Annual Report
Year Ended 30 June 2019
GENERAL
Year in Review
Creating Value
Performance
Diversity Snapshot
Chair’s Review
Chief Executive Officer’s Review
Delivering Our Group Strategy
About SkyCity
Auckland
Hamilton
Adelaide
Queenstown
International Business
Our Risk Profile and Management
Our Board
Our Senior Leadership Team
SUSTAINABILITY
Our Sustainability
Our Sustainability Pillars
Our Customers
Our People
Our Communities
Our Suppliers
Our Environment
Independent Limited Assurance Statement
CORPORATE GOVERNANCE STATEMENT AND OTHER DISCLOSURES
Corporate Governance Statement
Director and Employee Remuneration
Shareholder and Bondholder Information
Directors’ Disclosures
Company Disclosures
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
GRI CONTENT INDEX
GLOSSARY
DIRECTORY
ANNUAL MEETING
4
6
8
12
14
15
16
24
27
31
32
34
35
36
40
44
48
52
58
72
78
84
91
92
104
118
121
123
127
134
135
136
137
138
139
174
178
182
183
The 2019 SkyCity Annual Meeting will be held on Friday 18 October 2019 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 14 August 2019 and is signed on behalf of the Board of directors of SkyCity
Entertainment Group Limited (SkyCity or the company and, together with its subsidiaries, the Group) by:
Rob Campbell
Chair
Bruce Carter
Deputy Chair
An electronic copy of this annual report is available in the Investor Centre section of the company’s
website at www.skycityentertainmentgroup.com
ABOUT THIS ANNUAL REPORT
Unless otherwise stated, all dollar amounts in this annual report are expressed in New Zealand dollars.
Where appropriate, information is also provided in relation to activities that have occurred after 30 June 2019, but prior to publication of this
annual report.
The non-financial information in this annual report has been informed by the principles and disclosures of the Global Reporting Initiative’s
(GRI) Sustainability Reporting Standards. Ernst & Young has undertaken limited assurance (in accordance with the International Standard on
Assurance Engagements (New Zealand)) over disclosures associated with selected performance data included in the Sustainability section
included in this annual report. A GRI reference index based on the GRI Sustainability Reporting Standards is included on pages 178–181 of this
annual report.
Normalised numbers are a non-GAAP financial measure. A reconciliation of reported and normalised earnings and description of the
differences are provided on pages 174–177.
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Year in Review
8
1
0
2
JULY
• Sky Tower lit yellow and orange
to depict a sunrise over a 3-week
period to celebrate Matariki,
the Māori New Year
• SkyCity becomes a signatory to
the Climate Change Statement
committing SkyCity to reducing
greenhouse gas emissions in line
with New Zealand’s obligations
under the Paris Agreement
AUGUST
• Record FY18 full-year result with
normalised net profit after tax
(NPAT) up 10.4% to $169.9 million
and reported NPAT up 277.9% to
$169.5 million (due to A$95 million
impairment of SkyCity Darwin’s
goodwill the previous year)
• Sky Tower open day raises more
than $9,000 for Youthline
• SkyCity Teddy Bears’ Picnic in the
Sky Tower raises more than $4,500
for Kidz First Children’s Hospital
SEPTEMBER
• FY18 final dividend paid to
shareholders – 10 cents per share
• SkyCity Auckland welcomes
public health providers into the
casino during Gambling Harm
Awareness Week
• Marek Przyborek (Huami) named
2018 New Zealand Sommelier of
the Year
• Sky Tower hosts the Memorial
Firefighter Stair Climb in honour
of New Zealand firefighters lost
in the line of duty since 1872
OCTOBER
• Carmen Leong (SkyCity Grand Hotel)
wins New Zealand Receptionist
of the Year 2018 at the AICR Hotel
Receptionist of the Year competition
• More than 600 egg trays donated
to the Auckland Council to assist
the safe carriage of eggs from
Great Barrier Island to the
Auckland City Mission
• SkyCity announces plans to
grow its hotels business across
its portfolio and develop its
Queenstown site
NOVEMBER
• SkyCity agrees to sell SkyCity Darwin
to Delaware North for A$188 million
• Dani Chen (Bellota) wins the 2018
World Tapas Championship in Spain
• SkyCity becomes a Platinum Partner
of Women in Gaming Australasia
• SkyCity's bespoke Māori leadership
programme, Tahuna Te Ahi, wins the
2018 Deloitte Top 200 Diversity
& Inclusion Leadership Award
DECEMBER
• Academy Award-winning design
and effects company Weta
Workshop announces plans
to open a new entertainment
experience at SkyCity Auckland
• Danielle Davies (SkyCity Auckland)
named Young Tourism Export
Council’s Rising Star
9
1
0
2
JANUARY
• Annual Sky Tower New Year’s Eve
fireworks and laser animation
display welcomes in the New Year
• Record visitation of 32,000 people
to the SkyCity Auckland main
casino floor on New Year's Eve/Day
– up 11% from the prior year
• Record New Year's Eve/Day daily
gaming machine turnover at
SkyCity Auckland
FEBRUARY
MARCH
• FY19 interim dividend paid to
shareholders – 10 cents per share
• Sky Tower lit as a candle to honour
the victims of the Christchurch
attack and to stand in solidarity
with the Muslim community and
all those affected
• 2019 NRL season officially
launched at SkyCity Auckland,
the official ‘Home of the
Vodafone Warriors’, with squad
members and fans in attendance
• SkyCity announces a climate
change strategy that will see
its New Zealand sites carbon
neutral by the end of 2019, with its
Adelaide site to follow in 2020
• Reported net profit after tax
(NPAT) down 11.4% for the first
half of FY19 to $82.8 million and
normalised NPAT up 11.4% to
$97.0 million
• SkyCity announces on-market
share buy back programme to
purchase up to 5% of its total
ordinary shares on issue
• Installation commences of
Sara Hughes’ 2,400sqm glass
artwork on the exterior of the
New Zealand International
Convention Centre
APRIL
• Sale of SkyCity Darwin to Delaware
North for A$188 million completed
• David Christian appointed as
General Manager Adelaide
• SkyCity agrees to sell a long term
concession to Macquarie
Principal Finance to operate
SkyCity Auckland’s 3,200 car park
spaces until 2048 for $220 million
• SkyCity awarded Gender Tick,
a New Zealand-based accreditation,
in recognition of its commitment to
providing a fair workplace for
all employees
MAY
JUNE
• SkyCity Auckland awarded the
New Zealand Rainbow Excellence
Awards 2019 Training and
Development Award for its
Transition Support framework
• SkyCity announces plans to
launch an offshore online
gaming business
• More than $1.3 million raised
for Leukaemia & Blood
Cancer New Zealand in the
15th Firefighter Sky Tower
Stair Challenge
• SkyCity awarded the Auckland
International Airport Award for
Contribution to the Growth of
Chinese Tourism in New Zealand
at the 2019 HSBC NZCTA China
Business Awards
• The Sugar Club launches
New Zealand’s first ever low
carbon menu
• SkyCity named as a Platinum
winner in the Best Learning &
Development Project – Leadership
Capability category at the
international LearnX Awards for
its Tahuna Te Ahi programme
• Liz Burrett (SkyCity Auckland)
named Hotel Industry Sales,
Marketing & Distribution Employee
of the Year at the 2019 New Zealand
Hotel Industry Awards
We are proud of the contribution we make to the
communities we operate in, and our staff continue
to do us proud, year-on-year.
Creating Value
Inputs
Our Business
FINANCIAL CAPITAL
Pool of funds (equity, debt and grants) available
to SkyCity from banks, shareholders and
bondholders or generated through SkyCity’s
operations or investments
MANUFACTURED CAPITAL
Manufactured production-orientated
physical objects (buildings, equipment and
infrastructure) available to SkyCity that
contribute to the delivery of SkyCity’s products
and services
INTELLECTUAL CAPITAL
Intellectual property, organisational capital,
brand and reputation developed by SkyCity
HUMAN CAPITAL
Competencies, capabilities and experience of
the SkyCity workforce and SkyCity’s capacity to
add value through human capital development
SOCIAL AND RELATIONSHIP CAPITAL
Relationships within SkyCity and with external
stakeholders that enhance individual and
collective wellbeing and are essential to
SkyCity’s social licence to operate
NATURAL CAPITAL
Renewable and non-renewable environmental
stocks (air, water, land and ecosystem health)
that provide goods and services that support
SkyCity’s current and future prosperity
5,031 staff
5 properties across New Zealand
and Australia
GAMING
5 casino licences
3,204 electronic gaming machines
273 table games
307 automated table games
HOSPITALITY
23 restaurants
16 bars
HOTELS
635 hotel rooms
CONFERENCES
6,266 sqm of conference rooms
SKY TOWER
328 metres tall
PARKING
2,248 parking bays
as at 30 June 2019
FY19 OPERATING
EARNINGS BY PROPERTY
FY19 REVENUE BY
BUSINESS ACTIVITY
Auckland 79%
Hamilton 8%
Queenstown & Wharf 1%
Adelaide 6%
Darwin 5%
Local Gaming 63%
International
Business 12%
Hotel and
Conventions 8%
Food and Beverage 11%
International Business 1%
Other 6%
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Outputs &
Financial Results
FY19 revenue (including gaming GST) and annual visitation
GAMING
$764 million
(reported)
2.8million visits from
loyalty card members*
$831 million
(normalised)
HOSPITALITY
$111 million
HOTELS
$54 million
CONFERENCES
$22 million
5.7 million
restaurant/bar covers
228,000
rooms occupied
160,000
conference delegates
SKY TOWER
$18 million
574,000 visits
PARKING
$8 million
2.2 million cars parked
$161 million in taxes to Governments
$301 million in salaries & wages to staff
$135 million of dividends declared in relation
to FY19 period for shareholders
$14 million in community contributions, levies
and sponsorships
$178 million to suppliers
$344 million of capital invested
$38 million in interest paid to lenders
Outcomes
& Impacts
Customers
Be responsible hosts
Happy, safe customers
People
Inspire our people
Great, safe place to work
Communities
Grow our communities
Thriving local communities
Suppliers
Source responsibly
Consistent ethical sourcing
Environment
Protect the environment
Significantly lower
emissions
Note: The sale of the SkyCity Darwin business was completed on 4 April 2019. Accordingly, the SkyCity Darwin business is not included in
the figures provided as at 30 June 2019, but is included for the period from 1 July 2018 – 3 April 2019 for the purposes of the FY19 Operating
Earnings by Property graph, FY19 Revenue by Business Activity graph and FY19 annual visitation and normalised revenue information.
* Calculated by reference to customers who used their SkyCity Premier Rewards cards
to game, where one visit records a customer's patronage on a day irrespective of how
many times they used their card on that day.
Performance
Our FY19 Highlights
SkyCity delivered a solid financial performance in FY19, underpinned by strong growth in our
International Business and good results from the combined New Zealand properties. Adelaide was
stable on a like-for-like basis, despite ongoing to construction disruption experienced from the
redevelopment project.
The key features of the FY19 result are:
Reported EBITDA
Normalised EBITDA of
$297.8 million
down 3.9% due to a win rate in International Business
of 1.00% (below the theoretical win rate of 1.35%) and
other significant items
$342.7 million
up 1.3% over the previous comparable period
International Business turnover
$14.1 billion
up 19% on FY18 with gain in share of Australia/NZ VIP market
Auckland electronic gaming machine revenue
7.4%
growth over FY18 due to growth in visitation, new product mix and floor layout
Reported NPAT
Normalised NPAT of
$144.6 million
down 14.7% due to a win rate in International
Business of 1.00% (below the theoretical win rate of
1.35%) and other significant items
$173.0 million
up 1.9% over the previous comparable period
Net asset sale proceeds
$450 million
to be released from the sale of SkyCity Darwin, Auckland car park concession and Federal Street car park
Dividends (fully imputed)
20 cps
comprising an interim dividend of 10 cents per share and a final dividend of 10 cents per share,
which will be paid on 13 September 2019 to all shareholders on the company’s register at the
close of business on 30 August 2019
Our Performance History
Group Revenue
1,008
867
1,084
919
1,029
878
1,101
1,119
816
822
n
o
i
l
l
i
m
$
1,200
1,000
800
600
400
200
0
FY15
FY16
FY17
FY18
FY19
Group EBITDA
Performance
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Normalised
(Including Gaming GST)
Reported
305
304
334
330
320
307
338
310
343
298
n
o
i
l
l
i
m
$
350
300
250
200
150
100
50
0.0
FY15
FY16
FY17
FY18
FY19
Earnings Per Share (EPS) and Dividend Per Share (DPS)
30.0
25.0
22.9
22.0
20.0
25.5
24.3
23.4
21.0
25.4
25.3
25.6
20.0
20.0
21.4
20.0
e
r
a
h
s
r
e
p
s
t
n
e
C
20.0
15.0
10.0
5.0
0.0
6.8
FY15
FY16
FY17
FY18
FY19
Enterprise Value
3,357
348
3,110
643
3,072
349
3,196
447
3,036
488
2,467
3,009
2,723
2,749
2,548
n
o
i
l
l
i
m
$
3,500
3,000
2,500
2,000
1,500
1,000
500
0.0
Normalised
Reported
Normalised EPS
Reported EPS
Declared DPS
Equity Value(1)
Net Debt(2)
FY15
FY16
FY17
FY18
FY19
(1) Based on the share price and number of shares on issue as at 30 June in each financial year.
(2) Gross hedged debt less cash at bank as at 30 June in each financial year.
Notes: (a) FY15–FY19 reported Group revenue figures have been adjusted for New Zealand IFRS 15 (Revenue from Contract with Customers);
and (b) reported Group revenue and reported Group EBITDA figures for FY18 and FY19 exclude SkyCity's Darwin operations, which were
discontinued on 4 April 2019.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Better
communities
at the heart
of what
we're doing
Our sustainability initiatives are focussed on doing good for our communities
– our customers, employees and suppliers. Our objective is to ensure that our
strategic decisions strengthen the communities we operate in and provide
environments and opportunities for our customers, suppliers and staff to enjoy,
to be entertained and to be safe.
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FY19 Performance Highlights
Our People
We established the SkyCity Inclusion
Council to support the embedding of
an authentic and inclusive culture
within SkyCity Auckland
Our Customers
In the 2019 SkyCity Employee
Engagement Survey, our staff rating as a
'responsible host' was 88% – an increase
of 2% from the 2017 survey
Our Suppliers
We developed and adopted a new
ethical and responsible sourcing
strategy for the SkyCity Group
Our Communities
We paid a total of $4.0 million (assured) to
the four New Zealand SkyCity Community
Trusts for distribution to communities in
the Auckland, Waikato and Queenstown
Lakes regions and distributed over
$1.6 million (not assured) in
sponsorships to individuals
and organisations
Our Environment
We will be among the first major
New Zealand companies to go carbon
neutral, achieving carbon neutrality
across our New Zealand sites
in 2019
STAFF
GENDER BREAKDOWN
WOMEN IN LEADERSHIP
Diversity Snapshot
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Diversity
Snapshot
SkyCity is a major employer with over 5,000 staff
and growing. We employ a diverse range of people
at all skill levels and aim to create an environment
where people are at the centre, are motivated
to work hard, progress in their careers and are
empowered to grow and achieve.
The following graphic shows the diverse make up of
our workforce as at 30 June 2019.
WE HAVE
5,031
STAFF
(full-time, part-time
and casual)
AGE
LGBTTI+ COMMUNITY
6%
identify as being
a member of the
LGBTTI+
community
TOTAL WORKFORCE
VS
48.8%
WOMEN
51.1%
MEN
0.1%
GENDER DIVERSE
38%
of leadership
roles held
by women
The gender composition of SkyCity’s directors, officers, senior executives and total workforce as at
30 June 2019 and, comparatively as at 30 June 2018, is set out below:
Female
Male
Female
Male
2019
Number
%
Number
%
Total
2018
Number
%
Number
%
Total
Directors
Officers
Senior Executives
2
3
4
33%
38%
36%
4
5
7
67%
62%
64%
6
8
11
Directors
Officers
Senior Executives
2
3
4
Total Workforce
2,456
49%
2,569
51%
5,025
Total Workforce
2,737
29%
43%
40%
48%
5
4
6
2,950
71%
57%
60%
52%
7
7
10
5,691
In the above tables:
•
‘officers’ are the Chief Executive Officer and those directly reporting to the Chief Executive Officer, other than the
Executive Assistant;
•
‘senior executives’ are those who hold a strategic position (as determined by the People and Culture Committee from
time to time) and are noted as a ’senior executive’ in the SkyCity Board Charter; and
•
the ‘total workforce’ number does not specify those who identify as gender diverse.
Generation Z (<23 years)
18.8%
Millennials (24–36 years)
40.8%
Generation X (37–53 years)
28.8%
Baby Boomers (54–75 years)
11.5%
Veterans (76–93 years)
0.1%
59%
of our workforce are
36 years old and under
35 YEARS
average age of
our workforce
83 YEARS
age of our oldest
staff member
DISABILITIES
ETHNICITIES*
1%
identify as having
a disability
OUR TOP 10 ETHNICITIES STAFF IDENTIFY WITH:
Chinese
New Zealander
Indian
Australian
Māori
Other Asian
Filipino
European
Other European
Samoan
16.5%
15.1%
11.3%
9.3%
8.1%
7.7%
6.1%
6.0%
3.4%
2.7%
OUR TOP 3 NON-ENGLISH LANGUAGES:
Mandarin, Tagalog (Philippines) and Hindi
*Given as a percentage of those staff members who provided details about their ethnicity.
Staff speak/write in
60
different languages
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Chair’s Review
The past year has been one of solid
performance by SkyCity’s ongoing
business while progress has been made
on major projects setting the stage for
future improvement.
Reported net profit was down 14.7%, impacted
by some significant transactions, including the
sale of SkyCity Darwin and a lower win rate in
International Business. Normalised net profit,
which is a commonly referenced measure of
performance in the casino industry in Australasia,
was up slightly from the preceding year.
The FY19 outcome was negatively impacted by
some specific events, such as the imposition of
a new 'bed tax' on our Auckland hotel revenue,
a $6.5 million increase in effective tax rate and
the earnings from our SkyCity Darwin property
being available for only 9 months due to its sale.
Our operations in Auckland and Adelaide continue
to face disruption from surrounding development.
The wider economic and tourism conditions
have not been buoyant. Those things noted,
along with the costs associated with rectifying a
substantial technology deficit across the business,
performance must improve.
The aim of SkyCity is to be a business which
succeeds in financial, social and environmental
terms in the long run. This is an “all of business”
objective which requires the active commitment of
all of our leadership and staff. We judge ourselves,
and expect to be judged by others, across this
full range. Our success must be part of the success
of the communities of which we form part.
Given this, we have applied considerable attention
to our staff training and involvement programmes
based on diversity, skills and performance;
refocussed our community funding programmes
on youth and employment development; and
taken a more defined and positive position on
climate change response. We have continued
to develop our alcohol and gambling addiction
programmes in monitoring and support.
The primary task of the SkyCity Board is the
efficient allocation of capital. There has been
genuine progress here since I identified
last year a strategy to enhance returns on
capital employed in the business. The sale of
the SkyCity Darwin business, the long term
concession of our SkyCity Auckland car park
assets and the Federal Street car park in
Auckland reflect this strategy. These sales will
net the business around $450 million to reduce
debt, institute a capital returns programme and
fund our ongoing and future growth projects.
The overall impact is to place the business in a
strong position to fund the ongoing repair of our
technology platform and other value enhancing
projects under consideration.
The Auckland and Adelaide construction projects
have made progress and are being intensively
managed within the terms of their build contracts.
The Auckland project is the subject of unacceptable
and costly delays, but will deliver an impressive
convention centre and hotel complex which will
be of considerable ongoing value to our business
and a national asset in its own right. Integrated as
it will be with our other hotel and entertainment
properties in the precinct, including expanded
activities and food and beverage outlets, today’s
construction site will become tomorrow’s gathering
place for locals, tourists and convention attendees
for many decades.
The Adelaide casino and hotel expansion project
is moving at pace. This project is fully integrated
with a massive city redevelopment around the
iconic Riverside and Oval. We remain confident
that this project will greatly enhance the value of
our Adelaide property, lifting its performance to
required levels.
In all of our casino properties, we continue to
invest to provide our customers with up-to-date
products and experiences equal to that of casinos
throughout the world. Our customers cover a
wide range of gaming interests, levels of play and
service expectations. Their satisfaction with their
experience is vital to our success and it is in the
nature of our business that we must be constantly
reinvesting to meet their demands. This makes
our vigilance and control over capital and risk all
the more critical.
Rob Campbell
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Chief Executive Officer’s Review
The year under review has been a good
one for SkyCity with a continuation of
the positive momentum that has been
evident in the business over the last
few years.
Features of the year include:
•
•
•
•
•
•
•
•
•
•
•
•
Reported earnings before interest, tax,
depreciation and amortisation (EBITDA)
down 3.9%, and reported net profit after
tax (NPAT) down 14.7%, due to a lower win
rate in International Business and other
significant items
Normalised EBITDA up 1.3%, and normalised
NPAT up 1.9%, despite a more challenging
operating environment
Excellent progress on our major project in
Adelaide – due to open towards the end of 2020
Making progress on our major project in
Auckland – now expected to complete towards
the end of 2020. We continue to engage with
the main construction contractor to expedite
the project
Sale of SkyCity Darwin and Auckland car parks
(main site concession and Federal Street) –
expected to release $450 million of cash proceeds
Successful buy back of $39 million of shares
on-market as part of our refreshed capital
allocation framework
Declaration of a fully-imputed final dividend
of 10 cents per share – bringing total FY19
dividends to 20 cents per share
Offshore online casino launched in August 2019
in partnership with Gaming Innovation Group
Development of master plans for Auckland,
Hamilton and Queenstown, including the
acquisition of land in Queenstown and
consolidation of properties adjacent to the
SkyCity Auckland precinct
Refreshed brand launched on 1 July 2019
Continued investment in our people with new
staff values approved – “Own it, Share it, Live it”
Ongoing investment in key sustainability
initiatives
Overall, I am pleased with where we have finished
the year, particularly our operating results
which were slightly ahead of expectations − full
credit to the team for delivering the numbers.
These results were achieved against the backdrop
of a more challenging operating environment,
both domestically and internationally, and
increased cost pressures across the business.
When you adjust for the sale of our Darwin
property (which closed in April 2019) and
legislative changes increasing our effective
tax rate, normalised NPAT for FY19 was up 7.5%
relative to the previous corresponding period.
Reflecting on the current economic environment
(both local and international), our outlook
for FY20 is more cautious than prior periods.
However, we continue to expect growth on a
like-for-like basis and will be working hard to
achieve this. Comparability of our FY20 earnings
to prior periods will be complicated by structural
changes to the business (ie. asset sales and
the upcoming closure of our existing SkyCity
Auckland Convention Centre while it is readied
for Weta Workshop and the All Blacks Experience)
and higher pre-opening costs as we ramp up
preparations to operationalise our new assets in
Auckland and Adelaide post completion.
Our refreshed Group strategy, now in its second
year, has a clear emphasis on the creation of
shareholder wealth and a focus on sustainability
initiatives critical to our social licence to
operate. The progress we have made across
our key sustainability initiatives is an area I am
particularly proud of in the year under review.
Being recognised at the Deloitte Top 200 Awards
as the winner of the Diversity & Inclusion category
for our Māori leadership programme, Tahuna
Te Ahi, was a great moment for SkyCity, as is
our progress towards being carbon neutral in
New Zealand by September 2019 (and Adelaide
during 2020).
We refreshed our brand across our New Zealand
properties from 1 July 2019 with a new, more
contemporary logo which reflects our values
of “Own it, Share it, Live it” and the modern,
dynamic, entertainment company we are today.
Our Adelaide property will follow this refresh in
2020 to coincide with completion and opening of
the expanded casino and new hotel project.
Everyone has been really stretched to accomplish
the many strategic initiatives whilst also improving
the underlying operations. This pressure will
continue through next year and the following as
we open and establish our two major projects –
in addition to managing the completion of the
developments themselves we will be recruiting
and training around 1,500 new team members.
A big thank you to the SkyCity Board for their
ongoing support of me and the Senior Leadership
Team over the past year and to my team across the
business for their tireless efforts and positive energy.
Graeme Stephens
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 17
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Delivering Our Group Strategy
Last year, we announced a refreshed Group medium term strategy which has a
clear focus on the creation of both sustainable shareholder returns and enhanced
social and sustainability initiatives critical to the long term viability and success
of SkyCity.
Key considerations when setting the strategy were:
•
Communities
need good
businesses
By creating value for others,
we create value for SkyCity.
•
•
•
profitability of our business is roughly 80%
from New Zealand and 20% from Australia.
Shareholders are comfortable with the
relatively low country risk and regulatory
environments that these jurisdictions offer and
we are likely to remain focussed on this region
for the foreseeable future;
our business is predominantly gaming-led,
with roughly 80% currently coming from the
casino component. The long term, exclusive
nature of our casino licences provides a solid
underpin to the risk profile of the business.
We have strategically evaluated our existing
casino licences to ensure we are maximising
the potential within them and have identified
further opportunity for growth in the premium
market as well as our Queenstown licences;
there are unlikely to be many (if any) new
land-based casino licence opportunities in our
jurisdictions of operation, so growth (other than
organic growth) will have to come from other
lines of business. The balance of our business
essentially derives from hotels and restaurants.
Our restaurants are relatively low margin and
exist primarily to service our gaming, hotel
and conventions customers and to ensure
that our destinations remain relevant in their
communities. Our hotels are higher margin
businesses and there is an opportunity to scale
up our portfolio and expertise;
•
•
we are cognisant of a strategic need to
remain abreast of developments in the online
and digital space and, where appropriate,
to ensure that we take up opportunities that
will ensure we continue to offer a relevant form
of entertainment;
a review of our existing precincts to ensure
that we are maximising opportunities has
highlighted areas of potential investment
into premium gaming spaces, hotels (as
highlighted above) and entertainment to
ensure our destinations remain relevant to
customer demand. Where necessary, we are
prepared to acquire property to ensure we
are future-proofed;
we have two major projects currently underway
that have committed us to ~$800 million of
debt over the next few years. While we are
very comfortable with our ability to service
and repay this level of gearing, it does not
leave us with any significant debt capacity
for other expansionary projects or initiatives
in the short term. Any funding requirements
for new initiatives will be raised through sale
of non-core assets and/or partnering using a
“capital lighter” approach; and
•
the relatively high dividend yield that SkyCity
offers is valued by shareholders and should be
preserved and recognised when looking at any
future funding requirements.
Our Vision
To be the leader in gaming, entertainment
and hospitality in our communities
Our Business Goals
Improve
our operating
performance
Optimise
our existing
portfolio
Grow and
diversify our
business
Our Character &
Culture Goals
Offer a great
and safe
place to work
Always put
customers
first
Be responsible
leaders in our
communities
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This section provides a summary of SkyCity’s
performance and strategic positioning to create
value during the 2019 financial year and our
priorities for the year ahead.
FY19 Performance –
Our Business Goals
Improve our Operating Performance
During the financial year, we successfully
implemented several initiatives to improve
our operating performance, including new
events/promotions, more effective marketing,
investing in new products and placing a greater
emphasis on data analytics.
The benefits of new gaming product and changes
to the floor layout are being realised across
the Group, particularly in Auckland, as is our
ongoing investment in premium/VIP gaming.
Our International Business has seen increased
visits from major customers, which has led to a
record year in terms of turnover and normalised
profitability. Plans to significantly upgrade our
premium gaming areas in Auckland are underway
with a complete refurbishment of Levels 8 and 9
of the main casino site due to be completed by
the second half of FY20.
We continue to make good progress on our
ICT investment and digital capability. We have
delivered significant change to critical ICT
infrastructure over FY18 and FY19 and are now
at a point where we can focus on initiatives
to enhance the customer experience, centred
around customer relationship management and
loyalty improvements.
SkyCity remains firmly focussed on achieving
efficiencies where possible to offset cost inflation
and achieve operating leverage. SkyCity has a
lean operational model with detailed cost reviews
completed annually.
We were excited to launch a refresh of our
brand on 1 July 2019 in New Zealand with
changes to signage and brand collateral being
progressively implemented. Our new brand is
reflective of who we are now − a diverse, dynamic,
entertainment company. Our approach to the
refresh has been to focus on the customer and
to make incremental changes to avoid a costly
replacement of touchpoints. We plan to launch
the refresh in Adelaide around the time the new
expanded facility opens, which will also coincide
with a name change from Adelaide Casino to
SkyCity Adelaide.
Optimise our Existing Portfolio
We have progressed a number of key initiatives
to optimise our existing portfolio over the year
in review.
The New Zealand International Convention
Centre and Horizon Hotel project, which has been
subject to considerable delays from originally
contracted completion dates, is proceeding
albeit slower than desired. The convention
centre is close to being watertight and the
shape and form of the meeting rooms, plenary,
exhibition floor and public spaces is coming to
life. The unique glass panels and terracotta spine
wall created by New Zealand artists, Sara Hughes
and Peata Larkin, are now visible at street level.
The 300-room, 5-star hotel is well advanced with
the external façade completed and internal fitout
well progressed. At this stage, we continue to
expect completion of the project towards the
end of 2020 and expect no material changes to
previous guidance on the total investment for
the project.
Excellent progress has been made on our
expansion of the Adelaide Casino during the
year. The project is progressing well with Hansen
Yunken, the main construction contractor, on time
for a September 2020 completion. The 'topping
off’ of the new facility is expected to take place
in September 2019 and the hotel, casino levels
and public spaces are well established – the first
glass panels were installed in early June 2019.
Walker Corporation, which is developing Festival
Plaza and a 1,500-space car park (adjacent to the
casino), is progressing satisfactorily. SkyCity still
expects to deliver the project in-line with its
A$330 million budget.
Significant attention is being given to preparing
both projects for operationalisation to ensure
a smooth handover and ensure we can hit the
ground running post openings. As a result, you
will note a step up in pre-opening costs in both
Auckland and Adelaide as we near completion.
SkyCity’s master planning for the Federal Street
precinct in Auckland is beginning to take shape,
with the property acquisitions largely completed
and the move of Head Office to SkyCity HQ on the
corner of Albert and Victoria Streets underway.
This move will allow for Federal House on
Federal Street to be demolished and become
part of a broader precinct development, which
will include accommodation, retail and further
entertainment/hospitality. SkyCity is actively
seeking a development partner to co-invest in
developing the Federal Street block and to further
unlock the value of the precinct.
SkyCity continues to evaluate the potential for
further development opportunities in both
Hamilton and Queenstown. We own undeveloped
freehold land in Hamilton adjacent to our casino
which could accommodate a hotel. Our decision
to proceed with any development will be
influenced by a need to increase the number of
electronic gaming machines at the property as we
are already capacity constrained on weekends.
approval to buy up to 5% of issued capital under
the buy back programme. Even assuming the full
buy back is executed, we have sufficient funding
headroom to invest in our master planning
opportunities in Hamilton and Queenstown on
a standalone basis and stay within acceptable
gearing limits, but would need a development
partner in Auckland to make the investment
feasible and not stretch our balance sheet.
In Queenstown, we have successfully acquired
a hectare of lakefront land (633 Frankton Road)
with panoramic views of the Remarkables and
Lake Wakatipu. Premium accommodation in
Queenstown remains undersupplied despite
the prominence of high-value tourists − a
significant opportunity exists for SkyCity to
provide an integrated gaming/lodging offering for
VIP/premium customers given the popularity of
the location.
Given the nature and size of our potential
investments in Hamilton and Queenstown,
certain regulatory changes will be required.
Consistent with our intention to pursue
opportunities to go “capital lighter”, we have
concluded the sale of our SkyCity Darwin
property and the Federal Street car park and
have gone unconditional on the sale of the
long term concession over our Auckland car
parks (expected to complete on 19 August 2019).
These transactions will release significant capital
(around $450 million) to repay bank debt in the
first instance and then recycled into capital return
initiatives and strategic opportunities.
SkyCity remains focussed on effective capital
allocation and our balance sheet is in a strong
position to deliver on our medium term
strategic plan. A combination of surplus cash
due to asset sales and there being no immediate
requirement for re-distribution of proceeds into
strategic projects (and a share price trading
below our view of fair value), saw SkyCity proceed
with an on-market share buy back programme
during 2H19 with $39 million in total shares having
been acquired by 30 June 2019. We have Board
Consistent with prior periods, we remain
committed to both our BBB- credit rating, which
was recently reinforced by Standard & Poor’s,
and our existing dividend policy, which offers
shareholders attractive yield through the cycle.
Grow and Diversify our Business
Hotel Strategy
SkyCity is progressing with its strategy to grow
its hotel business. SkyCity’s existing presence in
hotels is expanding in Auckland and Adelaide over
the next 18 months. As previously highlighted, we
also see potential for further hotels connected
to existing precincts in Auckland, Hamilton and
Queenstown as part of master planning initiatives,
and potentially a second hotel in Adelaide
over time.
SkyCity recognises the value that it is creating
through the development of a portfolio of
hotels and remains keen to introduce an
investment/development partner at an
appropriate price and time. There is no immediate
need or requirement to release capital from a
partial sale or monetisation of our hotel assets
and we have sufficient capacity to progress the
current pipeline of initiatives.
Online Gaming
In May 2019, we announced that SkyCity, via a
Maltese subsidiary, had agreed to partner with
Gaming Innovation Group (a leading European
based online gaming platform provider) to provide
an offshore online casino gaming platform for
New Zealand customers. The SkyCity online
Delivering Our Group Strategy
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gaming site was subsequently launched in
early August 2019 and offers high-quality host
responsibility and a brand name New Zealanders
can trust.
Gaming Innovation Group provides SkyCity Malta
with a full-suite online casino solution which
includes a technical platform, gaming content,
managed services and front-end development.
The SkyCity online casino business is managed by
an Online Director who is based in Europe.
SkyCity would support regulation of the
New Zealand online casino market, including
introducing an appropriate licensing regime for
operators and imposing taxes and mandatory
host responsibility requirements. While ultimately
a regulated online gaming market remains
the preferred solution for SkyCity, the launch
of the SkyCity online casino is another step on
the journey of pursuing opportunities to grow
and diversifying our earnings, addressing a fast
growing industry which is highly complementary
to our land-based activities and offering
customers a multi-channel gaming experience.
Other Forms of Entertainment
As an entertainment and hospitality provider,
SkyCity is challenged to stay relevant in relation
to new forms of entertainment competing
for disposal income. Digital entertainment is
obviously growing rapidly and, in addition to our
foray into online gaming, we have also invested
into New Zealand’s leading broadcaster and
operator of esports, Let’s Play Live Media. We now
own 100% of this business and, although it’s a
relatively small investment, given that esports is
one of the fastest growing forms of entertainment
globally (and particularly popular with millennials),
we are hopeful that there will be synergies that we
can develop to increase visitation to our properties
as well as enhance brand awareness.
In addition, in 2020, our existing SkyCity Auckland
Convention Centre becomes home to the All Blacks
Experience and Weta Workshop, both providing
unique, interactive customer experiences.
Federal Street will become an entertainment
zone focussed on food, beverage and family/kids’
entertainment ensuring long term relevance of
our precinct. SkyCity considers itself privileged to
be partnering with two of New Zealand’s iconic
global brands which, together with the Sky Tower,
will create a must-see entertainment destination in
Auckland, with more attractions to come.
FY19 Performance – Our
Character and Culture Goals
At SkyCity, we need to continually focus on
protecting and enhancing our social licence
to operate. Following the progress made
during FY18, we have continued to invest in key
sustainability initiatives.
Pleasingly, we are starting to be recognised as
a leader in these areas, culminating in being
recognised at the Deloitte Top 200 Awards as the
winner of the Diversity & Inclusion category for
our Māori Leadership programme, Tahuna Te Ahi.
We continue to actively promote women into
leadership positions and are proud of the gender
and cultural diversify we have across the business.
We are also committed to providing safe, fun
and progressive environments for our customers,
suppliers and staff. We continue to deliver on our
Group health and safety strategy, which is centred
around preventing harm and building awareness.
We remain focussed on youth development and
supporting our most vulnerable staff.
At SkyCity, we are proud of, and rely on, our
culture of compliance, which encourages people
to focus on doing the right thing by themselves,
their team mates, the company and stakeholders.
