
(65,473)
122,778
1,113,042
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
NOTES
SHARE
CAPITAL
$’0 0 0
HEDGING
RESERVE
$’0 0 0
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’0 0 0
RETAINED
EARNINGS
$’0 0 0
TOTAL EQUITY
$’0 0 0
CONSOLIDATED
Balance as at 1 July 2015
Total comprehensive income/(expense)
Dividends provided for or paid
Shares issued under dividend reinvestment plan
Share rights issued for employee service
Net purchase of treasury shares
Issue of new share capital
Balance as at 30 June 2016
Balance as at 1 July 2016
Total comprehensive income/(expense)
Dividends provided for or paid
Shares issued under dividend reinvestment plan
Share rights issued for employee service
Net purchase of treasury shares
7
7
758,800
(10,803)
(28,091)
97,016
816,922
–
–
39,352
1,275
(375)
256,685
(3,627)
–
–
–
–
–
(22,952)
–
–
–
–
–
145,672
(119,910)
–
–
–
–
119,093
(119,910)
39,352
1,275
(375)
256,685
1,055,737
(14,430)
(51,043)
122,778
1,113,042
1,055,737
(14,430)
(51,043)
122,778
1,113,042
–
–
44,511
736
(192)
(51)
–
–
–
–
2,154
–
–
–
–
44,862
(134,125)
–
–
–
46,965
(134,125)
44,511
736
(192)
Balance as at 30 June 2017
1,100,792
(14,481)
(48,889)
33,515
1,070,937
The above statement of changes in equity should be read in conjunction with the accompanying notes.
41
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Gaming taxes and levies paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of/proceeds from property, plant and equipment
Payments for intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Issue of new share capital
Cash flows associated with derivatives
New borrowings
Repayment of borrowings
Net purchase of treasury shares
Dividends paid to company shareholders
Interest paid
Net cash outflow from financing activities
Net (decrease)/increase in cash and bank balances
Cash and bank balances at the beginning of the year
Cash and cash equivalents at end of year
The above statement of cash flows should be read in conjunction with the accompanying notes.
CONSOLIDATED
NOTES
2017
$’0 0 0
2016
$’0 0 0
938,820
(567,951)
370,869
(60,933)
(30,412)
279,524
(154,617)
(3,970)
(158,587)
–
(5,028)
10,000
(38,972)
(192)
(89,614)
(30,713)
(154,519)
(33,582)
90,309
56,727
978,683
(599,995)
378,688
(60,469)
(13,062)
305,157
(147,955)
(8,562)
(156,517)
256,685
2,839
125,000
(372,369)
(375)
(80,558)
(42,785)
(111,563)
37,077
53,232
90,309
27
19
20
10
10
19
7
17
42
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SKYCITY Entertainment Group Limited (SKYCITY or the company and its subsidiaries or the Group) operates in the gaming/entertainment,
hotel and convention, hospitality, recreation and tourism sectors. The Group has operations in New Zealand and Australia.
SKYCITY is a limited liability company incorporated and domiciled in New Zealand. The address of its registered office is Federal House,
86 Federal Street, Auckland. The company is dual-listed on the New Zealand and Australian stock exchanges.
These consolidated financial statements were approved for issue by the board of directors on 8 August 2017.
In preparing these financial statements SKYCITY has adopted ‘streamlined’ reporting. Streamlined reporting aims to present the financial
statements in a more logical manner and eliminate unnecessary information. This approach is supported by the New Zealand Financial
Markets Authority.
(a) Basis of Preparation
The financial statements of the Group have been prepared in accordance with Generally Accepted Accounting Practice (GAAP). They comply
with New Zealand Equivalents to International Financial Reporting Standards (‘NZ IFRS’) and other applicable Financial Reporting Standards,
as applicable to for-profit entities. The financial statements also comply with International Financial Reporting Standards (‘IFRS’).
The Group has a negative working capital balance which includes US$75 million of United States private placement notes which mature in
March 2018 (refer to note 9). The Group has significant available undrawn committed banking facilities totalling $604 million as at 30 June 2017
(refer to note 10) and has the ability to fully pay all debts as they fall due.
The Group is designated as a for-profit entity for financial reporting purposes.
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2017 and the results of all
subsidiaries for the year then ended.
Statutory Base
SKYCITY Entertainment Group Limited is a company registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of
the Financial Markets Conduct Act 2013. The financial statements of the Group have been prepared in accordance with the requirements of Part 7
of the Financial Markets Conduct Act 2013 and the NZX Main Board Listing Rules.
Measurement Basis
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities
(including derivative instruments) at fair value through profit or loss.
Critical accounting estimates and judgements
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires the company to exercise its
judgement in the process of applying the Group’s accounting policies. Judgement is used in the determination of recoverable amount (or value
in use) of goodwill and indefinite useful life casino licences.
The Group tests annually whether goodwill and indefinite useful life licences have suffered any impairment in accordance with the accounting policy
stated in note 15. The recoverable amounts of cash-generating units have been determined based on value in use calculations. These calculations require
the use of estimates.
There is sufficient headroom between the value in use calculations and the carrying value of the remaining assets that significant changes in the
assumptions used would not require an impairment, except for Darwin (refer to note 15).
(b) Principles of Consolidation
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that
control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also
eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.
43
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM NOTES TO THE FINANCIAL STATEMENTS
(c) Foreign Currency Translation
(i) Functional and Presentation Currency
Items included in the financial statements of each of the company's operations are measured using the currency that best reflects the economic
substance of the underlying events and circumstances relevant to that operation (functional currency). The consolidated financial 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 included in equity as qualifying cash
flow hedges and qualifying net investment hedges.
Translation differences on non-monetary financial assets and liabilities are recognised in profit or loss as part of the fair value gain or loss.
Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income.
(iii) Foreign Operations
The results and financial position of foreign entities (none of which has the currency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the presentation currency as outlined below:
• 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.
(d) Goods and Services Tax (GST)
The Income Statement, Statement of Cash Flows and Statement of Changes in Equity have been prepared so that all components are stated exclusive
of GST. All items in the Balance Sheet are stated net of GST, with the exception of receivables and payables which include GST invoiced.
(e) Statement of Cash Flows
Cash flows associated with derivatives that are part of a hedging relationship are off-set against cash flows associated with the hedged item.
(f) New Accounting Standards Adopted in the Year
During the period the Group adopted NZ IFRS 9 Financial Instruments. As a result a limited number of disclosures have been added to these
financial statements. There have been no changes to the measurement category and carrying amount of any financial assets or financial liabilities as
a result of the adoption of NZ IFRS 9. There has been no material impact on the current and prior period income statements or balance sheets and
therefore no comparative information has been amended.
(g) Standards, Amendments and Interpretations to Existing 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 2017 or later periods, but which the Group has not early adopted. The significant items are:
• NZ IFRS 15, Revenue from Contracts with Customers
(Effective date: periods beginning on or after 1 January 2018). NZ IFRS 15, 'Revenue from Contracts with Customers', deals with revenue
recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control
of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces NZ IAS 18
'Revenue' and NZ IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after
1 January 2018 and earlier application is permitted. The Group intends to adopt NZ IFRS 15 from 1 July 2018 and is currently assessing its
full impact.
4 4
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 NOTES TO THE FINANCIAL STATEMENTS
• NZ IFRS 16: Leases
(Effective date: periods beginning on or after 1 January 2019). NZ IFRS 16, ‘Leases’, replaces the current guidance in NZ IAS 17.
Under NZ IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. Under NZ IAS 17, a lessee was required to make a distinction between a finance lease (on balance sheet) and an
operating lease (off balance sheet). NZ IFRS 16 now requires a lessee to recognise a lease liability reflecting future lease payments and a
‘right-of-use asset’ for virtually all lease contracts. Included is an optional exemption for certain short-term leases and leases of low-value assets;
however, this exemption can only be applied by lessees. The standard is effective for accounting periods beginning on or after 1 January 2019.
Early adoption is permitted but only in conjunction with NZ IFRS 15. The Group intends to adopt NZ IFRS 16 from 1 July 2019 and has yet
to assess its full impact.
2 SEGMENT INFORMATION
Accounting policy
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker has been identified as the Chief Executive Officer.
(a) Primary reporting format – business segments
SKYCITY
AUCKLAND
$’0 0 0
REST OF
NEW ZEALAND
$’0 0 0
ADELAIDE
CASINO
$’0 0 0
SKYCITY
DARWIN
$’0 0 0
INTER-
NATIONAL
BUSINESS
$’000
CORPORATE/
GROUP
$’0 0 0
TOTAL
$’0 0 0
2017
Revenue from external customers and other income
Expenses
Impairment of goodwill
Depreciation and amortisation
514,642
(263,349)
–
(50,817)
63,056
(37,884)
–
(5,690)
144,832
(123,691)
–
(17,809)
110,712
(82,646)
(99,486)
(13,809)
94,825
(89,164)
–
–
–
(24,323)
–
(6,924)
200,476
19,482
3,332
(85,229)
5,661
(31,247)
928,067
(621,057)
(99,486)
(95,049)
112,475
(16,712)
95,763
Segment profit/EBIT
Net finance costs
Profit before income tax
Segment assets
1,119,935
56,632
475,169
229,461
Net additions to non‑current assets
(other than financial assets and deferred tax)
48,130
5,028
23,042
7,890
2016
–
–
397,114
2,278,311
105,127
189,217
Revenue from external customers and other income
Expenses
Depreciation and amortisation
507,021
(255,862)
(55,961)
59,370
(34,826)
(8,310)
152,993
(125,001)
(18,603)
117,872
(80,779)
(14,591)
162,391
(125,052)
–
–
(44,200)
(6,605)
999,647
(665,720)
(104,070)
Segment profit/EBIT
Net finance costs
Profit before income tax
Segment assets
195,198
16,234
9,389
22,502
37,339
(50,805)
229,857
(32,588)
197,269
1,139,778
60,337
465,962
336,931
Net additions to non‑current assets
(other than financial assets and deferred tax)
84,486
2,331
20,940
10,961
–
–
351,910
2,354,918
52,170
170,888
45
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
(b) Secondary reporting format – geographical segments
New Zealand
Australia
(c) Description of segments
SEGMENT REVENUES
NON- CURRENT ASSETS
EXCLUDING FINANCIAL
INSTRUMENTS
2017
$’0 0 0
2016
$’0 0 0
2017
$’0 0 0
2016
$’000
656,928
270,372
672,522 1,480,510
663,092
326,171
1,385,937
760,382
927,300
998,693 2,143,602
2,146,319
Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer that are used to assess
performance and allocate resources.
The Group is organised into the following main operating segments:
SKYCITY Auckland
SKYCITY Auckland includes casino operations, hotels and conventions, food and beverage, car parking, Sky Tower and a number of other related
activities and excludes International Business customers.
Rest of New Zealand
Rest of New Zealand includes the Group's operations at SKYCITY Hamilton, SKYCITY Queenstown and SKYCITY Wharf, but excludes
International Business customers.
Adelaide Casino
Adelaide Casino includes casino operations and food and beverage, but excludes International Business customers.
SKYCITY Darwin
SKYCITY Darwin includes casino operations, food and beverage and hotel, but excludes International Business customers.
International Business
The International Business segment is made up of international customers sourced mainly from Asia. The revenue is generated at SKYCITY’s
Auckland, Darwin, Adelaide, Queenstown and Hamilton locations. The results of the segment include commission and complimentary play.
Corporate/Group
Head office and group-wide functions including legal and regulatory, group finance, human resources, information technology, innovation, the
Chief Executive Officer's office and directors. The Group's interest in the New Zealand International Convention Centre is also included here.
In the current period, certain intra-company costs such as IT and sponsorships of $11 million have been reallocated from Corporate/Group to the
business units. This reallocation is intended to more appropriately allocate costs to associated revenues.
46
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
3 REVENUE
Accounting policy
Revenues include casino, hotel and conventions, food and beverage, Sky Tower, car parking 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 hotel rooms, food, beverage and other promotional allowances provided on a complimentary basis to customers.
Total receipts including GST
Less non‑gaming GST
Gaming win plus non‑gaming revenue
Less gaming GST
Total revenue
Gaming
Non‑gaming
Total revenue
2017
$’0 0 0
2016
$’0 0 0
1,052,145
(30,886)
1,021,259
(93,959)
927,300
704,854
222,446
927,300
1,131,526
(31,314)
1,100,212
(101,519)
998,693
773,074
225,619
998,693
Gaming win represents the gross cash inflows associated with gaming activities and includes GST. “Total receipts including GST” and “Gaming
win plus non-gaming revenue” do not represent revenue as defined by NZ IAS 18 Revenue. The Group has decided to disclose these amounts as
they give shareholders and interested parties a better appreciation for the scope of the Group’s gaming activities and is consistent with industry
practice adopted by casino operations in Australia.
4 OTHER INCOME
Net gain on disposal of property, plant and equipment
Dividend income
2017
$’0 0 0
762
5
767
2016
$’0 0 0
944
10
954
47
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
5 EXPENSES
Other expenses includes:
Utilities, insurance and rates
Other property expenses
Other items (including International Business commissions)
Minimum lease payments relating to operating leases
Provision for bad and doubtful debts
Total other expenses
Depreciation and amortisation
Depreciation
Casino licence amortisation (Adelaide)
Computer software amortisation
Total depreciation and amortisation
Auditor's fees
2017
$’0 0 0
2016
$’0 0 0
23,584
15,039
101,616
4,587
7,660
152,486
82,766
5,533
6,750
95,049
24,173
14,673
131,898
4,876
3,088
178,708
91,467
5,696
6,907
104,070
During the year the following fees were paid or are payable for services provided by the auditor of the parent entity and its related practices.
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 tax
compliance. For other work, the company's External Audit Independence Policy requires that advisers other than PricewaterhouseCoopers should
be engaged wherever practical. Other assurance services are defined by the Group where PricewaterhouseCoopers provide assistance with the
Group's internal compliance or risk activities.
Tax advisory services relates to ad-hoc queries covering a range of tax related matters.
(a) Assurance services
Audit services
Group Audit
Total remuneration for audit services
Other assurance services
Accounting advice and assistance
IT risk review
Tax compliance services
Total remuneration for other assurance services
Total remuneration for assurance services
(b) Other services
Taxation advisory services
Executive benchmarking assistance
Total remuneration for taxation services
Total fees expense
2017
$’0 0 0
837
837
27
48
100
175
1,012
322
72
394
1,406
2016
$’0 0 0
856
856
27
–
95
122
978
324
71
395
1,373
During the year the Group completed a tender for the external auditor appointment. Following the completion of this competitive process
PricewaterhouseCoopers were reappointed.
48
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
6 EARNINGS PER SHARE
Accounting policy
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of
interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of shares assumed to have
been issued for no consideration in relation to dilutive potential ordinary shares.
Basic earnings per share
Profit attributable to the ordinary equity holders of the company
used in calculating basic earnings per share
Diluted earnings per share
Profit attributable to the ordinary equity holders of the company
used in calculating diluted earnings per share
CONSOLIDATED
2017
$’0 0 0
2016
$’0 0 0
44,862
145,672
44,500
145,672
2017
NUMBER
2016
NUMBER
Weighted average number of ordinary shares in issue
662,207,364
598,489,211
Adjustments for calculation of diluted earnings per share:
Share rights and options
2,623,124
–
Weighted average number of ordinary shares for diluted earnings per share
664,830,488
598,489,211
49
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
7 DIVIDENDS
Accounting policy
Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date.
Prior year final dividend
Current year interim dividend
Total dividends provided for or paid
Cents per share
Prior year final dividend (per share)
Current year interim dividend (per share)
2017
$’0 0 0
68,457
65,668
134,125
2016
$’0 0 0
58,216
61,694
119,910
10.5
10.0
10.0
10.5
On 8 August 2017, the directors resolved to declare a final dividend of 10.0 cents per share in respect of the year ended 30 June 2017 (refer to
note 28 for further details).
8 NET FINANCE COSTS
Finance costs
Exchange (gains)/losses
Interest income
Capitalised interest (refer to Property, Plant and Equipment note 14)
Net finance costs
2017
$’0 0 0
32,303
(534)
(1,187)
(13,870)
16,712
2016
$’0 0 0
43,501
(709)
(1,529)
(8,675)
32,588
9 CURRENT LIABILITIES – INTEREST-BEARING LIABILITIES
Accounting policy
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
2017
$’0 0 0
2016
$’0 0 0
102,375
38,028
United States private placement notes
Refer to note 10(a) for details concerning the US private placement notes.
50
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
10 NON-CURRENT LIABILITIES – INTEREST-BEARING LIABILITIES
Accounting policy
Interest-bearing liabilities are recognised initially at fair value, net of transaction costs incurred. Interest bearing liabilities are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statements over
the period of the borrowings using the effective interest method.
Unsecured
United States private placement notes
Syndicated bank facility
New Zealand bonds
Deferred funding expenses
Total non‑current interest‑bearing liabilities
2017
$’0 0 0
2016
$’0 0 0
157,627
10,000
125,000
(3,223)
289,404
267,606
–
125,000
(3,574)
389,032
(a) United States Private Placement (USPP) Notes
As at 30 June 2017, SKYCITY had US$175.0 million and NZ$21.1 million of USPP notes outstanding:
• US$75.0 million maturing 15 March 2018
• NZ$21.1 million maturing 15 March 2020
• US$100.0 million maturing 15 March 2021
Movements in the outstanding balance in the current year relate to repayment of US$27.0 million in March 2017 and foreign exchange rate
movements.
The US dollar USPP notes have been hedged to New Zealand dollars or Australian dollars by way of cross currency interest rate swaps to eliminate
foreign exchange exposure to the US dollar. The offsetting changes in the value of the cross currency interest rate swaps are included within
derivative financial instruments in note 20.
Fair value of USPP debt is estimated at NZ$283.2 million compared to a carrying value of NZ$260.0 million. Fair value has been calculated based
on the present value of future principal and interest cash flows, using market interest rates and credit margins at balance date. Fair value is calculated
using inputs other than quoted prices that are observable for the liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
This is a level 2 valuation.
(b) Syndicated Bank Facility
The syndicated banking facility is provided by ANZ (New Zealand and Australia), Commonwealth Bank of Australia, Bank of New Zealand,
National Australia Bank and Westpac (New Zealand and Australia).
As at 30 June 2017, SKYCITY had in place revolving credit facilities of:
• NZ$200.0 million maturing 30 June 2020
• NZ$120.0 million maturing 15 March 2021
• A$280.0 million maturing 31 March 2022
During the year the A$250.0 million tranche maturing 30 June 2019 was increased to A$280.0 million and the maturity date was extended to
31 March 2022.
(c) New Zealand Bond
$125 million of unsubordinated, unsecured, redeemable fixed rate bonds were issued on 28 September 2015 with a maturity of seven years.
The bonds are quoted on the NZDX. As at 30 June 2017, the closing price was $1.01635 per $1 bond. The bonds are carried at amortised cost.
The total fair value is $127.0 million and is a level 1 valuation as they are listed securities.
51
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
(d) Negative Pledge Deeds
A negative pledge deed has been executed in relation to each of the funding facilities; bank, USPP and New Zealand bonds. In each deed are
requirements for minimum guarantee group participation as well as financial covenants. All requirements of the negative pledge deeds have been
met as at 30 June 2017.
(e) Weighted average interest rate as at 30 June
2017
%
$’000
2016
%
$’0 0 0
Interest‑bearing liabilities*
6.70%
395,002
6.61%
430,634
*The weighted average debt interest rate includes the impact of interest rate hedging.
11 INCOME TAX EXPENSE
Accounting policy
The income tax expense for the period is the tax payable on the current period’s taxable income, based on the income tax rate for each jurisdiction.
This is then adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the financial statements, and changes in unused tax losses.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of
goodwill. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
(a) Income Tax Expense
Current tax
Deferred tax
Income tax expense
(b) Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable
Profit from continuing operations before income tax expense
Prima facie income tax @ 28%
Tax effects of:
Expenses not deductible for tax purposes
Foreign exchange rate differences
Share of partnership expenditure
Differences in overseas tax rates
Non‑deductible loss on disposal
Impairment of goodwill
(Over)/under provision in prior years
Income tax expense
The weighted average applicable tax rate was 53.2% (2016: 26.2%).
52
2017
$’0 0 0
2016
$’0 0 0
49,467
1,434
50,901
95,763
26,814
2,687
(433)
(6,213)
(2,023)
–
30,083
(14)
50,901
52,519
(922)
51,597
197,269
55,235
959
(307)
(6,549)
111
2,106
–
42
51,597
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
12 DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributable to:
Provision and accruals
Depreciation
Foreign exchange variances
Tax losses (Australian operations)
Cashflow hedges
Other
Net deferred tax liabilities
Movements:
Balance at the beginning of the year
Charged to the income statement (note 11)
Debited to equity reserves
Foreign exchange differences
Closing balance at 30 June
13 IMPUTATION AND FRANKING CREDITS
Balances available for use in subsequent reporting periods
Imputation credit account (New Zealand)
Franking credit account (Australia)
As required by relevant tax legislation, the imputation credit account had a credit balance as at 31 March 2017.
2017
$’0 0 0
2016
$’0 0 0
(14,378)
106,282
521
(6,476)
(5,542)
(386)
80,021
78,688
1,434
(89)
(12)
80,021
(15,747)
103,694
(3,387)
–
(5,450)
(422)
78,688
80,613
(922)
(1,256)
253
78,688
2017
$’0 0 0
2016
$’0 0 0
52,034
3,870
15,534
6,106
14 PROPERTY, PLANT AND EQUIPMENT
Accounting policy
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the
acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment.
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of their residual values,
over their estimated useful lives, as below:
Buildings and fitout
Plant, equipment and motor vehicles
Fixtures and fittings
5–75 years
2–75 years
3–20 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
53
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
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.
CONSOLIDATED
At 1 July 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Exchange differences
Net additions/transfers
Depreciation charge (note 5)
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
Exchange differences
Net additions/transfers
Depreciation charge (note 5)
Closing net book amount
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
LAND
$’0 0 0
BUILDINGS
AND FITOUT
$’0 0 0
PLANT,
EQUIPMENT
AND MOTOR
VEHICLES
$’0 0 0
FIXTURES AND
FITTINGS
$’0 0 0
CAPITAL
WORK IN
PROGRESS
$’0 0 0
TOTAL
$’0 0 0
191,712
–
956,334
(280,480)
401,285
(284,442)
124,221
(72,483)
138,101
–
1,811,653
(637,405)
191,712
675,854
116,843
51,738
138,101
1,174,248
191,712
(1,941)
–
–
675,854
(12,908)
44,498
(38,769)
116,843
(3,124)
61,956
(40,864)
51,738
(996)
12,410
(11,834)
138,101
(3,077)
43,463
–
1,174,248
(22,046)
162,327
(91,467)
189,771
668,675
134,811
51,318
178,487
1,223,062
189,771
–
962,623
(293,948)
384,212
(249,401)
121,093
(69,775)
178,487
–
1,836,186
(613,124)
189,771
668,675
134,811
51,318
178,487
1,223,062
189,771
89
16
–
668,675
589
13,541
(27,014)
134,811
146
35,411
(43,752)
51,318
42
8,171
(12,000)
178,487 1,223,062
1,024
183,257
(82,766)
158
126,118
–
189,876
655,791
126,616
47,531
304,763 1,324,577
189,876
–
976,690
(320,899)
412,569
(285,953)
128,629
(81,098)
304,763 2,012,527
(687,950)
–
189,876
655,791
126,616
47,531
304,763 1,324,577
(a) Capitalised borrowing costs
Borrowing costs of $13,869,753 have been capitalised in the current year relating to capital projects (2016: $8,674,989) using the Group's weighted
average cost of debt of 6.98% (2016: 6.03%).
(b) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities was $390.9 million (2016: $477.6 million). The majority of the
2017 capital commitment relates to the construction of the New Zealand International Convention Centre and the Hobson Street hotel.
(c) Encumbrances
A memorandum of encumbrance is registered against the title of land for the Auckland casino in favour of Auckland Council. Auckland 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 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.
54
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
There are four encumbrances relating to the NZICC site land. One encumbrance protects the rights of the Crown under the NZICC Project and
Licensing Agreement, two relate to firewalls between buildings that have now been demolished and the final encumbrance protects the underground
vehicle entrance to the car park on the main Auckland casino site. The NZICC site land is also subject to a covenant in favour of the Crown which
restricts the subdivision and use of the site to that permitted under the NZICC Project and Licensing Agreement.
15 INTANGIBLE ASSETS
Accounting policy
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
business/associate at the date of acquisition. Goodwill on acquisitions of businesses is included in Intangible Assets. Goodwill 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.
Goodwill is allocated to cash generating units for the purpose of impairment testing.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell.
Any impairment is recognised immediately as an expense and is not subsequently reversed.
(ii) Casino licences
The Group's casino licences that have a finite useful life are carried at cost less accumulated amortisation. Amortisation of these casino licences is
calculated on a straight line basis so as to expense the cost of the licences over their legal life.
The casino licences that have been determined to have an indefinite useful life for amortisation purposes are not amortised but are reviewed for
impairment on an annual basis.
Judgement is exercised in determining whether a casino licence has a finite or indefinite useful life. Consideration is given to the terms and
conditions of the relevant licence and in particular the renewal terms.
(iii) Regulatory reforms associated with casino licences
Regulatory reforms granted which are specific to the Group are initially recognised at their fair value where there is a reasonable assurance that the
reforms will be received and the Group will comply with all conditions attached.
Regulatory reforms are recognised as an intangible asset and included within the value of casino licences. Where a regulatory reform is related to
property, plant and equipment, once constructed the carrying value of that property, plant and equipment is reduced by the value of the regulatory
reforms. Prior to construction of the related property, plant and equipment, the value of the regulatory reforms is accounted for as deferred licence
value.
(iv) Aquired software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs
are amortised over their estimated useful life (three to seven years) on a straight line basis.
55
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM GOODWILL
$’000
CASINO
LICENCES
$’000
COMPUTER
SOFTWARE
$’000
TOTAL
$’000
142,236
–
429,994
(41,876)
79,054
(53,379)
651,284
(95,255)
142,236
388,118
25,675
556,029
(7,298)
–
–
(26,081)
405,000
(5,696)
(352)
8,562
(6,907)
(33,731)
413,562
(12,603)
134,938
761,341
26,978
923,257
134,938
–
805,818
(44,477)
86,670
(59,692)
1,027,426
(104,169)
134,938
761,341
26,978
923,257
334
–
(99,486)
–
1,226
–
–
(5,533)
17
5,960
–
(6,750)
1,577
5,960
(99,486)
(12,283)
35,786
757,034
26,205
819,025
135,272
(99,486)
807,152
(50,118)
92,829
(66,624)
1,035,253
(216,228)
35,786
757,034
26,205
819,025
NOTES TO THE FINANCIAL STATEMENTS
At 1 July 2015
Cost
Accumulated amortisation
Net book amount
Movements in the year ended 30 June 2016
Exchange differences
Additions
Amortisation charge
Closing net book amount
At 30 June 2016
Cost
Accumulated amortisation
Net book amount
Movements in the year ended 30 June 2017
Exchange differences
Additions
Impairment charge
Amortisation charge
Closing net book amount
At 30 June 2017
Cost
Accumulated amortisation
Net book amount
56
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
Casino Licence
Contract Term
SKYCITY
Auckland Casino
(indefinite useful life)
SKYCITY Auckland Limited holds a Casino Premises Licence for the Auckland premises.
The initial licence was granted in 1996 for nil consideration and hence there was no associated initial carrying value.
Pursuant to the terms of the New Zealand International Convention Centre Project and Licensing Agreement between
Her Majesty the Queen in Right of New Zealand and the Company dated 5 July 2013 (NZICC Agreement), the initial
term of the licence was extended to 30 June 2048.
The licence can be renewed for further periods of 15 years pursuant to section 138 of the Gambling Act 2003 (NZ).
In addition to the licence extension, the Casino Premises Licence was amended to (a) permit the implementation of account
based cashless gaming and ticket in ticket out (TITO) gaming systems; (b) permit an increase in the number of gaming
machines, gaming tables and automated table games; and (c) implement various other operational improvements. Under the
NZICC Agreement, the company has agreed to construct the NZICC for a total cost of at least $430 million.
The reforms (a to c above) are exclusive to the Group and were recorded at fair value based on the estimated incremental
benefit over the life of the reforms. The fair value was determined using a discounted cashflow model falling within level
3 of the fair value hierarchy over the life of the reforms.
The asset will not be amortised but will be reviewed for impairment annually.
The carrying value of the casino licence is $405 million (FY16: $405 million).
Adelaide Casino
(finite useful life)
The casino and associated operations are carried out by SKYCITY Adelaide Pty Limited under a casino licence (the
Approved Licensing Agreement (ALA)) dated October 1999 (as amended). Unless terminated earlier, the expiry date
of the ALA is 30 June 2085. The term of the ALA can be renewed for a further fixed term pursuant to section 9 of the
Casino Act 1997 (SA). The carrying value of the casino licence is amortised over the life of the ALA.
The asset is amortised over 20 years or 71 years depending on whether the incremental benefit is associated with the
exclusivity period or the full licence period.
The carrying value of the casino licence is A$298.8 million (FY16: A$304.0 million).
SKYCITY
Darwin Casino
(indefinite useful life)
The casino and associated operations are carried out by SKYCITY Darwin Pty Limited under a casino licence/operator
agreement (the Casino Operator's Agreement) with the Northern Territory Government. The current licence term was
extended in 2011 and now expires on 30 June 2031. The Casino Operator's Agreement is subject to extension for a
further 5 years once its period to maturity reaches 15 years. These licence extensions apply on a continuing 5 year basis
so that, subject to certain criteria being met, the licence period is never less than 15 years. The carrying value of the
casino licence is A$31.7 million (FY16: A$31.7 million).
SKYCITY
Hamilton Casino
(indefinite useful life)
SKYCITY Hamilton Limited holds a Casino Premises Licence for the Hamilton premises. The Casino Premises Licence
is for an initial 25 year term from 19 September 2002. The licence can be renewed for further periods of 15 years
pursuant to section 138 of the Gambling Act 2003 (NZ). As the licence was initially granted for nil consideration, there
is no associated carrying value.
SKYCITY
Queenstown Casino
(indefinite useful life)
Queenstown Casinos Limited holds a Casino Premises Licence for these Queenstown premises. The Casino Premises
Licence is for an initial 25 year term from 7 December 2000. The licence can be renewed for further periods of 15 years
pursuant to section 138 of the Gambling Act 2003 (NZ). As the licence was initially granted for nil consideration, there
is no associated carrying value.
SKYCITY
Wharf Casino
(Queenstown)
(indefinite useful life)
Otago Casinos Limited holds a Casino Premises Licence for these Queenstown premises. The Casino Premises Licence
is for an initial 25 year term from 11 September 1999. The licence can be renewed for further periods of 15 years
pursuant to section 138 of the Gambling Act 2003 (NZ). The carrying value of the casino licence which arose on
SKYCITY's acquisition of Otago Casinos Limited is $4.4 million (FY16: $4.4 million).
The asset is not amortised but will be reviewed for impairment annually.
57
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM NOTES TO THE FINANCIAL STATEMENTS
The deferred licence value relating to Auckland ($405.0 million) and Adelaide (NZ$150.5 million, 2016: NZ$149.4 million) included within
non-current liabilities will be transferred and offset against property, plant and equipment when the New Zealand International Convention Centre
and Adelaide redevelopment, respectively, have been completed.