A recent culture survey produced strongly positive
results and underpins our refreshed staff values
“Own it, Share it, Live it” - these were developed
in consultation with staff and hence reflect what
working at SkyCity means to them.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 We would describe FY20 and FY21 as transitory
years for SkyCity as we ready and open the two
new major projects. We have a strong platform to
drive positive medium term earnings growth and
a high-quality team focussed on delivery of our
strategic plan. Our balance sheet is conservatively
geared, our existing projects are funded and,
whilst we continue to develop our Group master
plans, we are yet to commit to anything new
that could significantly impact us. We continue
to invest for the future and look through the
cycle to the earnings potential of the business
in FY22/FY23 and beyond. In the meantime, we
have stable and defensive earnings and pay an
attractive dividend yield which should protect
shareholder wealth.
Outlook for FY20
Due to structural changes in the business (ie. the
sale of SkyCity Darwin and Auckland car parks,
conversion of the existing SkyCity Auckland
Convention Centre and increased pre-opening
costs in advance of the two main projects), direct
comparability of FY20 earnings to the previous
corresponding period will be challenging.
We intend to establish a like-for-like base against
which FY20 should be measured and we will
endeavour to break down and present our FY20
results in a clear fashion enabling the market to
assess the underlying performance of the Group.
Despite a more challenging and uncertain
operating environment domestically and
internationally, we continue to expect revenue
growth across our various businesses, partially
offset by increased cost pressures. We continually
monitor the potential for an economic slowdown
and currently believe there is more we can
do to improve our performance and hence
expect to achieve some earnings growth on a
like-for-like basis.
Our Business Goals FY20 Priorities
Improve our
operating
performance
•
•
•
•
•
Continue growth in core Auckland gaming business
Drive improved performance from Adelaide business
Secure product changes for Hamilton gaming business
Achieve further growth in international VIP gaming business (both tables and
electronic gaming machines)
Implement new information and communications technology (ICT) systems,
including point-of-sale and rostering
Optimise our
existing portfolio
•
Continue to pursue operating efficiencies and mitigate external cost pressures
•
•
•
•
•
Progress New Zealand International Convention Centre/Horizon Hotel project
and Adelaide expansion project within agreed timeframes and budgets,
and continue preparation for the new operations associated with these two
major projects
Complete upgrade of Auckland VIP/premium gaming areas
Enhance Auckland main gaming floor food and beverage facilities
Progress evaluation and design of Auckland master plan and commence
initial projects
Progress evaluation and design of development opportunities in
Hamilton and Queenstown (including any required regulatory approvals)
Delivering Our Group Strategy
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Our Business Goals FY20 Priorities
Grow and diversify
our business
•
•
Launch offshore online casino business and support regulation of online
casino activities in New Zealand
Create separate internal structure for hotel business (both management and
ownership) and evaluate new hotel opportunities
•
Support development and opening of new entertainment attractions in Auckland
Our Character and
Culture Goals
FY20 Priorities
Offer a great and
safe place to work
Always put
customers first
Be responsible
leaders in our
communities
•
•
•
•
•
•
•
Maintain a cohesive management team focussed on strengthening the
SkyCity culture – one which supports employees to achieve their potential,
be engaged and deliver an exceptional customer experience
Continuous improvement in health and safety performance as evidenced by
achievement of leading and lagging indicator targets
Zero work-related fatalities on our sites and/or sites where SkyCity has primary
control or management responsibilities
Deliver employment opportunities for youth through the Project Nikau
programme
Maintain labour practices commensurate with an employer of choice
Undertake safety engagement activities that promote active and visible
safety leadership
Implement facial recognition technology on gaming floors following the
successful trial in FY19
• Maintain best practice host responsibility standards across all properties
• Launch new customer website and app for New Zealand customers
•
•
•
•
•
Develop digital web and mobile products for Adelaide business to bring in line
with rest of the Group (for launch in FY21)
Build foundations for a new customer data platform to provide more relevant
insights and communications
In preparation of the new customer data platform, continue to improve
performance of SkyCity’s Premier Rewards loyalty programme and customer
experiences across each property
Maintain leading position on diversity and inclusion through active
engagement on issues and with stakeholder groups
Measure and reduce SkyCity’s carbon footprint and implement a carbon offset
strategy for all operations in New Zealand and Australia by the end of FY20
•
Deliver year one of SkyCity’s ethical supply chain roadmap
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Delivering
award-winning
entertainment
destinations
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About SkyCity
SkyCity is New Zealand’s largest tourism, leisure and entertainment company and
is dual listed on the New Zealand and Australian stock exchanges.
As one of three major publicly listed casino
operators in Australasia, SkyCity operates
integrated entertainment complexes in
New Zealand (in Auckland, Hamilton and
Queenstown) and in Adelaide, Australia.
In addition to casino gaming facilities at each
of its complexes, SkyCity also offers premium
restaurants, bars and conference facilities which
appeal to both domestic and international visitors
alike. Additionally, SkyCity offers award-winning
hotel accommodation in Auckland.
SkyCity employs over 5,000 staff across its
operations in New Zealand and Australia, with
around 3,500 of them based at its flagship
property in Auckland across 200+ job types.
Upon completion of the New Zealand International
Convention Centre and Horizon Hotel projects in
Auckland and the A$330 million expansion project
in Adelaide (both due for completion in 2020),
SkyCity’s workforce will significantly increase
in size.
An Exciting New Era
July 2019 signalled the start of an exciting new era
for SkyCity with the rollout of a refreshed brand
and logo. The new look SkyCity brand represents
the leading entertainment business we are today
and the exciting new experiences across our
gaming, hospitality and entertainment portfolios
coming soon. Our world-class casinos, hotels,
attractions, conference facilities and hospitality
outlets are naturally vibrant epicentres of our
communities and we have become synonymous
with entertainment.
Our new brand logo reflects the sum of many
parts of our business and the ‘k’ includes a nod
to our most famous landmark, the Sky Tower.
The new brand logo also pays homage to the
stars of the Southern Hemisphere and, in many
instances, incorporates the use of light – just like
the light we reflect into our communities and our
customers’ lives.
The SkyCity brand and logo have been refreshed
but our name, exceptional service and all
the benefits our customers know and love
remain unchanged.
The brand rollout comprises several programmes
of work to address the thousands of touchpoints
across our properties. Adopting a sustainable
approach to the change, collateral will be replaced
as needed with New Zealand’s rebrand expected
to be completed by early 2020. Our Adelaide
property will be rebranded in 2020 to coincide
with major openings there.
SkyCity Auckland
SkyCity Hamilton
SkyCity Queenstown
and SkyCity Wharf
Adelaide Casino
OUR HISTORY AT A GLANCE
2019
SkyCity sells SkyCity Darwin
SkyCity online casino launched offshore
2018
Construction commences on the Adelaide Casino
expansion project
2016
The first sod was turned on the New Zealand
International Convention Centre/Horizon Hotel site
2013
SkyCity acquires SkyCity Wharf in Queenstown
2012
SkyCity acquires full ownership
of SkyCity Queenstown
2005
SkyCity acquires full ownership of SkyCity Hamilton
2004
SkyCity acquires SkyCity Darwin
2002
SkyCity Hamilton opens
2000
SkyCity Queenstown opens
SkyCity acquires Adelaide Casino
1999
SkyCity lists on the Australian stock exchange
1998
Harrah's management contract ends and SkyCity
becomes a New Zealand-managed operation
1997
Sky Tower opens in Auckland
1996
SkyCity opens its flagship SkyCity Auckland complex with
Harrah's Entertainment (now Caesars Entertainment),
the largest casino entertainment operator in the United States,
as the operator
SkyCity lists on the New Zealand stock exchange
1994
Construction of the SkyCity Auckland complex commences
About SkyCity
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Auckland
Property
General Manager
SkyCity Auckland, New Zealand
Opened
1996
Casino Venue Licence
Runs until 2048*
Michael Ahearne, Group Chief Operating Officer
Facilities
• Casino
• Hotels
• Out-catering
• Car parking
• Food and beverage
• Sky Tower
• Entertainment
• Conventions
• esports broadcasting
studio
• Theatre
• Telecommunications and
broadcasting facilities
Licensed Gaming Product
• 1,877 electronic gaming machines
Workforce
FY19 Revenue
• 150 table games
• 240 automated table games
~3,500 staff
$567.9 million (reported)
$606.7 million (normalised)
*The 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.
Located in the heart of Auckland’s CBD,
SkyCity Auckland is the flagship property
of the SkyCity Entertainment Group and
features a casino, two award-winning hotels –
the SkyCity Grand Hotel and SkyCity Hotel, over
20 bars and restaurants, a convention centre,
a 700-seat theatre and the iconic Sky Tower.
Opened in 1997, the 328-metre tall Sky Tower
has been an icon of Auckland’s skyline for over
20 years and attracts over 500,000 visitors
each year. As the tallest free-standing structure
in the Southern Hemisphere, visitors can enjoy
breathtaking views right across Auckland
from the Sky Tower’s two observation decks
or while dining in one of three restaurants
in the Sky Tower, including Auckland’s only
360-degree revolving restaurant. At the very top
of the Sky Tower, a 93-metre communications
mast accommodating VHF, UHF, AM and FM
broadcasting and telecommunications antennas
provides telecommunications and broadcasting
facilities to the telecommunications industry.
The Sky Tower is also home to New Zealand's
only esports broadcasting studio.
SkyCity is currently investing more than
$700 million within the SkyCity Auckland precinct
with the development of the New Zealand
International Convention Centre, an adjacent
laneway, over 1,300 additional car parking spaces
and the new 300-room, 5-star Horizon Hotel
– all due for completion in 2020.
About SkyCity
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NEW ZEALAND INTERNATIONAL CONVENTION CENTRE
The New Zealand International Convention Centre will operate as a carbon neutral venue following
completion of construction – the only one of its kind in the Asia Pacific region.
32,500sqm
gross floor area
6,674sqm
of divisible hall space suitable for theatre, exhibition
or one-off events for up to 4,000 people
2,700sqm
of meeting space – configurable for up to 33 meeting
spaces at any one time with additional pre-function
spaces in the adjacent laneway
2,850-seat theatre
divisible into two 1,200-seat theatres, with retractable seating and flat floor options
The New Zealand International Convention Centre
will be New Zealand’s premier convention centre
enabling New Zealand to attract major international
conferences as well as having capability for
sporting events, theatre and musical performances.
The centre is designed to be a welcoming, open
building complemented by a fresh new streetscape
for local, national and international visitors alike
to enjoy.
Two of the largest pieces of public art ever created
in New Zealand, commissioned by SkyCity from
New Zealand artists Sara Hughes and Peata
Larkin, will adorn the exterior of the New Zealand
International Convention Centre and span a total
of 5,760sqm.
The 5-star Horizon Hotel will bring 300 new
high-end rooms to the Auckland CBD and will
be uniquely connected via an air bridge over
Hobson Street to three city centre blocks across
the New Zealand International Convention Centre
and SkyCity Auckland’s entertainment precinct.
It will also be located directly above a new retail
and dining laneway that will connect Nelson and
Hobson Streets, and adjacent to Federal Street’s
award-winning restaurants and bars.
With a pipeline of events coming to Auckland,
including the opening of the New Zealand
International Convention Centre, Horizon Hotel
is well positioned to play an important role in
supporting the City’s growth.
The design of the hotel emanated from the
opportunity to expand the horizons of the site by
curving the building to maximise the views from
all guest rooms – resulting in the extraordinary
curved glass façades of the hotel that feature 300
glass fins that capture the clear marine light of
the Auckland isthmus. The interior continues this
theme with grand public spaces featuring natural
stones, marbles and timbers, with the horizon-like
curves of the guest room environments creating a
unique and special experience.
Over the last financial year, we have continued to
progress our master plan for the SkyCity Auckland
complex with ongoing concept development
and feasibility analysis to explore opportunities
for further accommodation, food and beverage,
new gaming spaces and entertainment offerings.
Our vision is for SkyCity Auckland to be a
customer-centred destination with an ecosystem
of mutually beneficial places – buildings,
experiences and public spaces.
As part of this broader master planning programme,
SkyCity has acquired over $100 million of property
around the SkyCity Auckland precinct over the last
two years – with the SkyCity Auckland footprint
now spanning the majority of three blocks in the
Auckland CBD (~3.5 hectares) with ~295,000sqm
of gross floor area.
FY19 PERFORMANCE
SkyCity Auckland achieved robust normalised
EBITDA growth in FY19 – up 2.8% to
$267.9 million despite a more challenging
operating environment, a strong comparative in
2H19 and ongoing disruption in the Auckland CBD
from various development projects.
Gaming revenue was up 4.9%, with the standout
feature being strong growth in our electronic
gaming machines of 7.4% due to investment
in product mix and configuration and better
marketing and positive changes to our
smoking decks.
Non-gaming revenue was flat year-on-year
with improved performances in food and
beverage offset by weaker hotel revenue per
available room (RevPar) as new hotel supply
came into the Auckland market ahead of
major tourism, commercial and entertainment
developments which have been delayed (eg. the
New Zealand International Convention Centre and
Commercial Bay).
Margins in Auckland were stable on a like-for-like
basis despite increased cost pressures, such as
the implementation of a new Auckland-wide
hotel 'bed tax' and our ongoing transition to a $20
minimum wage for New Zealand staff by 2020.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 ACHIEVEMENTS
The Sugar Club and The Grill by Sean Connolly were each awarded two hats,
and Depot, Gusto at the Grand and MASU by Nic Watt retained one hat, in the
2018 Cuisine Good Food Awards (October 2018)
Depot named Best Casual Dining Restaurant in 2018 Cuisine Good Food Awards
(October 2018)
Hamilton
Property
General Manager
SkyCity Hamilton, New Zealand
About SkyCity
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Opened
Michelle Baillie
2002
Increased ownership from 70% to 100% in 2005
Casino Venue Licence
Runs until 2027*
East Day Spa, located in the SkyCity Grand Hotel, wins New Zealand’s Best Hotel Spa
at the World Spa Awards 2018 (October 2018)
Facilities
Sky Tower achieves Qualmark Gold Award – a Gold Award recognises the best
sustainable tourism businesses in New Zealand and identifies businesses
leading the way in making the New Zealand tourism industry a world-class
sustainable visitor destination (December 2018)
MASU by Nic Watt, Depot and Gusto at the Grand named in Metro Magazine’s
2019 Top 50 Restaurants (April 2019)
Huami named in Metro Magazine’s 2019 Top 50 Bars (April 2019)
SkyCity Hotel, SkyCity Grand Hotel and the Sky Tower awarded a Trip Advisor
Certificate of Excellence for 2019 (May 2019)
SkyCity Hotel and SkyCity Grand Hotel awarded Trip Advisor’s 2019 Travellers’
Choice Award (May 2019)
Huami was awarded the Wine Spectator Best of Award of Excellence for 2019
for the second year in a row (July 2019)
• Casino
• Food and beverage
• Entertainment
• Conventions
• Car parking
• Tenpin bowling
Licensed Gaming Product
• 339 electronic gaming machines
Workforce
FY19 Revenue
• 23 table games
~400 staff
$54.8 million (reported)
$61.8 million (normalised)
*The 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.
Situated within Hamilton’s historic Chief
Post Office, in a building designed to maximise
a superb riverside location on the banks of the
Waikato River, SkyCity Hamilton features a casino,
eight bars and restaurants, a conference centre
and Hamilton’s only tenpin bowling alley.
The SkyCity Hamilton business has been on a
transformational journey over the last few years
with the opening of a new food and beverage
development in 2015, the addition of a modern
tenpin bowling alley, Bowl and Social, in 2016
and the addition of X-Golf, a virtual golf simulator,
and new café in 2019.
Over the last financial year, we have progressed
our master plan for the SkyCity Hamilton complex
to explore further opportunities to leverage the
property’s riverbank location, including a potential
hotel development and additional food and
beverage and entertainment offerings.
We have also continued to explore opportunities
to optimise the product mix at SkyCity Hamilton
in response to customer demand for electronic
gaming machines (which are capacity
constrained over weekends) in preference
to tables, which are underutilised. The hotel
feasibility also relies on hosting out of town
gaming customers over the weekend, so the
extra gaming machine product is necessary
to satisfy this potential increase in demand.
In this regard, during the year, we applied
to the New Zealand Gambling Commission
to deploy 60 additional gaming machines
at SkyCity Hamilton in substitution of three
existing Blackjack table games.
FY19 PERFORMANCE
SkyCity Hamilton achieved EBITDA of $26.9 million
consistent with a record prior period with solid
electronic gaming machine performance and
improved contribution from food and beverage.
Hamilton remains capacity constrained, with
insufficient electronic gaming machines
during peak periods limiting our ability to
sustain the above-trend growth achieved over
previous periods.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 About SkyCity
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ADELAIDE CASINO EXPANSION
Investment of
A$330 million
~1,000 jobs
created during construction from 2018–2020
An additional
800 ongoing positions
will become available when construction is complete, taking the total number of employees to ~2,000
FY19 PERFORMANCE
David Christian commenced as General
Manager, Adelaide Casino, during 2H19 bringing
considerable operational experience to the role
and an expertise in delivering and opening new
mixed-use casino developments.
Adelaide Casino’s EBITDA was up slightly on a
like-for-like basis (after adjusting for A$1.7 million
of staff restructuring costs incurred during
1H19) despite the disruption caused by building
works around the property (including SkyCity’s
A$330 million expansion project).
Adelaide
Property
General Manager
Adelaide Casino, Australia
Acquired
David Christian
2000
Licensing Agreement
Runs until 2085*
Facilities
• Casino
• Food and beverage
• Entertainment
Licensed Gaming Product
• 828 electronic gaming machines (allowance for 1,500)
Workforce
FY19 Revenue
• 82 table games (allowance for 200)
• 67 automated table games
~1,000 staff
A$137.1 million (reported)
A$148.7 million (normalised)
* The Approved Licensing Agreement between the Minister for Business Services and Consumers and SkyCity Adelaide Pty Limited provides
Adelaide Casino with exclusive rights to provide casino gaming (except for interactive gambling) in South Australia until 30 June 2035.
Located in the historic Railway Station building on
the banks of the River Torrens, Adelaide Casino is
South Australia’s only casino destination.
SkyCity is currently investing A$330 million to
transform the Adelaide Casino into a world-class
integrated entertainment hub on the Festival
Plaza forecourt adjacent to the Torrens River that
will include a new luxury hotel, wellness centre
with a day spa, pool, sauna and gym, new VIP
gaming facilities, three new bars and three
additional signature restaurants – all due for
completion in 2020. SkyCity has an agreement
with developer Walker Corporation to lease
750 car parks in an adjacent car park which is
expected to be opened contemporaneous with
the expansion in 2020.
The current Adelaide Casino, housed in the iconic
Adelaide Railway Station, is also being revitalised
and restored to improve the layout and experience
for customers with a three-storey glass atrium
connecting the heritage and new buildings.
After being overlooked for more than a decade,
SkyCity is transforming the former Overland
Dining Hall in the Railway Station building
through a A$6 million restoration into a new,
all-hours bar and dining hall, The Guardsman,
which is due to open later this year. The new
venue pays homage to the Railway Station’s rich
heritage and will feature a grand central bar,
open kitchen and a coffee front.
The South Australian Government’s broader
review of gambling regulation in South Australia is
expected to be completed soon. SkyCity remains
optimistic about the introduction of ticket-in
ticket-out (TITO) technology on its main casino
floor and the use of note acceptors.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 SkyCity Queenstown and SkyCity Wharf, New Zealand
General Manager
International Business
About SkyCity
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Queenstown
Property
General Manager
Opened/Acquired
Jono Browne
Opened Queenstown in 2000 and increased ownership
from 60% to 100% in 2012
Acquired Wharf in 2013
Casino Venue Licence
Runs until 2025* for Queenstown
Facilities
Runs until 2024* for Wharf
• Casino
• Food and beverage
• Entertainment
• Conventions
Licensed Gaming Product
• 86 electronic gaming machines (Queenstown)
Workforce
FY19 Revenue
• 12 table games (Queenstown)
• 74 electronic gaming machines (Wharf)
• 6 table games (Wharf)
~100 staff
$11.6 million (reported)
$13.1 million (normalised)
*The 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.
SkyCity’s two Queenstown casinos,
SkyCity Queenstown and SkyCity Wharf,
are located in central Queenstown, surrounded
by the majestic Southern Alps.
As Queenstown is an attractive destination for
SkyCity’s International Business customers,
SkyCity continues to explore options to create an
improved VIP/premium facility in Queenstown.
In June 2019, SkyCity purchased land on the
shores of Lake Wakatipu in Queenstown, which
the company intends to use to develop a 5-star
hotel to complement its existing entertainment
facilities in Queenstown and further attract
international visitors to Queenstown.
Plans for the hotel development are being
finalised and the regulatory framework to achieve
the proposed development will be investigated in
the year ahead.
FY19 PERFORMANCE
Our combined Queenstown properties grew
earnings by 12.5% to $2.3 million driven by
increased visits from premium customers and
operating leverage, albeit with a weaker 2H19 due
to the later start to the winter season.
International Business turnover at Queenstown
was up 47.2% highlighting the attractiveness
of the location for premium/VIP customers
and reinforcing our strategy to develop a new
luxury hotel and International Business salons in
that destination.
Facilities
FY19 Revenue
Stewart Neish
Group General Manager – International Business
Premium gaming facilities at SkyCity Auckland,
SkyCity Adelaide and SkyCity Queenstown
$42.3 million (reported)
$190.5 million (normalised)
SkyCity’s International Business division caters for
high-net worth international players and junkets
who visit casinos as part of their leisure activities.
good connectivity. SkyCity intends to continue
to invest prudently in International Business to
enhance sustainable shareholder returns.
The flagship SkyCity Auckland property features
several premium gaming spaces, including the
‘Grand Horizon’ VIP gaming salons opened in 2016
in the SkyCity Grand Hotel and 1,800 sqm of luxury
high-end gaming space opened in 2011 above the
SkyCity Hotel.
The bulk of SkyCity's business is stable and low
risk, originating from local/domestic players.
The International Business provides incremental
growth, but due to its inherent volatility, is likely to
be maintained as a relatively small, but important,
contributor to overall Group profit.
Located above the SkyCity Hotel, the ‘Horizon
Suites’ feature four luxurious hotel suites for
exclusive use, three of which have adjoining
private accommodation. Each suite features
a private gaming salon and each salon has its
own private dining facilities, bar and massage
chairs, as well as its own lounge area and outdoor
balcony. Gaming dealers are available on request
for customers, who enjoy the full range of gaming
options offered at SkyCity Auckland in their own
private salon.
As part of the A$330 million Adelaide Casino
expansion project, SkyCity is constructing
additional VIP luxury gaming facilities to
complement the existing ‘Horizon’ premium
gaming salon opened in Adelaide in 2015.
There remains potential for further growth in
International Business over the medium to
long term due primarily to the attractiveness
of New Zealand as a tourist destination and
FY19 PERFORMANCE
SkyCity’s International Business division delivered
turnover of $14.1 billion up 18.9%, with normalised
EBITDA of $41.7 million and reported EBITDA
of $3.0 million due to a low casino win rate of
1.00%. The casino win rate, whilst improved in
2H19 vs 1H19, was still below the theoretical of
1.35%. It is probable that the strong turnover
achieved across the year was aided, in part, by our
customers’ luck and hence greater frequency of
bet turns (turnover).
The result in International Business was
driven by a number of factors, including
higher average spend per customer. We also
significantly improved the quality of our sales and
marketing teams. Consistent with the prior period,
the International Business experienced very few
bad debts and continues to have a conservative
approach to credit.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Protecting
the value of
our business
Delivering strong and sustainable
earnings across the SkyCity Group.
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Our Risk Profile and Management
SkyCity operates in a dynamic and challenging environment with risks and
opportunities both locally and internationally.
The SkyCity Board is ultimately responsible for
the governance of the Group’s risk management,
which includes formulating the Group’s risk
appetite and setting and monitoring risk tolerance.
The company maintains a risk management
framework for the identification, assessment,
monitoring and management of risk to
the company’s business. As part of this
framework, SkyCity maintains an independent,
centrally-managed Group Risk function which
evaluates and reports on risks and controls across
the Group. The Group Risk team collates, assesses
and monitors the risks the Group faces by way
of a Top Risk Profile, which is updated regularly.
The Top Risk Profile is a current view of the most
significant emerging, or potential risks facing
the Group, as well as a summary of how those
risks are being mitigated or prepared for, and is
a critical input to strategic planning, insurance
renewal, investment and resource prioritisation,
and assurance planning.
Management reports to the Audit and
Risk Committee and SkyCity Board on the
effectiveness of the company’s management
of its material business risks at least annually.
SkyCity’s ability to create and 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 outlined below.
Material Exposure
Managing Risk
Highly Regulated Industry
SkyCity operates in the casino industry,
which is highly regulated. The regulatory
framework is subject to change 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 and/or smoking legislation
and regulations, licence conditions
and gaming taxes and levies.
Loss of 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 suspension, cancellation or
expiry of the Auckland casino licence,
would have a significant negative impact
on SkyCity.
The suspension, cancellation or expiry of
any of SkyCity’s other casino licences would
also have a negative impact on SkyCity.
The risk of regulatory change is mitigated by maintaining
frequent engagement with the governments and
regulators in each jurisdiction in which SkyCity operates
and with industry stakeholders.
Targeted 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.
SkyCity has mitigated this risk by securing an extension
of the Auckland casino licence to 30 June 2048.
The Adelaide casino licence currently runs until
30 June 2085 and extensions to the Hamilton and
Queenstown casino licences are intended to be sought
in accordance with the renewal provisions of the
Gambling Act 2003 (New Zealand) in due course.
In addition, SkyCity mitigates the risk by maintaining
a robust compliance culture and framework to ensure
compliance with licence conditions and gaming
legislation and regulations, and maintaining engagement
with the governments and regulators, in each jurisdiction
in which SkyCity operates.
Material Exposure
Managing Risk
Material Exposure
Managing Risk
Our Risk Profile and Management
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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.
Customer and Innovation Risk
SkyCity recognises that it is important
to consider evolving customer
demographics and preferences in both
its gaming and non-gaming operations,
including new offerings, technologies
and innovation.
To mitigate these risks, SkyCity continually monitors its
external environment, including the geo-political and
global economic landscape, and has a robust liquidity
management framework.
SkyCity also continually reviews the optimal mix for its
business activities to ensure it has a balanced portfolio
reflecting its risk appetite.
To ensure SkyCity remains relevant to its customers, key
strategic projects are currently being progressed, with a
focus on emerging industry trends and opportunities for
leveraging new technology and demographic changes.
Online delivery of goods and services is increasingly the
norm across many industries and SkyCity’s business is no
exception. SkyCity has therefore, over the last financial
year, been developing an online gaming strategy as a
logical extension of its land-based casino operations.
In May 2019, SkyCity announced its plans to launch an
offshore online gaming business via a Maltese subsidiary
company and, subsequently, launched its new offshore
SkyCity casino gambling site in August 2019.
In 2018, SkyCity acquired a 40% interest in Let’s Play Live
Media Limited, New Zealand’s leading broadcaster
and operator of esports, and in conjunction with them
launched Australasia’s first esports studio in the Sky Tower.
In July 2019, SkyCity acquired a further 60% and took full
ownership of Let’s Play Live Media Limited.
New forms of entertainment are also set to open at
SkyCity Auckland in early 2020, including:
•
the All Blacks Experience, a joint venture between
New Zealand Rugby and Ngāi Tahu Tourism, which
will provide visitors with a state-of-the-art, interactive
experience that will showcase the All Blacks. Through
the use of innovation and technology, it will provide a
full sensory, interactive, and immersive experience for all
New Zealanders and visitors to celebrate New Zealand’s
rugby heritage, achievements and culture – bringing
together the stories of our rugby legends, the drama
and excitement of test match rugby, and the mastery
and legacy of the All Blacks; and
•
Academy Award-winning design and effects company
Weta Workshop is developing an immersive attraction
to complement its behind-the-scenes tours at their
Miramar headquarters in Wellington.
Master planning also continues to be progressed for each
of the SkyCity sites to explore opportunities for further
accommodation, food and beverage, new gaming spaces
and entertainment offerings.
Technology Risk
Technology represents a critical platform
to SkyCity’s business – not only for
facilitating/enabling its operations,
but also mitigating cyber-threats and
ensuring compliance with regulatory
and licence requirements.
Development and Project Risk
With two significant growth projects
underway, the New Zealand International
Convention Centre and Horizon Hotel
development in Auckland and the
Adelaide Casino expansion project, as
well as master planning across the Group,
SkyCity recognises that robust project
management is critical to successful
delivery of these projects.
Health and Safety Risk
SkyCity has Health and Safety Risk
Registers in place that identify
risks into two key categories – high
consequence/low frequency (being
critical risks) and low consequence/high
frequency risks.
Due to the hospitality and retail focus of
SkyCity’s business, a high percentage of
the company’s health and safety risk falls
into the low consequence/high frequency
category, which includes risks such as
slips/trips and cuts from manual tasks.
To mitigate technology risk, SkyCity has invested in a
significant programme over recent years to improve
technology systems, infrastructure, capability and
data management, and to improve cyber-resilience.
SkyCity continues to invest in these areas as required.
In addition, there is also significant focus on technology
project governance, risk management and assurance.
SkyCity has established strong governance and
oversight frameworks for both current and future
major growth projects, including the establishment
of a dedicated Board sub-committee to oversee the
New Zealand International Convention Centre and
Horizon Hotel development and a separate dedicated
Board sub-committee to oversee the Adelaide Casino
expansion project.
SkyCity also ensures robust governance over capital
allocation and shareholder returns.
Peter Alexander was appointed SkyCity's Chief Property
Officer in January 2019 and is responsible for the Group's
property investment and development activities in
New Zealand and Australia. He has more than 30 years'
experience in investment management, primarily in
property investment and development, in New Zealand
and overseas.
To mitigate critical risks (which include working at
heights, confined spaces, electrical, moving plant,
fire and explosion), SkyCity has in place extensive safe
systems of work to effectively control the potential for
an incident. Ongoing safety assurance activities seek to
test these controls and, where appropriate, strengthen
critical risk controls ensuring SkyCity keeps its people and
visitors safe.
SkyCity has harm prevention programmes in place which
are aimed at reducing minor injuries and promoting
wellness amongst SkyCity’s employees and contractors.
SkyCity’s New Zealand properties are tertiary accredited
under the Accident Compensation Corporation (ACC)
Accredited Employers Programme and its Adelaide site is a
registered self-insured employer. The company undertakes
assurance activities to maintain certifications and
continually improve its health and safety performance.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our Board
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Keeping us
on track
with sound
governance
and strong
leadership
ROB CAMPBELL
Chair
BRUCE CARTER
Deputy Chair
Member of the Audit and Risk Committee
Chair of the Audit and Risk Committee
Member of the People and Culture Committee
Member of the Sustainability Committee
Member of the Governance and
Nominations Committee
Chair of the Governance and
Nominations Committee
Appointed a director of SkyCity in June 2017
and Chair of the SkyCity Board in January 2018
Rob 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 and Ultrafast
Fibre 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.
Appointed a director of SkyCity in October 2010
Based in Adelaide, Australia, Bruce is currently
Chair of ASC Pty Limited (Australian Submarine
Corporation) and Aventus Capital Limited
and a director of Bank of Queensland Limited
and Genesee and Wyoming Inc (US) as
well as a number of private companies and
government bodies.
Bruce was one of the founding partners of
Ferrier Hodgson in Adelaide. He was formerly
a partner at Ernst & Young and has more than
30 years’ experience in corporate restructuring
and insolvency.
Bruce is a Fellow of Chartered Accountants
Australia and New Zealand.
Our Board
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SUE SUCKLING
Director
RICHARD DIDSBURY
Director
JENNIFER OWEN
Director
MURRAY JORDAN
Director
Chair of the Sustainability Committee
Member of the Sustainability Committee
Member of the Audit and Risk Committee
Chair of the People and Culture Committee
Member of the Governance and
Nominations Committee
Member of the Governance and
Nominations Committee
Appointed a director of SkyCity in May 2011
Appointed a director of SkyCity in July 2012
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 Insurance
& Financial Services Ombudsman Scheme
Commission, Jacobsen Holdings Limited,
Blinc Innovation Limited, Brannigans Consulting
Limited and Jade Software Corporation Limited.
Previous governance roles include chairing
NIWA, the New Zealand Qualifications Authority
and 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 a Chartered 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 Chair 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 Chair of Committee for
Auckland Limited. His previous governance
roles include being a director of Infrastructure
Auckland and Tourism Auckland.
Member of the People and Culture Committee
Member of the Governance and
Nominations Committee
Appointed a director of SkyCity in December 2016
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 and 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.
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, Foodstuffs’ Members
Protection Trust and The Foodstuffs Co-operative
Perpetuation Trust.
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 programme.
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.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our Senior Leadership Team
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From left to right:
Glen McLatchie, Michael Ahearne, Liza McNally, Graeme Stephens, Claire Walker,
Peter Alexander, Simon Jamieson, Rob Hamilton and Jo Wong
Our Senior Leadership Team
GRAEME STEPHENS
Chief Executive Officer
Graeme joined SkyCity as Chief Executive Officer
in May 2017, bringing with him significant
expertise in the gaming, hospitality, and
leisure industries.
Prior to joining SkyCity, Graeme was Chief
Executive Officer of Sun International, a casino,
resorts and entertainment company listed on
the Johannesburg Stock Exchange. Under his
leadership, the company rebalanced its portfolio,
diversified into growth areas in both South Africa
and Latin America, redeveloped its flagship
resort in Sun City and built a new casino resort
near Pretoria.
An accountant by profession and with more than
10 years’ experience in banking and corporate
finance, Graeme was appointed Senior Vice
President of New Business Development at
Kerzner International in 2003 and was responsible
for a number of global hospitality projects before
joining Sun International in 2011.
ROB HAMILTON
Chief Financial Officer
MICHAEL AHEARNE
Chief Operating Officer
Rob joined SkyCity as Chief Financial Officer in
October 2014 and is responsible for the financial
management of SkyCity, including reporting,
treasury, risk management and corporate
development. He also oversees SkyCity’s
International Business and Information and
Communications Technology function and
helps to drive the strategic direction of the
SkyCity Group.
Rob is a respected member of the finance
community with more than 20 years’ experience
at First NZ Capital, where he led the investment
banking team. He is currently a non-executive
director of Tourism Holdings Limited.
Rob holds Bachelor degrees in Commerce and
Science and is on the Board of Trustees for
Auckland Grammar School.
Michael joined SkyCity in December 2017
as Group Chief Operating Officer and is responsible
for overseeing the operations and driving value
across SkyCity’s five properties in New Zealand
and Australia.
Prior to SkyCity, Michael held a number of senior
operational and product leadership roles at
Paddy Power Betfair, one of the world’s leaders in
sports betting and gaming. Prior to this, Michael
enjoyed a 13-year career in the Australasian
gaming and entertainment sector – ten years
of which were spent at The Star Casino, Sydney,
where he held a variety of senior management
positions and, following that, three years as Chief
Operating Officer for Aristocrat in the Australia
and New Zealand regions.
Michael is a qualified accountant and holds an
MBA from the University of Technology, Sydney.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 CLAIRE WALKER
Chief People and Culture Officer
Claire was appointed General Manager
Human Resources in August 2016 and
Chief People and Culture Officer in April 2019.
She is responsible for leading the development
and implementation of best practice human
resource strategy across SkyCity. She also
has executive responsibility for sustainability
at SkyCity.
Prior to joining SkyCity in 2016, Claire was
Chief People Officer at Sanford Limited where
she established the human resources function
and led the sustainability and integrated reporting
activities for the organisation and, prior to that,
Claire led the human resources and employee
relations function for the SkyCity Auckland
business. Claire has also held senior human
resource roles with Carter Holt Harvey and Downer
after several years working in the education sector.
JO WONG
General Counsel and Company Secretary
Jo joined SkyCity as Senior Legal Counsel in
January 2009 and was subsequently appointed
as Deputy General Counsel before being
appointed as General Counsel and Company
Secretary in September 2016. As General Counsel
and Company Secretary, Jo is responsible for
SkyCity’s legal, company secretarial, regulatory
affairs and anti-money laundering functions.