(a) Impairment Tests for Intangibles with Indefinite Lives
201 7
Goodwill
Casino Licence
Total
2016
Goodwill
Casino Licence
Total
SKYCITY
AUCKLAND
$’000
OTAGO CASINOS
LIMITED*
$’000
SKYCITY
HAMILTON*
$’000
SKYCITY
DARWIN
$’000
TOTAL
$’000
–
405,000
405,000
–
405,000
405,000
–
4,391
4,391
–
4,391
4,391
35,786
–
–
33,374
35,786
442,765
35,786
33,374
478,551
35,786
–
99,152
33,262
134,938
442,653
35,786
132,414
577,591
The recoverable amount of a cash generating unit is determined based on value in use calculations. These calculations use cash flow projections
approved by directors which include cash flows in relation to International Business where those cash flows relate to the relevant Cash Generating
Unit. There is a surplus between the calculated value in use and the carrying value for each asset except Darwin.
*SKYCITY Hamilton and Otago Casinos Limited are included within the "Rest of New Zealand" segment in note 2.
The movement in goodwill is as follows:
Balance at 1 July
Impairment charge
Exchange differences
Balance at 30 June
CONSOLIDATED
2017
$’0 0 0
2016
$’0 0 0
134,938
(99,486)
334
35,786
142,236
–
(7,298)
134,938
(b) Key Assumptions used for Value in Use Calculations of Cash Generating Units
SKYCITY Auckland
SKYCITY Hamilton
SKYCITY Darwin
EBITDA MARGIN
GROWTH RATE
DISCOUNT RATE
2017
2016
2017
2016
2017
2016
40.9%
43.5%
23.3%
41.4%
42.6%
28.1%
2.0%
2.0%
–
2.0%
2.0%
2.0%
9.5%
9.5%
9.5%
9.5%
9.5%
9.5%
These assumptions are consistent with past experience adjusted for economic indicators. The discount rates are post tax and reflect specific risks
relating to the relevant operating segment.
58
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
(c) Impairment charge
In the current year, an impairment of the goodwill associated with SKYCITY Darwin of A$94.6 million has been recognised. The write-off of
Darwin's goodwill is primarily attributable to increased competitive pressures in the gaming machine business. This stems from the unforeseen
policy decision in December 2014 by the previous Northern Territory Government to remove the cap on gaming machines in the Territory. Since
the implementation of that policy in July 2015 there has been a 75% increase in the number of gaming machines in Darwin (outside of the casino).
This significant increase in competing gaming machines in the catchment area of the casino has consequently had an increasingly adverse impact on
revenue and earnings at SKYCITY Darwin since the beginning of 2016.
(d) Adelaide Casino licence
The Adelaide Casino licence is a finite life intangible asset which is amortised annually. There is no requirement to formally review this licence for
impairment, however, given the recent Adelaide performance an impairment review was completed in the current year.
Following this review no impairment charge is required. While the headroom is not currently significant it is expected to grow in the future as the
asset is amortised over time.
16 RECEIVABLES AND PREPAYMENTS
Accounting policy
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for doubtful debts.
Trade receivables (net)
Sundry receivables
Total receivables and prepayments
Due to the short-term nature of these receivables, their carrying value is assumed to be equal to their fair value.
17 CASH AND BANK BALANCES
Cash at bank
Cash in house
Total cash and bank balances
2017
$’0 0 0
11,882
5,481
17,363
2017
$’0 0 0
11,526
45,201
56,727
2016
$’0 0 0
30,627
5,911
36,538
2016
$’0 0 0
40,358
49,951
90,309
59
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
18 PAYABLES
Accounting policy
Payables are stated at fair value or estimated liability where accrued.
Trade payables
Deferred income
Accrued expenses
Employee benefits
Total payables
19 SHARE CAPITAL
Opening balance of ordinary shares issued
Issue of new share capital
Share rights issued for employee services
Employee share entitlements issued
Treasury shares issued
Net issue/(purchase) of treasury shares
Shares issued under dividend reinvestment plan
2017
$’0 0 0
16,945
2,426
79,966
37,233
2016
$’0 0 0
23,789
2,075
65,322
46,732
136,570
137,918
2017
SHARES
2016
SHARES
2017
$’000
2016
$’000
656,986,761 587,472,741
59,720,271
–
979,177
(979,177)
–
9,793,749
–
–
204,689
(204,689)
–
10,389,762
1,055,737
–
736
–
–
(192)
44,511
758,800
256,685
1,275
–
–
(375)
39,352
Closing balance of ordinary shares issued
667,376,523 656,986,761
1,100,792
1,055,737
All ordinary shares rank equally with one vote attached to each fully-paid ordinary share.
Included within the number of shares is 5,515,841 treasury shares (2016: 5,720,530) held by the company. The movement in treasury shares during
the year related to the issuance of shares under the employee incentive plans and purchases of shares by an external trustee as part of the executive
long term incentive plan (refer to note 22). Treasury shares may be used to issue shares under the company's employee incentive plans or upon the
exercise of share rights/options.
During May and June 2016 the company completed a 1 for 10 entitlement offer of ordinary shares. This offer raised net proceeds of $256.7 million
(gross proceeds of $262.8 million less transaction costs of $6.1 million).
60
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
20 DERIVATIVE FINANCIAL INSTRUMENTS
Accounting policy
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at 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:
(1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or
(2) hedges of exposures to variability in cash flows associated with recognised assets or liabilities or highly probable forecast transactions
(cash flow hedges).
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.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the
hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement.
Amounts accumulated in equity are recycled in the Income Statement in the periods when the hedged item will affect profit or loss (for instance
when the forecast sale that is hedged takes place).
When a hedging instrument expires or is sold or 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 transferred to the Income Statement.
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 in the Income Statement.
NOTIONAL VALUE
FAIR VALUE
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Current assets
Cross‑currency interest rate swaps ‑ cash flow hedges
Forward foreign exchange contracts
Total current derivative financial instrument assets
Non-current assets
Interest rate swaps ‑ cash flow hedges
Cross‑currency interest rate swaps ‑ cash flow hedges
102,375
81,078
38,028
113,208
183,453
151,236
6,384
1,713
8,097
100,517
106,308
–
211,585
2,275
41,142
Total non‑current derivative financial instrument assets
206,825
211,585
43,417
Current liabilities
Forward foreign currency contracts
Interest rate swaps ‑ cash flow hedges
Total current derivative financial instrument liabilities
Non-current liabilities
Interest rate swaps ‑ cash flow hedges
71,959
98,100
18,165
38,000
170,059
56,165
362
2,192
2,554
456,450
497,224
24,307
Total non‑current derivative financial instrument liabilities
456,450
497,224
24,307
1,492
451
1,943
–
65,189
65,189
176
1,295
1,471
38,218
38,218
Total net derivative financial instrument assets
26,861
39,689
61
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
21 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risks (including currency and interest rate risk), liquidity risk, and credit risk.
The Group’s overall risk management programme recognises the nature of these risks and seeks to minimise potential adverse effects on the Group’s
financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by a central treasury department under a formal Treasury Policy approved by the board of directors. The Treasury
Policy sets out written principles for overall risk management, as well as policies covering specific areas such as currency risk, interest rate risk,
credit risk, use of derivative financial instruments and non-derivative financial instruments and investment of excess funds. The Treasury Policy sets
conservative limits for allowable risk exposures which are formally reviewed at least annually.
(a) Market risk
(i) Currency risk
The Group operates internationally and is exposed to currency risk, primarily with respect to Australian and US dollars. Exposure to the Australian
dollar arises from the Group’s investment in, and intercompany loans to, its Australian operations. Exposure to the US dollar arises from funding
denominated in that currency.
The Group utilises natural hedges wherever possible with forward foreign exchange contracts used to manage any significant residual risk to the
income statement.
The Group’s exposure to the US dollar (refer to US private placement notes detailed in note 10) has been fully hedged by way of cross currency
interest rate swaps (CCIRS), hedging US dollar exposure on both principal and interest. The CCIRS correspond in amount and maturity to the
US dollar borrowings with no residual US dollar exposure.
(ii) Interest rate risk
The Group's interest rate risk arises from long-term borrowings.
Interest rate swaps (IRS) and CCIRS are utilised to modify the interest repricing profile of the Group’s debt to match the profile required by
Treasury Policy. All IRS and CCIRS are in designated hedging relationships that are highly effective.
As the Group has no significant interest bearing assets, the Group’s revenue is substantially independent of changes in market interest rates.
(iii) Summarised sensitivity analysis
SKYCITY manages its interest rate and foreign exchange rate exposure to minimise the impact of fluctuations in the market. The residual exposure
is not considered material or significant.
(b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its financial obligations.
SKYCITY is largely a cash based business and its material credit risks arise mainly from financial instruments utilised in funding and from
International Business activity.
Financial instruments (other than International Business discussed below) that potentially create a credit exposure can only be entered into with
counterparties that are explicitly approved by the board. Maximum credit limits for each of these parties are approved on the basis of long term
credit rating (Standard & Poor’s or Moody’s). A minimum long term rating of A+ (S&P) or A1 (Moody’s) is required to approve individual
counterparties.
The maximum credit risk of any financial instrument at any time is the fair value where that instrument is an asset. All derivatives are carried at fair
value in the balance sheet. Trade receivables are presented net of an allowance for estimated doubtful receivables.
International Business activity is managed in accordance with accepted industry practice. Settlement risk associated with International Business
customers is minimised through credit checking and a formal review and approval process.
There are no significant concentrations of credit risk in the Group.
62
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 NOTES TO THE FINANCIAL STATEMENTS
(c) Liquidity risk
Liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of unutilised committed
credit facilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and maintaining flexibility in funding
by keeping committed credit lines available with a variety of counterparties and maturities.
Maturities of Committed Funding Facilities
Debt maturities are detailed in note 10.
(d) Fair value estimation
The financial instruments are measured in the balance sheet at fair value by level of the fair value measurement hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Other than the New Zealand bonds, which are listed on the NZDX and therefore level 1, all SKYCITY financial instruments, which includes
cross-currency interest rate swaps, interest rate swaps and forward foreign currency contracts, are valued using level 2 in the above fair value
measurement hierarchy.
The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using
valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on
entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Specific valuation techniques used to value financial instruments include:
• The fair value of interest rate swaps and cross currency interest rate swaps is calculated as the present value of the estimated future cash flows
based on observable yield curves; and
• The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting
value discounted back to present value.
Further details on derivatives are provided in note 20.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and to maximise returns for shareholders
and benefits for other stakeholders over the long term.
In order to optimise its capital structure, the Group manages actual and forecast operational cash flows, capital expenditure and equity distributions.
The Group primarily manages capital on the basis of gearing measured as a ratio of net debt (debt at hedged exchange rates less cash at bank) to
EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) and interest coverage (EBITDA relative to net interest cost).
The primary ratios were as follows at 30 June:
Gearing ratio
Interest coverage
2017
1.1 x
10.3 x
2016
1.1 x
7.9 x
These types of ratios are consistent with the financial covenants in the Group’s various funding facilities. Actual gearing ratio and interest cover as at
30 June 2017 were within covenant limits on funding facilities.
The Group does not have any externally-imposed capital requirements.
63
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
22 SHARE-BASED PAYMENTS
Accounting policy
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 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 granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). 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.
(a) Current plans
2009 Executive Long Term Incentive Plan
Under this plan, executives purchase SKYCITY shares funded by an interest-free loan from the Group. The shares purchased by the executives are
held by a trustee company with executives entitled to exercise the voting rights attached to the shares and receive dividends, the proceeds of which
are used to repay the interest-free loan.
At the end of the restricted period (3 to 4 years), the Group will pay a bonus to each executive to the extent their performance targets have been
met which is sufficient to repay the initial interest-free loan associated with the shares which vest. The shares upon which performance targets have
been met will then fully vest to the executives. The loan owing on shares upon which performance targets have not been met (the forfeited shares)
will be novated from the executives to the trustee company and will be fully repaid by the transfer of the forfeited shares. Performance targets relate
to total shareholder return relative to other comparable companies.
At 30 June 2017, the interest free loans on the Executive Long Term Incentive Plan total $8,712,764 (2016: $9,155,468).
2017 Chief Executive Officer commencement shares
Effective 4 November 2016, the newly appointed Chief Executive Officer was granted 325,000 ordinary shares to be issued on 3 November 2018.
There are no performance targets associated with these shares, and there is no right to dividends in the intervening period.
(b) Outstanding rights and shares
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
GRANT DATE
EXPIRY DATE
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
2017
29/08/12
28/08/13
27/08/14
26/08/15
24/08/16
04/11/16
Total
2016
31/08/11
29/08/12
28/08/13
27/08/14
28/08/15
Total
29/08/16
28/08/17
27/08/18
28/08/19
24/08/20
03/11/18
31/08/15
02/03/15
28/08/17
27/08/18
28/08/19
400,100
818,750
780,000
620,000
–
–
–
–
–
–
685,000
325,000
–
(204,689)
–
–
–
–
(400,100)
(120,937)
(115,000)
(105,000)
(60,000)
–
–
493,124
665,000
515,000
625,000
325,000
2,618,850
1,010,000
(204,689)
(801,037) 2,623,124
545,200
667,300
2,398,008
880,000
–
–
–
–
–
620,000
–
–
(979,177)
–
–
(545,200)
(267,200)
(600,081)
(100,000)
–
–
400,100
818,750
780,000
620,000
4,490,508
620,000
(979,177)
(1,512,481) 2,618,850
The weighted average remaining contractual life of rights outstanding at the end of the period was 1.67 years (2016: 1.79 years).
64
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
Fair value of share rights granted
The assessed fair value at grant date of the rights granted on 24 August 2016 was $1.56 (26 August 2015 was $1.10). This was calculated using the
single index model by Ernst & Young Transaction Advisory Services Limited.
The valuation inputs for the rights granted on 24 August 2016 included:
(a) rights are granted for no consideration
(b) exercise price: nil (2016: nil)
(c) share price at grant date: $4.94 (2016: $4.05)
The expected price volatility is derived by analysing the historic volatility over a recent historical period similar to the term of the right.
Fair value of Chief Executive Officer commencement shares granted
The assessed fair value at grant date of the commencement shares granted on 4 November 2016 was $2.68. This was calculated using the European
call option model by Ernst & Young Transaction Advisory Services Limited.
The valuation inputs for the commencement shares granted on 4 November 2016 included:
(a) granted for no consideration
(b) exercise price: nil
(c) share price at grant date: $3.62
The expected price volatility is derived by analysing the historic volatility over a recent historical period similar to the term of the
commencement shares.
(c) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:
Rights issued under Share Rights Plans
23 RELATED PARTY TRANSACTIONS
2017
$’0 0 0
736
2016
$’0 0 0
1,275
There are no bad or doubtful debts associated with any related party of the Group (2016: nil).
(a) Key management personnel compensation
Key management compensation is set out below. The key management personnel are all the directors of the company, the Chief Executive Officer,
the Interim Chief Executive Officer and the Senior Leadership Team.
2017
2016
SHORT-TERM
BENEFITS
$’000
SHARE-BASED
PAYMENTS
$’000
5,668
12,191
398
900
TOTAL
$’000
6,066
13,091
(b) Other transactions with key management personnel or entities related to them
Certain directors and management 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, and a register of directors' interests is maintained.
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 24.
65
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
24 SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting
policy described in note 1(b):
NAME OF ENTITY
New Zealand International Convention Centre Limited
Otago Casinos Limited
Queenstown Casinos Limited
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 Australia Limited
SKYCITY Investments Queenstown Limited
SKYCITY Management Limited
SKYCITY Metro Limited
SKYCITY Wellington Limited
SKYCITY Adelaide Pty Limited
SKYCITY Australia Finance Pty Limited
SKYCITY Australian Limited Partnership
SKYCITY Australia Pty Limited
SKYCITY Darwin Pty Limited
SKYCITY Treasury Australia Pty Limited
Horizon Tourism Limited
SKYCITY Investment Holdings Limited
PRINCIPAL
PLACE OF BUSINESS
CLASS OF
SHARES
2017
2016
EQUITY HOLDING
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Hong Kong
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
All wholly-owned subsidiary companies and significant partly-owned subsidiaries have balance dates of 30 June.
25 CONTINGENCIES
There are no significant contingencies at year end (2016: nil).
66
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
NOTES TO THE FINANCIAL STATEMENTS
26 COMMITMENTS
Operating Lease Commitments
The Group leases various offices and other premises under non-cancellable operating leases. These leases have varying terms, escalation clauses and
renewal rights. On renewal, the terms of the leases are renegotiated.
Within one year
Later than one year but not later than five years
Later than five years
Total operating lease commitments (not recognised in the financial statements)
2017
$’000
4,266
11,754
329,565
345,585
2016
$’000
4,923
14,110
288,822
307,855
The above operating lease summary includes a large number of leases, the most significant of which are:
• SKYCITY Auckland - Hobson and Federal Streets sub soil lease: This lease is for a period of 999 years from 31 January 1996 with rent
reviews every five years.
• Adelaide Casino building lease: The initial lease term is until 3 March 2025 with three further rights of renewal for 20 years each and annual
rent reviews.
27 RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW
FROM OPERATING ACTIVITIES
Profit for the year
Depreciation and amortisation
Net finance costs
Current period employee share expense
Gain on sale of fixed assets
Impairment of goodwill
Change in operating assets and liabilities
Change in receivables and prepayments
Change in inventories
Change in payables
Change in deferred tax liability
Change in tax receivable – current
Change in provisions
Change in tax receivable – term
Change in tax payable – current
Capital items included in working capital movements
Net cash inflow from operating activities
2017
$’000
44,862
95,049
16,712
736
(762)
99,486
19,175
668
(1,348)
1,333
4,847
(1,182)
–
13,741
(13,793)
2016
$’000
145,672
104,070
32,588
1,275
(944)
–
(19,884)
657
7,833
(1,925)
38,312
386
779
–
(3,662)
279,524
305,157
67
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
NOTES TO THE FINANCIAL STATEMENTS
28 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
(a) Dividend
On 8 August 2017, the directors resolved to provide for a final dividend to be paid in respect of the year ended 30 June 2017. The fully imputed,
unfranked dividend of 10.0 cents per share will be paid on 15 September 2017 to all shareholders on the company's register at the close of business
on 1 September 2017.
(b) Adelaide
On 26 July 2017, the company announced that it had committed to proceeding with a A$330 million expansion project in Adelaide following
signing a Development Agreement with the South Australian Government. The main works on the expansion project are expected to commence
in 1Q18, following completion of early works by the South Australian Government, with completion expected in 3Q20.
68
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 RECONCILIATION OF NORMALISED RESULTS TO REPORTED RESULTS
FY17
FY16
REVENUE
$M
EBITDA
$M
EBIT
$M
NPAT
$M
REVENUE
$M
EBITDA
$M
EBIT
$M
Normalised
1,030.6
International Business at Theoretical
(8.6)
226.5
154.6
1,084.1
330.1
321.5
(14.5)
–
–
(14.5)
(99.5)
(10.2)
(99.5)
(8.6)
(14.5)
(114.0)
(109.7)
17.1
–
17.1
3.9
–
3.9
236.4
3.9
(10.4)
(6.5)
Asset write‑offs
Total Adjustments
Reported
1,022.0
307.0
112.5
44.9
1,101.2
333.9
229.9
145.7
NPAT
$M
152.7
2.8
(9.8)
(7.0)
SKYCITY’s objective of producing normalised financial information is to provide data that is useful to the investment community in understanding
the underlying operations of the Group.
Total revenues are gaming win plus non-gaming revenues.
Normalisation adjustments have been calculated in a consistent manner in FY17 and FY16.
FY17 adjustments
• Impairment of Darwin goodwill, A$94.6 million (NZ$99.5 million)
FY16 adjustments
• Write-off of the Hamilton hotel project costs as this project is no longer proceeding ($2.7 million of capitalised costs incurred over 2011 to 2014)
• Write-off of 101 Hobson Street and the Nelson Street car park to make way for the NZICC ($7.6 million book value)
The actual win rate on International Business was 1.25% for FY17 (FY16: 1.49%).
69
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM STATEMENT AND OTHER DISCLOSURES
For the year ended 30 June 2017
CORPORATE GOVERNANCE STATEMENT
SKYCITY Entertainment Group Limited is committed to maintaining
the highest standards of corporate behaviour and responsibility and has
adopted governance policies and procedures reflecting this.
In establishing its governance policies and procedures, the SKYCITY
board has adopted eleven governance parameters as the cornerstone
principles of its corporate governance charter as set out in the Company’s
Board Charter (available in the Governance section of the company’s
website at www.skycityentertainmentgroup.com).
As a New Zealand company listed on the Australian and New Zealand
stock exchanges, these cornerstone principles, detailed below and on the
following pages, reflect the Listing Rules and Corporate Governance
Code of NZX Limited (NZX), the Listing Rules of ASX Limited (ASX),
the Corporate Governance Principles and Recommendations
(Third Edition) of the ASX Corporate Governance Council, and the
New Zealand Financial Markets Authority’s Corporate Governance
Principles and Guidelines.
SKYCITY is listed as a ‘Foreign Exempt Listing’ on the ASX. The ASX
Foreign Exempt Listing category is based on a principle of substituted
compliance recognising that, for secondary listings, the primary
regulatory role and oversight rest with the home exchange and the
supervisory regulator in that jurisdiction. As a company with ASX
Foreign Exempt Listing status, SKYCITY is not required to comply
with ASX Listing Rule 4.10, which requires entities to include certain
prescribed information in their annual reports, or the Corporate
Governance Principles and Recommendations (Third Edition) of the
ASX Corporate Governance Council. Notwithstanding, SKYCITY has
included all the information required under ASX Listing Rule 4.10 in this
annual report and followed a majority of the recommendations set by the
ASX Corporate Governance Council, in addition to all the corporate
governance principles set out in the NZX’s Corporate Governance Code,
during the financial year ended 30 June 2017. In addition, as mentioned
above, the cornerstone principles set out in SKYCITY’s Board Charter
(available in the Governance section of the company’s website at
www.skycityentertainmentgroup.com) continue to reflect the principles
in the Corporate Governance Principles and Recommendations
(Third Edition) of the ASX Corporate Governance Council.
1. 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 Charter details the board’s role and responsibilities.
The board establishes the company’s objectives, the major strategies for
achieving those objectives and the overall policy framework within
which the business of the company is conducted, and monitors
management’s performance with respect to these matters.
The board is also responsible for ensuring that the company’s assets are
maintained under effective stewardship, that decision making authorities
within the organisation are clearly defined, that the letter and intent of
all applicable company and casino laws and regulations are complied
with, and that the company is well managed for the benefit of its
shareholders and other stakeholders.
Specific responsibilities of the board include:
• oversight of the company, including its control and
accountability procedures and systems;
• appointment, performance, and removal of the
Chief Executive Officer;
• confirmation of the appointment and removal of the
senior executive group (being the direct reports to the
Chief Executive Officer);
•
setting the remuneration of the Chief Executive Officer and
approval of the remuneration of the senior executive group;
• approval of the corporate strategy and objectives and oversight of
the adequacy of the company’s resources required to achieve the
strategic objectives;
• approval of, and monitoring of actual results against, the annual
business plan and budget (including the capital expenditure plan);
• review and ratification of the company’s systems of risk management
and internal compliance and control, codes of conduct and legal
compliance; and
• approval and monitoring of the progress of capital expenditures,
capital management initiatives, acquisitions and divestments.
The board has responsibility for the affairs and activities of the company,
which in practice is achieved through delegation to the Chief Executive
Officer 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 board maintains a
formal set of delegated authorities that details the extent to which
employees can commit the company. These delegated authorities are
approved by the board and are subject to annual review by the board.
The Chief Executive Officer also has the responsibility to manage and
oversee the interfaces between the company and the public and to act as
the principal representative of the company.
Each director and senior executive has a written agreement with the
company setting out their terms of appointment and responsibilities.
2. STRUCTURE THE BOARD TO ADD VALUE
Board effectiveness requires the efficient discharge of the duties imposed
on the directors by law and the addition of value to the company.
To achieve this, the SKYCITY board is structured to:
• have a sound understanding of, and competence to deal with,
the current and emerging issues of the business;
71
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CORPORATE GOVERNANCE STATEMENT
Appointment
The board has established the Governance and Nominations
Committee to:
•
identify and recommend to the board suitable persons for
nomination as members of the board and its committees (taking
into account such factors as experience, qualifications, judgement,
and the ability to work with other directors);
• annually review the overall composition and structure of the board
and its committee memberships and, if appropriate, the removal of
a director from the board and/or its committees;
• monitor the succession and rotation of board and committee members;
• monitor the outside directorships and other business interests of
directors with a view to ensuring independence/no conflicts of
interest, and director capability and time availability to effectively
undertake the requirements of their SKYCITY board and
committee positions;
• monitor related parties, conflicts of interest, and independence issues;
• ensure that potential candidates understand the role of the board and
the time commitment involved when acting as a member of the board;
• oversee the evaluation of the board; and
• review the board’s succession planning.
External consultants are engaged to access a wide base of potential
candidates and to review the suitability of candidates for appointment.
The procedures for the appointment and removal of directors are
prescribed in the company’s constitution, which, amongst other things,
requires all potential directors to have satisfied the extensive probity
requirements of each jurisdiction in which the company holds
gaming licences.
Subject to satisfaction of the probity requirements, the board may
appoint directors to fill casual vacancies that occur or to add persons to
the board up to the maximum number (currently 10) prescribed by the
constitution. If the board appoints a new director during the year, that
person will stand for election by shareholders at the next annual
meeting. Shareholders are provided with relevant information on any
candidate standing for election in the company’s notice of meeting.
Directors are appointed under the company’s Terms of Appointment
and Reference for Directors and Board Charter (both available
in the Governance section of the company’s website at
www.skycityentertainmentgroup.com) for a term of three years
and subject to re-election by shareholders in accordance with the
rotation requirements of NZX and ASX and as prescribed in the
company’s constitution.
• effectively review and challenge the performance of
management and exercise independent judgement; and
• assist in the selection of candidates to stand for election
by shareholders at annual meetings.
Board Composition and Skills Matrix
As at 30 June 2017, the board comprised eight non-executive directors.
Biographical details of individual directors are set out on pages 18-20
of this annual report.
As previously announced to the market in June 2017, Chris Moller will
retire from the board effective from 31 December 2017 and Rob Campbell
will succeed Chris as Chairman of the board from 1 January 2018.
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.
The areas of expertise and experience determined by the board as being
the key competencies required to meet these objectives include:
• governance and strategy;
•
infrastructure experience;
• gaming industry experience and understanding;
• understanding of Asia and Asian consumers;
•
•
•
local market knowledge of Auckland;
local market knowledge of Adelaide;
local market knowledge of Darwin;
• government relations;
• public relations and communications;
•
investment banking;
• property and real estate acumen;
• hospitality industry experience and understanding;
•
legal;
• finance and accounting;
• mathematical fluency;
• human resources;
• occupational health and safety; and
• marketing.
As at the date of this annual report, the board comprises individuals
with expertise and experience in the specific areas listed above other
than legal and Asia/Asian consumers. Details of individual expertise and
experience of the directors are set out on pages 18-20 of this annual
report.
72
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE GOVERNANCE STATEMENT
Director Independence
The Board Charter and the company’s constitution require 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 Officer position. The Board Charter requires
the board chairperson and (where appointed) deputy chairperson to be
independent directors and prohibits the company’s Chief Executive
Officer from filling either of these roles.
Directors are required to ensure all relationships and appointments
bearing on their independence are disclosed to the Governance and
Nominations Committee on a timely basis. In determining the
independence of directors, the board has adopted the definition of
independence set out in the NZX Main Board Listing Rules and has
taken into account the independence guidelines as recommended in
the ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations (Third Edition) (ASX Independence
Guidelines).
At its June 2017 meeting, the board reviewed the status of each director
in accordance with the definition of independence set out in the
NZX Main Board Listing Rules and taking into account the ASX
Independence Guidelines and determined that all current non-executive
directors were independent at the balance date.
Access to Information and Advice
New directors participate in an individual induction programme,
tailored to meet their particular information requirements.
Directors receive regular reports and comprehensive information on
the company’s operations before each board and committee meeting
and have unrestricted access to any other information they require.
Senior management is also available at and outside each meeting to
address queries.
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. Directors are provided with updates on industry
developments and undertake regular visits to the company’s key
operations. The board also undertakes periodic educational trips to
observe and receive briefings from other companies in the gaming and
entertainment industries.
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 notified the board chairperson of their
intention to do so.
Indemnities and Insurance
The company provides a deed of indemnity in favour of each director
and member of senior management 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 four formally appointed committees - the Audit and
Financial Risk Committee, Governance and Nominations Committee,
Remuneration and Human Resources Committee and Corporate Social
Responsibility Committee.
The members of each of the committees are non-executive directors
and the non-executive directors of the board appoint the chairperson of
each committee.
The current members and chairperson of each committee, and their
respective qualifications and experience, are set out on pages 18-20 of
this annual report and in the People section of the company’s website at
www.skycityentertainmentgroup.com.
Each committee operates under a formal charter document as agreed by
the board. Each charter sets out the role and responsibilities of the
relevant committee and is available in the Governance section of the
company’s website at www.skycityentertainmentgroup.com. Each
committee charter and the performance of each committee are subject
to formal review by the board on an annual basis.
Meeting Attendance
The following table shows attendances at board and committee
meetings by directors during the financial year ended 30 June 2017.
Seven board meetings were scheduled during the year.
APPOINTMENT
TO OFFICE
BOARD
SCHEDULED
BOARD
UNSCHEDULED
BOARD
TOTAL
AUDIT AND
FINANCIAL
RISK
REMUNERATION
AND HUMAN
RESOURCES
GOVERNANCE
AND
NOMINATIONS
CORPORATE
SOCIAL
RESPONSIBILITY
NUMBER OF MEETINGS HELD
Chris Moller
Bruce Carter
Brent Harman
Sue Suckling
Richard Didsbury
Richard Tsiang(2)
Jennifer Owen(3)
Murray Jordan(3)
Rob Campbell(4)
18 December 2008
12 October 2010
18 December 2008
9 May 2011
20 July 2012
17 December 2014
5 December 2016
5 December 2016
25 June 2017
7
7
7
7
7
7
2
6
6
3
5
5
3
5
5
4
1
5
5
–
12
12
10
12
12
11
3
11
11
3
7
7
7
–
1
1
1
6
1
3
4
4
–
4
1(1)
–
–
–
3
2
1
1
1
1
1
1
–
1
1
–
4
3
–
–
4
4
–
–
1
2
(1) Sue Suckling was a member of the Remuneration and Human Resources Committee for the period from 1 July 2016 to 4 December 2016.
(2) Richard Tsiang retired as a director effective from 1 January 2017.
(3) Prior to their appointment as directors on 5 December 2016, Jennifer Owen and Murray Jordan attended board and committee meetings from 1 September 2016 in their capacity as consultants.
(4) Prior to his appointment as a director on 25 June 2017, Rob Campbell attended board and committee meetings from 10 April 2017 in his capacity as a consultant.
73
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
CORPORATE GOVERNANCE STATEMENT
3. INTEGRITY, ETHICAL BEHAVIOUR AND DIVERSITY
Code of Business Practice
For SKYCITY, it is important to be a good corporate citizen, whilst
operating a sustainable and successful business model. SKYCITY
expects its board, management and employees to act in accordance
with the company’s values, policies and legal obligations and actively
promotes ethical and responsible behaviour and decision-making by:
• clarifying and promoting observance of its guiding values; and
• clarifying the standards of ethical behaviour required of company
directors and key executives (that is, officers and employees who
have the opportunity to materially influence the integrity, strategy
and operations of the business and its financial performance) and
encouraging the observance of those standards.
Training and information on the company’s values, policies and legal
obligations are provided to all employees on induction and continually
throughout their time at SKYCITY.
Corporate Social Responsibility
To help the company define its responsibilities and the effectiveness
of its activities, SKYCITY maintains operational supervision of its
Corporate Social Responsibility (CSR) activities through management
as well as governance-level oversight through the board’s Corporate
Social Responsibility Committee. This Committee directs all the
company’s commitment to care activities and is responsible for
developing and maintaining SKYCITY’s CSR policies.