Jo has more than 20 years’ experience in
both private practice and in-house legal
roles. Before joining SkyCity in 2009, she
held General Counsel and Group Corporate
Counsel roles in the New Zealand financial
services industry and was a Senior Solicitor at
Russell McVeagh, one of the leading law firms
in New Zealand.
Jo is a graduate of the 2017 Global Women
Breakthrough Leaders Programme, is a
member of New Zealand Asian Leaders and
holds a Bachelor of Laws and a Bachelor
of Arts (Criminology and Japanese) from
Victoria University of Wellington.
SIMON JAMIESON
General Manager NZICC
Since joining SkyCity in September 2007, Simon
has held a number of roles, including General
Manager Adelaide Casino, General Manager Hotels
SkyCity Auckland and Acting General Manager
SkyCity Auckland.
As General Manager NZICC, Simon oversees
the development of SkyCity’s New Zealand
International Convention Centre and Horizon Hotel
project in Auckland. He is also responsible for
health and safety at SkyCity.
With more than 30 years’ experience in large-scale
hospitality businesses, Simon brings a wealth of
commercial experience and tourism know-how to
the SkyCity business.
LIZA MCNALLY
Chief Marketing Officer
Liza joined SkyCity in January 2018 as Chief
Marketing Officer, bringing with her over 20 years
of marketing expertise.
Hailing from Australia, Liza’s experience includes
senior positions in both Sydney and Auckland
with a number of senior marketing and sales
positions within media, entertainment and
telecommunications organisations. These include
News Corp Australia, Telecom/Spark New Zealand
and New Zealand Media & Entertainment (NZME)
as well as a period of time running her own
consulting firm.
With her broad marketing background, Liza
brings holistic thinking to our marketing efforts
with particular focus on brand, digital, customer
and loyalty.
Liza is currently a non-executive director of
AFL New Zealand and a trustee of the Auckland
Farmers Santa Parade.
GLEN MCLATCHIE
Chief Information Officer
Glen joined SkyCity in 2016 as Chief Information
Officer and is responsible for lifting the digital
capability of the organisation to be able to
respond to future innovation initiatives and
growth strategies.
Prior to joining SkyCity, Glen was General Manager
ICT with Meridian Energy where he transformed
and modernised their aging technology
footprint and digital capability. He has 25 years
of technology experience from across several
industries globally, having worked in and out of
the UK, France, USA, Australia, Malaysia, India,
China and the Middle East.
Glen holds a Master of Information Systems from
Swinburne University of Technology, Australia,
and a Bachelor of Business Studies from
Massey University, New Zealand.
Our Senior Leadership Team
47
PETER ALEXANDER
Chief Property Officer
Peter joined SkyCity as Chief Property Officer
in January 2019 and is responsible for SkyCity’s
property investment and development activities
in New Zealand and Australia.
Peter has more than 30 years’ experience in
investment management, primarily in property
investment and development, in New Zealand and
overseas. Peter joined SkyCity from alternative
asset manager HRL Morrison & Co where he was
Director Private Equity Real Estate New Zealand.
He was previously Chief Executive Officer of
NZX listed Stride Property Group, a commercial
property investor, developer and investment
manager, and, prior to that, Peter led Auckland
International Airport’s commercial property
investment and development activities.
Peter is currently a trustee of the Dilworth
Trust Board, Chair for Homes of Choice and a
non-executive director of HLC Limited.
G
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BOARD AND SENIOR LEADERSHIP TEAM ORGANISATIONAL CHART
SkyCity
Board
Board
Governance
and
Nominations
Committee
Board Audit
and Risk
Committee
Board
People and
Culture
Committee
Board
Sustainability
Committee
Chief
Executive
Officer
Graeme
Stephens
Chief
Financial
Officer
Rob Hamilton
Group
Chief
Operating
Officer
Michael
Ahearne
Chief People
and Culture
Officer
Claire Walker
General
Counsel and
Company
Secretary
Jo Wong
General
Manager NZICC
Simon Jamieson
Chief
Marketing
Officer
Liza McNally
Chief
Information
Officer
Glen McLatchie
Chief
Property
Officer
Peter Alexander
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Being a
responsible
corporate
citizen
SkyCity is committed to maintaining
the highest levels of sustainability
objectives and practices, with priority
given to minimising the impacts
associated with problem gambling
as an area of primary focus.
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Our Sustainability
At SkyCity, we recognise that sustainability is critical to all levels of our business
and operations. 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.
At SkyCity, we need to continually focus on our
social licence to operate – as in the casino industry
we have to try harder than most to justify our
place in society.
Our sustainability initiatives are focussed on
doing good for our communities – our customers,
employees and suppliers. Our objective is to
ensure that our strategic decisions strengthen
the communities we operate in and provide
environments and opportunities for our
customers, suppliers and staff to enjoy, to be
entertained and to be safe.
Setting Our Framework
In 2016, after engaging with both internal and
external stakeholders on which sustainability
issues were most relevant to SkyCity’s business,
SkyCity adopted its first set of sustainability
goals, priority actions and targets and
developed a materiality matrix to identify
a set of priority impact areas and issues for
the business. In 2018, we refined the matrix
and sustainability framework to incorporate
global trends and local market conditions in
our approach to, and assessment of, risks and
opportunities, culminating in a refreshed set of
sustainability pillars.
We continue to focus on embedding these
sustainability pillars into all levels of the
organisation and in the way SkyCity operates.
The material issues have become the focus
for managing SkyCity’s risks and have heavily
influenced our sustainability strategy and
priorities, which underpin our reporting on our
non-financial performance.
Our Sustainability Committee
The Sustainability Committee is a dedicated
Board committee that assists the SkyCity Board
to contribute to SkyCity’s vision and strategic plan
by ensuring that the company’s sustainability
strategy is best practice and supports the highest
level of sustainability objectives, with priority
given to minimising the impacts associated with
problem gambling as an area of primary focus.
The responsibilities of the Committee include
reviewing and recommending to the Board the
sustainability strategy, principles, policies and
practices of the company to ensure alignment
with the company’s strategic objectives and
performance, and reviewing and reporting to the
Board on the company’s impacts associated with
SkyCity’s sustainability pillars.
The guiding principles that underpin SkyCity’s
sustainability activities and the role,
responsibilities, composition, structure and
membership of the Committee are set out in
the Sustainability Committee Charter (available
in the Governance section of the company’s
website at www.skycityentertainmentgroup.com),
which is reviewed and approved by the Board on
an annual basis.
The Board and Committee maintain operational
supervision of SkyCity’s sustainability activities
through clearly defined policy and effective
management. Claire Walker, SkyCity’s Chief People
and Culture Officer, has executive responsibility
for SkyCity’s sustainability activities with key
operational personnel within the business having
day-to-day responsibility for the activities.
Our Pillars
The following pages outline our goals, priorities
and metrics for each of our five sustainability
pillars, outline the activities undertaken to support
our sustainability strategy, and provide a summary
of our achievement against our priorities for the
financial year ended 30 June 2019.
The areas identified as priority issues are those
considered highly material for SkyCity’s business
and for our stakeholders. Our priorities and
metrics set out what we intend to do both in our
business and our communities. They are intended
to challenge the business and staff and provide
a dedicated framework for measuring progress
over the coming years. We are committed to
measuring performance on each goal, through
specific key performance indicators, which will
ensure the business strives to keep pace with
internal and external expectations.
We Welcome Your Feedback
If you have any feedback and questions in relation
to SkyCity’s sustainability framework, please
contact SkyCity at sustainability@skycity.co.nz.
Sustainability at SkyCity
By creating value for others, we create value for SkyCity
To be a sustainable business, we must be a responsible business actively protecting
and promoting the people we serve and the planet we share.
Our goals
What we’ll deliver
Our plan
How we’ll deliver it
Our priorities
Impact & importance
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Our Sustainability Pillars
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s i b l e
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C o m
O
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Customers
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E
Customers
People
Communities
Suppliers
Environment
Be responsible hosts
Inspire our people
Grow our communities
Source responsibly
Protect the environment
Ensure safe and
enjoyable opportunities
for customers, staff and
our communities
Create a great place
to work where people
are empowered to
grow and achieve
Serve a social purpose by
investing in local economies
and communities
Commit to the highest
standards of sourcing,
ethically, responsibly
and locally
Actively reduce waste
and minimise our
environmental impact
Happy, safe
customers
Great, safe place
to work
Thriving local
communities
Consistent ethical
sourcing
Significantly
lower emissions
Customers | Be responsible hosts
Ensure safe and enjoyable experiences for our customers, staff and communities
Leading and best practice
host responsibility
• Host responsibility programmes and problem gambling indicators such as
preventative customer service encounters and engagement practices
• Benchmarking of SkyCity’s host responsibility programmes against our industry
• Public policy and compliance, including reporting of regulator audit findings
1. Host
responsibly
Customer experience
and engagement
Community knowledge
• Employee training completion rates
• Increase in community knowledge and understanding of SkyCity’s harm
minimisation practices
2. Customer
experience and
engagement
People | Inspire our people
A great place to work where our people are empowered to grow and achieve
Employee engagement,
learning, development
and careers
Diversity, inclusion
and belonging
• Internal promotions, career paths and employment opportunities for youth
• Diversity and gender reporting, including equality of pay, management and
governance representation
• Health and Safety engagement activities such as Leadership Safety Walks and
Health, safety and
wellbeing
Health and Safety Committee engagement
• Take up of SkyCity subsidised health insurance by employees
• Number of managers trained in SkyCity’s White Ribbon policy
Community | Grow our communities
Serve a social purpose by investing in our local economies and communities
Economic contribution
• Measure and evaluate SkyCity’s economic contribution to the communities
in which we operate, including local procurement spend
1. Employee
engagement
2. Health, safety
and wellbeing
Building communities by
developing people
Investing through the
SkyCity Community
Trusts and through
charity partnerships
Developing deeper
connections with iwi and
indigenous peoples
• Employment, training and career paths provided for youth
• Reporting of community outcomes through narrative and case studies
accompanied by quantitative results
1. Community
partnerships
and outcomes
2. Economic
contribution
• Narrative and case studies on partnerships
Suppliers | Source ethically and responsibly
Sourcing ethically, responsibly and locally
Ethical and sustainable
sourcing practices
• Procurement supports the objectives of the Ethical Sourcing Strategy and roadmap
• Reporting of adherence, audit results and outcomes
Supply chain transparency • Disclosure of risk relating to human rights and forced labour issues in supply chain
Using local suppliers
• Local vs international procurement spend
• Case studies on local (and indigenous) suppliers and tangible community benefits
1. Ethical and
sustainable
procurement
Environment | Conserve the environment
Active commitment to reducing our environmental footprint
Climate change
and emissions
• Emission and emission intensity, including energy efficiency and reduction
• Employee led Green Fund established and operating for FY20
Reducing waste
• Reduction of waste and diversion from landfill
Carbon neutral by 2020
• SkyCity New Zealand operations offset for FY19 carbon emissions
• Employee led Green Fund established and operating for FY20
1. Climate change
and emissions
53
Our Customers
At our core, SkyCity is a provider of casino
entertainment.
The promotion of responsible gaming and safe
consumption of alcohol are topics at the heart of
our business.
Priority Issues
FY19 Performance Highlights
•
•
Leading and best practice
host responsibility
Customer experience and
engagement
• Community knowledge
•
•
•
•
•
•
•
In the 2019 SkyCity Employee Engagement Survey, our staff
rating as a ‘responsible host’ was 88% - an increase of 2% from
the 2017 survey
Reviewed our Host Responsibility Programmes against a
leading Australian casino operator, which showed we are
well placed in leading host responsibility operations
Commenced a limited facial recognition technology trial
across the SkyCity Auckland and SkyCity Hamilton sites and
selected a preferred supplier
Upgraded the predictive algorithm model in place at our
largest and busiest SkyCity Auckland property to enhance and
improve SkyCity’s ability to identify potential at-risk gamblers,
which will be operational in early FY20
Increased our observation and reporting of potential problem
gambling indicators
Increased our preventative interactions through our Customer
Service Ambassadors at our Auckland site
Welcomed problem gambling support providers into the
SkyCity Auckland casino to raise their profile with customers
during Gambling Harm Awareness Week in New Zealand
Be responsible
hosts
Ensure safe and enjoyable opportunities
for customers, staff and our communities.
88%
of our staff rated SkyCity as a responsible host
in our 2019 employee engagement survey
Leading and Best Practice
Host Responsibility
When done responsibly, gambling can be
a fun and enjoyable entertainment activity.
However, it can also have harmful effects on some
individuals, their families and their communities.
Our challenge is therefore to ensure that our
business provides entertaining and profitable,
yet safe and responsible, experiences and
environments for all customers and staff.
SkyCity has a robust Host Responsibility
Programme in place at each of its sites to
prevent and minimise harm from problem
gambling. All SkyCity staff receive training in
problem gambling awareness and we employ a
dedicated team of experienced host responsibility
specialists at all sites. Additionally, at our largest
and busiest Auckland site, a team of Customer
Service Ambassadors is trained to interact with
our customers and report any concerns to our
specialist Host Responsibility team so preventative
action can be taken, where required.
An outline of our commitment to host
responsibility and detailed individual
site-related information can be found at
www.skycityentertainmentgroup.com/
our-commitment/responsible-gambling.
A key focus for SkyCity is to maintain the high
standard of host responsibility best practice
recognised by the New Zealand Department of
Internal Affairs through its ‘mystery shopping’
exercise conducted across all casinos and
120 pubs and clubs (Class 4 venues) around
New Zealand in late 2016. SkyCity’s four casinos in
Auckland, Hamilton and Queenstown came out
top in the exercise with the Department noting
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”.
At the date of this annual report, the Department
of Internal Affairs had commenced a further
mystery shopping exercise across all casinos,
and pubs and clubs (Class 4 venues), around
New Zealand and visited SkyCity Auckland as part
of this exercise. We welcome the Department’s
findings in this regard and are committed to
working with the Department to ensure we
maintain a high standard of host responsibility
best practice.
We are immensely proud of the culture of care we
have developed within our casinos and continue
to focus on ways to ensure that this culture of care
is maintained, including through our own regular
internal mystery shopping training exercises.
Through our 2019 employee engagement survey,
our staff rating as a ‘responsible host’ was 88%, an
increase of 2% from our 2017 survey. This pleasing
result recognises the importance we place on
host responsibility throughout every part of
the organisation.
During the past financial year, we also conducted
a review of our Host Responsibility Programmes
against a leading Australian casino operator,
which showed we are well placed in leading host
responsibility operations across the SkyCity Group.
However, in a dynamic casino environment,
maintaining effectiveness, relevancy and
consistency in harm minimisation best practice
is an ongoing challenge. In response to that
challenge, SkyCity continues to explore available
technology solutions, seek expert advice, consult
stakeholder groups and source a range of
research material.
We take our responsibilities
to minimise risk and harm
from problem gambling
very seriously
Our Customers
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Harnessing New Technologies
Consistency of Responsible Gaming Culture
In late 2018, SkyCity commenced a limited
facial recognition technology trial across the
SkyCity Auckland and SkyCity Hamilton sites.
This technology will assist SkyCity to recognise
customers who have been excluded from
re-entering SkyCity’s New Zealand premises
by notifying SkyCity personnel when an
individual matching an image from SkyCity’s
database of excluded patrons re-enters a
SkyCity gambling area. This will significantly
bolster SkyCity’s ongoing efforts to detect and
prevent excluded customers from re-entering its
New Zealand casinos.
In June 2019, after trialling different available
technology solutions, a preferred supplier was
selected. SkyCity’s intention is to now implement
a full facial recognition technology solution at
SkyCity Auckland, SkyCity Hamilton and the main
SkyCity Queenstown site by the end of 2019.
Whilst there is no guarantee that this technology
will be effective in each and every case
(for example, where a customer actively tries to
avoid detection), this technology significantly
bolsters SkyCity’s ongoing efforts to deter, detect
and prevent excluded customers from re-entering
the SkyCity Auckland casino.
Additionally, since 2014, SkyCity has operated
a predictive algorithm risk model created by
Focal Research at SkyCity Auckland, which
analyses loyalty data as a tool to identify players
who may be at risk from gambling harm. The
algorithm was upgraded in May 2019 to enhance
and improve SkyCity’s ability to identify potential
at-risk gamblers. The algorithm will be operational
in early FY20.
and Practice
The alignment of excellent host responsibility and
harm minimisation practice and culture across
the SkyCity Group remains challenging due to
differences from site to site, such as size, scale
and staffing structure. There are also market and
customer differences that impact our approach to
staff training and programme design, in addition
to unique cultural distinctions to consider.
Furthermore, our sites across New Zealand and
in South Australia each have different regulatory
environments in which to operate.
These differences mean that while SkyCity’s
Host Responsibility Programmes have similarities,
they are often carried out quite differently.
However, problem gambling is an addiction and
the possibility of harm from this type of behaviour
manifests itself the same regardless of jurisdiction
or location. That is why SkyCity endeavours to lead
in this area and employ best practice prevention
methods across the business. A key strategic
focus across the SkyCity Group for minimising
gambling harm is prevention. Robust prevention
initiatives can be developed and implemented
across the Group with few or no regulatory or local
procedural constraints. By adopting a prevention
approach, we can increase our ability to identify
and respond early to new or emerging concerns
that may lead to problem gambling related issues
for our customers.
We are committed to carrying out regular reviews
of each of our Host Responsibility Programmes to
ensure alignment of our practices across our sites.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our Customers
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Customer Experience
and Engagement
SkyCity promotes a range of tools in order to
facilitate responsible gambling – however,
exclusion is an equally important host
responsibility offering for those that may be
vulnerable to problem gambling.
Our casinos offer extensive information to
customers about exclusion options and referral
details to problem gambling support services,
including gambling helplines and face-to-face
counselling organisations.
In New Zealand, customers can choose to
exclude themselves from all SkyCity casinos
in New Zealand for a period of up to two years.
In some cases, SkyCity itself makes the decision
to exclude a customer as a means to prevent
risk of harm occurring, or as a means to stop
further harm through a customer’s gambling
at SkyCity’s casinos.
In Adelaide, all exclusions are referred to
Consumer Business Services (the South Australian
Government’s Regulator) who has overall
management of exclusions.
The following graph summarises the number of
exclusions issued by each of the SkyCity properties
over the 2015–2019 financial years.
Exclusions at SkyCity Properties FY15 to FY19 (assured)
900
800
700
600
500
400
300
200
100
0
806
636
644
696
620
146
80
23
FY15
120
84
37
FY16
131
138
59 29
FY17
66
25
FY18
169
61
44
FY19
Auckland
Hamilton
Queenstown
Adelaide
Over the last financial year, we increased our
observation and reporting of potential problem
gambling indicators, as well as increased our
preventative interactions through our Customer
Service Ambassadors and Gaming teams at our
Auckland site.
Unfortunately, from time to time, some customers
may attempt to re-enter a SkyCity casino with
the intention of gaming in breach of their
exclusion orders.
With the size of our customer base and premises,
it can be a challenge to identify these individuals
immediately. We do all we can to prevent this
from happening – all casino supervisors and
floor security staff are provided with up-to-date
information on customers who have been
excluded, SkyCity keeps photographs of all
excluded customers and we share our database
across our sites so that excluded individuals
cannot enter our other premises.
However, we largely rely on our casino
staff, security and surveillance teams using
photographs to recognise excluded people.
As outlined above, facial recognition technology
will assist SkyCity to recognise excluded people
- however, despite our best efforts and these
processes, some individuals may nonetheless find
ways to elude staff and re-enter a SkyCity casino.
We offer extensive
information to
customers about
exclusion options
and referral details
to problem gambling
support services
Community Knowledge
Given that the most material issue to all
stakeholders, internal and external, is responsible
gambling, we aim to foster good relationships
with problem gambling stakeholders.
As part of this approach, we provide tours
of our facilities and literature to treatment
providers to assist them in understanding our
gaming environments and Host Responsibility
Programmes. We also partner with local experts
and support agencies to ensure we have the
resources in place for harm minimisation
and prevention.
The objective is to improve information sharing
and collaboration between stakeholders in order
to advance SkyCity’s harm minimisation approach.
This collaborative approach ensures that
knowledge about problem gambling is shared
between SkyCity and the relevant stakeholders,
who will work together to minimise harm.
Throughout the 2019 financial year, we continued
to engage with community stakeholders, both at
their request and through more formal bi-monthly
problem gambling liaison meetings.
In September 2018, during Gambling Harm
Awareness Week in New Zealand, SkyCity
welcomed various problem gambling support
providers, including Mapu Maia, Asian Family
Services, Salvation Army, Problem Gambling
Foundation’s He Kiwi Team, South Seas
Healthcare and Raukura Hauora o Tainui, into
the SkyCity Auckland casino to raise their profile
with customers. Representatives from each of the
providers staffed an information station within the
casino at SkyCity Auckland over Gambling Harm
Awareness Week.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 59
Our People
As a major employer with over 5,000 staff and
growing, we know that taking care of our people
is the key to creating a great place to work.
Priority Issues
FY19 Performance Highlights
•
Employee engagement, learning,
development and careers
•
• Diversity, inclusion and belonging
• Health, safety and wellbeing
•
•
•
•
•
•
•
•
Tahuna Te Ahi, a bespoke programme developed for SkyCity’s
New Zealand-based employees to provide accelerated
leadership development specifically for Māori employees,
won the 2018 Deloitte Top 200 Diversity & Inclusion Leadership
Award and was named as a Platinum winner in the Best
Learning & Development Project – Leadership Capability
category at the international LearnX Awards
31 employees graduated from the SkyCity Emerging Leaders
Programme, a bespoke programme designed to accelerate
the development of our best front-line talent
SkyCity managers completed a further 570 hours of
White Ribbon training across the business to assist them to
recognise the signs of family violence and respond accordingly
12 staff took up the opportunity to enrol in a 36-week Te Reo
Māori language course
Continued to focus on improving our health and safety
performance against our four health and safety goals set out
in our Group Health and Safety Strategy for 2019–2021
Established the SkyCity Inclusion Council to support the
embedding of an authentic and inclusive culture within
SkyCity Auckland
Awarded the Gender Tick in recognition of SkyCity’s
commitment to providing a fair workplace for all employees
Became a Platinum Partner of Women in Gaming and
Hospitality Australasia broadening the industry body’s reach
to New Zealand and Adelaide
Launched Culture Capital for Executives, a bespoke
programme for SkyCity executives, which aims to build
confidence and capability to engage authentically with Māori
and people from indigenous cultures
Inspire
our people
Create a great place to work where
people are empowered to grow
and achieve.
We are committed to
providing our employees
with sustainable career
paths at SkyCity and
want our staff to grow
their careers with us
At SkyCity, we aim to create an environment
where our people are at the centre and ensure
that our staff can work safely, are motivated to
work hard, progress in their careers, and have the
tools and knowledge they need to look after both
themselves and our customers
Employee
Engagement, Learning
and Development
and Careers
With a large and diverse workforce, SkyCity is
recognised for taking a lead in staff development
and care. Our vision is to be a centre of expertise
that delivers high value learning and development
solutions for staff which contribute to the
achievement of our business priorities.
We have an advanced set of priorities and
programmes in place across our sites to achieve
our goal of being a great place to work where our
people are empowered to grow and to achieve.
To ensure that these programmes remain
effective and relevant, we regularly review the
effectiveness of the programmes, in terms of
both interest and sustained impact, and make
refinements as required. New programmes are
also trialled and introduced where appropriate.
We regularly seek advice from staff on how
to remove barriers to participation (such as
release time) and introduce better incentives
for participation.
Our People
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Tahuna Te Ahi – Ignite the Fire
Emerging Leaders
Te Reo Māori
One of the ways we deliver on our commitment
to an inclusive workplace that enhances and
promotes diversity is with targeted programmes
that support employees from underrepresented
groups to thrive. As a large New Zealand
employer, we feel a particular responsibility to
ensure we provide our Māori employees (8% of
our employees identify as Māori) with every
opportunity to progress.
Recognising the special standing of Māori as
tangata whenua and the indigenous people of
Aotearoa, SkyCity launched a tailored programme,
developed by New Zealand company Indigenous
Growth Limited, for our New Zealand-based
employees in 2018 which provides accelerated
leadership development specifically for Māori
employees in addition to implementing initiatives
which elevate the standing of Māori at SkyCity
more broadly. The programme connects people to
indigenous values and culture while at the same
time giving them the tools to incorporate their
culture into a business environment.
The six-month programme includes five two-day
workshops, a project (rōpū) and personal
coaching. It also covers indigenous power and
authority in business, decision making and mental
toughness, leadership style and executive skills,
authentic presentation style, and personal goals
and development.
Fourteen employees graduated from the second
intake of the programme in October 2018 and the
third intake is scheduled for early 2020.
In November 2018, SkyCity won the 2018 Deloitte
Top 200 Diversity & Inclusion Leadership Award
for the programme and, in June 2019, SkyCity was
named as a Platinum winner in the Best Learning
& Development Project – Leadership Capability
category at the international LearnX Awards.
Driven by graduates of SkyCity’s bespoke
Māori leadership development programme,
Tahuna Te Ahi, during Te Wiki o Te Reo Māori
(Māori Language Week) in September 2018,
SkyCity Auckland staff were encouraged to learn
basic Māori phrases from daily sentences posted
on the staff intranet to translating all of the items
at the staff cafeteria. For the more advanced, daily
challenges, such as Te Reo crosswords, were set
where staff could compete to win prizes.
In addition, the staff cafeteria celebrated the
week with a Māori themed menu with traditional
delicacies and the Sky Tower was lit up in red and
white to mark Te Wiki o Te Reo Māori.
Through Te Wānanga o Aotearoa, SkyCity also
offered up to 30 staff the opportunity to enrol
in a 36-week Te Reo Māori language course
starting in March 2019, where participants learn
basic conversational Te Reo and graduate with
a New Zealand Certificate in Te Reo (Reo Rua)
Level 1 & Level 2 – with 12 staff members taking
up the opportunity.
The SkyCity Emerging Leaders Programme is
designed to accelerate the development of our
best front-line talent across the organisation.
It was designed from the ground up to
incorporate current best practice leadership
content and development approaches and
involves a sophisticated blend of online content,
facilitated workshops, leadership coaching and
on-job application.
Over a series of critical leadership topics,
participants experience a six-month
developmental pathway that supports them
through one of the most important transition
points in their career.
31 employees graduated from the SkyCity
Emerging Leaders Programme in August
and November 2018.
White Ribbon Policy – Training for Managers
Continuing from the 2018 Workplace Refuge
Endorsement from the Women’s Refuge,
SkyCity has completed a further 570 hours
of White Ribbon training for more than
227 managers across its business.
White Ribbon training assists managers to
recognise the signs of family violence, respond
accordingly and refer any incidents or issues on
to the appropriate organisations. In addition,
SkyCity Auckland has a Family Violence
Committee that, alongside the Connect Centre
(SkyCity’s employee support service), is an
additional point of contact for staff.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our health and
safety mission is to
prevent harm and
build wellness
Health, Safety and
Wellbeing
Health and Safety
At SkyCity, our people are paramount to the
success of our business. Ensuring we take care
of our people at work allows them to provide our
guests with a safe and enjoyable experience.
Each property within the SkyCity Group must
demonstrate compliance with our Group
Health and Safety policy and standards
for safety. We also conduct internal audits
annually and external audits as required for
registration and certification. Findings from
these audits are monitored and tracked for
continuous improvement.
In 2018, SkyCity adopted a new Group Health
and Safety Strategy for 2019-2021 which centres
around the mission “Prevent Harm and Build
Wellness” and four goals:
•
Industry leading safety culture – we will create
a positive safety culture for our workers and
guests with a strong emphasis on genuine and
visible leadership and active engagement of
our workers;
•
•
•
Effective risk management – we will focus on
our critical risks ensuring we have sufficient
risk mitigation strategies in place to prevent
fatal or serious harm;
Sustainable systems and processes – we will
create a contemporary and resilient approach
to the management and improvement of
health and safety; and
Health and wellbeing – we will adopt a
risk-based approach to health and wellbeing
including programmes to reduce physical
and psychosocial risks to our workers.
The strategy also addresses the New Zealand
Government’s key goals of its draft NZ Health
and Safety at Work Strategy 2018-2028.
Ensuring we take
care of our people
at work allows
them to provide
our guests with a
safe and enjoyable
experience
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FY19 Health and Safety Scorecard
Indicator
Target
FY19 Performance
Safety Success Indicator 1
(not assured)
Safety Success Indicator 2
(assured)
Zero fatalities or serious injuries
Achieved
Reduce Total Recordable Incident
Frequency Rate (TRIFR) by 10%
from the FY18 baseline
Achieved
Safety Success Indicator 3
(not assured)
Increase hazard reports by 20%
from the FY18 baseline
Achieved
GOAL 1
Industry Leading
Safety Culture
GOAL 2
Effective Risk
Management
GOAL 3
Sustainable Systems
and Processes
GOAL 4
Health and
Wellbeing
Highlights
Highlights
Highlights
Highlights
A significant increase in
the number of employees
electing to participate in
our health vaccination
programmes
Participated in a range of
wellness activities, including
the World’s Biggest Boot
Camp held at Eden Park
in Auckland where a large
contingent of our Auckland
team participated in a
successful world record
attempt for the most
simultaneous frog squats
Established a new health
and safety performance
framework with a greater
emphasis on reporting,
engagement and
participation
Engaged more actively with
our workforce and celebrated
our inaugural Annual Health
and Safety event where
our employees showcased
how they manage safety
in their workplaces
Established baseline
measurements in our safety
culture and commissioned
further research to
support the development
of a hospitality specific
safety leadership training
programme
Introduced a new annual
‘Chairman’s Award for
excellence in Health and
Safety’ with the inaugural
winner recognised at
our annual employee
awards events
Continued to invest in
strengthening our critical
risk control across the Group,
focussing on achieving zero
fatalities (Safety Success
Indicator 1)
Implemented a new
Construction Safety
Assurance programme
focussed on our high risk
construction projects
Reinforced to our
construction partners
our safety beliefs and
collaborated with them
on improving health and
safety outcomes
Focussed on improving
our preparedness for
emergencies with new
learning activities and
improve technology to
enable a professional
and effective response
to serious or potential
catastrophic events
Commenced
implementation of new
systems for incident and
hazard reporting, focussing
on making safety simple for
our employees. The positive
change in process has
resulted in improved
reporting and a more timely
response to rectify hazards
and identify opportunities
for improvement
Implemented a new
Chemical Risk Management
database focussed on
improving our workers'
access to information on the
effective management of
hazardous chemical risks
Achieved Tertiary level
accreditation for our
New Zealand properties
in our ACC Accredited
Employers programme
recertification audit
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
24-hour support
is available to all staff, seven days a week, from trained professional counsellors
Employee Wellbeing
SkyCity’s wellness 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.
SkyCity runs a wellness programme called ‘Play
Well’ which focusses on four areas of wellbeing –
physical activity, nutrition, smoke free and mind
and soul. We have a number of initiatives, such
as the Sky Tower Challenge, smoking cessation
programmes and speaker sessions on mental
health and wellbeing, throughout the year.
Our Adelaide site’s ‘Healthy Minds’ programme
provides education and training to all employees
on the importance of building and maintaining
personal wellbeing through a balance of
health, wellness, exercise and relationships.
The programme provides practical, demonstrable
tools and techniques to enable the development
of a healthy, balanced emotional life and for
employees to be at their best, regardless of
external circumstances.
As part of the wellness programme, all SkyCity
employees across the Group are also invited
to receive their flu vaccinations at work
for free. This service is offered annually to
employees on-site at the beginning of the flu
season to ensure all staff have easy access to
the vaccinations.
Staff Support Programmes
SkyCity has a range of services designed to assist
employees who may need a helping hand.
At our Auckland and Hamilton sites, the Connect
Centre offers confidential help and advice for
SkyCity employees – for work issues and situations
outside of work. They offer advice about practical
and effective ways to handle difficult or sensitive
issues. Where needed, they can also assist
employees in working with agencies outside of
SkyCity who may be able to help.
The Group-wide Employee Assistance Programme
(EAP) is a supportive and confidential programme
designed to assist SkyCity employees who may
have problems that affect them at work – advice
and support is available 24 hours a day, seven days
a week, from trained professional counsellors who
can help staff with their problems.
SkyCity also provides emergency financial
assistance for employees suffering financial
hardship. This help can include budgeting advice,
and last resort financial help through a ‘SMILE’
loan to New Zealand-based staff who qualify
for support.
Healthcare
SkyCity understands that healthcare can be
expensive and sometimes difficult to access
for members of the workforce. We therefore
offer permanent, full-time employees in our
New Zealand sites health insurance via our
healthcare provider Southern Cross Healthcare.
SkyCity fully subsidises the RegularCare plan,
which provides shared cover for surgical
treatment, recovery, support, imaging and
diagnostic tests and day-to-day treatment.
Employees are also able to add their family
members to the insurance plan at an
additional cost.
We are committed to
providing opportunities
and initiatives that
assist all to reach
their potential
Diversity, Inclusion
and Belonging
We have a strong representation of minority
groups at SkyCity who are often underrepresented
at leadership levels in the workforce.
Encouraging diversity of thought in our workforce,
and in leadership roles in particular, allows us to
strategically reflect our diverse customer base
and draw people with different backgrounds to
our business. We believe this diversity of thought
offers an opportunity to enhance SkyCity’s
competitive advantage and provide long term
sustainable business success.
We value and respect the contributions, ideas
and experiences of people from all backgrounds
and are committed to an inclusive workplace
that enhances and promotes workplace diversity
across the business. We are committed to
providing opportunities and initiatives that
assist all to reach their potential, and regularly
benchmark and report on our diversity position,
policy and objectives.
SkyCity’s Diversity and Inclusion Policy (available
in the Governance section of the company’s
website at www.skycityentertainmentgroup.com)
provides a framework for the company’s current
and future diversity and inclusion initiatives.
Each year, the SkyCity Board sets measurable
objectives to promote diversity and inclusion.
The measurable objectives set by the Board for
the financial year ending 30 June 2020 are to:
•
continue to ensure strong female candidates
are identified in the recruitment process for all
Board and senior executive roles;
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•
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•
•
•
maintain a gender balance across the
population of employees who make up the
top four levels of the organisation hierarchy;
continue to review gender pay equality and
deliver an organisation-wide programme that
removes any risk of bias or inequality;
leverage diverse talent pools to develop a more
ethnically diverse leadership population;
maintain Rainbow Tick certification for our
New Zealand sites and partner with Pride in
Diversity Australia to reiterate our commitment
to our lesbian, gay, bi-sexual, transgender,
takatapui and intersex staff;
build the capability of all leaders in
understanding and leveraging diversity of
thought through ensuring appropriate learning
and development solutions are delivered; and
continue to provide support and education to
employees and managers to promote mental
health awareness.
Inclusion Council
In 2019, a SkyCity Inclusion Council was
established to support the embedding of
an authentic and inclusive culture within
SkyCity Auckland.
The Council is made up of Employee Resource
Groups (ERGs), whose purpose is to bring to
life SkyCity’s diversity and inclusion objectives.
The ERGs sit on a forum to discuss priorities and
proposed actions with senior leadership on a
quarterly basis.
The first ERGs are Women in Leadership, SkyCity
Pride, Te Roopu Māori o SkyCity, NZ Asian Leaders,
Pasifika Leaders and Winning Women Chefs Club.
The leaders of these groups bring together
their respective communities, confirming their
priorities and work together to drive initiatives
that impact the groups they represent.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 SkyCity is one of
only six companies
in New Zealand to
receive Gender Tick
accreditation
Supporting Our Rainbow Community
SkyCity has maintained a Rainbow Tick for its
Auckland, Hamilton and Queenstown properties
in 2019.
Being a Rainbow Tick employer means SkyCity
has been acknowledged as being a safe,
supportive and welcoming workplace where
employees can bring their whole selves to work
without fear of discrimination or disadvantage
– no matter what their gender identity or
sexual orientation.
SkyCity is committed to continually improving
and working with the feedback received from
Rainbow Tick to find ways we can further support
our SkyCity rainbow community.
Our Adelaide site participated in the Australian
Pride in Diversity programme, which reiterates
our commitment to our lesbian, gay, bi-sexual,
trans-sexual and intersex Australian-based staff.
SkyCity Queenstown has also been a supporter
of the Winter Pride event in Queenstown for
many years and signed up to the Pride Pledge
in June 2018. The Pride Pledge was started in
Queenstown to raise the visibility of safe spaces
within the Queenstown community after the
Winter Pride festival organisers realised that,
although the town had an inclusive heart, it
was very difficult for the rainbow community
to see any visible signs that they were welcome
and included.
Gender Tick
In April 2019, SkyCity was awarded the Gender Tick
in recognition of its commitment to providing a
fair workplace for all employees.
Gender Tick is a New Zealand-based accreditation
for businesses to demonstrate their commitment
to gender equality in the workplace.
SkyCity is one of only six companies in
New Zealand to receive this accreditation,
which is an important step in its diversity and
inclusion journey.
Pay Equality
SkyCity continues to monitor and report on
remuneration outcomes by gender to ensure
pay equality.
In the past financial year, we conducted gender
pay equality analysis for like positions, positions
with similar degrees of know-how, problem
solving and accountability. This analysis identified
that there are no indications of gender bias
across similar positions. However, due to the lack
of representation of women in senior positions,
there is a pay gap at SkyCity when considering the
median hourly rate for women as a percentage of
the median hourly rate for men.
The following chart illustrates the SkyCity pay gap
as at 30 June 2019 (assured):
NEW ZEALAND
8.2%
AUSTRALIA
1.5%
The median hourly rate for women as a percentage of the median
hourly rate for men as at 30 June 2019. Includes permanent and
temporary employees.
The New Zealand national gender pay gap is 9.2%
(August 2018).
The programme assesses organisations across five
key indicators, including gender inclusive culture,
flexibility and leave, women in leadership, gender
pay equality and ensuring a safe workplace.
We remain focussed on increasing the
representation of women in senior roles across
the business through a gender balanced
talent pipeline.
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Women in Gaming and Hospitality Australasia
Cultural Capital for Executives
As part of our ongoing focus on diversity and
inclusion, SkyCity became a Platinum Partner of
Women in Gaming and Hospitality Australasia
(WGHA) in November 2018, broadening
the industry body’s reach to New Zealand
and Adelaide.
The industry-for-industry body is dedicated to
empowering women working in, or looking to
work in, the gaming and hospitality industry
in Australasia. This includes work that removes
barriers and increases opportunities for the
advancement of women in the industry, all of
which aligns strongly with SkyCity’s values.
SkyCity has committed to a three-year
partnership, and is the fifth partner of WGHA,
joining The Star Entertainment Group, Aristocrat,
Crown Resorts and ALH Group.
In August 2018, SkyCity partnered with Indigenous
Growth Limited to launch a tailored programme
for SkyCity executives.
The programme builds confidence and capability
to engage authentically with Māori and people
from indigenous cultures with the use of basic
Te Reo Māori and an in-depth understanding of
tikanga (cultural practices). Participants build
early confidence in engaging in a marae
environment through marae-based learning.
They cover the key elements of indigenous
cultural values and practices with support from
kaumātua (elders) and rangatira (leaders) to
honour tikanga. The programme reinforces
the business case for inclusive practices and
demonstrates the connections to strategy,
business growth and social entrepreneurship.
14 executives graduated from the first intake of
the programme in October 2018 and, in May 2019,
a further nine executives completed their journey
on the programme.
Our Employee's
Story
management team, others at SkyCity and
myself to ensure the appropriate support
was provided.
SkyCity Auckland won
The New Zealand Rainbow
Excellence Awards 2019
Training and Development
Award for its Transition
Support framework. The framework is designed
to support managers in onboarding transgender
staff, which enables our transgender staff to be
their authentic selves at work. Since inception,
5 employees have successfully transitioned
through the framework. The following is the
experience of one of our employees, who used
the framework and the support of the SkyCity
Connect Team to transition at work.
“From the outset, my team leader, operations
manager and, especially, the Connect Team
were helpful and supportive of me and
my transition.
Having the Connect Team there to talk to has
been invaluable - they worked alongside my
This support has been wide and positive – from
an initial meeting to discuss challenges and
expectations from both my perspective and that
of SkyCity. This allowed me to share my thoughts
in a safe space with both my manager and the
Connect Team where we discussed matters,
including what I felt was appropriate and
comfortable to share with my work team about
myself, and what wasn’t.
I’ve enjoyed being able to come in and share
my news with the Connect Team, especially as
most of my friends and family don’t live near
Auckland and it was nice to have some people
to tell in person.
Knowing that I could pop in to talk to the
Connect Team about anything has been very
reassuring and made my journey at SkyCity a
positive experience thus far”.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our People
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Performance Against Board Diversity and Inclusion Objectives
SkyCity performed well against the measurable objectives set by the Board to promote diversity and
inclusion for the year ended 30 June 2019 (as reported in the company’s 2018 annual report) as follows:
Objective
Progress Made
Objective
Progress Made
Leverage diverse talent pools to
develop a more ethnically diverse
leadership population
Several initiatives were delivered during the past financial year
with the objective of developing a more ethnically diverse
leadership population:
Continue to ensure strong female
candidates are identified in the
recruitment process for all Board
and senior executive roles
Recruitment briefs for the Board recruitment process during
the past financial year explicitly specified that SkyCity required
female candidates to be identified wherever possible.
Recruitment briefs for senior leadership recruitment process
explicitly specified that SkyCity required female candidates to
be identified wherever possible.
In the past financial year, two senior executive appointments
have been made to the positions of Chief Property Officer
and Director Online Gaming and, whilst female candidates
were identified through the search and selection process,
no females were appointed.
Maintain a gender balance across
the population of employees who
make up the top four levels of the
organisation hierarchy
During the past financial year, gender balance has been
maintained across the top four levels of the organisation
hierarchy with 50.5% of employees being female and 49.5% being
male, demonstrating an equal gender representation in our
talent pipeline.
Continue to review gender
pay equality and deliver an
organisation-wide programme
that removes any risk of bias
or inequality
SkyCity continues to monitor and report on remuneration
outcomes by gender to ensure pay equality. The annual salary
review resulted in an average increase for female salaried
employees of 2.5% and an average increase for male salaried
employees of 2.37%.
SkyCity also conducted gender pay equality analysis for like
positions, positions with similar degrees of know-how, problem
solving and accountability. This analysis identified that there
are no indications of gender bias across similar positions.
While our analysis has identified no evidence of a gender
driven pay gap for like positions, we remain focussed on
increasing the representation of women in senior roles across
the business through a gender balanced talent pipeline.
•
•
•
SkyCity continued to offer its Māori leadership
programme, Tahuna Te Ahi, in partnership with
Indigenous Growth Limited;
Eight Pasifika employees participated in the Growing Niu
Pasifika leadership programme; and
SkyCity continued its sponsorship of the New Zealand
Asian Leaders Forum, doubling employee memberships.
In addition, of the participants in SkyCity’s Emerging
Leadership Programme, 38% identified as Asian and 12%
identified as either Māori or Pasifika.
Rainbow Tick certification was achieved for each of our
Auckland, Hamilton and Queenstown sites.
Our Adelaide site maintained Pride in Diversity membership
and participated in the Australian Workplace Equality
Index survey.
The SkyCity Senior Leadership Team took part in the Cultural
Capital for Executives programme, delivered by Indigenous
Growth Limited, during the past financial year. The purpose
of the programme is to develop an understanding of cultural
practices and the confidence to engage authentically
with Māori.
The SkyCity Emerging Leaders programme has a highly
integrated approach to diversity and inclusion, from our
selection of participants to the collaborative and experiential
modules which focus on exploring bias.
Maintain Rainbow Tick
certification for all our
New Zealand sites and partner
with Pride in Diversity Australia to
reiterate our commitment to our
lesbian, gay, bi-sexual, intersex,
takatapui and trans-sexual staff
Build the capability of all leaders
in understanding and leveraging
diversity of thought through
ensuring appropriate learning
and development solutions
are delivered
Continue to provide support and
education to employees and
managers to promote mental
health awareness
Mental Health Awareness Week was celebrated at the
Auckland, Hamilton and Queenstown sites during the past
financial year with several opportunities for employees to
access practical tips and resources to support mental health.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our People
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Workforce profile, employment contract type by gender (%) (not assured)
Contract type
Permanent
Temporary
Female
Gender Diverse
Male
Group Total
94%
6%
100%
0%
91%
9%
92%
8%
Workforce profile, employment contract type by site (%) (not assured)
Contract type
Permanent
Temporary
Adelaide
Auckland
Hamilton
Queenstown
72%
28%
97%
3%
99%
1%
100%
0%
Workforce profile, employment type by gender (%) (not assured)
Contract type
Full-Time
On Demand
Part-Time
Female
Gender Diverse
Male
Group Total
52%
19%
29%
17%
50%
33%
62%
18%
20%
57%
19%
24%
Employees in collective agreements, by site (%) (not assured)
Contract type
Adelaide
Auckland
Hamilton
Queenstown
Group Total**
Yes
No
75%
25%
25%
75%
7%
93%
0%
100%
33%
67%
Employee absenteeism (%), as a percentage of scheduled days (not assured)
Contract Type
Absenteeism
Adelaide
Auckland
Hamilton
Queenstown
Group Total**
3.62%
3.98%
3.60%
2.18%
3.76%
Adelaide
Auckland
Hamilton
Queenstown
Adelaide
Auckland
Hamilton
Queenstown
Permanent
Temporary
Our Staff Numbers
Worked full-time equivalent (FTE)* by site (%)
(assured)
Site
Adelaide
Auckland
Hamilton
Queenstown
Total
Number of Employees
575
2,426
242
75
%
18%
73%
7%
2%
3,318
100%
Total headcount for Group (%)
(assured)
Site
Adelaide
Auckland
Hamilton
Queenstown
Group Total
Number of Staff
997
3,625
320
89
%
20%
72%
6%
2%
5,031
100%
Employment contract type for Group (%)
(assured)
Contract Type
Number of Employees
Permanent
Temporary
Grand Total
4,642
389
%
92%
8%
5,031
100%
* The FTE calculation is based on actual hours worked by staff, not contracted hours. This definition provides a more accurate assessment
of full-time equivalent staff.
**Group total percentages are weighted proportionately based on site Worked FTE.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Grow our
communities
Serve a social purpose by investing in
local economies and communities.
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Our Communities
Our aim is to create value in our business and in the
communities in which we operate.
We understand that to do this we need to engage
meaningfully with our communities, listen to
their critical needs and expectations, and respond
through developing meaningful community
partnerships and by taking action to address key
issues in our operations.
Priority Issues
• FY19 Performance Highlights
• Economic contribution
•
•
•
Building communities by
developing people
Investing through the SkyCity
Community Trusts and through
charity partnerships
Developing deeper connections
with iwi and indigenous peoples
•
•
•
•
•
•
•
Spent over $450 million with a vast array of suppliers of goods
and services (assured)
Helped to raise more than $1.3 million for Leukaemia &
Blood Cancer New Zealand in the 15th Firefighter Sky Tower
Stair Challenge (not assured)
Helped to raise over $85,000 for Variety – The Children’s
Charity in the 7th annual Variety of Chefs campaign
(not assured)
Paid a total of $4.0 million to the four New Zealand SkyCity
Community Trusts for distribution to communities in the
Auckland, Waikato and Queenstown Lakes regions – of which
$2.8 million was distributed by the Trusts in FY19 (assured)
Launched the Nikau Project, a youth employment programme
with a focus on developing work-ready skills – with the first
cohort of 15 participants joining the SkyCity Auckland pilot
programme in June 2019
SkyCity’s partnership with Te Puni Kōkiri has enabled young
Māori to access cadetships which support their transition into
employment with SkyCity
Established Te Roopu Māori o SkyCity, an internal Employee
Resource Group, to support authentic engagement with
Māori staff
We invest in and
work to develop our
communities in a
variety of ways
SkyCity is a cornerstone of each of the
communities in which it operates. We understand
that our scope for influence and change is huge,
and SkyCity invests in and works to develop our
communities in a variety of ways.
Engaging our stakeholders helps us to
understand community attitudes toward SkyCity,
the communities’ expectations of us, and how
stakeholders believe SkyCity should create value.
SkyCity engages with stakeholders in a variety
of ways, both formal and informal, in each of the
communities in which it operates. These actions
range from legally required engagement with
regulators and problem gambling service
providers for example, to less formal feedback
mechanisms such as social media, customer
surveys and public perception monitoring.
Whilst it is easy for organisations to talk about
inputs and outputs, such as how much money
or ‘in-kind’ contributions are given to charity,
the number of charities receiving support, or
how many hours staff spend on volunteering
for community projects, it is a more challenging
exercise to determine the outcomes and impact
of those activities. We want to ensure that there is
genuine and measurable social impact from our
SkyCity Community Trusts and other charitable
giving. We continue to review and assess our
community investments and partnerships in a
more holistic and strategic way, to ensure that
they are aligned to our unique business assets
and are ultimately delivering both social and
business value.
Economic
Contribution
Sourcing Locally
SkyCity is committed to sourcing locally. One of
the intentions outlined in the SkyCity Group
Procurement Policy is to source and procure
locally made and supplied products from
Australasian owned and operated businesses
as a preference wherever possible.
In the financial year ended 30 June 2019, SkyCity
spent over $450 million with a vast array of
suppliers of goods and services – with over
$50 million on food and beverage items across
New Zealand and Australia.
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$11.9 million
raised for Leukaemia & Blood Cancer New Zealand via Firefighter Sky Tower Stair Challenge,
Step Up Sky Tower Stair Challenge and SkyCity Dining for a Difference since our partnership began
Over
$57 million
awarded to more than 4,760 community groups and organisations in New Zealand since 1996
Partnerships
Leukaemia & Blood Cancer New Zealand
Firefighters from communities across
New Zealand joined forces again to raise more
than $1.3 million for Leukaemia & Blood Cancer
New Zealand (the national charity dedicated to
supporting patients and their families living with
blood cancers and related blood conditions) in the
15th Firefighter Sky Tower Stair Challenge in 2019,
with each participant climbing the 1,103 steps of
the Sky Tower wearing 25 kilograms of gear.
SkyCity is proud to have Leukaemia & Blood
Cancer New Zealand as a charity partner and
to have worked together to raise more than
$11.9 million through three annual events – the
Firefighter Sky Tower Stair Challenge, Step Up
Sky Tower Stair Challenge and SkyCity Dining
for a Difference.
Variety – The Children’s Charity
SkyCity continued its 19-year partnership with
Variety – The Children’s Charity, with our 7th
annual Variety of Chefs campaign raising over
$85,000. We also supported the charity to deliver
Variety Bingo in Auckland, Adelaide and Hamilton.
We are really proud of the partnership we have
with Variety, and the support we can provide
to continue the important work they do in
our communities.
Investing in our
Communities
SkyCity Community Trusts
Established to provide funds for community and
charitable purposes, the SkyCity Community
Trusts are one of the vehicles SkyCity uses to
‘put something back’ into the New Zealand
communities in which the company operates.
The SkyCity Auckland Community Trust,
SkyCity Hamilton Community Trust,
SkyCity Queenstown Casino Community Trust and
SkyCity Wharf Casino Community Trust aim to
help local and regional organisations carry out
community assistance and development work,
focussing on supporting families to thrive and
communities to prosper, with a specific focus on
youth development.
Each of the Trusts calls for applications once a
year with close-off dates in March for Auckland,
July for Queenstown and September for Hamilton.
The Trusts prioritise grants to groups or
programmes that encourage financial capability,
employment and economic prosperity for healthy
and stable families and youth. Many of the grants
support the salaries and wages of counsellors,
case workers, coordinators, coaches, managers,
advocates, social workers, team leaders, senior
nurses and mentors of these community groups
– an area increasingly difficult to find funding for.
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Over the past financial year, SkyCity paid a total
of $4.0 million to the four SkyCity Community
Trusts for distribution to community groups
and organisations in the Auckland, Waikato and
Queenstown Lakes regions of which $2.8 million
was distributed by the Trusts in FY19 (assured).
Since establishing the first SkyCity Auckland
Community Trust in 1996, SkyCity has awarded
over $57 million to more than 4,760 community
groups and organisations in New Zealand,
large and small, through the four SkyCity
Community Trusts.
Our SkyCity Community Trusts are currently
undergoing a review to align with governance,
grant making and philanthropic best practice.
Community Outcomes,
Strategy and Progress
Building Communities by Developing People
During the 2018 financial year, after engaging
with employees from across the SkyCity Group
and community representatives (including
the youth development, family support and
financial capability sectors), SkyCity developed a
new community development and investment
strategy centred around a thematic approach of
“Building Communities by Developing People”.
This approach recognises that SkyCity can
provide employment opportunity for unskilled,
unemployed and at-risk youth within each of the
communities within which it operates – we can
provide employment, training and a career path.
During the 2019 financial year, SkyCity finalised
the operational strategy across the SkyCity Group
to deliver this new strategy with the launch of the
Nikau Project, a youth employment programme
with a focus on developing work-ready skills.
SkyCity worked in collaboration with the Ministry
of Social Development and a community-based
provider to design a work ready programme –
with the first cohort of 15 participants joining the
SkyCity Auckland pilot programme in June 2019,
and a further 15 to join in September 2019.
SkyCity has designed and implemented a
wraparound youth mentoring support for the
cohort and, in partnership with Te Puni Kōkiri,
is co-designing individualised learning and
development plans for each cadet.
If the pilot programme is successful, the
programme is intended to be rolled out to
SkyCity’s Hamilton and Adelaide sites.
In addition, through collaboration with the
SkyCity Auckland Community Trust, greater
social impact has been achieved in the areas
of youth development and wellbeing through
the Trust’s prioritisation of youth development
and its identification of the following key
areas for funding – youth development,
including mentoring and transition support;
youth wellbeing, including mental health;
work readiness and work-related skills
and training; and initiatives that support
educational achievement.
Underpinning SkyCity’s community development
and investment strategy is an opportunity to
implement a programme for SkyCity staff to
take their knowledge and skills out into their
communities through volunteer programmes and
involvement in the delivery of youth development
programmes. This will be rolled out in 2019/2020.
Developing Deeper Connections with Māori
Iwi Māori relationships have been initiated
to support and guide the development of
SkyCity’s youth employment programme, the
Nikau Project. Our partnership with Te Puni Kōkiri
has enabled young Māori to access cadetships
which support their transition into employment
with SkyCity.
Through SkyCity’s Inclusion Council, Te Roopu
Māori o SkyCity, an internal Employee Resource
Group has been established to support authentic
engagement with Māori staff.
Auckland City Mission's Story
Auckland City Mission received a $1 million
grant over five years ($200,000 pa) from
the SkyCity Auckland Community Trust to
contribute to the construction of their new
“home” on Hobson Street, Auckland – with 2019
being the third year of the five-year grant.
Auckland City Mission – HomeGround Project
From comforting shell-shocked soldiers in
the great wars and helping people living with
HIV and AIDS, to proactively managing the
homeless problem in Auckland and caring
for those individuals who have nobody left to
turn to – Auckland City Mission is proud to be
on the front line.
In a perfect world, the Mission should not need
to exist. But life is rarely perfect, and even
today hunger, homelessness and poor health
are still major issues in Auckland. As Auckland
advances to become one of the most dynamic
cities in the Pacific region, we need new,
thoughtful, and innovative ways of solving these
age-old problems.
The Mission has a history of forward thinking
and its answer has been decades in the making.
The new City Mission centre, expected to be
ready from 2020, will transform the Auckland
City Mission – not just for the good of Auckland,
but for countless human lives in the process –
offering hope, community and proactive help.
The new centre is unlike anything anywhere
in the world. From idea and ambition, to
services and layout, it’s been carefully planned,
painstakingly designed, and shaped by world
best practice.
HomeGround Project Facts
• $90 million fundraising target
•
•
80 apartments to permanently house people
– 50% for the chronically homeless and
50% for those on low incomes on the social
housing register
Fit-for-purpose spaces for City Mission
services, administration and offices;
the Calder Medical Centre; dental clinic;
pharmacy; and detox centre, including
25 beds
•
Retail spaces, community spaces, conference
and event spaces for all Aucklanders
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 79
Our Suppliers
We can leverage our relationships with other
organisations to promote positive outcomes in
areas of impact such as anti-corruption, responsible
political advocacy, fair competition and promoting
social and environmental responsibility in our
supply chain.
Priority Issues
•
Ethical and sustainable
sourcing practices
•
Supply chain transparency
• Using local suppliers
FY19 Performance Highlights
•
Continued to advance our leadership in supply chain
sustainability by rolling out our Ethical Sourcing Code to
current and new suppliers across our sites via the onboarding
process for new vendors
•
•
•
Developed and adopted a new ethical and responsible sourcing
strategy for the SkyCity Group
EcoVadis assessment/audit made mandatory for SkyCity’s
significant existing suppliers and new suppliers
As part of a major information technology upgrade, SkyCity can
now categorise items in more detail, including country of origin,
which will enable SkyCity to modify procurement practices
where required to support the intention outlined in SkyCity’s
Group Procurement Policy – to source and procure locally made
and supplied products from Australasian owned and operated
businesses as a preference wherever possible
•
SkyCity spent over $450 million with a vast array of suppliers of
goods and services (assured)
Source
responsibly
Commit to the highest standards
of sourcing, ethically, responsibly
and locally.
800 key suppliers
across the SkyCity Group
Over
$450 million
spent on goods and services
SkyCity has approximately 800 key ongoing
significant suppliers across the Group, with a
substantial number of these being in the food and
beverage sector. As a major purchaser of goods
and services (we spent over $450 million with a
vast array of suppliers of goods and services in the
financial year ended 30 June 2019), SkyCity has
a significant opportunity to use its purchasing
power to drive sustainability.
Our approach is to focus on the areas in which
we can have the biggest impact in terms of
minimising our carbon footprint and with respect
to key vendors at high ongoing expenditure levels.
These areas include food, beverage, property and
marketing portfolios in particular.
Ethical and Sustainable
Sourcing Practices
Ethical Sourcing Code
In 2016, we adopted an Ethical Sourcing Code
to improve our indirect impact on society
and the environment by carefully selecting
and working with our suppliers to ensure
sustainable procurement.
The Code outlines our alignment with the ten
principles of the United Nations Global Compact.
It is not a compliance measure in itself, but asks
that vendors provide voluntary acknowledgement
of our commitment to the principles of the Code.
Through distribution of the Code, we aim
to encourage our suppliers to improve their
practices and to assist them in doing so, hence
improving the quality of life of the people
we touch indirectly and contributing to the
protection of the environment.
In the past financial year, we have continued
to advance our leadership in supply chain
sustainability by rolling out our Ethical Sourcing
Code to current and new suppliers across our sites
via the onboarding process for new vendors.
New Ethical and Responsible Sourcing Strategy
In November 2018, SkyCity engaged sustainability
consulting firm, Proxima, to help formulate a
Group-wide strategy for this pillar. Their brief
was to assist SkyCity using their specialist
knowledge of sustainable sourcing practices
and understanding of global best practice, to
establish a roadmap to improve the sustainability
performance of all SkyCity’s procurement
activities (focussing initially on food and
beverage), identify priority procurement
challenges to focus on in the shorter-term and
define strategic goals and associated metrics.
Following consultation with key internal
stakeholders, a new ethical and responsible
sourcing strategy was adopted in February 2019.
This strategy seeks to minimise negative impacts
linked to our operational footprint and to make a
positive contribution to the business, people and
communities that make up our supply chain.
Our Suppliers
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SkyCity’s new ethical sourcing strategy focus areas are outlined in the diagram below:
Signatory Level
Leading the industry and
shaping the supply chain
Good Practice
Meeting customer expectations
beyond legal compliance
Basics
Compliance with minimum
standards and build knowledge
Shift to
low carbon
Buy local
and seasonal
Connect to the circular economy
Serve meals from a sustainable
supply chain
Support supplier delivery and working conditions
Source animal products responsibly
Processes and tools
Supply Chain
Transparency
and Traceability
Sustainable Supply Chain
In September 2017, we commenced a sustainable
supply chain assessment pilot initiative with 129
of our key suppliers in New Zealand. As part of
this, we engaged an external provider, EcoVadis,
to audit and rate our suppliers against an
industry-tailored set of environmental, social and
governance criteria and our suppliers were invited
to fill out an online questionnaire and provide
evidence to support their actions and policies
across each criterion. A supplier who completes
the assessment receives a rating scorecard that
shows areas where they are achieving good
practice and areas where they may need to
improve. We can therefore identify critical risks
and begin a dialogue with our suppliers with a
view to improving sustainability performance
over time.
By the end of the 2019 financial year, of the
129 suppliers initially invited to undertake the
EcoVadis assessment/audit, 80 New Zealand-
based suppliers (representing over $25 million
or approximately 70% of our annual food and
beverage procurement spend in New Zealand)
had completed the process.
As supplier participation is central to SkyCity’s
ability to quantify its impact on the supply
chain and execute its strategy for this pillar, the
EcoVadis assessment/audit was made mandatory
for SkyCity’s significant existing suppliers and
new suppliers during the 2019 financial year.
Accordingly, at the end of the 2020 financial year
we expect to deploy the EcoVadis system across
more of our procurement portfolios capturing
professional services, ICT and construction.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Our Suppliers
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Local
Suppliers
As part of a major information technology
upgrade implemented in April 2019, SkyCity
will be able to categorise items in more detail,
including country of origin. This enables SkyCity to
modify procurement practices where required to
support the intention outlined in SkyCity’s Group
Procurement Policy - to source and procure locally
made and supplied products from Australasian
owned and operated businesses as a preference
wherever possible.
The policy drives greater rigour in the onboarding
of new suppliers and has an emphasis on supplier
consolidation and ethical sourcing with SkyCity
choosing the best mix of suppliers to meet its
business requirements.
In the financial year ended 30 June 2019, SkyCity
spent over $50 million on food and beverage
items across New Zealand and Adelaide.
This equates to over 17% of our spend when
excluding major capital construction projects.
We will be continuing to work with our food and
beverage suppliers to gain more understanding
as to where our products are being sourced to
ensure a local focus where practical (assured).
We continue to focus on obtaining a clearer
picture of our suppliers’ supply chains to ensure
they align with our Ethical Sourcing Code and
new suppliers are asked about their supply
practices prior to becoming an approved
supplier of the company. However, the scope
and geographic spread of our supply chain, and
also the wide variety of suppliers we engage
with, creates challenges for embedding the
Ethical Sourcing Code and ensuring our suppliers
are doing more than acknowledging their
commitments. Our suppliers are very diverse,
ranging from small localised family businesses
to global multinationals. In some cases, our
suppliers are very small operators and they have
few resources to provide detailed information
about their policies and sustainability and
governance approaches. In other cases, we have
had long-standing agreements with suppliers, but
have not engaged them before on sustainability
issues. As we manage these issues more closely,
we will have the opportunity to deepen our
engagement with our suppliers on the Ethical
Sourcing Code. A key way that we will do that into
the future is to undertake supplier sustainability
assessments and audits.
Whilst we have made good progress in our supply
chain practices to date, we recognise that more
focus and attention is required to achieve our
objectives. To this end, we have now developed
a 24-month Ethical and Responsible Sourcing
Strategy Roadmap, which will be embedded into
the business during the financial year ending
30 June 2020. We are committed to increasing
the clarity around our goals, priorities and metrics
for this pillar.
Kitchen Supplies
We operate New Zealand's largest commercial kitchen catering for a diverse range of occasions from
corporate events to weddings. We support our local businesses by sourcing through them whenever
possible. Here's a glimpse of what our SkyCity Auckland Pastry Kitchen utilised, and produced, in FY19.
51,000
eggs (or 1,700 trays)
6.5 tonnes
of butter (or 13,000 blocks)
25 tonnes
of flour (16 tonnes used for bread and 9 tonnes for cakes)
22,000 litres
of cream (or 11,000 bottles)
150,000
individual desserts produced per month on average
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 85
Our Environment
We are dedicated to growing in a sustainable
manner with a commitment to environmental
sustainability as a foundation for successful
economic, social and cultural development.
Priority Issues
FY19 Performance Highlights
• Climate change and emissions
• Reducing waste
• Carbon neutral by 2020
•
•
•
•
•
•
•
379kg of food donated to Kaivolution in FY19 and a total of
2,647kg since March 2015 (not assured)
314 tonnes of food waste collected from all SkyCity Auckland
kitchens and commercially composted offsite to be used on
New Zealand soils to aid the horticulture industry (assured)
Measured, audited and verified SkyCity’s carbon footprint
for FY15–FY18 through the Certified Emissions Measurement
and Reduction Scheme programme operated by Enviro-Mark
Solutions
Submitted to the Science Based Targets (SBT) initiative,
a partnership between CDP, the United Nations Global
Compact, the World Resources Institute and the World
Wildlife Fund, to set science-based reduction targets from
our FY15 base year
SkyCity was the first hospitality business in Oceania to
set science-based targets to help keep the rise in global
temperature to well below 2°C
SkyCity will be among the first major New Zealand companies
to go carbon neutral, achieving carbon neutrality across our
New Zealand sites in 2019
The Sugar Club developed New Zealand’s first ever low
carbon menu in partnership with Enviro-Mark Solutions and
WWF New Zealand and included a ‘low carbon icon’ into the
restaurant menu
Protect the
environment
Actively reduce waste and minimise
our environmental impact.
Working within the limits of the natural
environment will allow current and future
generations to benefit from its resources
to ensure continual economic and social
prosperity, which we believe results in business
continuity and positive impacts on staff and
stakeholder wellbeing.
Reducing
Waste
SkyCity’s Auckland and Hamilton sites have
implemented a food waste redirection and
recovery programme.
In Hamilton, SkyCity has partnered with
Kaivolution, a Go Eco Climate Action Project
that rescues edible and useable kai that would
have otherwise gone to waste or landfill
and redistributes it as free kai to registered
community groups and charities. During the past
financial year, SkyCity donated 379kg of food to
Kaivolution – bringing the total amount donated
since the programme began in March 2015 to
2,647kg (not assured).
In Auckland, SkyCity donates food to the Auckland
City Mission. Food that cannot be donated from
the SkyCity Auckland kitchens is collected and
commercially composted offsite to be used
on New Zealand soils to aid the horticulture
industry. During the past financial year, through
the efforts of our kitchen teams, SkyCity sent
314 tonnes of food waste to be commercially
composted (assured).
Implementing a food waste composting
system has allowed SkyCity to also benefit from
commercial composting to reduce single use
plastics. SkyCity is transitioning from traditional
plastic to commercially compostable food and
beverage packaging, such as takeaway coffee
cups and lids, straws, plates, containers and
cutlery. The packaging is made from rapidly
replenishing plant-based material and can be
disposed of in food waste bins.
Climate Change
and Emissions
As part of SkyCity’s commitment to climate
action, over the past financial year, we have
measured, audited and verified SkyCity’s carbon
footprint for FY15–FY18 through the Certified
Emissions Measurement and Reduction Scheme
(CEMARS) programme operated by Enviro-Mark
Solutions, a government-owned environmental
certifications body in New Zealand.
Although SkyCity is not a major emitter of
greenhouse gases, we recognise the role that we
need to play in reducing our impacts. During the
past financial year:
•
•
•
SkyCity submitted to the Science Based Targets
(SBT) initiative, a partnership between CDP
(formerly Carbon Disclosure Project), the United
Nations Global Compact, the World Resources
Institute and the World Wildlife Fund, to set
science-based reduction targets from our
FY15 base year. Targets are science-based
when in line with the level of decarbonisation
required to keep global temperature increase
well below 2°C. As part of this, SkyCity has
committed to reduce absolute scope one and
scope two Green House Gas (GHG) emissions
by 38% by 2030 and by 73% by 2050 (from a
2014-2015 base year) and that 67% of SkyCity’s
suppliers, by spend covering purchased
goods and services and capital goods, will
set science-based scope one and scope two
targets by the year 2023;
SkyCity became the first hospitality business
in Oceania to set science-based targets to help
keep the rise in global temperature to well
below 2°C; and
SkyCity announced that it would be among
the first major New Zealand companies to go
carbon neutral.
Climate Change Strategy
In February 2019, SkyCity announced a
climate change strategy that would see
SkyCity’s New Zealand sites become carbon
neutral by 30 September 2019, with SkyCity’s
Adelaide site achieving carbon neutrality by
30 September 2020.
As part of this strategy, a SkyCity Green Fund will
be established – funded by an internal carbon
levy paid by each of SkyCity’s Auckland, Hamilton,
Queenstown and Adelaide sites relative to each
site’s emissions. The levy is an internal charge
of $25 per tonne of carbon, in line with the
New Zealand Government’s price of carbon under
the Emissions Trading Scheme.
Our Environment
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Funds from the levy will be used to offset
SkyCity’s carbon footprint to net zero by investing
in emission reduction projects selected by
Enviro-Mark Solutions.
The SkyCity Green Fund also accrues and invests
in projects identified and developed by SkyCity
employees to reduce SkyCity’s carbon emissions
in accordance with its science-based targets set
in 2019.
SkyCity employees also have the opportunity to
measure and offset their own household carbon
footprints, with SkyCity matching their offset
dollar-for-dollar by payment into the SkyCity
Green Fund.
The New Zealand International Convention Centre,
currently under development in Auckland, will
operate as a carbon neutral venue following
completion of construction in 2020 – the only one
of its kind in the Asia Pacific region.
The New Zealand International Convention Centre
has also adopted a sustainability management
plan and will participate in globally recognised,
independent verification programmes, including
the Leadership in Energy and Environmental
Design’s (LEED) Green Building Rating System.
The New Zealand International Convention Centre
aims to achieve a certified status following the
assessment of the sustainable nature by which
the centre has been designed, built and delivered.
Climate Change Governance and Risks
SkyCity’s climate change strategy is overseen
by the Board’s Sustainability Committee.
A management-led Climate Change Committee
is responsible for working with wider operational
management to execute the strategy.
In line with the recommendations of the Task
Force on Climate-related Financial Disclosures,
SkyCity is building a comprehensive risk register of
climate related risks as per the recommendations
summarised in the table overleaf.
In May 2019, the Climate Change Response
(Zero Carbon) Amendment Bill was introduced
into the New Zealand Parliament and provides a
framework by which New Zealand can develop
and implement clear and stable climate change
policies that contribute to the global effort under
the Paris Agreement to limit the global average
temperature increase to 1.5°C above pre-industrial
levels. The Bill is expected to go to the Select
Committee in the second half of 2019 with the
amended Climate Change Response Act 2002
expected to come into force in late 2019. The
resulting national and local response plans will
then critically inform SkyCity of its own detailed
risks and response plans.
SkyCity is also a signatory to the Climate Leaders
Coalition, a group representing a variety of
businesses from different industries which
contribute to nearly half of New Zealand’s
emissions. The group’s goal is to help
New Zealand transition to a low emissions
economy and, in doing so, create a positive future
for New Zealanders, business and the economy.
Members of the Climate Leaders Coalition have
signed a joint Climate Change Statement, which
commits their companies to action and is the
group’s first step in their drive for positive change.
By signing the statement, each of the business
leaders have committed to:
•
•
•
•
•
measuring their greenhouse gas emissions and
publicly reporting on them;
setting a public emissions reduction target
consistent with keeping within 2°C of warming;
working with their suppliers to reduce their
greenhouse gas emissions;
supporting the Paris Agreement and
New Zealand’s commitment to it; and
supporting the introduction of a climate
commission and carbon budgets enshrined
in law.