The Corporate Social Responsibility Committee focuses on the
five pillars of the company’s CSR strategy, being: responsible gaming,
the environment, fair operating practices, labour practices and human
rights, and community development and investment. These pillars are
described in further detail on pages 23-28 of this annual report.
The guiding principles that underpin SKYCITY’s CSR activities are
set out in the Corporate Social Responsibility Committee Charter
(available in the Governance section of the company’s website at
www.skycityentertainmentgroup.com) and are as follows:
• Accountability: SKYCITY is accountable for its impacts on
society, the economy and the environment;
• Transparency: SKYCITY will be transparent in its decisions
and activities that impact on society, the economy and the
environment;
• Ethical behaviour: SKYCITY will behave ethically;
• Respect for stakeholder interests: SKYCITY will respect,
consider and respond to the interests of its stakeholders;
• Respect for the rule of law: SKYCITY will accept that
respect for the rule of law is mandatory;
• Respect for international norms of behaviour: SKYCITY
will respect international norms of behaviour, while adhering to
the principle of respect for the rule of law; and
• Respect for human rights: SKYCITY will respect human rights
and recognise both their importance and their universality.
Further details of SKYCITY’s CSR activities are included on pages 23-28
of this annual report.
74
The Corporate Social Responsibility 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 (available in the Governance section of the company’s
website at www.skycityentertainmentgroup.com), which sets out the
guiding principles of its relationships with stakeholder groups such as
regulators, shareholders, suppliers, customers, community groups and
employees.
Compliance with the Code of Business Practice is monitored through
education and notification by individuals who become aware of any
breach. In addition, all senior managers are required annually to provide
a confirmation to the company that to the best of their knowledge all
business matters undertaken within their areas of responsibility have
been conducted in accordance with the Code of Business Practice.
Trading in Securities
The company maintains a Securities Trading Policy (available in
the Governance section of the company’s website at
www.skycityentertainmentgroup.com) for directors and employees that
sets out guidelines in respect of trading in, or giving recommendations
concerning, the company’s securities, including derivatives of such
listed securities.
Prior consent must be obtained from the Company Secretary (or any
other authorised person) before directors and certain employees who
may have access to material information undertake any trading in the
company’s securities, grant security over SKYCITY securities, enter
into any margin loan or similar instrument in respect of such securities
or enter into any hedging arrangements which reduce the risk elements
essential to effective employee incentive schemes.
Details of any securities trading by directors or executives who are
subject to the company’s Securities Trading Policy are notified to the
board. In addition, directors and officers of the company must comply
with the disclosure obligations under subpart 6 of the New Zealand
Financial Markets Conduct Act 2013 and the NZX Main Board Listing
Rules and formally disclose their SKYCITY shareholdings and other
securities holdings to the NZX and, consequently, ASX within
prescribed timeframes.
Conflicts of Interest
SKYCITY expects its directors and employees to avoid conflicts of
interest in their decisions and to avoid any direct or indirect interest,
investment, association, or relationship which is likely to, or appears to,
interfere with the exercise of their independent judgement.
Where conflicts of interest may arise (or where potential conflicts of
interest may arise), directors must formally advise the company or, in
the case of an employee, their manager about any matter relating to
that conflict (or potential conflict) of interest.
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE GOVERNANCE STATEMENT
Gaming Prohibition
OBJECTIVE
Directors and employees are not permitted to participate in any gaming
or wagering activity at SKYCITY operated properties.
Actively encourage and report on the participation of underrepresented
groups in our leadership training and talent programmes.
Diversity and Inclusion
PROGRESS MADE
Each year, SKYCITY’s board sets measurable objectives to promote
diversity, including gender diversity and inclusion. At the end of each
financial year, the objectives are reviewed along with the company’s
progress in achieving them.
SKYCITY performed well against the measurable objectives set by the
board for the year ended 30 June 2017 (as reported in the company’s
2016 annual report) as follows:
OBJECTIVE
Continue to strive to ensure strong female candidates are identified
in the recruitment process for all board and senior executive roles.
PROGRESS MADE
40% of senior executive roles recruited for in the past financial year
had a successful female candidate and 55% had one or more female
included on the short list of applicants.
Recruitment briefs for the board recruitment process during the past
financial year explicitly specified that SKYCITY required female
candidates to be identified wherever possible.
Several significant female appointments have been made during the
past financial year, including a non-executive director to the
SKYCITY board, Group General Manager Human Resources and
General Counsel and Company Secretary.
OBJECTIVE
During the past financial year, 181 staff attended one or more of the
internal leadership modules – 77 (43%) of whom were female and 104
(57%) of whom were male.
Over the past financial year, 46% of participants in the internal talent
management programme were female.
SKYCITY continued its sponsorship of the New Zealand Asian Leaders
Forum during the year under review and contributed five participants –
four (80%) of whom are female.
Jo Wong, General Counsel and Company Secretary, joined the 2017
Breakthrough Leaders Programme facilitated by New Zealand Global
Women.
OBJECTIVE
Deliver targeted programmes that support staff from underrepresented
groups to thrive and develop at SKYCITY.
PROGRESS MADE
New partnerships were developed during the year under review that
will support underrepresented groups:
• Indigenous Growth Limited will assist in delivering a bespoke
leadership programme for Ma¯ori at SKYCITY; and
• SKYCITY participated in the TupuToa Ma¯ori and Pasifika
Corporate Pathways programme through which work experience
was provided to Ma¯ori and Pasifika tertiary students.
In New Zealand, obtain Rainbow Tick certification for both
SKYCITY Hamilton and SKYCITY Queenstown and retain
Rainbow Tick certification for SKYCITY Auckland.
OBJECTIVE
Review gender pay equality and deliver an organisation wide
programme that removes any risk of bias or inequality.
In Australia, consider appropriate options to reiterate our commitment
to our lesbian, gay, bi-sexual, trans-sexual and intersex staff.
PROGRESS MADE
PROGRESS MADE
Rainbow Tick certification was achieved for SKYCITY Hamilton
and SKYCITY Queenstown and retained for a third year at
SKYCITY Auckland.
SKYCITY has implemented the Pride in Diversity programme at our
Australian properties. Once established, we will review the opportunity
to take part in the Australian Workplace Equality Index (AWEI).
During the past financial year, SKYCITY continued its review of
remuneration outcomes to ensure pay equality. The annual salary
review round resulted in a higher average increase for females (2.94%)
versus males (2.82%).
SKYCITY continued its sponsorship of the YWCA Equal Pay Awards.
During the year under review, SKYCITY Darwin and SKYCITY
Adelaide achieved compliance with the Workplace Gender Equality Act
2012 as determined by the Workplace Gender Equality Agency.
75
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CORPORATE GOVERNANCE STATEMENT
The measurable objectives set by the board for the financial year
ending 30 June 2018 are set out on page 31 of this annual report.
As at 30 June 2017, the gender composition of the company’s directors,
senior executives, officers and total workforce was as follows:
required to confirm in writing that the annual and interim financial
statements present a true and fair view of the company’s financial
condition and results of operations, and comply with relevant
accounting standards.
FEMALE
MALE
TOTAL
NUMBER
%
NUMBER
Directors
Senior
Executives
Officers
Total
Workforce
2
3
2
2,730
25%
30%
33%
48%
%
75%
70%
67%
8
10
6
2,956
52% 5,686
Comparatively, the gender composition of the company’s directors,
senior executives, officers and total workforce as at 30 June 2016 was
as follows:
FEMALE
MALE
TOTAL
NUMBER
%
NUMBER
Directors
Senior
Executives
Officers
Total
Workforce
1
2
2
2,726
17%
29%
29%
48%
In the above tables:
%
83%
71%
71%
6
7
7
3,003
52% 5,729
6
7
4
5
5
5
•
•
‘senior executives’ are those directly reporting to the Chief
Executive Officer (or Interim Chief Executive Officer), other than
the Executive Assistant, and those who are a site General Manager;
and
‘officers’ are the Chief Executive Officer (or Interim Chief
Executive Officer) and those directly reporting to the Chief
Executive Officer, other than the Executive Assistant.
4. SAFEGUARD THE INTEGRITY OF THE COMPANY’S
FINANCIAL REPORTING
The board is responsible for ensuring that effective policies and
procedures are in place to provide confidence in the integrity of the
company’s financial reporting.
The Audit and Financial Risk Committee has responsibility for
oversight of the quality, reliability, and accuracy of the company’s
internal and external financial statements, the quality of the company’s
external result presentations, its internal control environment and risk
management programmes, and for its relationships with its internal and
external auditors.
The Audit and Financial Risk Committee and the board undertake
sufficient inquiry of the company’s management and the company’s
internal and external auditors in order to enable them to be satisfied
as to the validity and accuracy of the company’s financial reporting.
The Chief Executive Officer and the Chief Financial Officer are
76
The Audit and Financial Risk 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 non-audit
services. 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 satisfied that its objectivity and
independence is not compromised as a consequence of non-audit work
undertaken for the company.
PricewaterhouseCoopers has confirmed to the Committee that it is not
aware of any matters that could affect its independence in performing its
duties as auditor of the company.
Fees paid to PricewaterhouseCoopers during the financial year ended
30 June 2017 are set out in note 5 to the financial statements. Fees for
audit and tax compliance work for the financial year ended 30 June 2017
represent 67% of total PricewaterhouseCoopers fees.
In 2017, the company undertook a tender for its external audit services.
Following the completion of a competitive process,
PricewaterhouseCoopers was reappointed as the company’s auditor.
5. TIMELY AND BALANCED DISCLOSURE
The board is committed to ensuring timely and balanced disclosure of
all material matters concerning the company to ensure compliance with
the letter and intent of the NZX and ASX Listing Rules such that:
• all investors have equal and timely access to material information
concerning the company, including its financial situation,
performance, ownership and governance; and
• company announcements are factual and comprehensive.
SKYCITY believes high standards of reporting and disclosure are
essential for proper accountability between SKYCITY and its investors,
employees and stakeholders.
The company is committed to promoting investor confidence by
providing timely and balanced disclosure of all material matters
relating to SKYCITY and its subsidiaries (SKYCITY Group).
The company maintains a Market Disclosure Policy (available in
the Governance section of the company’s website at
www.skycityentertainmentgroup.com) for directors and employees that
sets out guidelines in respect of the company’s continuous disclosure
obligations. The Policy is designed to ensure that SKYCITY:
•
satisfies the requirements of the New Zealand Financial Markets
Conduct Act 2013, Australian Corporations Act 2001, NZX Main
Board Listing Rules and ASX Listing Rules;
• meets its disclosure obligations in a way that allows all interested
parties equal opportunity to access information;
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE GOVERNANCE STATEMENT
• meets stakeholders’ expectations for equal, timely, balanced and
• ensuring that continuous disclosure obligations are understood and
meaningful disclosure; and
complied with throughout the SKYCITY Group.
• provides guidance on the processes to ensure compliance.
The company is also committed to presenting its financial and key
operational performance results in a clear, effective, balanced and timely
manner to the stock exchanges on which the company’s securities are
listed, and to its shareholders, analysts and other market commentators,
and ensures that such information is available on the company’s website.
Jo Wong, General Counsel, is Company Secretary and the Disclosure
Officer for SKYCITY Entertainment Group Limited and is responsible
for bringing to the attention of the board any matter relevant to the
company’s disclosure obligations. The Company Secretary is also
accountable directly to the board, through the chairperson of the board,
on all matters to do with the proper functioning of the board.
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 (including its
corporate governance framework, media releases, current and past
annual reports, dividend histories and notices of meeting) is
available to all shareholders in the Investor Centre section of the
company’s website at www.skycityentertainmentgroup.com;
• posting stock exchange announcements in the Investor Centre
section of the company’s website promptly after they have been
disclosed to the market;
• giving shareholders the option to receive communications from,
and send communications to, the company and its security registry,
Computershare, electronically;
• engaging in a programme of regular interactions with institutional
investors, shareholder associations and proxy advisers;
• promoting two-way interaction with shareholders, by 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. Each year, in the
company’s notice of meeting, shareholders are invited to submit
questions to the company prior to the annual meeting to enable the
company to aggregate the main themes of the questions asked and
respond to them at the annual meeting. Representatives of the
company’s external auditors are also invited to attend the
company’s annual meeting to answer any shareholder questions
concerning their audit and external audit report; and
7. RECOGNISE AND MANAGE RISK
The company maintains a risk management framework for the
identification, assessment, monitoring and management of risk to the
company’s business.
SKYCITY maintains an independent, centrally-managed group risk
function which evaluates and reports on risks and controls across the
Group. Management is required to report to the Audit and Financial
Risk Committee and board on the effectiveness of the company’s
management of its material business risks at least annually.
The Audit and Financial Risk Committee approves the assurance plan,
with results and performance of the control environments regularly
reviewed by both the committee and the external auditors. The Chief
Executive Officer and the Chief Financial Officer are required to
confirm in writing to the Audit and Financial Risk Committee at least
annually that the statement in respect of the integrity of the company’s
financial statements referred to above is founded on a sound system of
risk management and internal compliance and control which
implements the policies of the board, and that the company’s financial
risk management and internal compliance and control systems are
operating efficiently and effectively in all material respects. The most
recent confirmations were provided by the Chief Executive Officer and
Chief Financial Officer in August 2017.
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.
SKYCITY’s ability to create or preserve value for its shareholders
requires the successful execution of its business strategy. Risks
influencing its ability to do this, including SKYCITY’s material
exposure to economic, environmental and social sustainability risks,
if any, and how it manages or intends to manage those risks, are
set out below:
• Highly regulated industry
SKYCITY operates in industries (in particular, the casino industry)
which are highly regulated. The regulatory framework is subject to
changes from time to time, which may impact the environment in
which SKYCITY operates and the costs of operating its business.
Potential examples of such changes include unfavourable changes to
gaming legislation and regulations, licence conditions and gaming
taxes and levies.
The risk of regulatory change is mitigated by maintaining
engagement with the governments of each jurisdiction in which
SKYCITY operates and with the industry stakeholders through
frequent submissions and regular informal engagements. Targeted
proactive and reactive compliance initiatives are undertaken as and
when required based on the likelihood of the risk occurring and the
impact it would have on SKYCITY’s business.
77
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
CORPORATE GOVERNANCE STATEMENT
• Renewal or extension of Auckland casino licence
SKYCITY’s Auckland property contributes a significant portion of
SKYCITY’s EBITDA. This concentration of earnings means that the
performance of SKYCITY is heavily dependent upon the Auckland
property. A significant disruption to SKYCITY’s Auckland
operations (which may arise through the expiry of the Auckland
casino licence) could have a significant negative impact on
SKYCITY.
SKYCITY has mitigated this risk by entering into the New Zealand
International Convention Centre Project and Licensing Agreement
dated 5 July 2013 with the New Zealand Government, which has
secured an extension of the Auckland casino licence to 30 June 2048.
• Economic and business volatility
The general economic conditions in the markets that SKYCITY
operates in, in addition to volatility in certain parts of the business,
can significantly influence the financial performance of the company.
To mitigate these risks, SKYCITY continually monitors its
external environment, including the geo-political and global
economic landscape. SKYCITY also continually reviews the
optimal mix for its business activities to ensure it has a balanced
portfolio reflecting its risk appetite.
Details of SKYCITY’s health and safety risks, performance and
management are set out on pages 31 and 32 of this annual report.
8. PERFORMANCE EVALUATION
Evaluation of the Board and its Committees
The board and committee charters require an evaluation of the board
and its committees’ performance on an annual basis. The Governance
and Nominations 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.
As an independent facilitated board evaluation process was undertaken
by an international facilitator with significant experience in board
evaluations in early 2016 and the Governance and Nominations
Committee agreed at its December 2016 meeting that an independent
board review was not required in 2017. Instead, a self-evaluation
questionnaire was completed by each of the directors and select
management in March 2017 for the purpose of evaluating the board’s
performance. The findings of the review were discussed at the board’s
April 2017 meeting.