The Climate Leaders Coalition recognises the role
that business can play in bringing about change
and demonstrates the significant leadership
direction being taken by businesses on the issue
of climate change.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019 Nature of Risk
Description and Impact
Physical risks
Rise in global temperatures
Increase in violent weather
events, including cyclone, sea
surge, tornado
Increased load on air
conditioning, increased power
outages, increased reliance on
generators, increased fire risk
in Adelaide and a reduced ski
season in Queenstown
Damage to property, business
interruption, undrinkable
water, gas leaks, power
outages, increased reliance on
generators, reduced visitation/
tourism and the need for new
infrastructure to be more
resilient
Market and
reputational risks
and opportunities
Policy and legal risks
Economic risks and
opportunities
Rise in sea levels
Salt intrusion in soils impacting
supply chain
•
•
•
•
•
•
•
•
•
•
•
Shift in consumer preferences, increasing societal pressure
to participate in green economy and the stigma of not
participating
Potential for banks to increase cost of funds for non-green
entities
Increasing long term focus by investors in green funds,
which could impact SkyCity’s share price
Increased challenges with tourism around New Zealand
(erratic weather) increases the opportunity for an indoor
“proxy” experience
Potential for New Zealand to become a more attractive tourism
destination for its “green” status
Increase in compliance and reporting costs associated with
measuring, demonstrating and actioning new requirements
Change in policy and regulations (new building construction,
building fit outs and remedial work to maintain building
warrant of fitness)
General increase in cost of doing business (through an
emissions trading scheme and/or value chain risk), including
fuel, water, waste water, electricity, gas, transportation, taxes,
waste disposal, certain goods and services, and insurance
Prohibition of non-green consumables, which may cost more
or less than alternative green consumables
Change in infrastructure and furniture, fixtures, and
equipment (FFE) costs (green standards, energy efficiency,
electric vehicles and other green technology)
SkyCity will be considering carbon in future investment and
divestment opportunities
Our Environment
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Low Carbon Menu Introduction
SkyCity Auckland restaurant The Sugar Club has developed New Zealand’s first ever low carbon menu
in partnership with Enviro-Mark Solutions and WWF New Zealand. The menu was launched on World
Environment Day in June 2019 and uses only locally sourced ingredients. Following the launch, a new
low carbon dish, identified by a ‘low carbon icon’, has been added permanently to the restaurant menu
alongside The Sugar Club’s vegan options and range of cocktails using sustainably sourced ingredients.
SkyCity aims to add low carbon dishes to other restaurant menus across all SkyCity locations.
FY19 Carbon Footprint Inventory (not assured)
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Electricity 54%
Flights
15%
Gas
23%
Waste
6%
Other
2%
FY15–FY19 Performance
The following tables summarise SkyCity's key environmental performance data for FY15–FY19.
SkyCity has continued efforts to reduce its carbon footprint – with Scope 1 and 2 emissions combined
reducing by 13% since FY15 and emissions from waste reducing by 21%, whilst SkyCity's business has
grown. The increase in absolute carbon from FY18 to FY19 was due to increased air travel across the
Group, which SkyCity will look to reduce in FY20 through better utilisation of Skype for Business and
economy class flights.
Total Emissions (Scope 1, 2 and 3) (not assured)
20,650
20,339
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2
O
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s
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n
n
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21,000
20,500
20,000
19,500
19,000
18,500
18,000
17,500
19,272
18,811
18,974
FY15
FY16
FY17
FY18
FY19
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Scope 1 and 2 Emissions (not assured)
17,333
17,013
15,691
15,270
15,691.08
15,032
12,207
12,105
11,075
10,629
10,270
5,126
4,908
4,615
4,641
4,762
e
2
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s
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n
n
o
T
17,500
15,000
12,500
10,000
7,500
5,000
2,500
0.0
FY15
FY16
FY17
FY18
FY19
Scope 1
Scope 2
Scope 1 & 2
Scope 3 Emissions (not assured)
2,044
2,060
2,137
1,424
1,477
1,481
1,410
1,299
1,132
2,747
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2
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s
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3,000
2,500
2,000
1,500
1,000
500
0
FY15
FY16
FY17
FY18
FY19
Waste
Flights
Scope Definitions
Through the CEMARS programme, SkyCity must report all Scope 1, Scope 2 and Scope 3 emissions
(unless deemed de minimis), where:
•
•
•
Scope 1 emissions are direct emissions from sources owned or controlled by SkyCity – for example,
gas (LPG and natural), fuel combustion from company vehicles, rental cars and leased fleet, and
refrigerant and air conditioning systems;
Scope 2 emissions are indirect emissions from electricity purchased by SkyCity; and
Scope 3 emissions are indirect emissions from sources not owned or controlled by SkyCity but
resulting from SkyCity's activities – for example, travel (including short and long-haul air travel),
waste sent to landfill and freight/couriers (for items exceeding 2kg).
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Independent Limited
Assurance Statement
Independent Limited Assurance Statement to the
Management and Directors of SkyCity Entertainment
Group Limited
Our Conclusion
Ernst & Young (‘EY’, ‘we’) was engaged by SkyCity Entertainment Group Limited (“SkyCity”) to undertake limited assurance as
defined by the International Standards on Assurance engagements (New Zealand), over disclosures associated with selected
sustainability performance data included in SkyCity’s Annual Report for the year ended 30 June 2019. Based on our procedures,
nothing came to our attention that caused us to believe that the agreed sustainability performance data detailed in the table below
has not been prepared and presented fairly, in all material respects, in accordance with the criteria defined below.
What our review covered
We reviewed the sustainability performance data for 12 of
SkyCity’s Annual report disclosures included in its Annual Report
for the year ended 30 June 2019. The sustainability performance
data metrics covered by our assurance procedures are detailed in
the table below.
Summary of procedures performed
A limited assurance engagement consists of making enquiries,
primarily of persons responsible for preparing the sustainability
performance data and related information, and applying analytical
and other review procedures.
Our procedures included, but were not limited to:
Sustainability performance data
Report
page
► Conducting interviews with personnel to understand the
business and reporting process
•
•
•
•
•
•
•
•
•
•
•
•
Customer exclusions at SkyCity Properties FY15 to FY19
SkyCity gender pay gap (%) as at 30 June 2019
Total Headcount for Group (%) as at 30 June 2019
Worked Full-Time Equivalent (FTE) by site (%)
Employment contract type for Group (%)
Total Recordable Injury Frequency Rate (TRIFR) % change
from FY18 - FY19
56
66
70
70
70
63
Total amount paid by SkyCity to the four New Zealand
SkyCity Community trusts for the year ended 30 June 2019
11, 73,
76
Total ‘Committed grants’ from SkyCity’s New Zealand
Community Trusts the year ended 30 June 2019
Total procurement spend for the year ended 30 June 2019
Total food and beverage spend for the year ended 30 June
2019
% of total FY19 procurement spend (excluding major capital
construction projects) on food and beverage items.
Food waste (Tonnes) from SkyCity Auckland sites in FY19
73, 76
73, 74,
79
74, 82
82
85
Criteria applied by SkyCity
The criteria for our assurance engagement included the Global
Reporting Initiative (GRI) Standards and SkyCity’s own published
criteria, as detailed within the SkyCity Entertainment Group Annual
Report for the year ended 30 June 2019 available at:
https://www.skycityentertainmentgroup.com.
Key responsibilities
EY’s responsibility and independence
Our responsibility was to express a conclusion on SkyCity’s
selected sustainability performance data metrics based on our
procedures.
We were also responsible for maintaining our independence and
confirm that we have met the requirements of the External
Reporting Board of New Zealand, and have the required
competencies and experience to conduct this assurance
engagement.
SkyCity’s responsibility
SkyCity’s management (“management”) was responsible for
selecting the Criteria, and preparing and fairly presenting the
sustainability performance data metrics in accordance with that
Criteria. This responsibility includes establishing and maintaining
internal controls, adequate records and making estimates that are
reasonable in the circumstances.
Our approach to conducting the engagement
We conducted this engagement in accordance with the
International Standard on Assurance Engagements ISAE (NZ)
3000: Assurance Engagements Other than Audits or Reviews of
Historical Financial Information and the terms of reference for this
engagement as agreed with SkyCity on 5 July 2019.
A member firm of Ernst & Young Global Limited
► Conducting interviews with key personnel to understand the
process for collecting, collating, and reporting the sustainability
performance data during the reporting period
► Undertaking analytical review procedures to support the
reasonableness of the data
► Identifying and testing assumptions supporting the calculations
► Testing, on a sample basis, underlying source information to
check the accuracy of the data
► Performing recalculations of performance data metrics to
confirm quantities stated were replicable
► Reviewing the appropriateness of presentation of disclosures
We believe that the evidence obtained is sufficient and appropriate
to provide a basis for our limited assurance conclusions.
Limited Assurance
Procedures performed in a limited assurance engagement vary in
nature and timing from, and are less in extent than for, a
reasonable assurance engagement. Consequently the level of
assurance obtained in a limited assurance engagement is
substantially lower than the assurance that would have been
obtained had a reasonable assurance engagement been
performed.
While we considered the effectiveness of management’s internal
controls when determining the nature and extent of our
procedures, our assurance engagement was not designed to
provide assurance on internal controls. Our procedures did not
include testing controls or performing procedures relating to
checking aggregation or calculation of data within IT systems.
Use of our Assurance Statement
We disclaim any assumption of responsibility for any reliance on
this assurance report to any persons other than management and
the Directors of SkyCity or for any purpose other than that for
which it was prepared.
Ernst & Young Limited
Graeme Bennett
Partner - Assurance
Auckland
08 August 2019
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
93
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Corporate Governance Statement
and Other Disclosures
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
New Zealand and Australian 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 2019. 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.
Committed to
maintaining
the highest
standards
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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;
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
The Board ensures that it is of an effective
composition and size to adequately discharge its
responsibilities and duties and to add value to the
company’s decision-making.
In order to meet these requirements, the
Board membership comprises a range of skills
and experience to ensure that it has a proper
understanding of and competence to deal
with the current and emerging issues of the
business, to effectively review and challenge the
performance of management, and to exercise
independent judgement.
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Corporate Governance Statement
95
The areas of expertise and experience determined
by the Board as being the key competencies
required to meet these objectives were most
recently agreed by the Board in May 2018
and include:
•
•
•
•
gaming industry experience and
understanding;
understanding of Asia and Asian consumers;
local market knowledge of Auckland;
local market knowledge of Adelaide;
• finance and accounting;
• mathematical fluency;
• human resources;
• occupational health and safety;
• marketing;
• digital capability and exposure;
• sustainability; and
• millennial understanding.
• government relations;
• public relations and communications;
•
investment banking;
• property and real estate acumen;
•
hospitality industry experience and
understanding;
•
legal;
Director Competencies
In June 2019, Board members completed a
self-assessment survey to identify the Board’s
overall competency in relation to the above areas
of expertise and experience. The results of the
survey are set out in the table below – where 1
indicates low competency and 5 indicates high
competency. Details of individual expertise and
experience of the directors are set out on pages
40–43 of this annual report.
4.17
4.00
4.17
3.83
3.83 3.83
3.67
3.33
3.33
4.17
3.67
3.67
3.50
3.33
3.67
3.17
3.00
3.00
3.00 3.00
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3.50
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SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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.
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 chair from the Chief Executive Officer
position. The Board Charter requires the Board
chair and (where appointed) deputy chair 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).
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Corporate Governance Statement
97
At its June 2019 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 having regard to the factors described in
the NZX Corporate Governance Code and ASX
Independence Guidelines that may impact
director independence.
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
training and regular visits to the company’s key
operations. The Board also undertakes periodic
educational trips (as a group and/or individually)
to observe and receive briefings from other
companies in the gaming and entertainment
industries. The most recent group educational
Board trip was to the United States and Canada
in March 2019.
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 chair 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
standing committees – the Audit and Risk
Committee, Governance and Nominations
Committee, People and Culture Committee and
Sustainability Committee.
The members of each of these committees are
non-executive directors and the non-executive
directors of the Board appoint the chair of
each committee.
Each of these committees 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.
From time to time, the Board creates specific
sub-committees to deal with a particular matter
or matters and/or to have certain decision-making
authority as the Board may elect to delegate to
that sub-committee. As at 30 June 2019, the Board
had established a sub-committee to oversee the
New Zealand International Convention Centre
and Horizon Hotel development and a separate
sub-committee to oversee the Adelaide Casino
expansion project.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Board and Committee Membership
Board and Committee Meeting Attendance
Corporate Governance Statement
99
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The following table lists the members and chair of the SkyCity Board and each of its four formally
appointed standing committees as at 30 June and as at the date of this annual report.
Biographical details of individual directors, and their respective qualifications and experience, are set out
on pages 40–43 of this annual report.
BOARD
Appointment
to Office
GOVERNANCE AND NOMINATIONS COMMITTEE
Chair
Rob Campbell
25 June 2017
Chair
Deputy Chair
Bruce Carter
12 October 2010
Members
Members
Sue Suckling
9 May 2011
Richard Didsbury
20 July 2012
Jennifer Owen
5 December 2016
Murray Jordan
5 December 2016
AUDIT AND RISK COMMITTEE
SUSTAINABILITY COMMITTEE
Chair
Members
Bruce Carter
Chair
Rob Campbell
Members
Jennifer Owen
Rob Campbell
Bruce Carter
Sue Suckling
Richard Didsbury
Jennifer Owen
Murray Jordan
Sue Suckling
Rob Campbell
Richard Didsbury
PEOPLE AND CULTURE COMMITTEE
Chair
Members
Murray Jordan
Rob Campbell
Jennifer Owen
The following table shows director attendance at Board meetings and committee member
attendance at committee meetings (both scheduled and unscheduled) during the financial year
ended 30 June 2019.
BOARD
AUDIT AND RISK
PEOPLE AND
CULTURE(1)
GOVERNANCE AND
NOMINATIONS
SUSTAINABILITY(2)
TOTAL NUMBER
OF MEETINGS
Rob Campbell
Bruce Carter
Sue Suckling
Richard Didsbury
Jennifer Owen(3)
Murray Jordan
Brent Harman(4)
7
7
7
7
7
7
7
2
6
6
6
–
–
6
–
–
5
5
–
–
–
3
5
2
1
1
1
1
1
1
1
–
3
3
–
3
3
–
–
–
(1) The Remuneration and Human Resources Committee was renamed the People and Culture Committee on 17 April 2019.
(2) The Corporate Social Responsibility Committee was renamed the Sustainability Committee on 17 April 2019.
(3) Jennifer Owen was appointed a member of the People and Culture Committee effective from 20 October 2018.
(4) Brent Harman retired as a director effective 19 October 2018.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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Corporate Governance Statement
101
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.
Gaming Prohibition
Directors and employees are not permitted to
participate in any gaming or wagering activity
at SkyCity operated properties.
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 Risk Committee has responsibility
for oversight of the quality, reliability, and
accuracy of the company’s internal and external
financial statements, the quality of the company’s
external result presentations, its internal control
environment and risk management programmes,
and for its relationships with its internal and
external auditors.
The Audit and Risk Committee and the Board
undertake sufficient inquiry of the company’s
management and the company’s internal and
external auditors in order to enable them to be
satisfied as to the validity and accuracy of the
company’s financial reporting. The Chief Executive
Officer and the Chief Financial Officer are
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.
The Audit and Risk Committee oversees the
independence of the company’s internal and
external auditors and monitors the scope and
quantum of work undertaken 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 2019 are set out
in note 5 to the financial statements. Fees for
audit and tax compliance work for the financial
year ended 30 June 2019 represent 57% of total
PricewaterhouseCoopers fees.
3. Integrity and Ethical
Code of Conduct
Behaviour
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.
Sustainability
To help the company define its responsibilities
and the effectiveness of its activities, SkyCity
maintains operational supervision of its
sustainability activities through management as
well as governance-level oversight through the
Board’s Sustainability Committee. This Committee
directs all the company’s commitment to care
activities and is responsible for developing and
maintaining SkyCity’s sustainability policies.
The Sustainability Committee focusses on the five
pillars of the company’s sustainability strategy,
which are described in further detail on pages
48–90 of this annual report together with details
of SkyCity’s sustainability activities.
The Sustainability 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 Conduct (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 Conduct 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 Conduct.
Trading in Securities
The company maintains a Securities Trading
Policy (available on 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.
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.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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;
meets stakeholders’ expectations for equal,
timely, balanced and meaningful disclosure;
and
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
chair 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;
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Corporate Governance Statement
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•
•
•
•
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;
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
•
ensuring that continuous disclosure obligations
are understood and complied with throughout
the SkyCity Group.
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 Risk Committee and Board on the
effectiveness of the company’s management of
its material business risks at least annually.
The Audit and Risk Committee approves the
assurance plan, with results and performance
of the organisation’s risk and controls 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 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 control which
aligns to the policies of the Board, and that
the company’s risk management and internal
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 2019.
The company maintains business continuity,
material damage and liability insurance cover to
ensure that the earnings of the business are well
protected from adverse circumstances.
SkyCity’s ability to create and 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 outlined on pages 36–39
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.
A self-evaluation questionnaire was completed
by each of the directors and select management
in December 2018 for the purpose of evaluating
the Board’s performance. The findings of
the review were discussed at the Board’s
February 2019 meeting.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
In June 2019, the Board agreed to participate in
an independently facilitated Board evaluation
process in late 2019 by a specialist facilitator with
significant experience in board evaluations.
a clear link to the company’s strategic objectives
and corporate and individual performance.
The Committee is also responsible for annually
reviewing non-executive director fees.
Evaluation of Senior Management
The Board undertakes the performance review
of the Chief Executive Officer and reviews the
performance 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 People and Culture 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 People and Culture
Committee are outlined in the People and
Culture Committee Charter (available in the
Governance section of the company’s website
at www.skycityentertainmentgroup.com),
which is reviewed annually by the Board.
The People and Culture Committee oversees
the management of people and culture related
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
The Board-approved Remuneration 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.
The guiding principles that underpin SkyCity’s
remuneration policies are to:
•
•
•
•
•
be market competitive at all levels to ensure
the company can attract and retain the best
available talent;
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;
manage remuneration within levels of cost
efficiency and affordability; and
align remuneration for senior managers with
the interests of shareholders.
A range of market data and specific
benchmarking reports are used to ensure
market relativity of senior executive positions,
including research and reports from independent
remuneration consultants. The People and
Culture Committee regularly reviews changes
in remuneration laws and practices and market
trends and amends the company’s practices to
ensure they are appropriately aligned.
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Director and Employee Remuneration
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During the financial year ended 30 June 2019,
there were two material changes to SkyCity’s
remuneration policies:
•
•
a new incentive scheme, the Performance
Incentive Plan, was introduced for the 2019
financial year. The Performance Incentive Plan
provides selected employees the opportunity
to earn a cash payment under a short term
incentive scheme and to acquire restricted
share rights under a deferred short term
incentive scheme. Further details of the
Performance Incentive Plan are outlined on
pages 108–110 of this annual report; and
the 2018 SkyCity Executive Long Term
Incentive Plan was introduced, with the first
grants under the plan made in August 2018.
The plan has been designed to better align the
remuneration of the Chief Executive Officer
and other group executives with the creation
of shareholder value over the long term, and
replaces grants, going forward, under the
former SkyCity Senior Executive Long Term
Incentive Plan. Further details of the 2018
SkyCity Executive Long Term Incentive Plan are
outlined on pages 110–112 of this annual report.
SkyCity’s remuneration strategy and policies are
based on a “pay for performance” philosophy.
The People and Culture Committee has reviewed
the structure of SkyCity’s incentive schemes
to ensure they are competitive and effective
to enable the company to attract and retain
the leadership and talent required to drive
business strategy and financial performance in
the interests of shareholders. Any subsequent
change to the company’s remuneration strategy
and/or policies will continue to reflect SkyCity’s
“pay for performance” philosophy and drive
shareholder value.
Non-Executive Directors Fees
This section details the company’s approach to
fees for non-executive directors for the financial
year ended 30 June 2019.
The company’s Non-Executive Director
Remuneration Policy (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.
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. Shareholders at the annual meeting
determine the total remuneration available to the
company’s non-executive directors.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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Director and Employee Remuneration
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FY19 Non-Executive Director Remuneration and Benefits
BOARD AND
COMMITTEE FEES
OTHER
Rob Campbell
Bruce Carter
Richard Didsbury
Sue Suckling
Jennifer Owen(1)
Murray Jordan
Brent Harman(2)
$280,000.00
$195,000.00
$143,600.00
$16,800.00(3)
$163,500.00
$2,586.37(4)
$153,983.87
$163,500.00
$11,700.00(5)
$43,204.30
$2,315.77(4)
The figures shown are gross amounts and exclude GST where applicable.
(1) Jennifer Owen was appointed as a member of the People and Culture Committee effective 20 October 2018.
(2) Brent Harman retired as a director effective 19 October 2018.
(3) Being fees payable for consultancy services provided by Richard Didsbury in relation to the New Zealand International Convention Centre
development, which were provided as additional services outside of his capacity as a director of the company – of which $12,000.00 was
accrued but unpaid as at 30 June 2019.
(4) 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).
(5) Being fees payable for consultancy services provided by Murray Jordan 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.
SkyCity also meets the expenses incurred by
directors in relation to company matters, which
are incidental to the performance of their duties,
including travel.
At the 2018 annual meeting, shareholders
approved, effective from 1 July 2018, a total
remuneration amount for non-executive directors
of $1,440,000 per annum (plus GST, if any).
The following table outlines the approved
non-executive directors’ fees (exclusive of GST,
if any) for the Board and its committees as at
30 June 2019:
In accordance with the company’s Non-Executive
Director Remuneration Policy, which specifies
that shareholder approval for increases to the total
non-executive director fee pool will be sought
on an annual basis, at its June 2019 meeting,
the Board reviewed SkyCity’s current total
non-executive director remuneration pool and
Board and committee fees against a comparator
group and available data on board fee movements
in both New Zealand and Australia. Following this
review, the Board has determined that no request
for additional directors’ fees will be made for the
financial year commencing 1 July 2019.
APPROVED POSITION FEES (PER FINANCIAL YEAR)
Share Ownership in SkyCity
Board
Chair
$280,000
Deputy Chair
$160,000
Non-Executive Director
$128,500
Audit and Risk
Chair
Committee
Member
People and Culture
Chair
Committee
Member
Sustainability
Chair
Committee
Member
$35,000
$15,000
$35,000
$15,000
$35,000
$15,000
All non-executive directors are members of the
Governance and Nominations Committee and
receive no additional fees for this Committee.
The Board Chair does not receive separate fees for
the Board committees that he sits on.
To further align non-executive directors’ interests
with those of shareholders, each non-executive
director is encouraged, over a period of two
years from appointment, to build up and retain
shares in the company (purchased on market
by each non-executive director) equivalent to
at least one year of their base non-executive
director fees. Following this initial two-year period,
non-executive directors are then encouraged to
acquire 15% of their base director fees per year.
Non-Executive Director Fees for the year ended
30 June 2019
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 2019 are as
listed in the table overleaf.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Remuneration of Employees
Fixed Remuneration
This section details the company’s approach
to remuneration frameworks, outcomes and
performance of SkyCity’s Chief Executive Officer,
other group executives and employees for the
financial year ended 30 June 2019.
Chief Executive Officer and Other
Group Executives
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 where the fixed portion comprises
a base salary, a KiwiSaver/superannuation
contribution and a limited number of other
benefits and the variable portion comprises both
short term incentive at-risk remuneration (STI)
and long term incentive at-risk remuneration (LTI).
The Board determines appropriate levels
of fixed remuneration taking into account
recommendations from the People and Culture
Committee. The STI component 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 disclosures on the following pages of this
annual report reflect the total rewards earned by,
although not necessarily paid to, group executives
for the financial year ended 30 June 2019 as the
Board believes this approach more appropriately
describes executive pay and performance.
Accordingly, the following disclosures include
the STI and LTI components earned by group
executives in respect of the financial year
ended 30 June 2019 notwithstanding that the
Board approved STI awards will be granted in
August/September 2019.
The company endeavours to set fixed
remuneration at levels that are relative to similar
positions in the broader Australasian market and,
for 'casino-specific' positions, account is taken of
salaries within the sector.
To assist the People and Culture Committee
in its remuneration deliberations, external
remuneration benchmarking specialists are
commissioned on a regular basis to survey
remuneration at SkyCity against external
comparator markets as relevant and appropriate
(eg. industry and geography).
Fixed remuneration is reviewed annually for
each group executive and, when appropriate,
the People and Culture Committee approves
remuneration increases for group executives.
Short Term Incentive Remuneration
To drive outstanding company and individual
performance, SkyCity introduced the Performance
Incentive Plan (PIP) for the Chief Executive Officer,
other group executives and senior managers
in FY19.
The PIP:
•
recognises and rewards short and longer
term performance by providing participants
an opportunity to be further aligned with
shareholders’ interests by earning, subject
to the company achieving its financial
performance gateway, an incentive award
which is delivered in cash and deferred equity
awards (in the form of restricted share rights in
the company); and
•
provides participants the opportunity to earn
a cash payment under a STI scheme and
acquire restricted share rights under a deferred
STI scheme.
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Director and Employee Remuneration
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Each restricted share right granted under the
PIP is a right to receive one ordinary share in
the company, which only vests if the relevant
employee satisfies the specified vesting criteria.
For the financial year ended 30 June 2019, 86
employees (excluding the Chief Executive Officer
and other group executives) will receive a total
of $2,481,738 in cash payments and $1,938,048 in
restricted share rights in August/September 2019
under the PIP.
For the financial year ending 30 June 2020,
476 employees will be invited in September
2019 to participate in the PIP for the opportunity
to earn a cash payment under the STI scheme
– 102 of whom also have the opportunity to
acquire restricted share rights under the deferred
STI scheme.
STI Scheme Component of PIP
In respect of the financial year ended
30 June 2019, 70% of each participant’s STI target
award was determined based on the company’s
financial performance and the remaining 30% was
determined based on a small number of personal
goals which were aligned to the strategic priorities
of the company.
STI awards will be delivered in cash at the end of
the financial year following the completion of the
external audit of the company’s year-end results,
where the maximum award under the STI is 150%
of the target award.
Deferred STI Component of PIP
•
•
the first anniversary of the Declaration Date in
respect of 50% of the restricted share rights;
and
the second anniversary of the Declaration
Date in respect of the remaining 50% of the
restricted share rights.
However, if a participant’s deferred STI
entitlement in any financial year is to restricted
share rights having a value of $10,000 or less
(calculated using the volume-weighted average
sale price of SkyCity shares used to determine the
number of restricted share rights to be issued to
the participant), the restricted share rights will not
be split out equally into two separate tranches,
but will instead comprise one tranche and
(subject to the vesting criteria being satisfied) vest
to the participant on the first anniversary of the
Declaration Date.
Upon vesting, a participant will be allocated one
ordinary share in the company for each restricted
share right that vests as soon as practicable after
the relevant anniversary of the Declaration Date.
Subject to complying with the Company’s
Securities Trading Policy and Code of Conduct,
participants are free to sell, transfer or otherwise
deal with shares issued to them under the PIP
(subject to minimum shareholding requirements
for the Chief Executive Officer and other
group executives).
The intention of the deferred STI component
under the PIP is to act both as a retention and an
engagement tool. The maximum award under the
deferred STI scheme is 150% of the target award.
The deferred STI scheme under the PIP
offers participants, subject to the relevant
STI performance conditions being met, the
opportunity to acquire restricted share rights of
an amount equivalent to between 10% and 50%
of their base salary. Restricted share rights (if any)
issued to a participant on a STI cash payment date
(Declaration Date) will only vest if that participant
remains an employee up and until:
Any unvested restricted share rights will be
forfeited if a participant ceases to be employed
by SkyCity (or a company in the SkyCity Group)
before the relevant Declaration Date, although
the Board has discretion to determine otherwise
such as where a participant ceases to be an
employee due to injury, permanent disability,
ill health or redundancy, or dies. In the case of
a group executive however, if he/she ceases
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
employment for any reason (other than as a result
of the termination of their employment by SkyCity
for cause, including for serious misconduct) prior
to vesting of any restricted share rights, and
they have been employed by SkyCity for at least
three years as at the date of cessation of his/her
employment, then he/she will continue to be
eligible to have shares transferred to him/her on
the first and second anniversaries (as applicable)
of the Declaration Date as if their employment
had not ceased, at the discretion of the Board.
As a rule, a group executive will not be eligible to
the extent they are terminated for cause, breach
the terms of their employment agreement or
for underperformance.
In the event that a genuine error is made by,
or on behalf of, the Board or the company
in determining any entitlement under the
PIP, including where the company’s financial
statements are subsequently required to be
restated, the Board may seek to recover from a
participant the value of any benefits erroneously
awarded to a participant under the PIP.
Restricted share rights issued under the PIP may
not be transferred, assigned or disposed of and
participants may not create any interest in favour
of any third party over the restricted share rights
(except with Board approval).
Long Term Incentive Remuneration
Three LTI plans were in operation during the
financial year ended 30 June 2019 for the
company’s most senior employees, including the
group executives. These plans were the SkyCity
Senior Executive Long Term Incentive Scheme, the
2018 SkyCity Executive Long Term Incentive Plan
and the SkyCity Executive Cash Award Plan. Copies
of the plan documents and rules are available on
the governance section of the company’s website
at www.skycityentertainmentgroup.com.
In the financial year ended 30 June 2019, grants
were made to the Chief Executive Officer and
other group executives under the 2018 SkyCity
Executive Long Term Incentive Plan.
To further align the group executives’ interests
with those of shareholders, each group executive
is encouraged, over a period of five years, to build
up and retain shares in the company (acquired
under the PIP and/or 2018 SkyCity Executive Long
Term Incentive Plan) equivalent to at least one
year of their base salary.
2018 SkyCity Executive Long Term Incentive Plan
The 2018 SkyCity Executive Long Term Incentive
Plan (2018 LTI Plan) was introduced in 2018 to
replace the earlier SkyCity Senior Executive
Long Term Incentive Plan.
The 2018 LTI Plan is substantially similar to the
earlier SkyCity Senior Executive Long Term
Incentive Plan in that participants 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 participants for a restrictive period of three
years until certain performance hurdles are met.
The following material enhancements were
included in the 2018 SkyCity Executive Long Term
Incentive Plan to align remuneration with the
creation of shareholder value over the long term:
•
•
•
50% of the shares are allocated to an absolute
total shareholder return (TSR) tranche which
includes a cost of equity premium;
the remaining 50% of the shares are allocated
equally to each of an NZX comparator group
tranche, an ASX comparator group tranche and
a competitor comparator group tranche; and
performance is assessed three years after the
issue of the shares, with no retesting dates in
the event the performance hurdles are not
satisfied as at that date.
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In order to determine whether any shares will vest
in a participant following the three-year restrictive
period for those shares, each tranche is measured
against the performance hurdle for that tranche
on the performance testing date for those shares,
where the performance hurdle for each of the
tranches is:
•
•
•
•
for the absolute TSR tranche, a comparison
of SkyCity’s TSR over the restrictive period
against the cost of equity for the SkyCity Group
over the restrictive period as determined by
the Board;
for the NZX comparator group tranche,
a comparison of SkyCity’s TSR over the
restrictive period against the TSR of each of the
constituent entities of the NZX 50 index (as at
the grant date, other than SkyCity) over the
same period;
for the ASX comparator group tranche,
a comparison of SkyCity's TSR over the
restrictive period against the TSR of each of the
constituent entities of the ASX 200 index (as
at the grant date, other than SkyCity) over the
same period; and
for the competitor comparator group
tranche, a comparison of SkyCity’s TSR
over the restrictive period against the TSR
of each of Crown Resorts Limited and The
Star Entertainment Group Limited over the
same period.
As at 30 June 2019, a total of 434,035 shares were
issued under the 2018 LTI Plan and held by Public
Trust on behalf of 8 participants. The shares vest in
a participant only when performance hurdles set
by the Board of directors are met.
The maximum award under the 2018 LTI Plan is
100% of the relevant grant allocation.
The transfer of shares to participants at the
end of the three-year restrictive period is
dependent on satisfaction of the performance
conditions and continued employment with
SkyCity. If a participant resigns or is dismissed
for misconduct or poor performance before
the end of the restrictive period, any unvested
shares will be forfeited, unless SkyCity terminates
the employment of a group executive without
cause, a group executive ceases employment
as a result of a material change to the terms
and conditions of his/her employment which
results in a diminution of that group executive’s
role, status and responsibility in the period of
12 months immediately preceding a performance
testing date or a group executive dies or ceases
to be an employee due to medical incapacity or
permanent disability.
However, to support long term decision-making,
execution of strategy and to encourage strong
succession planning by the Chief Executive
Officer, the Chief Executive Officer will continue
to be eligible to have shares transferred to him, at
the Board’s discretion, if he ceases employment
with SkyCity for any reason (other than as a result
of the termination of employment by SkyCity for
cause, including for serious misconduct) during
the restrictive period and the performance
conditions are satisfied – in this situation, the
performance conditions will be tested on the
performance testing date as if his employment
had not ceased.
In the event that a genuine error is made by,
or on behalf of, the Board or the company in
determining a participant’s entitlement under
the 2018 LTI Plan, including where the company’s
or a third party’s financial statements are
subsequently required to be restated, the Board
may seek to recover from a participant the value
of any shares erroneously determined to have
vested to that participant.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Until the restrictive period for the relevant shares
has ended and the relevant loan on those shares
is repaid, a participant may not sell those shares
or use them as security for another loan.
From time to time as directed by SkyCity, the
Public Trust acquires shares in the company
on-market for the purposes of the company’s
long term incentive employee plans, including
the SkyCity Senior Executive Long Term Incentive
Plan and the 2018 LTI Plan. As at 30 June 2019,
the Public Trust held a total of 5,190,841 shares
– 2,054,918 of which were allocated and held on
behalf of eligible participants and 3,135,923 of
which were unallocated and held on behalf of
future participants.
Fixed Remuneration of Salaried Employees
All salaried roles within SkyCity are 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 several 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 considering such matters as
individual performance, scarcity/availability of
resource/skill, internal relativities and specific
business needs. This process ensures internal
equity between roles and allows comparison with
the overall market. Remuneration ranges are
reviewed annually to reflect market movements.
Other Incentive Plans for Salaried Employees
Chief Executive Officer's Remuneration
Director and Employee Remuneration
113
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As outlined earlier in this section, the most senior
eligible salaried employees will receive their STI in
cash and restricted share rights under the PIP in
September 2019.
The remaining eligible salaried employees will
receive their STI in cash in August/September 2019
under the Salaried STI Plan following completion
of the external audit of the company’s year-end
results. For the financial year ended 30 June 2019,
353 salaried staff (excluding the Chief Executive
Officer and other group executives) will receive,
based on achievement of individual and financial
targets, an average STI outcome of 8.3% of their
fixed salary.
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 will be paid to those
outstanding staff who consistently exceed the key
performance indicators that were set for them at
the commencement of the financial year.
In total, in respect of the financial year ended
30 June 2019, 549 SkyCity salaried personnel
(excluding the Chief Executive Officer and
other group executives) will be paid or granted
incentives totalling approximately $3.8 million
under the Individual Bonus Plan and Salaried
STI Plan.
The total remuneration earned by Graeme Stephens for duties relating to the Chief Executive Officer
position for the years ended 30 June 2018 and 30 June 2019 is outlined in the following table:
FIXED ANNUAL REMUNERATION
PIP OUTCOME
BASE
SALARY KIWISAVER
OTHER
BENEFITS
SUB TOTAL
CASH STI DEFERRED STI
LTI GRANT
SUB TOTAL
NON-RECURRING
PAYMENTS
TOTAL
REMUNERATION
2019 $1,489,875
$44,374
$4,433 $1,538,682 $595,950
$744,938(1) $1,042,912(2) $2,383,800
2018 $1,450,000
$43,500
$5,302 $1,498,802
$0 $1,015,000(3) $1,250,000(4) $2,265,000
$0
$0
$3,922,482
$3,763,802
(1) Calculated on the basis of 195,872 restricted share rights to be granted to Mr Stephens under the PIP in August/September 2019.
The restricted share rights will vest in two tranches, with the first tranche vesting on the first anniversary of the Declaration Date and the
second tranche vesting on the second anniversary of the Declaration Date.
(2) Calculated on the basis of 246,726 SkyCity shares allocated to Mr Stephens under the 2018 LTI Plan in August 2018.
(3) Calculated on the basis of 251,238 restricted share rights granted to Mr Stephens under the Restricted Share Rights Plan in
September 2018, which vest in July 2020.
(4) Calculated on the basis of 320,883 SkyCity shares allocated to Mr Stephens under the SkyCity Senior Executive Long Term Incentive Plan
in August 2017.
Equity Based Incentive Vested in 2019
The following equity based incentive, being the 2017 Chief Executive Officer commencement shares,
vested to Mr Stephens in the financial year ended 30 June 2019:
GRANT YEAR
SECURITIES
GRANT PERIOD
MEASURE VESTING OUTCOME
SHARES VESTED VALUE ON VESTING
PERFORMANCE
Financial Year 2017
Ordinary Shares November 2016 to
November 2018
No performance
measures
100% vested
325,000
$1,251,250(1)
(1) Represents the NZX closing price of SkyCity shares on the closest following trading date to the vesting date multiplied by the number
ordinary shares vested.
The graph below shows the mix of remuneration that was earned by Mr Stephens for his performance
over the financial year ended 30 June 2019:
FY19 Actual
FY19 Target
FY19 Maximum
27%
27%
38%
38%
23%
33%
Base Salary
STI Target
LTI Target
35%
35%
44%
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Pay Gap
Mr Stephens’ base salary remuneration ratio to
the median annualised employee base salary
is 30.
STI Outcome
The graphic below shows how the STI component
was calculated for Mr Stephens for the financial
year ended 30 June 2019 under the PIP.
PIP Outcome for the Chief Executive Officer
Mr Stephens’ at-risk STI component for the 2019
financial year under the PIP was a STI target
cash award of 40% of base salary and a deferred
STI target equity award of 50% of base salary.
Eligibility for an award under the PIP was based
on improvement on the previous financial year’s
normalised Group NPAT (net profit after tax)
performance and achievement of non-financial
goals. 70% of Mr Stephens’ outcome of both the
cash and equity award is measured against the
company’s achievement of normalised Group
NPAT and the remaining 30% was based on a
small number of agreed key non-financial goals.
The company’s FY19 financial performance
exceeded the budgeted normalised Group NPAT
target. In consideration of the forecast trading
and market conditions, the Board exercised its
discretion under the PIP and applied a capped
multiplier to Mr Stephens’ (and the other group
executives) financial component of 100%.
The Board assessed Mr Stephens as having met
expectations against his non-financial goals,
which related to certain strategic initiatives,
environment, social and governance impacts,
people, stakeholder relations, health and safety
and risk management.
Consequently, the outcome for Mr Stephens
under the PIP for the year ended 30 June 2019
comprised a cash payment of $595,950, and the
grant of 195,872 restricted shares rights, to be
made in August/September 2019.
LTI Grant
Mr Stephens was granted an allocation of 246,726
shares in the company equal to $1,042,912 under
the 2018 LTI Plan in August 2018. Details of the
2018 LTI Plan are outlined on pages 110–112 of this
annual report.
Financial Component – STI Cash Award
Base
Salary
X
At Risk
(40%)
X
Financial
Component
(70%)
X
Business
Unit
Multiplier
=
Financial
Outcome
Non-Financial Component – STI Cash Award
27%
Cash STI
33%
Base
Salary
X
At Risk
(40%)
X
Non-
Financial
Component
(30%)
X
Performance
Multiplier
=
Non-
Financial
Outcome
Financial Component – Deferred STI Award
Base
Salary
X
At Risk
(50%)
X
Financial
Component
(70%)
X
Business
Unit
Multiplier
=
Financial
Outcome
Non-Financial Component – Deferred STI Award
Base
Salary
X
At Risk
(50%)
X
Non-
Financial
Component
(30%)
X
Performance
Multiplier
=
Non-
Financial
Outcome
Deferred
STI
Outcome
/
VWAP
50% Restricted
Share Rights
(Tranche 1) vest on
1st anniversary of
Declaration Date
50% Restricted
Share Rights
(Tranche 2) vest on
2nd anniversary of
Declaration Date
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G
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A
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Director and Employee Remuneration
115
Employment Agreement
Performance Incentive Plan Outcome
Mr Stephens’ employment agreement (a copy of
which is available on the company’s website at
www.skycityentertainmentgroup.com) is dated
4 November 2016 and reflects standard conditions
that are appropriate for a senior executive of
a listed Australasian company. Subsequent
amendments are also available online.
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 if 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.
Other Group Executives’ Remuneration
The following information relates to the
remuneration earned by the group executives
for the financial year ended 30 June 2019, but
excluding the Chief Executive Officer whose
remuneration is detailed earlier in this section.
Other group executives include those positions
detailed on pages 44–47 of this annual report.
Fixed Annual Remuneration
Fixed annual remuneration for each group
executive consisted of a base salary (delivered
in cash), KiwiSaver contributions and health
care benefits.
In determining base salaries for the group
executives, the Board refers to external market
data, including comparable positions in other
listed New Zealand companies and companies
within the casino industry.
Each group executive’s at-risk STI component
for the 2019 financial year under the PIP was set
at a cash STI of 30% and a deferred STI (to be
delivered in restricted share rights) within a range
of 20% to 30% of their base salary, contingent on
individual achievement of specific financial and
non-financial goals. 70% of each group executive’s
STI (both cash and deferred components) was
measured against the company’s achievement
of normalised Group NPAT (a financial goal
component) and the remaining 30% was based on
a small number of agreed key non-financial goals
(a non-financial goal component). To be eligible
to receive any incentive under the financial goal
component, the normalised Group NPAT result
must meet or exceed the normalised Group NPAT
for the immediately preceding financial year.
The company’s FY19 financial performance
exceeded the budgeted normalised Group NPAT
target. In consideration of the forecast trading
and market conditions, the Board exercised its
discretion under the PIP and applied a capped
multiplier to the group executives’ financial
component of 100%.
Based on the Board’s assessment of the
group executives’ performance against their
non-financial goals (relating to certain strategic
initiatives, the company’s business plan, people,
stakeholder relations, health and safety and risk
management), the group executives combined
received 113% of their non-financial component.
The combined STI outcome for the group
executives for the year ended 30 June 2019 was
$2,394,420, which includes the value of the
282,441 restricted shares rights to be granted to
group executives in August/September 2019 under
the PIP. Further details of the PIP are outlined on
pages 108–110 of this annual report.
LTI Grant
The combined LTI grant for the group executives
for the year ended 30 June 2019 was $1,834,672,
which represents the 434,035 SkyCity shares
allocated to the group executives under the 2018
LTI Plan in August 2018. Details of the 2018 LTI Plan
are outlined on pages 110–112 of this annual report.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
LTI Vesting Calculations
During the financial year ended 30 June 2019, the following vesting calculations were completed:
•
•
August 2014 LTI: the third (and final) test was completed. No shares have vested to executives in
respect of the 2014 allocation. All unvested shares were accordingly forfeited in accordance with the
terms of the SkyCity Senior Executive Long Term Incentive Plan; and
August 2015 LTI: the first and second tests were completed. To date, no shares have vested to
executives in respect of the 2015 allocation. The third (and final) test will be completed during
August 2019 and any shares that do not vest at that time will be forfeited in accordance with the
terms of the SkyCity Senior Executive Long Term Incentive Plan.
The total remuneration earned by the group executives for the financial year ended 30 June 2019 is
outlined in the following table:
FIXED ANNUAL REMUNERATION
PIP OUTCOME
BASE
SALARY KIWISAVER
OTHER
BENEFITS
SUB TOTAL
CASH STI DEFERRED STI(2)
LTI GRANT(3)
SUB TOTAL
NON-RECURRING
PAYMENTS
TOTAL
REMUNERATION
2019 $4,196,920 $125,908(1) $32,765 $4,355,593 $1,320,293
$1,074,127
$791,760 $3,186,180
–
$7,541,773
(1) Includes KiwiSaver payments paid on applicable non-recurring payments.
(2) Calculated on the basis of 282,428 restricted share rights to be granted to group executives under the PIP in August 2019. The restricted
share rights will vest in two tranches, with the first tranche vesting on the first anniversary of the Declaration Date and the second
tranche vesting on the second anniversary of the Declaration Date.
(3) Calculated on the basis of 187,309 SkyCity shares allocated to group executives under the 2018 LTI Plan in August 2018.
Delivery Timeframe of Remuneration for the Chief Executive Officer and other Group Executives
PERFORMANCE YEAR
BASE SALARY
STI CASH
DSTI – EQUITY
LTI – EQUITY
FY18
FY19
FY20
FY21
FY22
FY23
FY18 Base
FY19 Base
FY19 STI Cash
FY20 Base
FY20 STI Cash
FY19 Tranche 1
FY18 Def STI
FY21 Base
FY21 STI Cash
FY20 Tranche 1
FY19 Tranche 2
FY18 LTI Vest
FY22 Base
FY22 STI Cash
FY21 Tranche 1
FY20 Tranche 2
FY19 LTI Vest
FY23 Base
FY23 STI Cash
FY22 Tranche 1
FY21 Tranche 2
FY20 LTI Vest
There have been several changes to the delivery of incentives at SkyCity over previous financial years
and, as illustrated in the table above, delivery of reward components will vary year on year. In the case of
the deferred STI component of the PIP scheme, the Chief Executive Officer, other group executives and
senior managers may also receive performance based remuneration outcomes in financial years that do
not relate to the current financial year or performance.
C
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Director and Employee Remuneration
117
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 2019, are listed below:
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
$300,000–$309,999
$310,000–$319,999
$330,000–$339,999
$350,000–$359,999
$360,000–$369,999
$380,000–$389,999
$400,000-$409,999
$410,000-$419,999
$420,000–$429,999
$520,000–$529,999
$530,000–$539,999
$600,000-$609,999
$660,000–$669,999
$670,000-$679,999
$690,000-$699,999
$730,000-$739,999
$750,000-$759,999
$780,000-$789,999
$820,000–$829,999
$840,000–$849,999
$990,000–$999,999
$1,360,000–$1,369,999
$1,430,000–$1,439,999
$1,440,000-$1,449,999
$2,940,000–$2,949,999
TOTAL
NUMBER OF EMPLOYEES
65
51
41
27
31
10
16
13
23
9
9
8
4
6
6
2
4
1
4
1
1
2
2
1
2
1
3
2
2
1
1
3
1
1
1
1
1
1
1
1
1
1
1
1
1
365
In the above table, remuneration includes, where applicable, (a) salary; (b) short term cash bonuses; (c) health insurance premiums;
(d) the value of shares expected to vest under the 2018 SkyCity Restricted Share Rights Plan; (e) the value of share rights expensed during
the year (including PAYE and PAYG on vested share rights, but excluding accrued PAYE and PAYG on unvested share rights) under the
former SkyCity Senior Executive Long Term Incentive Plan and the 2018 SkyCity Executive Long Term Incentive Plan; (f) the value of
commencement shares expensed during the year; (g) sign-on cash payments; and (h) settlement payments and payments in lieu of notice
with respect to certain employees upon their departure from the company.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
C
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Shareholder and Bondholder Information
119
Twenty Largest Registered Shareholders as at 1 August 2019
NUMBER OF SHARES
% OF SHARES
Distribution of Ordinary Shares and Registered Shareholdings as
at 1 August 2019
1. HSBC Custody Nominees (Australia) Limited
2. JP Morgan Nominees Australia Limited
3. HSBC Nominees (New Zealand) Limited A/C State Street – NZCSD
4. Citibank Nominees (New Zealand) Limited – NZCSD
5. HSBC Nominees (New Zealand) Limited – NZCSD
6. Citicorp Nominees Pty Limited
7. Accident Compensation Corporation – NZCSD
8. JPMorgan Chase Bank NA NZ Branch – Segregated Clients Acct – NZCSD
9. BNP Paribas Noms Pty Limited
10. BNP Paribas Nominees (NZ) Limited – NZCSD
11. ANZ Custodial Services New Zealand Limited – NZCSD
12. BNP Paribas Nominees Pty Limited
13. Citicorp Nominees Pty Limited
14. BNP Paribas Nominees (NZ) Limited – NZCSD
15. ANZ Wholesale Australasian Share Fund – NZCSD
16. National Nominees Limited
17. New Zealand Depository Nominee Limited
18. HSBC Nominees A/C NZ Superannuation Fund Nominees Limited – NZCSD
19. Masfen Securities Limited
20. UBS Nominees Pty Limited
Total
133,906,678
69,737,048
55,469,421
43,726,121
40,918,133
32,448,269
26,178,854
21,152,479
18,286,612
14,274,738
12,553,838
10,963,401
8,052,625
7,930,033
7,314,665
7,064,025
6,863,468
5,344,678
5,030,986
4,597,352
531,813,424
19.92
10.37
8.25
6.50
6.09
4.83
3.89
3.15
2.72
2.12
1.87
1.63
1.20
1.18
1.09
1.05
1.02
0.80
0.75
0.69
79.10
Total ordinary shares on issue as at 1 August 2019 were 672,351,166 of which 5,190,841 were held in
aggregate by Public Trust on behalf of eligible and future participants pursuant to the SkyCity Senior
Executive Long Term Incentive Plan and 2018 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.
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
> 100,000
Total
NUMBER OF SHAREHOLDERS
NUMBER OF SHARES
3,822
6,446
2,511
2,298
124
15,201
1,412,682
17,728,196
17,700,144
53,806,788
581,703,356
672,351,166
As at 1 August 2019, there were 1,110 shareholders (with a total of 52,562 shares) holding less than a
marketable parcel of shares under the ASX Listing Rules, based on the closing share price of A$3.89.
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 2019, 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.
Commonwealth Bank of Australia
Lazard Asset Management Pacific Co
BlackRock, Inc
Investors Mutual Limited
The Vanguard Group, Inc
Sumitomo Mitsui Trust Holdings, Inc
DATE OF SUBSTANTIAL
SECURITY NOTICE
RELEVANT INTEREST IN
NUMBER OF SHARES
% OF SHARES HELD
AT DATE OF NOTICE
01/09/2017
12/09/2017
20/03/2018
26/07/2018
19/12/2018
07/03/2019
47,028,632
50,152,982
41,695,222
55,091,471
36,018,413
56,603,076
7.047%
7.515%
6.129%
8.44%
5.278%
8.29%
Substantial security holder notices received since 30 June 2019 can be viewed at
www.nzx.com/companies/SKC/announcements.
The total number of listed voting securities of SkyCity Entertainment Group Limited as at 30 June 2019
was 672,746,618.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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 2019
NUMBER OF BONDS
% OF BONDS
1. FNZ Custodians Limited
2. Investment Custodial Services 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. Tea Custodians Limited Client Property Trust Account – NZCSD
10. Custodial Services Limited
11. Lynette Therese Erceg & Darryl Edward Gregory & Catherine Agnes Quinn
12. Tappenden Holdings Limited
13. Citibank Nominees (New Zealand) Limited – NZCSD
14. Custodial Services Limited
15. BNP Paribas Nominees (NZ) Limited – NZCSD
16. Forsyth Barr Custodians Limited
17. JBWere (NZ) Nominees Limited
18. Investment Custodial Services Limited
19. BNP Paribas Nominees (NZ) Limited – NZCSD
20. BGS Trustee Limited
Total
13,794,000
13,221,000
11,931,000
9,973,000
8,216,000
6,274,000
5,604,000
2,841,000
2,100,000
2,083,000
2,000,000
2,000,000
1,800,000
1,457,000
1,275,000
1,113,000
995,000
800,000
755,000
750,000
88,982,000
11.04
10.58
9.55
7.98
6.57
5.02
4.48
2.27
1.68
1.67
1.60
1.60
1.44
1.17
1.02
0.89
0.80
0.64
0.60
0.60
71.19
Directors' Disclosures
121
Directors' Disclosures
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 2019 (notices
given by directors during the financial year ended 30 June 2019 are marked with an asterisk):
Rob Campbell (Chair)
Sue Suckling
C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
King Tide Asset Management
Limited
Precinct Properties New Zealand
Limited
RC Custodian Limited
Summerset Group Holdings
Limited
Tourism Holdings Limited
Tutanekai Investments Limited
Ultrafast Fibre Limited
WEL Networks Limited
Bruce Carter (Deputy Chair)
ASC Pty Limited
Aventus Capital Limited
Badge Management Pty Limited
Bank of Queensland Limited
Chapman Capital Partners Pty
Limited
Cobbadah Pty Ltd
Eudunda Farmers Limited
Genesee & Wyoming Australia
Holdings Limited Partnership
Director and
Shareholder
Director and
Shareholder
Director
Chair and
Shareholder
Chair and
Shareholder
Director and
Shareholder
Director*
Chair
Chair
Chair
Director
Director
Director*
Director
Director
Blinc Innovation Limited
Brannigans Consulting Limited
Insurance & Financial Services
Ombudsman Scheme Commission
Jacobsen Holdings Limited
Jade Software Corporation Limited
Chair
Chair*
Chair
Chair
Chair
Sue Suckling Holdings Limited
Managing Director
Richard Didsbury
Brick Bay Wines Limited
Brick Bay Development Trust
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
Director
Trustee
Trustee
Director
Director
Chair
Chair
Director
Aspire Child Care (Mascot) Pty Ltd
Owen Gaming Research
Director
Principal
Representative of
the Management
Committee*
Murray Jordan
Chorus Limited
Distribution of Bonds and Registered Holdings as at 1 August 2019
Genesee and Wyoming Inc (US)
Director
1,000–5,000
5,001–10,000
10,001–100,000
> 100,000
Total
NUMBER OF BONDHOLDERS
NUMBER OF BONDS
71
200
654
71
996
355,000
1,935,000
22,549,000
100,161,000
125,000,000
Foodstuffs’ Members Protection
Trust
Metcash Limited
Real Clarity Limited
Starship Foundation
Stevenson Group Limited
The Foodstuffs Co-operative
Perpetuation Trust
Director
Trustee*
Director
Director and
Shareholder
Trustee
Director
Trustee*
The following details included in the Interests Register as at 30 June 2018, or entered during the
financial year ended 30 June 2019, have been removed during the financial year ended 30 June 2019:
•
Bruce Carter is no longer a consultant to Ferrier Hodgson or a director of Genesee & Wyoming
Australia Pty Limited; and
•
Sue Suckling is no longer the chair of ECL Group Limited or the New Zealand Qualifications Authority.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Directors’ and Senior Managers’ 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 2019:
Rob Campbell
Sue Suckling
Richard Didsbury
Jennifer Owen
Murray Jordan
DATE OF ACQUISITION/
DISPOSAL DURING PERIOD
CONSIDERATION
SHARES
ACQUIRED/(DISPOSED)
14 September 2018
$4.0817 per share(1)
14 September 2018
$4.0817 per share(1)
14 September 2018
$4.0817 per share(1)
9 April 2019
Nil(4)
9 August 2018
$4.0972 per share
9 August 2018
$4.0900 per share
14 September 2018
$4.0817 per share(1)
1,198(2)
890(3)
859
35,000(5)
7,657(6)
4,554(6)
773(6)
(1) Shares issued under the SkyCity Dividend Reinvestment Plan.
(2) Shares held by FNZ Custodians Limited on behalf of Tutanekai Investments Limited.
(3) Shares held by the trustees of The Sue Suckling Family Trust.
(4) Off-market transfer to a corporate trustee pursuant to a personal reorganisation.
(5) Shares held by the trustees of the Owen & Paull Retirement Fund.
(6) 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 2019:
Rob Campbell
Bruce Carter
Sue Suckling
Richard Didsbury
Jennifer Owen
Murray Jordan
(1) Shares held by FNZ Custodians Limited on behalf of Tutanekai Investments Limited.
(2) Shares held by Tarquay Pty Limited on trust 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 the trustees of Endeavour Trust.
SHARES
BENEFICIALLY HELD
53,728(1)
64,618(2)
39,941(3)
38,519
35,000(4)
34,684(5)
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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 page
124 of this annual report.
SkyCity is listed as a ‘Foreign Exempt Listing’ on
the ASX.
SKYCITY ENTERTAINMENT GROUP LIMITED
The following persons held office as directors
of SkyCity Entertainment Group Limited as at
30 June 2019:
Rob Campbell (Chair)
Bruce Carter (Deputy Chair)
Sue Suckling
Richard Didsbury
Jennifer Owen
Murray Jordan
SUBSIDIARIES
Subsidiary Companies
The following persons held office as directors
of subsidiaries of SkyCity Entertainment Group
Limited as at 30 June 2019:
New Zealand
Subsidiaries
Directors
Graeme Stephens, Jo Wong
Companies
Cashel Asset Management Limited
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 Properties Limited
SkyCity Properties Albert St Limited
SkyCity Properties Victoria St Limited
SkyCity Wellington Limited
Overseas
Subsidiaries
Directors
Graeme Stephens, Jo Wong
Companies
Horizon Tourism Limited
SkyCity Investment Holdings Limited
Directors
Companies
Graeme Stephens, Jo Wong,
Bruce Carter, David Christian
SkyCity Adelaide Pty Limited
SkyCity Australia Finance Pty Limited
SkyCity Australia Pty Limited
SkyCity Treasury Australia Pty Limited
Directors
Steve Salmon, Joe Borg
Company
SkyCity Malta Limited
Directors
Steve Salmon, WH Management Limited
Company
SkyCity Malta Holdings Limited
Directors
Steve Salmon, Michael Ahearne
Company
SkyCity Management (UK) Limited
Non-wholly Owned Companies
As at 30 June 2019, SkyCity also had an interest
in the New Zealand and overseas companies
listed below:
New Zealand
Companies
Overseas
Lets Play Live Media Limited
TNZ Esports Limited
Company
LPL Media Pty 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 former 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.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Voting Rights Attached to Securities
– the transferee has not been approved by the
Donations
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.
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
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 2019,
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 of $57,420.87 were made by the
company during the financial year ended
30 June 2019 ($57,563.50 during the financial year
ended 30 June 2018).
Review of Operations and Activities
A detailed review of the operations and activities
of the company for the financial year ended
30 June 2019 is set out in the Chair’s Review
on page 14 of this annual report and the Chief
Executive Officer’s Review on page 15 of this
annual report.
Other Legislation and 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 included in the
company's constitution, 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.
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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 company's long term incentive
employee plans as detailed in the Director and
Employee Remuneration section in this annual
report. 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.
On 13 February 2019, the company announced its
intention to undertake an on-market share buy
back programme to purchase up to 5% of its total
ordinary shares on issue on the NZX Main Board
from 18 February 2019 until 31 December 2019.
As at 1 August 2019, a total of 10,095,373 ordinary
shares in the company had been acquired,
and cancelled, under the 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 2019,
a final dividend of 10 cents per share will be paid
on 13 September 2019 to all shareholders on the
company’s register at the close of business on
30 August 2019.
The company’s Dividend Reinvestment Plan
(established in February 2011) will not be applied
to the final dividend. 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.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Financial Statements and Notes
for the Year Ended 30 June 2019
A healthy
financial
performance is
good for us all
These financial statements were signed
on 13 August 2019 on behalf of the Board
of directors of SkyCity Entertainment
Group Limited by:
Rob Campbell
Chair
Bruce Carter
Deputy Chair and Chair of the
Audit and Risk Committee
Independent Auditor's Report
127
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Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
the balance sheet as at 30 June 2019;
the balance sheet as at 30 June 2019;
the income statement for the year then ended;
the statement of comprehensive income for the year then ended;
We have audited the financial statements which comprise:
We have audited the financial statements which comprise:
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the income statement for the year then ended;
the statement of cash flows for the year then ended; and
the statement of changes in equity for the year then ended;
the statement of comprehensive income for the year then ended;
the notes to the financial statements, which include a summary of significant accounting policies.
the notes to the financial statements, which include a summary of significant accounting policies.
Our opinion
In our opinion, the accompanying 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 2019, 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).
Our opinion
In our opinion, the accompanying 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 2019, 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 financial statements section of
our report.
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 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 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.
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, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
benchmarking assistance. The provision of these other services has not impaired our independence as
auditor of the Group.
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
benchmarking assistance. The provision of these other services has not impaired our independence as
auditor of the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Our audit approach
Overview
Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
An audit is designed to obtain reasonable assurance whether the
financial statements are free from material misstatement.
Overall Group materiality: $10.4 million, which represents 5% of
profit before tax from continuing operations.
the balance sheet as at 30 June 2019;
the income statement for the year then ended;
We have audited the financial statements which comprise:
the statement of cash flows for the year then ended; and
the statement of changes in equity for the year then ended;
We chose profit before tax from continuing operations 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 statement of comprehensive income for the year then ended;
the notes to the financial statements, which include a summary of significant accounting policies.
We have determined that there are four key audit matters:
Our opinion
In our opinion, the accompanying 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 2019, 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).
Accounting for liquidated damages
Accounting for and disclosure of the sale of the Auckland car
Consideration of the carrying value of goodwill and casino
licence intangible assets
Basis for opinion
Accounting for the Darwin discontinued operation.
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 financial statements section of
our report.
Materiality
The scope of our audit was influenced by our application of materiality.
park concession
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the 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 financial statements as a whole.
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.
Audit scope
We designed our audit by assessing the risks of material misstatement in the 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.
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
benchmarking assistance. The provision of these other services has not impaired our independence as
auditor of the Group.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the 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 the 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.
PwC
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T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Independent Auditor's Report
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Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial statements of the current year. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
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How our audit addressed the key audit matter
the balance sheet as at 30 June 2019;
the income statement for the year then ended;
We have audited the financial statements which comprise:
Key audit matter
Consideration of the carrying value of
goodwill and casino licence intangible
assets
The Group has goodwill and casino licence
intangible assets totalling $746.7 million.
statements and have not been recognised
as income in the income statement.
the statement of cash flows for the year then ended; and
the statement of changes in equity for the year then ended;
the statement of comprehensive income for the year then ended;
We performed an independent assessment of the DCF
models used in the impairment assessment. In relation
to the forecast cash flows we performed the following
procedures:
Board approved business plan;
Understood the processes undertaken,
How our audit addressed the key audit matter
Compared the forecast cash flows used to the
controls over and basis for preparing the
forecasts;
estimated future growth rates, by comparing
expectations of underlying inflation;
the notes to the financial statements, which include a summary of significant accounting policies.
We read the final agreement between SkyCity and
Macquarie and have independently assessed the
Considered key assumptions, in particular the
accounting for the transaction with the involvement of
our technical accounting specialists.
Key audit matter
As noted in note 17 to the financial
Accounting for and disclosure of the sale
Our opinion
statements an assessment of the value in
of the Auckland car park concession
In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the
use of the goodwill and indefinite life
On 4 April 2019, the Group entered into a
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
casino licence intangible assets was made
conditional agreement with Macquarie
position of the Group as at 30 June 2019, its financial performance and its cash flows for the year then
using discounted cash flow forecast (DCF)
Principal Finance Group (“Macquarie”)
ended in accordance with New Zealand Equivalents to International Financial Reporting Standards
models for each cash generating unit
granting Macquarie the right to undertake
(NZ IFRS) and International Financial Reporting Standards (IFRS).
(CGU).
the operation and management of its
Basis for opinion
Auckland car parks for a term to 30 June
In addition, an impairment assessment
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
2048. Macquarie will pay an upfront
was also prepared in relation to the
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
payment of $220 million for this right.
Adelaide CGU which includes a finite life
further described in the Auditor’s responsibilities for the audit of the financial statements section of
intangible asset.
our report.
Engaged our valuation expert to assist in our
We read management’s paper outlining the
assessment of the discount rates and the
considerations under the leasing criteria and the
terminal growth rates used in the models;
counterfactual scenarios. We challenged
Compared historical performance against
management’s rationale for accounting for the
budget, investigated material differences and
unnested element of the transaction as a finance lease.
considered the impact on future cash flow
In particular, the key judgements that the minimum
forecasts; and
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
lease payments are substantially all of the fair value of
our opinion.
the car parks and that substantially all the risks and
forecast cash flows to determine whether a
rewards of ownership will transfer to Macquarie.
reasonably possible change in assumptions
could lead to a conclusion that the intangible
asset is impaired.
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.
The agreement is for the operation of
3200 car parks in the Auckland
In preparing the DCFs management have
casino/hotel complex and the NZICC.
made a number of judgements that impact
There is significant judgement applied in
the enterprise value. The most significant
determining the appropriate accounting
of these judgements are disclosed within
for this transaction.
note 17 to the financial statements.
We obtained management’s expert’s independent
valuation of the car parks. We engaged our valuation
experts to assist in our assessment of the valuation
In relation to the Adelaide impairment assessment we
methodologies and assumptions used by
also performed the following:
management’s expert.
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
benchmarking assistance. The provision of these other services has not impaired our independence as
auditor of the Group.
The agreement grants SkyCity an exclusive
The assessments performed resulted in a
right to use 450 specific car parks for its
conclusion that there was no impairment
VIP customers defined as the ‘nested’
associated with any goodwill and casino
areas. For all other car parks under the
licence intangible assets.
agreement (‘unnested’ car parks) SkyCity
will pay on a per use basis, at agreed rates
with the car parks also available for public
use. Demand risk is fully borne by
Macquarie for the unnested car parks.
indicators exist with regard to the business
We challenged management’s judgement that the
itself as well as the wider South Australian
transaction is held for sale at balance date. In
economic outlook that could impact the
particular, the considerations regarding the probability
Adelaide valuation;
of meeting the conditions of the agreement.
Performed a sensitivity analysis on the
Considered whether any impairment
Reviewed management’s forecasts and
As noted in Note 1 (h) SkyCity has
determined that the unnested car parks
should be accounted for as a finance lease
due to the present value of the minimum
lease payments, being the upfront
payment, amounting to substantially all of
the fair value of the car parks and that it
will transfer all of the significant risks and
rewards of ownership of unnested car
parks to Macquarie. Management have
further determined that the exclusive use
nested car parks will be accounted for as a
financial liability and will not be
derecognised from property, plant and
equipment as SkyCity retains the
PwC
Understood the impacts of the Adelaide
assessed the prospects of achieving future
plans, in particular over the next five years;
We obtained management’s calculation of the
allocation of the carrying value of the car parks for the
Auckland casino/hotel complex and the NZICC. We
expansion currently in progress on future
tested the calculation and corroborated the amounts
performance and cash flows; and
used to supporting working papers and management’s
Reconciled these cash flows to Board approved
expert’s report.
plans for the expansion and obtained an
understanding of any changes.
As a result of our procedures, we have nothing to
report.
We also considered the appropriateness of disclosures
in relation to the valuation of intangible assets and
associated impairment testing performed.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
As a result of our procedures, we did not propose any
adjustments.
Key audit matter
Accounting for liquidated damages
How our audit addressed the key audit matter
The Group has withheld liquidated
damages from progress claims owing to
Fletcher Construction Company Limited
PwC
We read the contract for the construction of the NZICC
and HH, noting a number of separate delivery
milestones and the right to liquidated damages if
(FCC) under the contract to build the New
certain milestones are not met.
Zealand International Convention Centre
(NZICC) and Horizon Hotel (HH). As
We read management's paper summarising the
disclosed in note 29 to the financial
current status of the liquidated damages, supporting
statements, as at 30 June 2019, the Group
invoices and progress claims. We challenged
has withheld amounts totalling $39.5
management’s rationale behind the judgement applied
million. The amount withheld is
in terms of meeting the probable threshold and not the
recognised as a liability in the balance
virtually certain threshold. In particular, we
sheet.
considered the contract terms for the build and the fact
that SkyCity’s right to retain these liquidated damages
The Group has withheld these amounts as
is still disputed by FCC.
it considers that it has the right to these
funds under the liquidated damages
We considered the disclosure in the financial
provisions in the construction contract
statements to ensure that this is compliant with the
with FCC.
requirements of the New Zealand accounting
damages requires judgement. The critical
As a result of our procedures, we have nothing to
The accounting treatment of liquidated
standards.
judgement made by the Directors is
report.
whether the recovery of the liquidated
damages is probable or virtually certain.
At 30 June 2019, the Directors have
concluded that the recovery is probable
but not virtually certain as FCC have
notified SkyCity that they dispute
SkyCity’s right to these liquidated
damages. Therefore the liquidated
damages have been disclosed as a
contingent asset in note 29 of the financial
PwC
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
statements and have not been recognised
as income in the income statement.
Key audit matter
Accounting for and disclosure of the sale
of the Auckland car park concession
Reconciled these cash flows to Board approved
plans for the expansion and obtained an
understanding of any changes.
We also considered the appropriateness of disclosures
How our audit addressed the key audit matter
in relation to the valuation of intangible assets and
associated impairment testing performed.
the balance sheet as at 30 June 2019;
the income statement for the year then ended;
the statement of cash flows for the year then ended; and
the statement of changes in equity for the year then ended;
the statement of comprehensive income for the year then ended;
the notes to the financial statements, which include a summary of significant accounting policies.
Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
As a result of our procedures, we did not propose any
We read the final agreement between SkyCity and
adjustments.
Macquarie and have independently assessed the
accounting for the transaction with the involvement of
How our audit addressed the key audit matter
our technical accounting specialists.
We read management’s paper outlining the
We read the contract for the construction of the NZICC
considerations under the leasing criteria and the
and HH, noting a number of separate delivery
counterfactual scenarios. We challenged
milestones and the right to liquidated damages if
management’s rationale for accounting for the
certain milestones are not met.
unnested element of the transaction as a finance lease.
In particular, the key judgements that the minimum
We read management's paper summarising the
lease payments are substantially all of the fair value of
current status of the liquidated damages, supporting
the car parks and that substantially all the risks and
invoices and progress claims. We challenged
rewards of ownership will transfer to Macquarie.
management’s rationale behind the judgement applied
in terms of meeting the probable threshold and not the
We obtained management’s expert’s independent
virtually certain threshold. In particular, we
valuation of the car parks. We engaged our valuation
considered the contract terms for the build and the fact
experts to assist in our assessment of the valuation
that SkyCity’s right to retain these liquidated damages
methodologies and assumptions used by
is still disputed by FCC.
management’s expert.
On 4 April 2019, the Group entered into a
conditional agreement with Macquarie
Principal Finance Group (“Macquarie”)
Key audit matter
granting Macquarie the right to undertake
Accounting for liquidated damages
the operation and management of its
Auckland car parks for a term to 30 June
The Group has withheld liquidated
2048. Macquarie will pay an upfront
damages from progress claims owing to
payment of $220 million for this right.
Fletcher Construction Company Limited
We have audited the financial statements which comprise:
(FCC) under the contract to build the New
The agreement is for the operation of
Zealand International Convention Centre
3200 car parks in the Auckland
(NZICC) and Horizon Hotel (HH). As
casino/hotel complex and the NZICC.
disclosed in note 29 to the financial
There is significant judgement applied in
statements, as at 30 June 2019, the Group
determining the appropriate accounting
has withheld amounts totalling $39.5
for this transaction.
million. The amount withheld is
recognised as a liability in the balance
The agreement grants SkyCity an exclusive
sheet.
right to use 450 specific car parks for its
VIP customers defined as the ‘nested’
The Group has withheld these amounts as
areas. For all other car parks under the
it considers that it has the right to these
agreement (‘unnested’ car parks) SkyCity
funds under the liquidated damages
will pay on a per use basis, at agreed rates
provisions in the construction contract
with the car parks also available for public
with FCC.
use. Demand risk is fully borne by
Basis for opinion
Macquarie for the unnested car parks.
The accounting treatment of liquidated
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
damages requires judgement. The critical
As noted in Note 1 (h) SkyCity has
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
judgement made by the Directors is
determined that the unnested car parks
further described in the Auditor’s responsibilities for the audit of the financial statements section of
whether the recovery of the liquidated
should be accounted for as a finance lease
our report.
damages is probable or virtually certain.
due to the present value of the minimum
lease payments, being the upfront
At 30 June 2019, the Directors have
payment, amounting to substantially all of
concluded that the recovery is probable
the fair value of the car parks and that it
but not virtually certain as FCC have
will transfer all of the significant risks and
notified SkyCity that they dispute
rewards of ownership of unnested car
SkyCity’s right to these liquidated
parks to Macquarie. Management have
damages. Therefore the liquidated
further determined that the exclusive use
damages have been disclosed as a
nested car parks will be accounted for as a
contingent asset in note 29 of the financial
financial liability and will not be
statements and have not been recognised
derecognised from property, plant and
as income in the income statement.
equipment as SkyCity retains the
Our opinion
In our opinion, the accompanying 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 2019, 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).
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.
As a result of our procedures, we have nothing to
We obtained management’s calculation of the
report.
allocation of the carrying value of the car parks for the
Auckland casino/hotel complex and the NZICC. We
tested the calculation and corroborated the amounts
used to supporting working papers and management’s
expert’s report.
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
benchmarking assistance. The provision of these other services has not impaired our independence as
auditor of the Group.
We considered the disclosure in the financial
We challenged management’s judgement that the
statements to ensure that this is compliant with the
transaction is held for sale at balance date. In
requirements of the New Zealand accounting
particular, the considerations regarding the probability
standards.
of meeting the conditions of the agreement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
As a result of our procedures, we have nothing to
report.