• Development and project risk
Evaluation of Senior Management
With two significant major growth projects underway, the
New Zealand International Convention Centre and Hobson Street
hotel project in Auckland and the Adelaide Casino expansion,
SKYCITY recognises that robust project management is critical
to successful delivery of these projects on-time and on-budget.
Accordingly, SKYCITY has established strong governance,
control and oversight frameworks for both current and future
major growth projects.
• Customer and innovation risk
SKYCITY recognises that it is important to consider evolving
customer demographics and preferences in both our gaming and
non-gaming operations, including new offerings, technologies and
innovation.
To ensure SKYCITY remains relevant to its customers, a long-term
innovation strategy is currently under development, with a focus on
emerging industry trends and opportunities for leveraging new
technology and demographic changes.
• Technology risk
Technology represents a critical platform to SKYCITY’s business -
not only for facilitating/enabling our operations, but also mitigating
cyber-threats and ensuring compliance with regulatory and licence
requirements.
To mitigate technology risk, SKYCITY has invested in a significant
investment programme over the medium-term to improve
technology systems, infrastructure and data management, and to
improve cyber-resilience.
The board undertakes the performance review of the Chief Executive
Officer and reviews the outcomes of those reporting directly to that
position in accordance with the company’s performance review
procedures. In the case of the Chief Executive Officer, the review
generally involves a formal response/feedback process at both the half
year and full year. In the case of each senior executive, the review
involves a formal response/feedback process between the Chief
Executive Officer and each senior executive.
9. REMUNERATE FAIRLY AND RESPONSIBLY
Remuneration Governance
The Remuneration and Human Resources Committee is the main
governing body for setting remuneration policy across the SKYCITY
Group and develops the remuneration framework and policies for board
approval.
The responsibilities of the Remuneration and Human Resources
Committee are outlined in the Remuneration and Human Resources
Committee Charter (available in the Governance section of the
company’s website at www.skycityentertainmentgroup.com), which is
reviewed annually by the board.
The Remuneration and Human Resources Committee oversees the
management of the human resources activities of the company, the
senior management structure, senior executive performance,
remuneration and incentive plans, and succession planning. It also seeks
to assist the board to ensure that the company’s remuneration policies
and practices reward fairly and responsibly with a clear link to the
78
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
CORPORATE GOVERNANCE STATEMENT
company’s strategic objectives and corporate and individual
performance. The Remuneration and Human Resources Committee is
also responsible for periodically reviewing non-executive director fees.
The board-approved Remuneration and Human Resources Policy
Statement (available in the Governance section of the company’s website
at www.skycityentertainmentgroup.com) recognises that to achieve its
business objectives SKYCITY needs high quality, committed people.
The aim of the Policy is, therefore, to attract, retain and motivate high-
calibre executives capable of achieving the objectives of the company
and encourage superior performance and creation of shareholder value.
Former Non-Executive Director
Richard Tsiang
Director
Part Year
Group Executives
Graeme Stephens
Chief Executive Officer
Part Year
John Mortensen
Interim Chief Executive
Officer
Group Chief Operating
Officer
Part Year
Part Year
Rob Hamilton
Chief Financial Officer
Full Year
The guiding principles that underpin SKYCITY’s remuneration policies
are to:
Peter Treacy
• be market competitive at all levels to ensure the company can
attract and retain the best available talent;
• be performance-oriented so that remuneration practices recognise
and reward high levels of performance and to avoid an entitlement
culture;
• provide a significant at-risk component of total remuneration
which drives performance to achieve company goals and strategy;
Claire Walker
General Counsel,
Company Secretary and
Chief Risk Officer
Group General Manager
Corporate Affairs and
Chief Risk Officer
Part Year
Part Year
Group General Manager
Human Resources
Part Year
Sonya Crosby
Chief Innovation Officer
Full Year
• manage remuneration within levels of cost efficiency and
Jo Wong
affordability; and
General Counsel and
Company Secretary
Part Year
• align remuneration for senior executives with the interests of
shareholders.
The following key changes to the board and senior executive team
occurred during the financial year ended 30 June 2017:
A range of market data and specific benchmark reports are used to
ensure market relativity of senior executive positions, including research
and reports from independent remuneration consultants. Each year, the
Remuneration and Human Resources Committee reviews changes in
remuneration laws and practices and market trends to ensure the
company’s practices are appropriately aligned.
During the financial year ended 30 June 2017, there were no material
changes to SKYCITY’s remuneration policies.
A. Remuneration of Non-Executive Directors and
Group Executives
This section details the company’s approach to remuneration
frameworks, outcomes and performance for the following
non-executive directors and group executives for the financial year
ended 30 June 2017:
NAME
POSITION
TERM
Non-Executive Directors
Chris Moller
Bruce Carter
Richard Didsbury
Brent Harman
Sue Suckling
Jennifer Owen
Murray Jordan
Rob Campbell
Chairman
Deputy Chairman
Director
Director
Director
Director
Director
Director
Full Year
Full Year
Full Year
Full Year
Full Year
Part Year
Part Year
Part Year
Non-Executive Directors
Richard Tsiang
Jennifer Owen
Murray Jordan
Rob Campbell
Group Executives
Graeme Stephens
John Mortensen
Peter Treacy
Jo Wong
Retired as a director effective from
1 January 2017
Appointed as a director effective from
5 December 2016
Appointed as a director effective from
5 December 2016
Appointed as a director effective from
25 June 2017
Appointed as Chief Executive Officer
effective from 19 April 2017
Resigned as Interim Chief Executive
Officer and appointed as Group Chief
Operating Officer effective from
19 April 2017
Resigned as General Counsel and
Company Secretary and appointed as
Group General Manager Corporate Affairs
effective from 1 September 2016
Appointed as General Counsel and
Company Secretary effective from
1 September 2016
Grainne Troute
Resigned as General Manager Corporate
Services effective from 8 October 2016
79
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM CORPORATE GOVERNANCE STATEMENT
Claire Walker
Appointed as Group General Manager
Human Resources effective from
10 October 2016
Non-Executive Directors
Shareholders at the annual meeting determine the total remuneration
available to the company’s non-executive directors. At the 2014
Annual Meeting, shareholders approved, effective from 1 July 2014, a
total remuneration amount for non-executive directors of $1,365,000
per annum (plus GST, if any).
The following table outlines the non-executive directors’ fees (exclusive
of GST, if any) for the board and its committees as at 30 June 2017:
POSITION
Chairperson
Board
Deputy Chairperson
FEES
(PER ANNUM)
$275,000
$157,500
Non‑Executive Director
$126,000
Audit and Financial Risk
Committee
Remuneration and
Human Resources
Committee
Corporate Social
Responsibility
Committee
Chairperson
Member
Chairperson
Member
Chairperson
Member
$35,000
$15,000
$35,000
$15,000
$25,000
$15,000
All non-executive directors are members of the Governance and
Nominations Committee and receive no additional fees for this
Committee.
The board chairman does not receive separate fees for the board
committees that he sits on.
The company’s Policy on Non-Executive Director Remuneration
(available in the Governance section of the company’s website at
www.skycityentertainmentgroup.com) sets out a framework for
SKYCITY to attract and retain qualified, highly capable directors from
a pan-Australasian talent pool for the purpose of driving value and
maintaining the highest standards of corporate governance on behalf
of shareholders. The Policy is reviewed annually to take account of
changing market, industry and economic circumstances as well as
developing organisational requirements. The guiding principles that
underpin the Policy are that:
• non-executive director remuneration will be regularly
benchmarked against external comparator markets to ensure it is
broadly in line with that payable in other large publicly-listed
companies in Australasia; and
•
the incremental accountability and commitment that accompanies
specific roles will be recognised in the company’s non-executive
director remuneration structure.
The Remuneration and Human Resources Committee is responsible
for making recommendations to the board annually on non-executive
director remuneration changes. The board seeks shareholder approval
80
for any proposed increase to the total remuneration pool, but may not
seek such approval more regularly than every two years under the Policy
on Non-Executive Director Remuneration. In accordance with
practice, at its June 2017 meeting, the board reviewed the current total
remuneration pool, board and committee fees against a comparator
group and available data on fee increases in both New Zealand and
Australia. Notwithstanding that comparable fees had increased in the
three years since the last shareholder approved increase to the SKYCITY
non-executive director total remuneration pool in 2014, the board
resolved to delay seeking shareholder approval for any proposed increase
to the total remuneration pool until next year.
In addition to directors’ fees, non-executive directors may also receive
remuneration for additional services provided to the company outside of
their capacities as directors of the company at the discretion of the board
and subject to the maximum remuneration amount which has been
approved by the shareholders of the company.
Details of the total remuneration paid to, and other benefits received by,
non-executive directors during the financial year ended 30 June 2017
are set out on page 87 of this annual report.
Group Executives
Remuneration Framework
Remuneration components are offered in the context of a total
remuneration package, measured on a “total cost to the company” basis.
The remuneration arrangements for each group executive comprise
both fixed and variable remuneration, with the variable portion
comprising both short term incentive at-risk remuneration (STI) and
long term incentive at-risk remuneration (LTI).
The STI component for the Chief Executive Officer and each group
executive is based on performance against both key financial and
non-financial measures and all STI bonuses are at the ultimate discretion
of the board.
The board determines an appropriate level of fixed remuneration for
each group executive taking into account recommendations from the
Remuneration and Human Resources Committee.
Fixed Remuneration
The company endeavours to set fixed remuneration at levels that are
relative to similar positions in the market in which individual executives
are positioned and, for “casino-specific” positions, account is taken of
salaries within the sector.
To assist the Remuneration and Human Resources Committee in its
salary deliberations, PricewaterhouseCoopers is commissioned on a
regular basis to survey remuneration against external comparator
markets as relevant and appropriate (eg industry and geography).
Fixed remuneration is reviewed annually for each group executive
and the Remuneration and Human Resources Committee approves
remuneration increases for the group executives.
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE GOVERNANCE STATEMENT
Short Term Incentive Remuneration
In the year under review, 70% of each group executive’s STI was based
on the company’s financial performance. In the case of each group
executive, eligibility for this element was based on achievement of the
company’s budgeted NPAT (normalised net profit after tax) for the
financial year ended 30 June 2017 (gateway hurdle).
The remaining 30% of each group executive’s STI was based on the
achievement of a small number of personal goals that were agreed with
each individual at the commencement of the financial year. In the case
of the Interim Chief Executive Officer, these were aligned to the
strategic priorities of the company. The non-financial objectives for each
of the other group executives were aligned to those set for the Interim
Chief Executive Officer but included specific personal objectives.
The Chief Executive Officer and the Senior Executive STI schemes are
outlined in the relevant sections below.
Each group executive will receive their STI (in cash) following
completion of the external audit of the company’s year-end results.
Long Term Incentive Remuneration
The company operated two LTI plans during the financial year ended
30 June 2017 for the company’s most senior executives, including the
group executives outlined above.
Details of the SKYCITY Senior Executive LTI Plan and SKYCITY
Executive Cash Award Plan are included on pages 82 and 83 of this
annual report.
Chief Executive Officer Remuneration
Graeme Stephens was appointed as Chief Executive Officer effective from
19 April 2017. His employment agreement (a copy of which is available on
the company’s website at www.skycityentertainmentgroup.com) is dated
4 November 2016 and provides for:
• a fixed base salary of $1,450,000 gross per annum;
• effective from 1 July 2017, an STI component set at 70% of his base
salary, contingent on his achievement of both financial and non-
financial performance hurdles. The threshold for vesting of any
STI is an improvement on the previous financial year's Group
normalised NPAT performance. 70% of Mr Stephens’ STI will be
measured against the company’s achievement of normalised Group
NPAT and 30% will be based on a small number of key non-
financial goals. For the financial year ending 30 June 2018, the
maximum at which Mr Stephens’ STI will vest is 70% of his base
salary;
• a sign-on bonus of 325,000 shares in the company, which will be
issued to him on the earlier of the second anniversary of the date of
his employment agreement or the effective date of change of
control where the company has entered into a contract or
arrangement under which its business (or part of it) is to be
undertaken by another person or entity, or where the company's
business (or part of it) is to be sold or transferred to another person
or entity and Mr Stephens’ employment does not continue as
contemplated in his employment agreement; and
• an allocation of shares in the company equal to $1,250,000 each
year under the SKYCITY Senior Executive LTI Plan with the first
allocation scheduled to occur in September 2017. Details of the
SKYCITY Senior Executive LTI Plan are included on pages 82
and 83 of this annual report.
The terms of Mr Stephens’ employment agreement reflect standard
conditions that are appropriate for a senior executive of a listed
Australasian company.
Mr Stephens’ employment agreement may be terminated by:
• either Mr Stephens or the company by giving six months' notice
in writing;
•
•
the company without notice in the case of serious misconduct,
serious breach (including substantial non-performance) or other
cause justifying summary dismissal; or
the company immediately in the event that the SKYCITY board
forms the view that substantial incompatibility and/or
irreconcilable differences have developed with Mr Stephens or the
board otherwise wishes to terminate his employment when he is
not at fault (including a redundancy situation or medical
incapacity).
All entitlements payable to Mr Stephens on termination of his
employment are outlined in his employment agreement (a copy
of which is available on the company’s website at
www.skycityentertainmentgroup.com).
The total remuneration paid to Mr Stephens and, immediately prior to his appointment, Mr Mortensen during their tenures as
Chief Executive Officer and Interim Chief Executive Officer respectively in the year ended 30 June 2017 was as follows:
FIXED ANNUAL PAY
PAY FOR PERFORMANCE
BASE SALARY
BENEFITS
SUB TOTAL
STI
LTI
SUB TOTAL
TOTAL
REMUNERATION
Graeme Stephens
John Mortensen(1)
237,500
1,010,500
869
3,568
238,369
1,014,068
N/A
73,236
N/A
98,228(2)
N/A
171,464
238,369
1,185,532
(1) Mr Mortensen acquired 70,000 shares under the SKYCITY Senior Executive LTI Plan on 30 August 2016 (with an effective acquisition date of 24 August 2016) which are currently held on behalf
of Mr Mortensen by a trustee.
(2) Calculated on the basis of 25,000 SKYCITY shares at an allocation price of $3.93 per share.
81
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
CORPORATE GOVERNANCE STATEMENT
B. Remuneration of SKYCITY Employees
All salaried roles within SKYCITY are job-sized using a recognised
methodology to measure the impact, accountability and complexity of
each role as it contributes to the organisation. Remuneration data is
obtained from a number of sources to determine remuneration ranges
by job band or level to ensure competitiveness at both base salary and
total remuneration levels.
Individual remuneration is set within the appropriate range taking into
account such matters as individual performance, scarcity/availability of
resource/skill, internal relativities and specific business needs. This
process ensures internal equality between roles and allows comparison
with the overall market. Remuneration ranges are reviewed annually to
reflect market movements.
Senior Executive STI
For the financial year ended 30 June 2017, a total of $661,891 will be
paid under the Senior Executive STI Plan to 11 senior executives
(including some of the group executives outlined on page 79 of this
annual report) – an amount equivalent to 13% of combined base salary
for this group.
Payment levels are lower this financial year due to a number of business
units not meeting their financial performance targets.
This scheme will be reviewed by the Chief Executive Officer for the
financial year ending 30 June 2018.
SKYCITY Senior Executive LTI Plan
Under the SKYCITY Senior Executive LTI Plan introduced in 2009,
selected senior executives are provided with financial assistance by way
of an interest-free loan by a subsidiary of the company to acquire shares
in the company. A trustee holds legal title to the relevant shares on
behalf of those senior executives for a restrictive period of at least three
years until certain performance hurdles are met. The performance
hurdles involve comparison of the total shareholder return (TSR)
achieved by SKYCITY against the shareholder returns achieved by a
group of comparable Australasian companies (comparator group), and
by the companies whose securities are in the NZSX50 index (index
group).