How our audit addressed the key audit matter
Key audit matter
Accounting for and disclosure of the sale
of the Auckland car park concession
PwC
On 4 April 2019, the Group entered into a
PwC
conditional agreement with Macquarie
Principal Finance Group (“Macquarie”)
granting Macquarie the right to undertake
the operation and management of its
Auckland car parks for a term to 30 June
2048. Macquarie will pay an upfront
payment of $220 million for this right.
We read the final agreement between SkyCity and
Macquarie and have independently assessed the
accounting for the transaction with the involvement of
our technical accounting specialists.
We read management’s paper outlining the
considerations under the leasing criteria and the
counterfactual scenarios. We challenged
management’s rationale for accounting for the
unnested element of the transaction as a finance lease.
In particular, the key judgements that the minimum
lease payments are substantially all of the fair value of
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
the car parks and that substantially all the risks and
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
rewards of ownership will transfer to Macquarie.
The agreement is for the operation of
3200 car parks in the Auckland
casino/hotel complex and the NZICC.
There is significant judgement applied in
determining the appropriate accounting
for this transaction.
The agreement grants SkyCity an exclusive
right to use 450 specific car parks for its
VIP customers defined as the ‘nested’
areas. For all other car parks under the
agreement (‘unnested’ car parks) SkyCity
We obtained management’s expert’s independent
valuation of the car parks. We engaged our valuation
experts to assist in our assessment of the valuation
methodologies and assumptions used by
management’s expert.
will pay on a per use basis, at agreed rates
We challenged management’s judgement that the
with the car parks also available for public
transaction is held for sale at balance date. In
use. Demand risk is fully borne by
particular, the considerations regarding the probability
Macquarie for the unnested car parks.
of meeting the conditions of the agreement.
As noted in Note 1 (h) SkyCity has
We obtained management’s calculation of the
determined that the unnested car parks
allocation of the carrying value of the car parks for the
should be accounted for as a finance lease
Auckland casino/hotel complex and the NZICC. We
due to the present value of the minimum
tested the calculation and corroborated the amounts
lease payments, being the upfront
used to supporting working papers and management’s
payment, amounting to substantially all of
expert’s report.
the fair value of the car parks and that it
will transfer all of the significant risks and
As a result of our procedures, we have nothing to
rewards of ownership of unnested car
report.
parks to Macquarie. Management have
further determined that the exclusive use
nested car parks will be accounted for as a
financial liability and will not be
derecognised from property, plant and
equipment as SkyCity retains the
PwC
Independent Auditor's Report
131
How our audit addressed the key audit matter
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statements and have not been recognised
as income in the income statement.
Key audit matter
Accounting for and disclosure of the sale
of the Auckland car park concession
Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
the statement of changes in equity for the year then ended;
the statement of comprehensive income for the year then ended;
We read the final agreement between SkyCity and
Macquarie and have independently assessed the
accounting for the transaction with the involvement of
our technical accounting specialists.
the balance sheet as at 30 June 2019;
On 4 April 2019, the Group entered into a
conditional agreement with Macquarie
Principal Finance Group (“Macquarie”)
granting Macquarie the right to undertake
the operation and management of its
Auckland car parks for a term to 30 June
2048. Macquarie will pay an upfront
payment of $220 million for this right.
We have audited the financial statements which comprise:
the income statement for the year then ended;
the statement of cash flows for the year then ended; and
We read management’s paper outlining the
considerations under the leasing criteria and the
counterfactual scenarios. We challenged
management’s rationale for accounting for the
unnested element of the transaction as a finance lease.
In particular, the key judgements that the minimum
lease payments are substantially all of the fair value of
the car parks and that substantially all the risks and
rewards of ownership will transfer to Macquarie.
the notes to the financial statements, which include a summary of significant accounting policies.
The agreement is for the operation of
3200 car parks in the Auckland
Our opinion
casino/hotel complex and the NZICC.
In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the
There is significant judgement applied in
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
determining the appropriate accounting
position of the Group as at 30 June 2019, its financial performance and its cash flows for the year then
for this transaction.
ended in accordance with New Zealand Equivalents to International Financial Reporting Standards
(NZ IFRS) and International Financial Reporting Standards (IFRS).
We obtained management’s expert’s independent
valuation of the car parks. We engaged our valuation
experts to assist in our assessment of the valuation
methodologies and assumptions used by
management’s expert.
The agreement grants SkyCity an exclusive
right to use 450 specific car parks for its
Basis for opinion
VIP customers defined as the ‘nested’
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
areas. For all other car parks under the
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
agreement (‘unnested’ car parks) SkyCity
further described in the Auditor’s responsibilities for the audit of the financial statements section of
will pay on a per use basis, at agreed rates
our report.
with the car parks also available for public
use. Demand risk is fully borne by
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
Macquarie for the unnested car parks.
our opinion.
We challenged management’s judgement that the
transaction is held for sale at balance date. In
particular, the considerations regarding the probability
of meeting the conditions of the agreement.
We obtained management’s calculation of the
allocation of the carrying value of the car parks for the
Auckland casino/hotel complex and the NZICC. We
tested the calculation and corroborated the amounts
used to supporting working papers and management’s
expert’s report.
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.
As noted in Note 1 (h) SkyCity has
determined that the unnested car parks
should be accounted for as a finance lease
due to the present value of the minimum
lease payments, being the upfront
payment, amounting to substantially all of
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
the fair value of the car parks and that it
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
will transfer all of the significant risks and
benchmarking assistance. The provision of these other services has not impaired our independence as
rewards of ownership of unnested car
auditor of the Group.
parks to Macquarie. Management have
further determined that the exclusive use
nested car parks will be accounted for as a
financial liability and will not be
derecognised from property, plant and
equipment as SkyCity retains the
significant risks and rewards associated
with ownership.
As a result of our procedures, we have nothing to
report.
The transaction is conditional at balance
sheet date, however, management and the
PwC
Directors are committed to the sale and
consider it highly probable. As such the
carrying value of the unnested car parks
has been classified as held for sale under
NZ IFRS 5 Non-Current Assets Held for
Sale and Discontinued Operations at
balance date as this will be derecognised
when the agreement completes.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Management applied judgement in
calculating the carrying value of the car
park for the Auckland casino/hotel
complex and the NZICC.
Key audit matter
How our audit addressed the key audit matter
Accounting for the Darwin discontinued
Our audit procedures included:
approval. Following approval of regulatory
Tested a sample of revenue and expense items
operation
On 8 November 2018, SkyCity announced
the sale of SkyCity Darwin Pty Limited to
Delaware North. A sale and purchase
agreement for A$188 million (NZ$197
million) was signed subject to regulatory
and financing conditions the transaction
was completed on 4 April 2019.
Management concluded that the Darwin
business site will be reported as a
discontinued operation in accordance with
NZ IFRS 5 as at 30 June 2019.
Read and understood the key terms of the sale and
purchase agreement to confirm the appropriate
accounting, determine the components being
disposed and assess whether the classification as a
discontinued operation is in accordance with
accounting standards;
relating directly to the discontinued operations for
the period up to the disposal date of 4 April 2019
by agreeing them to supporting documentation;
Evaluated and tested the allocation of certain
income and expense items relating to both the
continuing operations and discontinued operation
by considering the appropriateness of the
assumptions used in the allocation methodology;
The application of NZ IFRS 5 and the
accounting for the disposal of the Darwin
and
business is significant to our audit because
Evaluated whether the disclosures in Notes 1(h)
the transaction and its accounting is non-
routine and involves management
judgement. These judgements include the
date of classification of the non-current
assets as held for sale, the identification of
the disposal group and the presentation of
and 23 are appropriate and in accordance with
accounting standards.
In relation to the loss on disposal recognised in the
income statement:
Obtained management's calculation and assessed
the reasonableness of the carrying value of the net
PwC
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
How our audit addressed the key audit matter
Independent auditor’s report
To the shareholders of SkyCity Entertainment Group Limited
Management applied judgement in
calculating the carrying value of the car
park for the Auckland casino/hotel complex
and the NZICC.
the balance sheet as at 30 June 2019;
the income statement for the year then ended;
We have audited the financial statements which comprise:
Key audit matter
Accounting for the Darwin discontinued
operation
the 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 a summary of significant accounting policies.
On 8 November 2018, SkyCity announced
Our audit procedures included:
Read and understood the key terms of the sale and
the sale of SkyCity Darwin Pty Limited to
Delaware North. A sale and purchase
purchase agreement to confirm the appropriate
agreement for A$188 million (NZ$197
accounting, determine the components being
Our opinion
million) was signed subject to regulatory
disposed and assess whether the classification as a
approval. Following approval of regulatory
In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the
discontinued operation is in accordance with
and financing conditions the transaction
accounting standards;
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
was completed on 4 April 2019.
position of the Group as at 30 June 2019, 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).
Management concluded that the Darwin
business site will be reported as a
Basis for opinion
discontinued operation in accordance with
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
NZ IFRS 5 as at 30 June 2019.
(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 financial statements section of
our report.
The application of NZ IFRS 5 and the
accounting for the disposal of the Darwin
business is significant to our audit because
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
the transaction and its accounting is non-
our opinion.
routine and involves management
judgement. These judgements include the
date of classification of the non-current
assets as held for sale, the identification of
the disposal group and the presentation of
its results as discontinued operations
including the resulting loss on disposal.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
23 are appropriate and in accordance with
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
accounting standards.
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.
Evaluated and tested the allocation of certain
income and expense items relating to both the
continuing operations and discontinued operation
by considering the appropriateness of the
assumptions used in the allocation methodology;
and
Tested a sample of revenue and expense items
relating directly to the discontinued operations for
the period up to the disposal date of 4 April 2019 by
agreeing them to supporting documentation;
Evaluated whether the disclosures in Notes 1(h) and
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
Further, there is judgement in the
benchmarking assistance. The provision of these other services has not impaired our independence as
identification of income and expenses that
auditor of the Group.
should be allocated to the Darwin business
and the related assumptions and estimates
made with regard to those allocations.
In relation to the loss on disposal recognised in the
income statement:
Obtained management's calculation and assessed
the reasonableness of the carrying value of the net
assets of the disposal group against our own
internally developed expectations based on our
understanding of the business;
Agreed net assets disposed back to underlying
accounting records;
Attended and observed the physical cash count at
Darwin on the 3rd and 4th of April 2019;
Assessed that the interest rate hedging impact and
the foreign currency translation reserve are adjusted
in accordance with accounting standards; and
Confirmed the receipt of the agreed sale price to the
bank statement.
As a result of our procedures, we have nothing to report.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
its results as discontinued operations
including the resulting loss on disposal.
Further, there is judgement in the
identification of income and expenses that
should be allocated to the Darwin business
and the related assumptions and estimates
made with regard to those allocations.
assets of the disposal group against our own
internally developed expectations based on our
understanding of the business;
Agreed net assets disposed back to underlying
accounting records;
Attended and observed the physical cash count at
Independent Auditor's Report
133
Darwin on the 3rd and 4th of April 2019;
Assessed that the interest rate hedging impact and
the foreign currency translation reserve are
adjusted in accordance with accounting standards;
and
Confirmed the receipt of the agreed sale price to
the bank statement.
As a result of our procedures, we have nothing to
report.
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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 financial statements does not
To the shareholders of SkyCity Entertainment Group Limited
cover the other information included in the annual report and we do not express any form of assurance
conclusion on the other information.
the balance sheet as at 30 June 2019;
the balance sheet as at 30 June 2019;
the income statement for the year then ended;
the statement of cash flows for the year then ended; and
the statement of cash flows for the year then ended; and
the statement of changes in equity for the year then ended;
the statement of changes in equity for the year then ended;
the statement of comprehensive income for the year then ended;
the notes to the financial statements, which include a summary of significant accounting policies.
the notes to the financial statements, which include a summary of significant accounting policies.
Our opinion
In our opinion, the accompanying 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 2019, 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).
We have audited the financial statements which comprise:
In connection with our audit of the financial statements, our responsibility is to read the other
Independent auditor’s report
information and, in doing so, consider whether the other information is materially inconsistent with
the income statement for the year then ended;
the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially
To the shareholders of SkyCity Entertainment Group Limited
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
We have audited the financial statements which comprise:
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the statement of comprehensive income for the year then ended;
the 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 financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the 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
Our opinion
going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease
In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the
operations, or have no realistic alternative but to do so.
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
position of the Group as at 30 June 2019, its financial performance and its cash flows for the year then
Auditor’s responsibilities for the audit of the financial statements
ended in accordance with New Zealand Equivalents to International Financial Reporting Standards
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole,
(NZ IFRS) and International Financial Reporting Standards (IFRS).
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
Basis for opinion
that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
if, individually or in the aggregate, they could reasonably be expected to influence the economic
further described in the Auditor’s responsibilities for the audit of the financial statements section of
decisions of users taken on the basis of these financial statements.
our report.
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 financial statements section of
our report.
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
A further description of our responsibilities for the audit of the financial statements is located at the
our opinion.
External Reporting Board’s website at:
PwC
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
benchmarking assistance. The provision of these other services has not impaired our independence as
auditor of the Group.
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
report-1/
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
This description forms part of our auditor’s report.
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
Who we report to
accordance with these requirements.
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, provision
undertaken so that we might state those matters which we are required to state to them in an auditor’s
of a software tool for subsidiary statutory financial statement preparation, and executive remuneration
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
benchmarking assistance. The provision of these other services has not impaired our independence as
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
auditor of the Group.
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 Jonathan
Freeman.
For and on behalf of:
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Auckland
Chartered Accountants
13 August 2019
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
PwC
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
135
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Statement of Comprehensive Income
For the year ended 30 June 2019
Profit for the Year
Other Comprehensive Income
Items that may be Reclassified Subsequently to Profit or Loss
Exchange differences on translation of overseas subsidiaries
Transfer to Income Statement on disposal of discontinued operation
Cash Flow Hedge Reserve
Cash flow hedges – revaluations
Cash flow hedges – transfer to finance costs
Cash flow hedges – income tax
Cost of Hedging Reserve
Cost of hedging reserve – costs incurred / revaluations
Cost of hedging reserve – transfer to finance costs
Cost of hedging reserve – income tax
Other Comprehensive Income/(loss) for the Year, net of tax
Total Comprehensive Income for the Year
CONSOLIDATED
2019
$'000
144,581
(11,498)
27,864
3,986
(5,459)
279
729
(462)
(75)
15,364
159,945
2018
$'000
169,519
8,436
–
(18,241)
8,376
2,855
(2,622)
(135)
772
(559)
168,960
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Income Statement
For the year ended 30 June 2019
Continuing operations
Revenue
Other income
Share of losses from associates
Employee benefits expense
Other expenses
Directors' fees
Gaming taxes
Direct consumables
Marketing and communications
Community contributions, levies and sponsorships
Fair value adjustment to investment property
Earnings Before Interest, Taxes, Depreciation
and Amortisation Expenses (EBITDA)
Depreciation and amortisation expense
Earnings Before Interest and Tax (EBIT)
Net finance costs
Profit Before Income Tax
Income tax expense
Profit from continuing operations
NOTES
3
4
5
11
5
8
12
CONSOLIDATED
2019
$'000
802,265
20,799
(737)
RESTATED
2018
$'000
813,828
2,405
(347)
(289,896)
(278,246)
(91,799)
(1,143)
(38,117)
(59,862)
(26,170)
(14,330)
(3,204)
297,806
(79,988)
217,818
(10,240)
207,578
(46,753)
160,825
(86,373)
(1,273)
(38,422)
(62,061)
(24,406)
(14,260)
(799)
310,046
(80,861)
229,185
(12,526)
216,659
(57,827)
158,832
(Loss)/Profit from discontinued operations
23
(16,244)
10,687
Profit for the Year Attributable to Shareholders of the Company
144,581
169,519
Earnings per share for Profit Attributable
to the Shareholders of the Company
Attributable to continuing operations:
Basic earnings per share
Diluted earnings per share
Attributable to discontinued operations:
Basic earnings per share
Diluted earnings per share
Attributable to total operations:
Basic earnings per share
Diluted earnings per share
CENTS
CENTS
6
6
6
6
6
6
23.8
23.8
(2.4)
(2.4)
21.4
21.4
23.7
23.7
1.6
1.6
25.3
25.3
The above income statement should be read in conjunction with the accompanying notes.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Statement of Changes in Equity
For the year ended 30 June 2019
NOTES
SHARE
CAPITAL
HEDGING
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
COST OF
HEDGING
RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
CONSOLIDATED
$'000
$'000
$'000
$'000
$'000
$'000
137
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Balance as at 1 July 2017
as previously reported
1,100,792
(14,481)
(48,889)
Adjustment on adoption of IFRS15
1(f)
–
–
–
1,100,792
(14,481)
(48,889)
–
–
–
33,515
1,070,937
(1,046)
(1,046)
32,469
1,069,891
Restated balance at the
beginning of the year
Total comprehensive
income/(loss)
Dividends paid
Shares issued under
dividend reinvestment plan
Share rights issued for
employee service
Net issue of treasury shares
–
–
48,257
2,983
228
7
22
22
22
(7,010)
8,436
(1,985)
169,519
168,960
–
–
–
–
–
–
–
–
–
–
–
–
(133,339)
(133,339)
–
–
–
48,257
2,983
228
Balance as at 30 June 2018
1,152,260
(21,491)
(40,453)
(1,985)
68,649
1,156,980
Balance as at 1 July 2018
1,152,260
(21,491)
(40,453)
(1,985)
69,695
1,158,026
Adjustment on adoption of IFRS15
1(f)
–
–
–
–
(1,046)
(1,046)
Restated balance at the
beginning of the year
Total comprehensive
income/(loss)
Dividends paid
Shares issued under
dividend reinvestment plan
Share rights issued for
employee service
Net issue of treasury shares
Buy back and cancellation of shares
1,152,260
(21,491)
(40,453)
(1,985)
68,649
1,156,980
–
–
8,591
4,540
397
(38,792)
7
22
22
22
22
(1,194)
16,366
192
144,581
159,945
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(135,689)
(135,689)
–
–
–
–
8,591
4,540
397
(38,792)
Balance as at 30 June 2019
1,126,996
(22,685)
(24,087)
(1,793)
77,541
1,155,972
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Balance Sheet
As at 30 June 2019
ASSETS
Current Assets
Cash and bank balances
Receivables and prepayments
Derivative financial instruments
Inventories
Current tax receivables
Assets classified as held for sale
Total Current Assets
Non-current Assets
Property, plant and equipment
Intangible assets
Investment properties
Investments accounted for using the equity method
Derivative financial instruments
Deferred tax assets
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
NOTES
19
18
24
20
16
17
11
24
13
21
9
24
10
24
14
17
22
CONSOLIDATED
2019
$'000
41,574
49,293
85
6,459
930
115,687
214,028
1,436,257
798,408
40,660
1,553
56,201
4,843
2,337,922
2,551,950
228,112
49,127
14,653
784
RESTATED
2018
$'000
75,955
23,379
–
7,570
4,799
22,175
133,878
1,498,610
831,833
35,300
2,290
42,597
–
2,410,630
2,544,508
193,725
–
7,376
534
292,676
201,635
495,913
508,453
1,512
30,913
70,160
504,804
1,103,302
1,395,978
1,155,972
1,126,996
(48,565)
77,541
1,155,972
3,288
28,770
84,547
560,835
1,185,893
1,387,528
1,156,980
1,152,260
(63,929)
68,649
1,156,980
The above balance sheet should be read in conjunction with the accompanying notes.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Statement of Cash Flows
For the year ended 30 June 2019
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
Disposal of business
Cash and bank balances disposed as part of discontinued operations
Disposal of Federal Street car park
Net purchase of/proceeds from property, plant and equipment
Payments for investment property
Payments for associates
Payments for intangible assets
Net Cash Outflow from Investing Activities
Cash Flows from Financing Activities
Cash flows associated with derivatives
New borrowings
Repayment of borrowings
Net issue of treasury shares
Dividends paid to company shareholders
Interest paid
Buy back of shares
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
NOTES
CONSOLIDATED
2019
$'000
RESTATED
2018
$'000
860,352
919,852
(498,602)
(508,830)
361,750
(58,800)
(50,626)
252,324
197,065
(12,204)
40,000
(303,651)
(8,564)
–
(29,129)
(116,483)
3,540
28,000
–
397
(127,098)
(37,787)
(37,274)
(170,222)
(34,381)
75,955
41,574
411,022
(59,189)
(62,744)
289,089
–
–
–
(206,466)
(36,099)
(2,637)
(8,589)
(253,791)
9,736
206,956
(112,459)
228
(85,082)
(35,449)
–
(16,070)
19,228
56,727
75,955
31
23
1(h)
11
24
10
10
22
7
19
The above statement of cash flows should be read in conjunction with the accompanying notes.
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Notes to the Financial Statements
139
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,
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 99 Albert 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
13 August 2019.
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, partially as a result of the classification
of some debt as current liabilities. The Group has
significant available undrawn committed banking
facilities totalling $625 million as at 30 June 2019
(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 2019 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 a 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
and investment properties 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 the 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 17. 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 related cash generating units' assets that
significant changes in the assumptions used
would not require an impairment.
Judgement has been used in determining the
appropriate accounting for liquidated damages,
as outlined in note 29.
Judgement has been used in determining the
accounting treatment as a finance lease for
the sale of the Auckland car park concession.
The determination of the finance lease accounting
required the use of estimates including
determining the fair value of the car parks
immediately before the transaction, the fair value
of exclusive use car parks and the calculation of
the carrying value of the existing car park assets.
Further details are provided in note 1(h).
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
The Group carries its investment properties
at fair value, with changes in fair value being
recognised in profit or loss. The Group engaged
an independent valuation specialist to assess
fair values as at 30 June 2019 for the investment
properties. Further details are provided in note 11.
loss are recognised in profit or loss as part of the
fair value gain or loss. Translation differences
on non-monetary financial assets such as
equity classified at fair value through other
comprehensive income are included in other
comprehensive income.
(b) Principles of Consolidation
(iii) Foreign Operations
(i) 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.
(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.
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 in other comprehensive income.
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.
(ii) Transactions and Balances
(e) Statement of Cash Flows
Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting
from the settlement of such transactions and
from the translation at year end exchange rates
of monetary assets and liabilities denominated in
foreign currencies are recognised in the Income
Statement, except when deferred in other
comprehensive income as qualifying cash flow
hedges and qualifying net investment hedges.
Translation differences on financial assets and
liabilities carried at fair value through profit and
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
There have been no significant changes in
accounting policies during the current year,
except as detailed below. Accounting policies
have been applied on a basis consistent with
prior year.
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Notes to the Financial Statements
141
NZ IFRS 15, Revenue from Contracts
with Customers
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. Revenue is recognised net of
rebates to International Business customers.
The standard replaced NZ IAS 18 'Revenue'
and NZ IAS 11 'Construction contracts' and
related interpretations.
The Group adopted NZ IFRS 15 from 1 July 2018.
The Group used the full retrospective approach
to applying the new standard.
As part of the impact of adopting NZ IFRS 15, the
Group reassessed how certain arrangements
with International Business customers should
be treated. Rebates paid to gaming promoters
were previously reflected as operating expenses.
These are now accounted for as a reduction in
gaming revenue. As a result of adopting this new
standard "Revenue" and "Other expenses" in the
Income Statement and "Receipts from customers"
and "Payments to suppliers and employees"
in the Cash Flow Statement are all reduced by
$80.3 million and $68.6 million for years ended
30 June 2019 and 30 June 2018 respectively.
Also, liabilities for loyalty points increased by
$1.0 million, with the adjustment being recognised
in the 1 July 2017 opening retained earnings and
payables. A third balance sheet has not been
presented given the minor impact on the opening
balance sheet.
Refer to note 23 for further details on the
discontinued operation.
Revenue
Other income
Share of losses from associates
Employee benefits expense
Other expenses
Directors' fees
Gaming taxes
Direct consumables
Marketing and communications
Community contributions, levies and sponsorships
Fair value adjustment to investment property
Earnings Before Interest, Taxes, Depreciation
and Amortisation Expenses (EBITDA)
Depreciation and amortisation expense
Earnings Before Interest and Tax (EBIT)
Net finance costs
Profit Before Income Tax
YEAR ENDED
30 JUNE 2018
BEFORE
RESTATEMENT
DARWIN
DISCONTINUED
OPERATIONS
NZ IFRS 15
ADJUSTMENTS
YEAR ENDED
30 JUNE 2018
AFTER
RESTATEMENT
$'000
994,579
2,608
(347)
(322,563)
(172,806)
(1,273)
(41,950)
(70,787)
(27,839)
(20,095)
(799)
$'000
(112,191)
(203)
–
44,317
17,873
–
3,528
8,726
3,433
5,835
–
338,728
(28,682)
(94,377)
244,351
(12,458)
231,893
13,516
(15,166)
(68)
(15,234)
$'000
$'000
(68,560)
813,828
–
–
–
2,405
(347)
(278,246)
68,560
(86,373)
–
–
–
–
–
–
–
–
–
–
–
(1,273)
(38,422)
(62,061)
(24,406)
(14,260)
(799)
310,046
(80,861)
229,185
(12,526)
216,659
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
(g) Standards, Amendments and Interpretations
to Existing Standards that are not yet
The above has no cash effect to the Group and the
change is for financial reporting purposes only.
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 2019 or later periods, but which the Group
has not early adopted. The significant items are:
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.
This standard will affect the accounting for the
Group's operating leases. As at the reporting date,
the Group has non-cancellable operating lease
commitments of $358.3 million (refer note 30).
Management has completed an analysis of the
impact on the Group’s consolidated balance sheet
and income statement of NZ IFRS 16. This requires
significant judgement on the incremental
borrowing rate used to discount lease assets
and liabilities. Given the long term nature of the
Group's lease commitments the discount rate has
a significant impact on the quantum of change.
On 1 July 2019, management will recognise a right
of use asset and a lease liability of $51.3 million.
This excludes the impact of the future lease
commitments that are not yet effective identified
in note 30. The impact on the FY20 income
statement will be to:
•
•
•
•
•
reduce operating expenses by approximately
$3.6 million;
increase depreciation by approximately
$1.2 million;
increase finance costs by approximately
$3.1 million;
reduce Net Profit After Taxation by
approximately $0.5 million; and
lease payments will no longer be part of
operating cash flows but rather will be included
within financing cash flows.
There is no expected change on the accounting
for the sale of the Auckland car park concession.
The Group will adopt the simplified transition
approach under NZ IFRS 16 in the year ending
30 June 2020 and will not restate comparative
amounts for the year prior to first adoption.
(h) Significant Transactions During the Year
Disposal of SkyCity Darwin Pty Limited
On 8 November 2018, SkyCity announced the
sale of the Darwin business to Delaware North.
A sale and purchase agreement for A$188 million
(NZ$197 million) was signed subject to regulatory
approval.
During March 2019 the agreement went
unconditional and the transaction was completed
on 4 April 2019.
The Darwin business is treated as a discontinued
operation within the 2019 financial statements.
In the current period the Darwin operations have
been accounted for as a discontinued operation as
detailed in note 23. As a result:
•
•
•
the Income Statement has been adjusted
(including prior periods) to disclose the results
of the Darwin operations as a single line.
Revenue and expenses and the loss on disposal
are separately disclosed in note 23;
the Statement of Cash Flows includes the
Darwin operations in all periods; and
all assets and liabilities of the Darwin
operations were disposed of.
Disposal of Federal Street Car Park
At 30 June 2018, the Federal Street car park was
disclosed as an asset classified as held for sale
with a carrying value of $22.2 million.
The disposal of this car park was completed
in April 2019 with sale proceeds received of
$40.0 million, resulting in a pre-tax gain on sale of
$17.4 million (refer note 4).
Sale of Auckland Car Park Concession
On 4 April 2019, the Group announced it had
entered into a binding, conditional agreement
to sell a long term concession to 2048 over the
Auckland car parks to Macquarie Principal Finance
Group (“Macquarie”) for $220 million, to be paid
upfront in a lump sum on completion.
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Notes to the Financial Statements
143
The agreement:
•
•
•
gives Macquarie the right to undertake the
operations and management of the 3,200 car
parks under the existing Auckland casino/hotel
complex and the New Zealand International
Convention Centre (“NZICC”) currently under
construction, with all economic benefit
of ownership passed to Macquarie for the
concession period;
provides SkyCity with exclusive access to
450 car parks, which will be used for VIP
customers, to be paid for by SkyCity irrespective
of use (these are known as the “nested car
parks”); and
provides SkyCity with non-exclusive access
to further car parks at agreed rates on a
pay-per-use basis (these are known as the
“unnested car parks”), which will also be
available to the public.
The agreement became unconditional on
9 August 2019 and is expected to complete on
19 August 2019.
The accounting outcome for the nested and
unnested car parks is different.
In determining the carrying value, judgement
was required to separate the unnested car parks
from the Auckland casino/hotel complex asset.
Judgement was also required to determine the
carrying value of the NZICC car parks. The NZICC
complex is still under construction and the final
carrying value of the car park will be determined
by the final construction cost. An adjustment to
the Deferred Licence Value associated with NZICC
(refer note 17) was also required to reflect the
proportion to be allocated to the car parks.
Reclassifying the carrying value of the unnested
car parks as non current assets held for sale,
results in the reduction of deferred tax liabilities
by $11.5 million (refer note 14).
Nested car parks
The Group has determined that it retains the
significant risks and rewards of ownership of
these car parks and therefore this part of the
concession payment should be accounted for as a
financial liability.
As a result of this determination, on completion a
portion of the $220 million concession payment
will be treated as a financial liability.
Unnested car parks
Share Buy Back
The Group has determined, based on an
evaluation of the terms and conditions of the
arrangement, including the present value of
the minimum lease payments amounting
to substantially all of the fair value of the car
parks, that all the significant risks and rewards
of ownership of the unnested car parks will be
passed to the concession holder and therefore will
account for this part of the concession payment
as a finance lease.
As a result of this determination, on completion
the current carrying value of the unnested car
parks will be derecognised, a finance lease
receivable for the unnested car parks recognised
and immediately settled in cash by the upfront
payment, a finance lease receivable recognised
for the residual value of the car parks (the value
beyond the period of the concession term)
and a resulting gain recognised in the Income
Statement. The dollar amount of these items is
currently being calculated.
In February 2019, the Group announced an
on-market share buy back of up to 5% of its total
shares during 2019. As at 30 June 2019, the Group
has purchased and cancelled $38.8 million of
shares. The effect of this is shown in note 22.
Acquisition of SkyCity HQ
On 19 July 2018, the company completed the
purchase of the strata title interests in the
AA Centre in Auckland for a total consideration
of $47 million. This building, now referred to as
SkyCity HQ, has become the registered office
for the company and is being used as the Group
head office.
Liquidated Damages
Included within the Fletcher Construction
Company Limited (FCC) construction contracts
for the NZICC and Horizon Hotel is the right to
liquidated damages if certain milestones are
not met.
At 30 June 2019, the estimated carrying value of
the unnested car parks is included in “non-current
assets classified as held for sale” within current
assets on the Balance Sheet. The current estimate
is $104.9 million.
As at 30 June 2018, SkyCity had withheld
$26.9 million from payments to FCC for liquidated
damages. During the current financial year this
increased to $39.5 million. Further details are
provided in note 29.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
2 Segment Information
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.
SkyCity Darwin has been treated as a
discontinued operation within the financial
statements. For internal management reporting
purposes SkyCity Darwin prior to sale continued
to be reported to the CEO on the same basis as
previously and therefore the segment information
note has been prepared on a consistent basis with
prior periods.
(a) Primary Reporting Format – Business Segments
Consistent with internal management reporting,
revenue from external customers within the
segment note does not include the impact of
NZ IFRS 15.
Total revenue for SkyCity Darwin within this
Segment Information note reconciles to
discontinued revenue disclosed in note 23.
Non-gaming revenue consists of other income
within note 4 and non-gaming within
note 3. Most of other income in note 4 relates
to SkyCity Auckland.
SKYCITY
AUCKLAND
REST
OF NEW
ZEALAND
ADELAIDE
CASINO
SKYCITY
DARWIN
INTERNATIONAL
BUSINESS
CORPORATE
/GROUP
TOTAL
$'000
$'000
$'000
$'000
$'000
$'000
$'000
2019
Gaming revenue
378,061
56,533
124,801
60,699
122,580
Non-gaming revenue
189,862
9,922
21,101
22,402
36
Total revenue
567,923
66,455
145,902
83,101
122,616
Shares of net profits/(losses)
of associates
–
(737)
–
–
–
–
–
–
–
742,674
243,323
985,997
(737)
Expenses
(285,855)
(37,160)
(123,566)
(62,679)
(119,610)
(38,146)
(667,016)
Depreciation and amortisation
(47,413)
(5,390)
(17,687)
(4,711)
–
(9,497)
(84,698)
Segment profit/EBIT
234,655
23,168
4,649
15,711
3,006
(47,643)
233,546
Net finance costs (including
discontinued operations)
Profit before income tax
Discontinued operations
before tax (note 23)
Profit before income tax
from continuing operations
(10,212)
223,334
(15,756)
207,578
New Zealand
Australia
Segment assets
1,258,606
101,584
548,778
–
Net additions to non-current
assets (other than financial
assets and deferred tax)
157,966
20,490
73,075
3,933
–
–
642,982
2,551,950
133,853
389,317
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Notes to the Financial Statements
145
SKYCITY
AUCKLAND
REST
OF NEW
ZEALAND
ADELAIDE
CASINO
SKYCITY
DARWIN
INTERNATIONAL
BUSINESS
CORPORATE
/GROUP
TOTAL
$'000
$'000
$'000
$'000
$'000
$'000
$'000
2018
Gaming revenue
360,501
55,405
125,779
82,638
138,980
Non-gaming revenue
170,527
9,943
23,617
29,760
37
Total revenue
531,028
65,348
149,396
112,398
139,017
Shares of net profits/(losses)
of associates
–
(347)
–
–
–
–
–
–
–
763,303
233,884
997,187
(347)
Expenses
(270,319)
(36,315)
(124,971)
(85,020)
(105,834)
(35,653)
(658,112)
Depreciation and amortisation
(50,385)
(5,401)
(18,287)
(13,515)
–
(6,789)
(94,377)
Segment profit/EBIT
210,324
23,285
6,138
13,863
33,183
(42,442)
244,351
Net finance costs (including
discontinued operations)
Profit before income tax
Discontinued operations
before tax (note 23)
Profit before income tax
from continuing operations
(12,458)
231,893
(15,234)
216,659
Segment assets
1,167,809
97,075
515,746
231,801
Net additions to non-current
assets (other than financial
assets and deferred tax)
96,894
6,582
43,925
10,664
–
–
532,077 2,544,508
158,038
316,103
(b) Secondary Reporting Format – Geographical Segments
SEGMENT REVENUES
2019
$'000
RESTATED
2018
$'000
NON‑CURRENT ASSETS
EXCLUDING FINANCIAL
INSTRUMENTS AND
DEFERRED TAX ASSETS
2019
$'000
2018
$'000
749,699
664,378
1,736,037
1,658,548
236,298
332,809
540,841
709,485
985,997
997,187
2,276,878
2,368,033
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
4 Other Income
Net gain on disposal of property, plant and equipment
Dividend income
Rental income from investment properties
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Notes to the Financial Statements
147
2019
$'000
18,453
8
2,338
20,799
RESTATED
2018
$'000
868
6
1,531
2,405
$17.4 million of the net gain on disposal of property plant and equipment related to the sale of the
Federal Street car park in Auckland.
5 Expenses
Other Expenses Include:
Utilities, insurance and rates
Other property expenses
Other items
Minimum lease payments relating to operating leases
Provision for bad and doubtful debts
Depreciation and Amortisation
Depreciation
Casino licence amortisation (Adelaide)
Computer software amortisation
2019
$'000
21,863
12,124
52,216
4,351
1,245
91,799
66,739
5,556
7,693
79,988
RESTATED
2018
$'000
21,405
11,440
46,970
4,870
1,688
86,373
68,913
5,786
6,162
80,861
(c) Description of Segments
SkyCity Darwin
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 convention, food and beverage, car
parking, Sky Tower, investment properties and a
number of other related activities, and excludes
International Business customers.
SkyCity Darwin includes casino operations,
food and beverage and hotel, and excludes
International Business customers.
SkyCity Darwin was sold on 4 April 2019
(refer note 23).
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 includes
commission and complimentary play.
Rest of New Zealand
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 NZICC is also
included here.
Rest of New Zealand includes the Group's
operations at SkyCity Hamilton, SkyCity
Queenstown, SkyCity Wharf and Associates, and
excludes International Business customers.