For LTI shares issued before and including 2013, to vest in a participant
under the SKYCITY Senior Executive LTI Plan, the company must
achieve a TSR equal to or greater than the average of the comparator
and index groups’ median TSRs. The number of shares that will vest
depend on where the SKYCITY TSR is relative to the average median
TSR (at which point 50% of the shares vest) and the average of the
TSRs representing the 75th percentiles of the TSRs achieved by the
comparator group and the index group (at which point 100% of the
shares vest). In addition, the board has discretion to determine that up
to 25% of the shares will vest if the company’s TSR for the relevant
period does not exceed the average median TSR, but exceeds one or
other of the TSRs representing the 50th percentile of TSRs of the
members of the comparator group and of the index group.
For LTI shares issued in 2014 and thereafter, 50% of the shares are
allocated to a peer comparator group tranche and 50% of the shares are
allocated to an index comparator group tranche. The number of shares
that will vest depend on where the SKYCITY TSR is relative to the
median TSR of each of the peer comparator group and index
comparator group separately and the TSRs representing the 75th
percentiles of the TSRs achieved by each of the peer comparator group
and the index group separately. Each tranche will be tested separately. If
SKYCITY’s TSR is at the median TSR of a group, 50% of a tranche
will vest. If SKYCITY’s TSR is at the 75th percentile of a group, 100%
of a tranche will vest.
Performance is assessed three years after the issue of the shares and
(provided the shares have not lapsed and all performance hurdles have
not been satisfied) after a further six and twelve months. Special
assessment may occur in the event of a takeover offer, amalgamation or
scheme of arrangement involving the company. In the event a takeover
offer for the acquisition of SKYCITY’s ordinary shares is formally
made, or an amalgamation or scheme of arrangement involving
SKYCITY’s ordinary shares is formally proposed, which will result in a
change in control of SKYCITY if it is successful:
•
•
the SKYCITY board will determine a date (TO Calculation Date)
prior to the final date on which holders of SKYCITY’s ordinary
shares may participate in the takeover offer, amalgamation or
scheme of arrangement (as applicable); and
the TSR achieved by SKYCITY, and the members of the
comparator group and the index group will be calculated, and the
change in the TSR index will be determined, for the period from
the date the shares were issued to the TO Calculation Date,
provided that the SKYCITY board may determine that the performance
calculation referred to above will not occur if it considers participants
will have the opportunity to participate in the takeover offer,
amalgamation or scheme of arrangement on terms that are fair and
reasonable as between participants and holders of other classes of
SKYCITY securities or there are no reasonable grounds to believe
that the takeover offer, amalgamation or scheme of arrangement will
be successful.
Shares which have not previously been vested will lapse to the extent
performance hurdles have not been fully satisfied in respect of the
period to the fourth anniversary of the issue date.
During the financial year ended 30 June 2017, the following vesting
calculations were completed:
• August 2012 LTI: The third (and final) test was completed on
29 August 2016 with no shares vesting to executives. All unvested
shares were accordingly forfeited in accordance with the terms of
the SKYCITY Senior Executive LTI Plan; and
• August 2013 LTI: The first and second tests were completed.
To date, 25% of shares have vested to executives. The third (and
final) test will be completed during September 2017 and any shares
that do not vest at that time will be forfeited in accordance with
the terms of the SKYCITY Senior Executive LTI Plan.
82
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 CORPORATE GOVERNANCE STATEMENT
Details of the shares issued under the SKYCITY Senior Executive LTI
Plan and outstanding as at 1 August 2017 are detailed on page 92 of this
annual report.
SKYCITY Executive Cash Award Plan
In February 2016, the company established the SKYCITY Executive
Cash Award Plan in Australia. The objectives of the Plan are to promote
the retention of the company’s most senior executives in Australia and
drive longer-term performance and alignment of incentives of
participants with the interests of the company’s shareholders. Grants
made under the Plan support these objectives by conferring on selected
senior executives the right to receive a cash amount (based on the
market value of shares in SKYCITY) on the achievement of
performance hurdles, which mirror the performance hurdles for the
SKYCITY Senior Executive LTI Plan as outlined above.
As at 1 August 2017, there were three participants in the SKYCITY
Executive Cash Award Plan.
Salaried Employee STI and Individual Bonus Plans
To drive outstanding company and individual performance, during the
year under review, SKYCITY operated an STI plan for selected senior
salaried employees and those with operational accountability for a
department or business unit (Salaried STI Plan). For each individual, a
minimum of 70% of their STI target was linked to the achievement of
minimum financial targets with the remaining percentage dependent on
the achievement of individual, role-specific targets. Payments under the
Salaried STI Plan had a minimum trigger point based on company and
business unit financial targets and increased according to the degree by
which the company performed relative to these financial targets.
Eligible senior salaried employees will receive their STI (in cash)
following completion of the external audit of the company’s year-end
results.
This scheme will be reviewed by the Chief Executive Officer for the
financial year ending 30 June 2018.
For the financial year ended 30 June 2017, 367 salaried staff participated
in the Salaried STI Plan. Based on achievement of individual and
financial targets, 367 staff will receive an average STI payment of 6% of
their fixed salaries.
All other permanent salaried employees who were not eligible to
participate in the Salaried STI Plan participated in a discretionary bonus
plan known as the Individual Bonus Plan. Under the Individual Bonus
Plan, bonuses were awarded to those outstanding staff that consistently
exceeded the key performance indicators that were set for them at the
commencement of the financial year.
In total, for the financial year ended 30 June 2017, SKYCITY salaried
personnel will be paid incentives totalling $4.3 million under the
Salaried STI Plan and Individual Bonus Plan.
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 (available in the Governance
section of the company’s website at www.skycityentertainmentgroup.
com) 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.
83
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM SHAREHOLDER INFORMATION
TWENTY LARGEST REGISTERED SHAREHOLDERS AS AT 1 AUGUST 2017
JP Morgan Nominees Australia Limited
1. HSBC Custody Nominees (Australia) Limited
2. HSBC Nominees (New Zealand) Limited ‑ NZCSD
3.
4. HSBC Nominees (New Zealand) Limited A/C State Street ‑NZCSD
5. Citibank Nominees (New Zealand) Limited ‑ NZCSD
6. BNP Paribas Noms Pty Limited
7. National Nominees Limited
8. Citicorp Nominees Pty Limited
9. Accident Compensation Corporation – NZCSD
10. JPMorgan Chase Bank NA NZ Branch‑Segregated Clients Acct ‑ NZCSD
11. Citicorp Nominees Pty Limited
12. BNP Paribas Nominees Pty Limited
13. ANZ Custodial Services New Zealand Limited ‑ NZCSD
14. BNP Paribas Nominees (NZ) Limited ‑ NZCSD
15. ANZ Wholesale Australasian Share Fund ‑ NZCSD
16. UBS Nominees Pty Limited
17. Guardian Nominees No 2 A/C Westpac W/S Enhanced Cash Trust ‑ NZCSD
18. BNP Paribas Nominees (NZ) Limited ‑ NZCSD
19. Public Trust
20. HSBC Nominees A/C NZ Superannuation Fund Nominees Limited ‑ NZCSD
NUMBER OF
SHARES
%
OF SHARES
102,773,982
67,007,658
63,186,341
49,215,217
44,099,162
23,499,218
23,097,812
18,759,079
17,782,765
16,598,556
14,009,976
11,559,515
10,110,305
9,185,913
7,634,447
6,917,483
6,035,768
5,518,028
4,732,839
4,358,157
15.40%
10.04%
9.47%
7.37%
6.61%
3.52%
3.46%
2.81%
2.66%
2.49%
2.10%
1.73%
1.51%
1.38%
1.14%
1.04%
0.90%
0.83%
0.71%
0.65%
Total
506,082,221
75.84%
Total ordinary shares on issue as at 1 August 2017 were 667,376,523 of which 5,515,841 were held in aggregate by Public Trust on behalf of
eligible and future participants pursuant to the SKYCITY Executive Long Term Incentive Plan.
The ordinary shares are quoted on both the NZX Main Board and ASX under the ticker code ‘SKC’.
No shares were held by the company directly as treasury stock.
84
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
SHAREHOLDER INFORMATION
DISTRIBUTION OF ORDINARY SHARES AND REGISTERED SHAREHOLDINGS AS AT 1 AUGUST 2017
1– 1,000
1,001– 5,000
5,001– 10,000
10,001– 100,000
> 100,000
Total
NUMBER OF
SHAREHOLDERS
NUMBER
OF SHARES
4,297
7,193
2,712
2,476
1,654,262
19,518,259
18,944,053
57,395,219
139 569,864,730
16,817 667,376,523
As at 1 August 2017, there were 1,119 shareholders (with a total of 54,818 shares) holding less than a marketable parcel of shares under the ASX
Listing Rules, based on the closing share price of A$3.83. The ASX Listing Rules define a marketable parcel of shares as a parcel of shares of not
less than A$500.
SUBSTANTIAL SECURITY HOLDERS
The following persons had given notice as at 30 June 2017, in accordance with subpart 5 of Part 5 of the New Zealand Financial Markets
Conduct Act 2013, that they were substantial security holders in the company and held a relevant interest in the number of ordinary shares
shown below:
Investors Mutual Limited
Lazard Asset Management Pacific Co
Commonwealth Bank of Australia
BlackRock, Inc
Perpetual Limited
DATE OF
SUBSTANTIAL
SECURITY
NOTICE
RELEVANT
INTEREST IN
NUMBER OF
SHARES
% OF SHARES
HELD AT
DATE OF
NOTICE
3 November 2016
17 November 2016
31 January 2017
22 March 2017
30 June 2017
40,793,496
40,403,218
39,877,446
33,401,916
46,999,542
6.25%
6.108%
6.029%
5.005%
7.20%
The total number of listed voting securities of SKYCITY Entertainment Group Limited as at 30 June 2017 was 667,376,523.
85
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
BONDHOLDER INFORMATION
BONDS
On 28 September 2015, the company issued 125 million unsubordinated, unsecured, redeemable, fixed rate, seven year bonds at an issue price
of $1 per bond. The bonds pay a fixed rate of interest of 4.65% per annum until the maturity date and are quoted on the NZX Debt Market
under the ticker code ‘SKC040’.
TWENTY LARGEST REGISTERED BONDHOLDERS AS AT 1 AUGUST 2017
NUMBER
OF BONDS
%
OF BONDS
13,491,000
13,123,000
11,403,000
10,719,000
7,871,000
5,186,000
4,800,000
2,929,000
2,820,000
2,100,000
2,000,000
2,000,000
1,775,000
1,472,000
1,250,000
950,000
863,000
800,000
755,000
750,000
87,057,000
10.79%
10.50%
9.12%
8.58%
6.30%
4.15%
3.84%
2.34%
2.26%
1.68%
1.60%
1.60%
1.42%
1.18%
1.00%
0.76%
0.69%
0.64%
0.60%
0.60%
69.65%
NUMBER OF
BONDHOLDERS
NUMBER
OF BONDS
85
215
715
69
425,000
2,072,000
25,016,000
97,487,000
1,084 125,000,000
Investment Custodial Services Limited
1.
2. FNZ Custodians Limited
3. Forsyth Barr Custodians Limited
4. Custodial Services Limited
5. ANZ Custodial Services New Zealand Limited ‑ NZCSD
6. Custodial Services Limited
7. Custodial Services Limited
8. Custodial Services Limited
9. Citibank Nominees (New Zealand) Limited ‑ NZCSD
10. Tea Custodians Limited Client Property Trust Account ‑ NZCSD
11. Lynette Therese Erceg & Darryl Edward Gregory & Catherine Agnes Quinn
12. Tappenden Holdings Limited
13. Custodial Services Limited
14. Custodial Services Limited
15. BNP Paribas Nominees (NZ) Limited ‑ NZCSD
16. JBWere (NZ) Nominees Limited
17. ANZ Bank New Zealand Limited ‑ NZCSD
18
Investment Custodial Services Limited
19. BNP Paribas Nominees (NZ) Limited ‑ NZCSD
20. BGS Trustee Limited
Total
DISTRIBUTION OF BONDS AND REGISTERED HOLDINGS AS AT 1 AUGUST 2017
1,001– 5,000
5,001– 10,000
10,001– 100,000
> 100,000
Total
86
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
DIRECTOR AND EMPLOYEE REMUNERATION
Individuals who are invited by the SKYCITY board to join the board as
non-executive directors are appointed subject to the company obtaining
the approval of the regulatory authorities in each of the gaming
jurisdictions in which the company operates, a process which usually
takes some months to conclude. Until such approvals are obtained,
individuals assist the board in an advisory capacity and are entitled to
receive remuneration for consultancy services provided to the company.
During the financial year ended 30 June 2017:
•
Jennifer Owen received $34,709.68 for consultancy services
provided to the company for the period from 1 September to
4 December 2016 (inclusive) prior to her appointment as a director
on 5 December 2016;
• Murray Jordan received $34,709.68 (plus GST) for consultancy
services provided to the company for the period from 1 September
to 4 December 2016 (inclusive) prior to his appointment as a
director on 5 December 2016; and
•
Rob Campbell received $29,375.00 (plus GST) for consultancy
services provided to the company for the period from 10 April to
24 June 2017 (inclusive) prior to his appointment as a director
on 25 June 2017.
REMUNERATION OF DIRECTORS
Remuneration paid to, and other benefits received by, non-executive
directors for services in their capacity as directors of the company
during the financial year ended 30 June 2017 are as listed below:
BOARD AND
COMMITTEE FEES
OTHER
Chris Moller (Chairman)
Bruce Carter (Deputy Chairman)
Brent Harman
Sue Suckling
Richard Didsbury
Richard Tsiang(2)
Jennifer Owen
Murray Jordan
Rob Campbell
$275,000.00
$192,500.00
$161,000.00
$157,411.29
$141,000.00
$70,500.00
$80,733.87
$80,733.87
$2,350.00
$3,928.08(1)
$1,964.04(1)
The figures shown are gross amounts and exclude GST where applicable.
(1) Being premiums paid to SKYCITY’s health insurance provider during the
period for the relevant director, who received the benefit of a health
insurance plan that SKYCITY offers to all of its employees (either at no cost
or at a discounted rate).
(2) Richard Tsiang retired as a director effective from 1 January 2017.
In addition to the amounts above:
• SKYCITY meets the expenses incurred by directors in relation to
company matters, which are incidental to the performance of their
duties, including travel;
• SKYCITY paid a total of $10,800.00 (plus GST) to Richard Didsbury
during the financial year ended 30 June 2017 in connection with
consultancy services provided by him in relation to the New Zealand
International Convention Centre development and Adelaide Casino
redevelopment projects, which were provided as additional services
outside of his capacity as a director of the company; and
• SKYCITY paid a total of $4,200.00 (plus GST) to Murray Jordan
during the financial year ended 30 June 2017 in connection with
consultancy services provided by him in relation to the Adelaide
Casino redevelopment project, which were provided as additional
services outside of his capacity as a director of the company.
87
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
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 benefits in their capacity as employees, the value of which was in excess of $100,000 and was paid to those employees during the financial
year ended 30 June 2017, are listed below.
Remuneration includes salary, short term cash bonuses and, where applicable, health insurance premiums and the value of share rights and shares
expensed (including PAYE and PAYG on vested share rights but excluding accrued PAYE and PAYG on unvested share rights) during the financial
year ended 30 June 2017. Remuneration shown below also includes settlement payments and 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
$230,000–$239,999
$240,000–$249,999
$250,000–$259,999
$260,000–$269,999
$270,000–$279,999
$280,000–$289,999
$290,000–$299,999
$320,000–$329,999
$330,000–$339,999
$340,000–$349,999
$350,000–$359,999
$370,000–$379,999
$380,000–$389,999
$390,000–$399,999
$400,000–$409,999
$410,000–$419,999
$420,000–$429,999
$430,000–$439,999
$440,000–$449,999
$450,000–$459,999
$480,000–$489,999
$500,000–$509,999
$540,000–$549,999
$580,000–$589,999
$790,000–$799,999
$840,000–$849,999
$1,050,000–$1,059,999
$1,320,000–$1,329,999
$1,380,000–$1,389,999
$1,690,000–$1,699,999
Total
88
EMPLOYEES
49
45
30
14
25
13
10
14
12
9
5
3
3
2
3
2
1
4
2
3
1
1
1
1
3
1
1
1
4
1
1
1
1
2
1
1
1
1
1
1
1
1
1
278
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 DIRECTORS' DISCLOSURES
INTERESTS REGISTER
Disclosure of Directors’ Interests
Section 140(1) of the New Zealand 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 2017 (notices given by directors during the
financial year ended 30 June 2017 are marked with an asterisk):
Chris Moller (Chairman)
Meridian Energy Limited
New Zealand Transport Agency
Westpac New Zealand Limited
Bruce Carter (Deputy Chairman)
ASC Pty Limited
Aventus Capital Limited
Badge Management Pty Limited
Bank of Queensland Limited
and certain subsidiaries
Cobbadah Pty Limited
Eudunda Farmers Limited
Ferrier Hodgson
Genesee & Wyoming Australia Pty Limited
Brent Harman
Harman Investments Limited
Sue Suckling
Callaghan Innovation Research Limited
ECL Group Limited
Jacobsen Holdings Limited
Jade Software Corporation Limited
Lincoln Hub Establishment Board
New Zealand Qualifications Authority
Sue Suckling Holdings Limited
Richard Didsbury
Chair
Chair
Auckland International Airport Limited
Brick Bay Wines Limited
Director
Brick Bay Development Trust
Chair
Chair
Director
Director
Director
Director
Consultant
Director
Director and
Shareholder
Chair
Chair
Chair
Chair*
Chair
Chair
Managing
Director
Brick Bay Investments Trust
Brick Bay Trustee Limited
Kiwi Property Group Limited
NX2 GP Limited
NX2 Hold GP Limited
Whisper Cove Heights Limited
Jennifer Owen
Aspire Child Care (Mascot) Pty Ltd
Owen Gaming Research
Murray Jordan
Chorus Limited
Metcash Limited
Real Clarity Limited
Starship Foundation
Stevenson Group Limited
Rob Campbell
Committee For Auckland Limited
King Tide Asset Management Limited
Precinct Properties New Zealand Limited
RC Custodian Limited
Summerset Group Holdings Limited
Tourism Holdings Limited
Tutanekai Investments Limited
WEL Networks Limited
Director
Director
Trustee
Trustee
Director
Director
Chair*
Chair*
Director
Director*
Principal*
Director*
Director*
Director and
Shareholder*
Trustee*
Director*
Director*
Director and
Shareholder*
Director and
Shareholder*
Director*
Chair and
Shareholder*
Chair and
Shareholder*
Director and
Shareholder*
Chair*
The following details included in the Interests Register as at 30 June 2016, or entered during the financial year ended 30 June 2017, have been
removed during the financial year ended 30 June 2017:
• Bruce Carter is no longer a director of Stichting Administratiekantoor Manadel;
• Sue Suckling is no longer a director of Restaurant Brands New Zealand Limited or a Trustee of Ministry of Awesome; and
• Richard Didsbury is no longer the chair of Committee for Auckland Limited or a director of Hobsonville Land Company Limited.
89
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
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 New Zealand Companies Act 1993, the following acquisitions and disposals of relevant interests
in SKYCITY shares during the period to 30 June 2017:
Chris Moller (Chairman)
Bruce Carter (Deputy Chairman)
Sue Suckling
Richard Didsbury
Jennifer Owen
Murray Jordan
DATE OF
ACQUISITION/
DISPOSAL
DURING PERIOD
16 September 2016
17 March 2017
16 September 2016
17 March 2017
16 September 2016
17 March 2017
16 September 2016
17 March 2017
2 March 2017
15 February 2017
19 April 2017
19 April 2017
CONSIDERATION
$4.6982 per share(1)
$3.9704 per share(1)
$4.6982 per share(1)
$3.9704 per share(1)
$4.6982 per share(1)
$3.9704 per share(1)
$4.6982 per share(1)
$3.9704 per share(1)
$3.7942 per share
$3.9211 per share
Nil(6)
Nil(6)
SHARES
ACQUIRED/
(DISPOSED)
1,295
1,243
1,281(2)
1,354(2)
642(3)
618(3)
619
595
15,000(4)
12,853(5)
(12,853)(5)
12,853(7)
(1) Shares issued under the SKYCITY Dividend Reinvestment Plan.
(2) Shares held by Tarquay Pty Limited for Tarquay Superannuation Fund.
(3) Shares held by the trustees of The Sue Suckling Family Trust.
(4) Shares held by the trustees of the Owen & Paull Retirement Fund.
(5) Shares held by ANZ Custodial Services New Zealand Limited for the trustees of Endeavour Trust.
(6) Shares transferred as part of a personal reorganisation.
(7) Shares held by the trustees of Endeavour Trust.
DISCLOSURE OF DIRECTORS’ INTERESTS IN SHARES
Directors disclosed the following relevant interests in SKYCITY shares as at 30 June 2017:
Chris Moller (Chairman)
Bruce Carter (Deputy Chairman)
Brent Harman
Sue Suckling
Richard Didsbury
Jennifer Owen
Murray Jordan
Rob Campbell
(1) Shares held by Tarquay Pty Limited on trust for Tarquay Superannuation Fund.
(2) Shares held by Forbar Nominees Limited.
(3) Shares held by the trustees of The Sue Suckling Family Trust.
(4) Shares held by the trustees of the Owen & Paull Retirement Fund.
(5) Shares held by the trustees of Endeavour Trust.
(6) Shares held by FNZ Custodians Limited for Tutanekai Investments Limited.
90
SHARES
BENEFICIALLY HELD
74,932
64,618(1)
49,808(2)
37,171(3)
35,846
15,000(4)
12,853(5)
25,000(6)
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017
COMPANY DISCLOSURES
STOCK EXCHANGE LISTINGS
SKYCITY Entertainment Group Limited is a listed issuer with ordinary
shares quoted on both the NZX Main Board and ASX (in each case,
under the ticker code ‘SKC’) and bonds quoted on the NZX Debt
Market (under the ticker code ‘SKC040’).
SKYCITY Entertainment Group Limited has been designated as
‘Non-Standard’ by the NZX due to the nature of the company’s
constitution. In particular, the constitution places restrictions on the
transfer of shares in the company in certain circumstances and provides
that votes and other rights attached to shares may be disregarded and
shares may be sold if these restrictions are breached, as more particularly
described on pages 92 and 93 of this annual report.
SKYCITY is listed as a ‘Foreign Exempt Listing’ on the ASX. The ASX
Foreign Exempt Listing category is based on a principle of substituted
compliance recognising that, for secondary listings, the primary
regulatory role and oversight rest with the home exchange and the
supervisory regulator in that jurisdiction.
SKYCITY ENTERTAINMENT GROUP LIMITED
The following persons held office as directors of SKYCITY
Entertainment Group Limited as at 30 June 2017:
Chris Moller (Chairman)
Brent Harman
Richard Didsbury
Murray Jordan
Bruce Carter (Deputy Chairman)
Sue Suckling
Jennifer Owen
Rob Campbell
SUBSIDIARY COMPANIES
Subsidiary Company Directorships
The following persons held office as directors of subsidiaries of
SKYCITY Entertainment Group Limited as at 30 June 2017:
• Directors: Graeme Stephens and Jo Wong:
New Zealand International Convention Centre Limited
Otago Casinos Limited
Queenstown Casinos 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 Australia Limited
SKYCITY Investments Queenstown Limited
SKYCITY Management Limited
SKYCITY Wellington Limited
Sky Tower Limited
• Directors: Graeme Stephens, Jo Wong, Bruce Carter and
David Christian:
SKYCITY Adelaide Pty Limited
SKYCITY Australia Finance Pty Limited
SKYCITY Australia Pty Limited
SKYCITY Darwin Pty Limited
SKYCITY Treasury Australia Pty Limited
• Directors: Peter Treacy and Robert Hamilton:
Horizon Tourism Limited
SKYCITY Investment Holdings Limited
• Directors: John Mortensen and Jo Wong:
SKYCITY Metro Limited
Non-wholly Owned Company Directorships
As at 30 June 2017, SKYCITY also had an interest in, and was
represented by SKYCITY executives on the boards of, the companies
listed below:
• SKYCITY representative on the board – John Mortensen:
Force Location Limited
WAIVERS FROM THE NEW ZEALAND AND AUSTRALIAN
STOCK EXCHANGES
The following waivers from the NZX and ASX Listing Rules were
either granted and published by NZX or ASX (as the case may be)
within, or relied upon by the company during, the 12-month period
preceding the balance date:
• on 9 February 2011, NZX granted SKYCITY a waiver from
NZX Listing Rule 7.11.1 (which requires allotment to occur within
five business days following the latest date on which applications for
securities close) in relation to the allotment of shares pursuant to
the company’s Dividend Reinvestment Plan
All other waivers granted prior to the 12-month period preceding the
balance date had ceased to have effect or were not relied upon during
the period.
VOTING RIGHTS ATTACHED TO SECURITIES
Each share gives the holder a right to attend and vote at a meeting of
shareholders. Holders have the right to cast one vote per share on a poll
of any resolution put to the shareholders.
There are no voting rights attached to SKYCITY’s debt securities.
However, bond holders are welcome to attend the annual meeting
of shareholders.
The total number of listed voting securities of SKYCITY Entertainment
Group Limited as at 30 June 2017 was 667,376,523.
91
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM
OTHER INFORMATION
LONG TERM INCENTIVE SHARES
As at 1 August 2017, a total of 2,248,124 shares were issued under the
SKYCITY Senior Executive Long Term Incentive Plan (initially
approved by directors in September 2009) and held by Public Trust
on behalf of 18 participants. The shares have been purchased by the
participants under the Plan with the assistance of interest-free loans and
are held on behalf of the participants by Public Trust for a restrictive
period. The relevant shares vest in a participant only when performance
hurdles set by the board of directors are met.
LIMITATIONS ON ACQUISITIONS 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);
• Casino Act 1997 (South Australia);
• Gaming Control Act (Northern Territory); and
•
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 significant influence or control over SKYCITY or its
business activities without obtaining any necessary statutory or
regulatory approvals in those jurisdictions.
Accordingly, the constitution contains the following provisions
restricting the acquisition of shares in the company to achieve this.
Clause 12.11 of the constitution provides that if a transfer of shares
results in the transferee, and the persons associated with that transferee:
• holding more than 5% of the shares in SKYCITY; or
•
increasing their combined holding further beyond 5% if:
– they already hold more than 5% of the shares in SKYCITY; and
– the transferee has not been approved by the relevant regulatory
authority as an associated casino person of any casino licence
holder,
then the votes attaching to all shares held by the transferee and the
persons associated with that transferee are suspended unless and until
either:
• each regulatory authority advises that approval is not needed; or
• any regulatory authority which determines that its approval is required
approves the transferee, together with the persons associated with that
transferee, as an associated casino person of any applicable casino
licence holder; or
•
•
the board of the company is satisfied that registration of the proposed
transfer will not prejudice any casino licence; or
the transferee and the persons associated with that transferee 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 transferees.
During the financial year ended 30 June 2017, the board considered all
such transfers and was satisfied in each case that the registration of the
relevant transfer would not prejudice any casino licence.
DONATIONS
Donations of $27,171 were made by the company during the financial
year ended 30 June 2017 ($10,041 during the financial year ended
30 June 2016).
REVIEW OF OPERATIONS AND ACTIVITIES
A detailed review of the operations and activities of the company for the
financial year ended 30 June 2017 is set out in the Chairman’s Review
on pages 4-7 of this annual report and Chief Executive Officer’s Review
on pages 8-11 of this annual report.
92
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 OTHER INFORMATION
OTHER LEGISLATION/REQUIREMENTS
General limitations on the acquisition of securities imposed by the
jurisdiction in which SKYCITY is incorporated (ie New Zealand law)
are outlined in the following paragraphs.
Other than the provisions noted on page 92 of this annual report, the
only significant restrictions or limitations in relation to the acquisition
of securities are those imposed by New Zealand laws relating to
takeover, overseas investment and competition.
The New Zealand Takeovers Code creates a general rule under which
the acquisition of more than 20% of the voting rights in SKYCITY, or
the increase of an existing holding of 20% or more of the voting rights
in SKYCITY, can only occur in certain permitted ways. These include
a full takeover offer in accordance with the Takeovers Code, a partial
takeover offer in accordance with the Takeovers Code, an acquisition
approved by an ordinary resolution, an allotment approved by an
ordinary resolution, a creeping acquisition (in certain circumstances),
or compulsory acquisition if a shareholder holds 90% or more of the
shares in the company.
The New Zealand Overseas Investment Act 2005 and the Overseas
Investment Regulations 2005 regulate certain investments in
New Zealand by overseas persons. In general terms, the consent of the
New Zealand Overseas Investment Office is likely to be required when
an ‘overseas person’ acquires shares or an interest in shares in SKYCITY
Entertainment Group Limited that amount to 25% or more 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.
ESCROW AND BUY-BACK ARRANGEMENTS
SKYCITY Entertainment Group Limited has no securities subject to
an escrow arrangement.
From time to time, the Public Trust acquires shares in the company
on-market for the purposes of the SKYCITY Senior Executive
Long Term Incentive Plan as detailed above. In addition, SKYCITY
(or a nominee or agent of SKYCITY) may, from time to time, acquire
existing shares in the company to satisfy its obligations to participating
shareholders under the company’s Dividend Reinvestment Plan
established in February 2011. As at the date of this annual report,
the company does not have in place an on-market share buy-back
programme.
CREDIT RATING
As at the date of this annual report, SKYCITY Entertainment Group
Limited has a Standard & Poor’s BBB– rating with a stable outlook.
FINAL DIVIDEND
In respect of the financial year ended 30 June 2017, a final dividend of
10 cents per share will be paid on 15 September 2017 to all shareholders
on the company’s register at the close of business on 1 September 2017.
The company’s Dividend Reinvestment Plan (established in
February 2011) will apply to this final dividend with a 2% discount.
The closing date for electing to participate in the Dividend
Reinvestment Plan for this final dividend is 5.00pm (New Zealand
time) on 1 September 2017. Full details of the company’s Dividend
Reinvestment Plan are available in the Investor Centre section of the
company’s website at www.skycityentertainmentgroup.com.
93
SKYCITY ENTERTAINMENT GROUP LIMITED | SKYCITYENTERTAINMENTGROUP.COM DIRECTORY
REGISTERED OFFICE
AUDITOR
SKYCITY Entertainment Group Limited
Level 6
Federal House
86 Federal Street
PO Box 6443
Wellesley Street
Auckland
New Zealand
Telephone:
+64 9 363 6000
Email: sceginfo@skycity.co.nz
www.skycityentertainmentgroup.com
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
PricewaterhouseCoopers
188 Quay Street
Private Bag 92162
Auckland
SOLICITORS
Russell McVeagh
Vero Centre
48 Shortland Street
PO Box 8
Auckland
Bell Gully
Vero Centre
48 Shortland Street
PO Box 4199
Auckland
Webb Henderson
110 Customs Street West
PO Box 105–426
Auckland
SUPERVISOR FOR BONDS
The New Zealand Guardian Trust
Company Limited
Dimension House
99–105 Customhouse Quay
PO Box 3845
Wellington
REGISTRARS
NEW ZEALAND
Computershare
Investor Services
Limited
Level 2
159 Hurstmere Road
Takapuna
Private Bag 92119
Auckland
Telephone:
+64 9 488 8700
Facsimile:
+64 9 488 8787
Email: enquiry@computershare.co.nz
AUSTRALIA
Computershare
Investor Services
Pty Limited
Level 4
60 Carrington Street
Sydney NSW 2000
GPO Box 7045
Sydney NSW 2000
Telephone:
+61 2 8234 5000
Facsimile:
+61 2 8234 5050
Email: enquiry@computershare.co.nz
94
ANNUAL REPORT | YEAR ENDED 30 JUNE 2017 skycityentertainmentgroup.com