Adelaide Casino
Adelaide Casino includes casino operations and
food and beverage, and excludes International
Business customers.
3 Revenue
Accounting Policy
Gaming revenues represent the net win to the casino from gaming activities, being the difference
between amounts wagered and amounts won by casino patrons. International Business commissions
are treated as a reduction in revenue.
Non-gaming revenues include hotel and conventions, food and beverage, Sky Tower, car parking and
other revenues. These are recognised when the goods are provided or services are rendered.
Gaming
Non-gaming
Total revenue
2019
$'000
601,696
200,569
802,265
RESTATED
2018
$'000
611,880
201,948
813,828
Revenue has been restated for the impact of NZ IFRS 15 (note 1(f)) and the sale of Darwin (note 23).
The Group also provides complimentary hotel accommodation, food and beverage and other
promotions to certain groups of customers, it is not practical to separate this revenue from gaming
revenues. Retail values of such complimentary items amounted to $33.6 million (2018: $33.2 million).
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Auditor's Fees
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.
Tax advisory services relates to ad-hoc queries covering a range of tax related matters.
(a) Assurance Services
Audit Services
Group Audit
(b) Other Services
Taxation advisory services
Tax compliance services
Executive remuneration benchmarking assistance
Provision of software tool for subsidiary statutory financial statement preparation
Total remuneration for other services
Total fees expense
6 Earnings Per Share
Accounting Policy
(i) Basic Earnings per Share
2019
$'000
2018
$'000
813
690
501
59
142
27
729
1,542
406
100
121
27
654
1,344
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.
There are no dilutive potential ordinary shares and therefore basic and diluted earnings per share are
the same.
Weighted average number of ordinary shares used as the
denominator in calculating basic and diluted earnings per share
2019
Number
2018
Number
675,772,802
669,112,499
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Notes to the Financial Statements
149
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)
2019
$'000
67,751
67,938
135,689
10.0
10.0
2018
$'000
66,210
67,129
133,339
10.0
10.0
On 13 August 2019, the directors resolved to declare a final dividend of 10.0 cents per share in respect of the
year ended 30 June 2019 (refer to note 32 for further details).
8 Net Finance Costs
Finance costs
Exchange (gains)/losses
Interest income
Capitalised interest (refer Property, Plant and Equipment note 16)
Total finance costs
2019
$'000
41,598
(316)
(723)
(30,319)
10,240
2018
$'000
35,915
(136)
(354)
(22,899)
12,526
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.
Current
Syndicated bank facility
United States private placement notes
Total current interest bearing borrowings
2019
$'000
28,000
21,127
49,127
2018
$'000
–
–
–
Refer note 10(a) for details concerning the US private placement notes ("USPP") and note 10(b) for details
concerning the syndicated bank facility.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
10 Non-Current Liabilities – Interest Bearing Liabilities
(e) Weighted Average Interest Rate as at 30 June
Accounting Policy
Interest bearing liabilities are recognised initially at fair value, net of transaction costs incurred.
Apart from US dollar denominated USPP debt maturing in March 2025, interest bearing liabilities are
subsequently carried at amortised cost and any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income statement over the period of the
borrowings using the effective interest method. The interest margin on the US dollar denominated
USPP debt maturing in March 2025 is accounted under NZ IFRS 9 as a fair value hedge. Therefore the
carrying value of this debt is carried at fair value for the interest rate risk.
WEIGHTED
AVERAGE
INTEREST
RATE
WEIGHTED
AVERAGE
INTEREST
RATE
BALANCE
2019
%
$'000
2018
%
Interest bearing liabilities*
6.56%
547,218
6.21%
*The weighted average debt interest rate includes the impact of interest rate hedging.
Notes to the Financial Statements
151
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BALANCE
$'000
511,658
2018
$'000
27,198
48,757
–
(511,658)
(435,703)
75,955
(490,531)
(21,127)
(435,703)
(f) Net debt reconciliation
Cash at bank
Cash in house
Borrowings – repayable within one year
Borrowings – repayable after one year
Cash at bank and in house
Gross debt – fixed interest rates
Gross debt – variable interest rates
2019
$'000
7,256
34,318
(49,127)
(498,091)
(505,644)
41,574
(498,091)
(49,127)
(505,644)
11 Non-Current Assets – Investment Properties
Accounting Policy
Investment property, principally comprising freehold office buildings, is held for long term rental
yields and is not occupied by the Group. Investment property is carried at fair value, which is based on
active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the
specific asset. If this information is not available, the Group uses alternative valuation methods such
as recent prices in less active markets or discounted cash flow projections. Changes in fair values are
recorded in the income statement.
At fair value
Balance at the beginning of the year
Acquisitions
Net (loss) from fair value adjustment
Closing balance at 30 June
2019
$'000
35,300
8,564
(3,204)
40,660
2018
$'000
–
36,099
(799)
35,300
Unsecured
United States private placement notes
New Zealand bonds
Deferred funding expenses
Total non-current interest bearing liabilities
2019
$'000
373,091
125,000
(2,178)
495,913
2018
$'000
386,658
125,000
(3,205)
508,453
(a) United States Private Placement (USPP) Notes
(b) Syndicated Bank Facility
As at 30 June 2019 (and 30 June 2018), SkyCity had
outstanding:
• NZ$21.1 million maturing 15 March 2020;
• US$100.0 million maturing 15 March 2021;
• US$100.0 million maturing 17 March 2025; and
• A$65.4 million maturing 15 March 2028.
Movements in the carrying value of the
outstanding balance in the current year relate to
movements in exchange rates and interest rates.
The US dollar USPP notes have been hedged
to NZ 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 24.
Fair value of USPP debt is estimated at
NZ$410.9 million compared to a carrying value of
NZ$394.2 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.
The unsecured 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 2019 (and 30 June 2018), SkyCity had
in place revolving credit facilities of:
• NZ$200.0 million maturing 30 June 2020;
• NZ$120.0 million maturing 15 March 2021; and
• A$280.0 million maturing 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 2019, the closing price was $1.05919 per
$1 bond (2018: $1.03385 per $1 bond). The bonds
are carried at amortised cost. The total fair value is
$132.4 million and is a level 1 valuation as they are
listed securities.
(d) Negative Pledge Deeds
A negative pledge deed has been executed in
relation to each of the funding facilities – bank
facilities, USPP notes 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 2019.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
(a) Amounts recognised in profit and loss for investment property
Rental income
Direct operating expenses from property that generated rental income
Net (loss) from fair value adjustment
2019
$'000
2,338
(819)
(3,204)
(1,685)
2018
$'000
1,531
(467)
(799)
265
(b) Valuation basis
Investment properties were valued on 30 June 2019 by Bower Valuations Limited and Extensor
Advisory Limited, Registered Valuers and Members of the New Zealand Institute of Valuers and the
Property Institute of New Zealand, at a total value of $40.66 million. The valuer has recent experience
in the location and category of the investment being valued. The basis of the valuation of investment
properties is fair value being the amounts for which the properties could be exchanged between willing
parties in an arm’s length transaction, based on current prices in an active market for similar properties
in the same location and condition and subject to similar leases.
The following were the significant assumptions used in the valuations:
•
initial yield of 4.4%;
• capitalisation rate of 5.0%; and
•
rate per square metre of net lettable area of approximately $9,500.
12 Income Tax Expense
Accounting Policy
The income tax expense for the year is the tax payable on the current year’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.
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.
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153
2019
RESTATED 2018
$'000
$'000
60,616
(13,863)
46,753
207,578
58,122
3,258
(3)
(1,920)
1,116
(11,509)
(6,211)
3,888
12
46,753
2019
$'000
5,303
(4,365)
1,713
1,846
346
4,843
(1,097)
5,088
84
2,651
(1,883)
4,843
50,129
7,698
57,827
216,659
60,665
2,141
(88)
(6,399)
523
999
–
–
(14)
57,827
2018
$'000
–
–
–
–
–
–
–
–
–
–
–
–
(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
Asset held for sale
Capital gain - Federal Street car park
Prior period adjustments (including ATO settlement)
Other
Income tax expense
The weighted average applicable tax rate was 22.5% (2018: 26.7%).
13 Deferred Tax Assets
The balance comprises temporary differences attributable to:
Provisions and accruals
Depreciation
Foreign exchange variances
Cashflow hedges
Other
Net deferred tax assets
Movements:
Transferred from deferred tax liabilities
Transferred to discontinued operations
Foreign exchange differences
Charged to the Income statement (note 12)
Tax charged/(credited) directly to other comprehensive income (note 12)
Closing balance at 30 June
Deferred tax assets relate to the Australian operations.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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14 Deferred Tax Liabilities
16 Property, Plant and Equipment
Notes to the Financial Statements
155
The balance comprises temporary differences attributable to:
Provisions and accruals
Depreciation
Foreign exchange variances
Cashflow hedges
Other
Net deferred tax liabilities
Movements:
Balance at the beginning of the year
Transferred to deferred tax assets
(Credited)/charged to the income statement (note 12)
Charged to the income statement relating to discontinued operations
Tax credited directly to other comprehensive income
Foreign exchange differences
Closing balance at 30 June
2019
$'000
(11,664)
89,958
–
(7,480)
(654)
70,160
84,547
(1,097)
(11,212)
–
(2,101)
23
70,160
2018
$'000
(14,537)
108,611
141
(9,217)
(451)
84,547
80,021
–
7,698
501
(3,627)
(46)
84,547
Deferred tax liabilities exclude the Australian operations which have a net deferred tax asset (liability as
at 30 June 2018) (refer to note 13).
15 Imputation and Franking Credits
Balances available for use in subsequent reporting periods
Imputation credit account (New Zealand)
Franking credit account (Australia) (A$'000)
2019
$'000
46,926
15,176
2018
$'000
47,254
3,476
As required by relevant tax legislation, the imputation credit account had a credit balance as at
31 March 2019.
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 follows:
Buildings and fitout
5–75 years
Plant, equipment and motor vehicles 2-75 years
Fixtures and fittings
3-20 years
The assets' residual values and useful lives are
reviewed, and adjusted if appropriate, at each
balance sheet date.
An asset's carrying amount is written down
immediately to its recoverable amount if the
asset's carrying amount is greater than its
estimated recoverable amount.
BUILDINGS
AND FITOUT
PLANT,
EQUIPMENT
AND MOTOR
VEHICLES
FIXTURES
AND FITTINGS
CAPITAL
WORK IN
PROGRESS
$'000
$'000
$'000
$'000
LAND
$'000
TOTAL
$'000
At 1 July 2017
Cost
189,876
976,690
412,569
128,629
304,763
2,012,527
Accumulated depreciation
–
(320,899)
(285,953)
(81,098)
–
(687,950)
Net book amount
189,876
655,791
126,616
47,531
304,763
1,324,577
Year ended 30 June 2018
Opening net book amount
189,876
655,791
126,616
47,531
304,763
1,324,577
Exchange differences
Net additions/transfers
948
–
6,074
15,982
Assets classified as held for sale (note 20)
(9,850)
(12,292)
1,509
37,444
(31)
424
2,183
11,138
8,725
205,046
267,197
(2)
–
–
(22,175)
(82,127)
Depreciation charge*
–
(28,675)
(41,458)
(11,994)
Closing net book amount
180,974
636,880
124,080
44,684
511,992
1,498,610
At 30 June 2018
Cost
180,974
985,155
443,233
137,689
511,992
2,259,043
Accumulated depreciation
–
(348,275)
(319,153)
(93,005)
–
(760,433)
Net book amount
180,974
636,880
124,080
44,684
511,992
1,498,610
Year ended 30 June 2019
Opening net book amount
180,974
636,880
124,080
44,684
511,992
1,498,610
Exchange differences
(1,095)
(6,864)
Net additions/transfers
56,828
12,000
(1,564)
31,704
(435)
(4,085)
(14,043)
5,925
244,836
351,293
Discontinued operations (note 23)
(17,661)
(122,977)
(17,172)
(4,916)
(253)
(162,979)
Assets classified as held for sale (note 20)
(8,729)
(45,428)
Depreciation charge*
–
(22,658)
Closing net book amount
210,317
450,953
(710)
(37,551)
98,787
–
(110,641)
(165,508)
(10,907)
–
(71,116)
34,351
641,849
1,436,257
At 30 June 2019
Cost
210,317
775,739
371,060
123,996
641,849
2,122,961
Accumulated depreciation
–
(324,786)
(272,273)
(89,645)
–
(686,704)
Net book amount
210,317
450,953
98,787
34,351
641,849
1,436,257
*depreciation charge above includes depreciation on both continuing (refer note 5) and discontinued operations (refer note 23).
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
(a) Capitalised Borrowing Costs
17 Intangible Assets
Borrowing costs of $30.3 million have been
capitalised in the current year relating to
capital projects (2018: $22.9 million) using the
Group's weighted average cost of debt of 6.11%
(2018: 6.27%).
(b) Capital Commitments
Capital expenditure contracted for at the
reporting date but not recognised as liabilities was
$257.7 million (2018: $490.5 million). The majority
of the 2019 capital commitment relates to the
construction of the NZICC, the Horizon Hotel and
the Adelaide expansion.
(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.
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.
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 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 of disposal.
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.
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Notes to the Financial Statements
157
(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 in accordance with NZ IAS 20.
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 completion of the
related property, plant and equipment, the value
of the regulatory reforms is accounted for as
deferred licence value.
(iv) Acquired Software
Acquired computer software licences are
capitalised on the basis of the costs incurred to
acquire and bring to use the specific software.
These costs are amortised over their estimated
useful life (three to 15 years) on a straight line basis.
At 1 July 2017
Cost
Accumulated amortisation
Net book amount
Movements in the Year Ended 30 June 2018
Exchange differences
Additions
Amortisation charge*
Closing net book amount
At 30 June 2018
Cost
Accumulated amortisation
Net book amount
Movements in the Year Ended 30 June 2019
Exchange differences
Additions
Discontinued operations
Amortisation charge*
Closing net book amount
At 30 June 2019
Cost
Accumulated amortisation
Net book amount
GOODWILL
CASINO
LICENCES
COMPUTER
SOFTWARE
$'000
$'000
$'000
TOTAL
$'000
35,786
807,152
92,829
935,767
–
(50,118)
(66,624)
(116,742)
35,786
757,034
26,205
819,025
–
–
–
12,411
–
133
12,514
12,544
12,514
(5,786)
(6,464)
(12,250)
35,786
763,659
32,388
831,833
35,786
821,364
102,842
959,992
–
(57,705)
(70,454)
(128,159)
35,786
763,659
32,388
831,833
–
–
–
–
(14,117)
(138)
(14,255)
–
(33,094)
29,461
(1,955)
29,461
(35,049)
(5,556)
(8,026)
(13,582)
35,786
710,892
51,730
798,408
35,786
768,618
127,311
931,715
–
(57,726)
(75,581)
(133,307)
35,786
710,892
51,730
798,408
* amortisation charge above includes amortisation on both continuing (refer note 5) and discontinued operations (refer note 23).
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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CASINO LICENCE
CONTRACT TERM
CASINO LICENCE
CONTRACT TERM
Notes to the Financial Statements
159
SkyCity Auckland
Casino (indefinite
useful life)
Adelaide Casino
(finite 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 is not amortised but is reviewed for impairment annually.
The carrying amount of the casino licence is $405 million (FY18: $405 million).
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 casino licence and associated regulatory reforms 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$288.3 million (FY18: A$293.5 million)
(NZ$301.5 million and NZ$319.7 million respectively).
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 (FY18: $4.4 million).
The asset is not amortised but is reviewed for impairment annually.
Deferred Licence Value
The deferred licence value relating to Auckland
($355.2 million, 2018: $405.0 million) and Adelaide
(NZ$149.6 million, 2018: NZ$155.8 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.
As detailed in note 1(h), SkyCity has signed an
agreement to grant a concession over the car
parks within the New Zealand International
Convention Centre. As a result of this agreement
the carrying value of, and the deferred licence
value associated with, these car parks have been
transferred to "non-current assets classified as
held for sale" within current assets on the Balance
Sheet. The transfer from the deferred licence
value was $49.8 million which represents the
estimated portion of the Auckland $405.0 million
deferred licence value that relates to the car parks
as a percentage of the total construction cost.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
(a) Impairment Tests for Intangibles with Indefinite Lives
19 Cash and Bank Balances
SKYCITY
AUCKLAND
OTAGO
CASINOS
LIMITED*
SKYCITY
HAMILTON*
SKYCITY
DARWIN
$'000
$'000
$'000
$'000
2019
Goodwill
Casino Licence
Total
2018
Goodwill
Casino Licence
Total
–
405,000
405,000
–
405,000
405,000
–
4,391
4,391
–
4,391
4,391
TOTAL
$'000
35,786
409,391
445,177
35,786
35,786
–
35,786
35,786
–
–
–
–
–
34,566
443,957
35,786
34,566
479,743
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.
*SkyCity Hamilton and Otago Casinos Limited are included within the "Rest of New Zealand" segment in note 2.
(b) Key Assumptions used for Value in Use Calculations of Cash Generating Units
SkyCity Auckland
SkyCity Hamilton
EBITDA MARGIN
GROWTH RATE
DISCOUNT RATE
2019
40.9%
43.5%
2018
40.9%
44.5%
2019
2.0%
2.0%
2018
2.0%
2.0%
2019
9.0%
9.0%
2018
9.0%
9.0%
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.
18 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
2019
$'000
36,160
13,133
49,293
2018
$'000
14,611
8,768
23,379
Due to the short term nature of these receivables, their carrying value is assumed to be equal to their
fair value.
Notes to the Financial Statements
161
2019
$'000
7,256
34,318
41,574
2018
$'000
27,198
48,757
75,955
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Cash at bank
Cash in house
Total cash and bank balances
20 Non‑Current Assets Classified as Held For Sale
Accounting Policy
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered
principally through a sale transaction and a sale is considered highly probable. They are stated at the
lower of carrying amount and fair value less costs to sell.
Non-current assets are not depreciated or amortised while they are classified as held for sale.
Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale
continue to be recognised.
Land
Buildings
Plant and equipment
Total
2019
$'000
8,729
104,041
2,917
115,687
2018
$'000
9,850
12,292
33
22,175
Assets held for sale consist of the Darwin Little Mindil site ($10.8 million (30 June 2018: nil)) and the
Auckland car park concession ($104.9 million (30 June 2018: nil)). The $104.9 million relating to the
Auckland car park concession includes $154.7 million transferred from Property, Plant and Equipment
(note 16), partially offset by $49.8 million transferred from Deferred Licence Value (note 17). The prior year
balance related to the Federal Street car park which was sold during the year.
21 Payables
Accounting Policy
Payables are stated at fair value or estimated liability where accrued.
Trade payables
Deferred income
Accrued expenses
Employee benefits
Liquidated damages (refer note 29)
Total payables
2019
$'000
26,489
1,779
117,448
42,896
39,500
228,112
RESTATED
2018
$'000
32,149
2,784
89,145
42,747
26,900
193,725
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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22 Share Capital
(c) Details of the sale of the subsidiary
Notes to the Financial Statements
163
2019
2018
Shares
Shares
2019
$'000
2018
$'000
Opening balance of ordinary shares issued
680,342,108
667,376,523
1,152,260
1,100,792
Share rights issued for employee services
Share buy back and cancellation
Net issue/(purchase) of treasury shares
–
(10,095,373)
–
–
–
–
Shares issued under dividend reinvestment plan
2,104,431
12,965,585
4,540
2,983
(38,792)
397
8,591
–
228
48,257
672,351,166
680,342,108
1,126,996
1,152,260
All ordinary shares rank equally with one vote attached to each fully-paid ordinary share.
Included within the number of shares is 5,190,841 treasury shares (2018: 5,515,841) 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 note 26). Treasury shares may be used to issue shares under the company's
employee incentive plans or upon the exercise of share rights/options.
23 Discontinued Operations
(a) Sale of Darwin Operations
On 8 November 2018, SkyCity announced the sale of the Darwin business to Delaware North. A sale
and purchase agreement for A$188 million was signed subject to regulatory approval and other minor
matters. All conditions were satisfied and the disposal was completed on 4 April 2019.
(b) Financial performance and cash flow information
The financial performance and cash flow information presented are for the period ended 4 April 2019
(2019 column) and the year ended 30 June 2018.
Revenue
Expenses
EBITDA
Depreciation and amortisation
EBIT
Financing
Profit before income tax
Income tax expense
Profit after income tax of discontinued operations
Loss on disposal
Profit from discontinued operations
Cash flow:
Net cash inflow from operating activities
Net cash (outflow) from investing activities
Net cash (outflow) from financing activities
Total cash flows
2019
$'000
83,101
(62,662)
20,439
(4,711)
15,728
28
15,756
(3,708)
12,048
(28,292)
(16,244)
11,232
(4,201)
–
7,031
2018
$'000
112,394
(83,713)
28,681
(13,515)
15,166
68
15,234
(4,547)
10,687
–
10,687
19,241
(12,638)
–
6,603
Consideration received or receivable:
Cash
Working capital settlement
Total disposal consideration
Carrying amount of net assets sold
Transaction costs
Gain on sale before income tax and reclassification of foreign
currency translation reserve
Reclassification of foreign currency translation reserve
Impact on interest rate hedging
Income tax expense on disposal
Loss on sale after income tax
2019
$'000
197,065
3,238
200,303
(193,730)
(4,618)
1,955
(27,864)
(5,010)
2,627
(28,292)
The carrying amounts of assets and liabilities as at the date of sale (4 April 2019) were:
Property, plant and equipment
Intangible assets (casino licence and software)
Cash and bank balances
Other assets
Total assets
Deferred tax liability
Employee benefit obligations
Other liabilities
Total liabilities
Net assets
2019
$'000
162,979
35,049
12,204
3,057
213,289
(5,088)
(4,544)
(9,927)
(19,559)
193,730
2018
$'000
–
–
–
–
–
–
–
–
–
–
2018
$'000
–
–
–
–
–
–
–
–
–
–
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
24 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 recognised
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
2019
$'000
2018
$'000
2019
$'000
2018
$'000
Current Assets
Forward foreign exchange contracts
6,798
–
Non-current Assets
Interest rate swaps – cash flow hedges
–
50,000
Cross-currency interest rate swaps - cash flow hedges*
255,106
110,106
Total non‑current derivative financial instrument assets
255,106
160,106
Current Liabilities
Forward foreign currency contracts
Interest rate swaps – cash flow hedges
75,459
61,607
–
80,000
Total current derivative financial instrument liabilities
75,459
141,607
Non-current Liabilities
85
–
–
71
56,201
56,201
42,526
42,597
784
–
784
86
448
534
Interest rate swaps – cash flow hedges
401,721
399,682
30,913
24,742
Cross-currency interest rate swaps – cash flow hedges
–
148,346
–
4,028
Total non‑current derivative financial instrument liabilities
401,721
548,028
30,913
28,770
Total net derivative financial instruments
24,589
13,293
*A component of the interest margin in US$100.0 million of these CCIRS is treated as a fair value hedge.
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Notes to the Financial Statements
165
25 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
The Group 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.
The Group 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.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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.
(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);
and
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 two in the above fair value
measurement hierarchy.
Gearing ratio
Interest coverage
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.
Investment Properties are valued using level three
in the above fair value measurement hierarchy.
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 24.
(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:
2019
1.5 x
8.4 x
2018
1.3 x
9.5 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 2019 were within covenant limits on funding facilities.
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26 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 company 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.
Current Plans
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 (three to
four 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 2019, the interest free loans relating
to the Executive Long Term Incentive Plan total
$7,760,214 (2018: $8,352,332).
2017 Chief Executive Officer
commencement shares
Under the terms of his employment agreement
dated 4 November 2016, the Chief Executive Officer
will (subject to his continued employment) be
issued 325,000 ordinary SkyCity shares on the
second anniversary of the date of his employment
agreement. There were no performance targets
associated with these shares, and there was
no right to dividends in the intervening period.
These shares vested to the Chief Executive Officer
during the year.
2018 Chief Operating Officer
commencement shares
Under the terms of his employment agreement
dated 18 November 2017, the Chief Operating
Officer will (subject to his continued employment)
be issued 35,000 ordinary SkyCity shares on
1 November 2019. There are no performance targets
associated with these shares, and there is no right
to dividends in the intervening period.
2018 SkyCity Restricted Share Rights Plan
The 2018 Short Term Incentive Plan was changed
for selected senior staff. For approximately 116 staff
the 2018 short term incentive was replaced with
restricted share rights. These rights were issued
to staff after the finalisation of the Group's results.
Each right converts to one share provided the staff
member continues to be employed by the Group
on 30 June 2020.
Performance Incentive Plan
The 2018 Short Term Incentive Plan was replaced
in 2019 with the Performance Incentive Plan (the
PIP) that includes cash (the short term incentive
scheme component of the PIP) and deferred
equity components (the deferred short term
incentive component of the PIP).
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
The deferred STI scheme under the PIP
offers participants, subject to the relevant
STI performance conditions being met, the
opportunity to acquire restricted share rights of
an amount equivalent to between 10% and 50%
of their base salary. Restricted share rights (if any)
issued to a participant on a STI cash payment date
(Declaration Date) will only vest if that participant
remains an employee up and until:
•
•
the first anniversary of the Declaration Date in
respect of 50% of the restricted share rights;
and
the second anniversary of the Declaration
Date in respect of the remaining 50% of the
restricted share rights.
However, if a participant’s deferred STI
entitlement in any financial year is to restricted
share rights having a value of $10,000 or less
(calculated using the volume-weighted average
sale price of SkyCity shares used to determine the
number of restricted share rights to be issued to
the participant), the restricted share rights will not
be split out equally into two separate tranches,
but will instead comprise one tranche and
(subject to the vesting criteria being satisfied) vest
to the participant on the first anniversary of the
Declaration Date.
These restricted share rights will be issued to staff
after the finalisation of the Group’s results.
Outstanding Rights and Shares
Movements in the number of share options
outstanding.
GRANT
DATE
EXPIRY
DATE
2019
27/08/14
27/08/18
26/08/15
28/08/19
24/08/16
24/08/20
04/11/16
03/11/18
23/08/17
23/08/21
18/11/17
18/11/19
22/08/18
22/08/21
11/09/18
30/06/20
Total
2018
28/08/13
28/08/17
27/08/14
27/08/18
26/08/15
28/08/19
24/08/16
24/08/20
04/11/16
03/11/18
23/08/17
23/08/21
18/11/17
18/11/19
Total
BALANCE
AT START OF
THE YEAR
GRANTED
DURING
THE YEAR
EXERCISED
DURING
THE YEAR
EXPIRED
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
Number
Number
Number
Number
Number
555,000
380,000
415,000
325,000
910,883
35,000
–
–
–
–
–
–
–
–
434,035
1,898,564
–
–
–
(555,000)
–
(20,000)
360,000
(20,000)
395,000
(325,000)
–
–
–
–
–
–
(45,000)
865,883
–
–
35,000
434,035
(38,923)
1,859,641
2,620,883
2,332,599
(325,000)
(678,923)
3,949,559
493,124
665,000
515,000
625,000
325,000
–
–
–
–
–
–
–
1,015,883
35,000
2,623,124
1,050,883
–
–
–
–
–
–
–
–
(493,124)
–
(110,000)
555,000
(135,000)
380,000
(210,000)
415,000
–
325,000
(105,000)
910,883
–
35,000
(1,053,124)
2,620,883
The weighted average remaining contractual life of rights outstanding at the end of the period was
1.42 years (2018: 1.69 years).
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Notes to the Financial Statements
169
Fair Values
Fair Value of Share Rights Granted
The assessed fair value at grant date of the
rights granted on 22 August 2018 was $1.17
(23 August 2017 was $1.28). This was calculated
using the single index model by Ernst & Young
Transaction Advisory Services Limited.
The valuation inputs for the rights granted on
22 August 2018 included:
(a) rights are granted for no consideration
(b) exercise price: nil (2018: nil)
(c) share price at grant date: $4.34 (2018: $3.90)
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
The assessed fair value at grant date of the
commencement shares at 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 on 4 November 2016 included:
(a) no consideration
(b) exercise price: nil
(c) share price at grant date: $3.62
(d) no right to dividends
The expected price volatility is derived by
analysing the historic volatility over a recent
historical period similar to the term of the
commencement shares.
Rights issued under Share Rights Plans
Fair Value of Chief Operating Officer
Commencement Shares
The assessed fair value at grant date of the
commencement shares at 18 November 2017 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 on 18 November 2017 included:
(a) no consideration
(b) exercise price: nil
(c) share price at grant date: $3.57
(d) no right to dividends
The expected price volatility is derived by
analysing the historic volatility over a recent
historical period similar to the term of the
commencement shares.
Fair Value of SkyCity Restricted Share Rights
The assessed fair value of each right was
determined by Ernst & Young Transaction
Advisory Services Limited at $3.02.
Fair Value of SkyCity Deferred Share Rights
The assessed fair value of each right was
determined by Ernst & Young Transaction
Advisory Services Limited. Rights vesting one year
after year end were valued at $3.68 and rights
vesting two years after year end were valued at
$3.33. The exact number of rights to be issued will
not be determined until after the finalisation of
the Group's results.
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:
2019
$'000
4,540
2018
$'000
2,983
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
27 Related Party Transactions
(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 and the Senior Leadership Team.
2019
2018
SHORT‑TERM
BENEFITS
SHARE‑BASED
PAYMENTS
$'000
8,993
9,061
$'000
2,311
1,730
TOTAL
$'000
11,304
10,791
(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 in the normal course
of business.
Certain directors and management hold shares in SkyCity and receive dividends in the normal course
of business.
(c) Subsidiaries
Interests in subsidiaries are set out in note 28.
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Notes to the Financial Statements
171
28 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
significant subsidiaries in accordance with the accounting policy described in note 1(b):
NAME OF ENTITY
PRINCIPAL
PLACE OF
BUSINESS
CLASS OF
SHARES
EQUITY HOLDING
2019
%
2018
%
Cashel Asset Management Limited
New Zealand
Ordinary
New Zealand International Convention Centre Limited
New Zealand
Ordinary
Otago Casinos Limited
Queenstown Casinos Limited
Sky Tower Limited
New Zealand
Ordinary
New Zealand
Ordinary
New Zealand
Ordinary
SkyCity Action Management Limited
New Zealand
Ordinary
SkyCity Auckland Holdings Limited
New Zealand
Ordinary
SkyCity Auckland Limited
New Zealand
Ordinary
SkyCity Casino Management Limited
New Zealand
Ordinary
SkyCity Hamilton Limited
New Zealand
Ordinary
SkyCity International Holdings Limited
New Zealand
Ordinary
SkyCity Investments Australia Limited
New Zealand
Ordinary
SkyCity Investments Queenstown Limited
New Zealand
Ordinary
SkyCity Management Limited
SkyCity Properties Limited
New Zealand
Ordinary
New Zealand
Ordinary
SkyCity Properties Albert St Limited
New Zealand
Ordinary
SkyCity Properties Victoria St Limited
New Zealand
Ordinary
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
SkyCity Malta Holdings Limited
SkyCity Malta Limited
New Zealand
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Australia
Ordinary
Hong Kong
Ordinary
Hong Kong
Ordinary
Malta
Malta
Ordinary
Ordinary
SkyCity Management (UK) Limited
United Kingdom
Ordinary
All wholly-owned subsidiary companies have balance dates of 30 June.
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%
100%
100%
100%
100%
100%
–
–
–
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
29 Contingencies
(a) Contingent Liabilities
The Group has no contingent liabilities at
30 June 2019.
(b) Contingent Assets
Included within the Fletcher Construction
Company Limited (FCC) construction contracts
for the NZICC and Horizon Hotel is the right to
liquidated damages if certain milestones are not
met. To date SkyCity has withheld $39.5 million
(2018: $26.9 million) from payments to FCC for
30 Commitments
Operating Lease Commitments
liquidated damages. The amounts withheld have
been recognised as part of current liabilities (refer
note 21) as ultimate recovery is not able to be
considered virtually certain due to the fact that
SkyCity’s right to retain these liquidated damages
is disputed by FCC.
Additional future costs expected to be incurred
by SkyCity due to delays in the NZICC and
Horizon Hotel project are expected to be covered
by liquidated damages.
There are no other significant contingent assets at
year end (2018: nil).
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
Commitments not recognised in the financial statements
2019
$'000
4,774
12,313
341,176
358,263
2018
$'000
4,947
13,150
329,068
347,165
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.
In addition to the operating lease summary above the Group has commitments to the following leases
which are not yet effective:
• Adelaide: 750 car park spaces
• Auckland: NZICC air bridge across Hobson Street
As outlined in note 1(g), from 1 July 2019 SkyCity will adopt NZ IFRS 16 resulting in the recognition of all
material operating leases on the balance sheet.
Notes to the Financial Statements
173
31 Reconciliation of Profit After Income Tax to Net Cash Inflow
from Operating Activities
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Profit for the year
Depreciation and amortisation (including discontinued operations)
Net finance costs
Current period employee share expense
Gain on sale of fixed assets
Fair value adjustment to investment property
Share of profits/(losses) of associates
Transfer from Foreign Currency Translation Reserve
Change in operating assets and liabilities
Change in receivables and prepayments
Change in inventories
Change in deferred tax asset
Change in payables
Change in deferred tax liability
Change in tax receivable - current
Change in provisions
Change in tax payable - current
Working capital relating to discontinued operations
Capital items included in working capital movements
Net cash inflow from operating activities
2019
$'000
144,581
84,698
10,240
4,540
(18,453)
3,204
737
27,864
(25,914)
1,111
(4,843)
34,387
(9,299)
3,869
(1,776)
7,277
11,415
(21,314)
252,324
2018
$'000
169,519
94,377
12,458
2,983
(1,071)
799
347
–
(6,016)
(533)
–
56,109
4,526
(2,731)
345
(6,365)
–
(35,658)
289,089
32 Events Occurring after the Balance Sheet Date
Dividend
On 13 August 2019, the directors resolved to provide for a 10 cents per share final dividend to be paid in
respect of the year ended 30 June 2019. The fully imputed, unfranked dividend of 10 cents per share will
be paid on 13 September 2019 to all shareholders on the company's register at the close of business on
30 August 2019.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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Reconciliation of Normalised Results to Reported Results
Adjustment
Explanation
Rationale
Reconciliation of Normalised Results to Reported Results
175
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. The intention is to
provide information which:
•
•
•
is representative of SkyCity’s underlying performance (as a potential indicator of future performance);
can be compared across years; and
can assist with comparison between publicly listed casino companies in New Zealand and Australia.
This objective is achieved by:
•
•
•
eliminating inherent volatility or “luck” as a factor from International Business, which has variable
turnover and actual win % period to period;
eliminating structural differences in our business between periods; and
eliminating known different treatments with other New Zealand and Australian publicly listed
casino companies.
Non-GAAP information is prepared in accordance with a Board-approved Non-GAAP Financial
Information Policy and is reviewed by the Board at each reporting period. Application of SkyCity’s
Non-GAAP Financial Information Policy is consistent with the approach adopted in FY18.
The differences between FY19 reported and normalised information is summarised below.
FY19
FY18
Revenue
$m
EBITDA
$m
EBIT
$m
NPAT
$m
Revenue
$m
EBITDA
$m
EBIT
$m
NPAT
$m
Reported
822.3
297.8
217.8
144.6
IB revenue adjustment
Gaming GST
IB at theoretical win rate
Sale of Darwin
80.3
95.2
49.9
88.7
–
–
38.7
20.4
–
–
–
–
38.7
27.8
10.4
24.7
120.6
Gain on sale of Federal Street car park
(17.4)
(17.4)
(17.4)
(17.7)
Revaluation of Auckland properties
Significant tax events
–
–
3.2
–
3.2
3.2
–
(9.5)
–
–
–
815.9
68.6
91.8
4.0
310.0
229.2
169.5
–
–
(0.5)
28.7
–
–
–
–
–
(0.5)
15.2
–
–
–
–
–
0.4
–
–
–
–
Normalised
1,118.9
342.7
252.8
173.0
1,100.8
338.2
243.8
169.9
Treat IB commissions as
an expense rather than
a reduction in revenue
which reduced both
reported revenue and
operating expenses within
International Business (by
$80.3m in FY19 and $68.6m
in FY18)
In FY19, SkyCity adopted NZ IFRS
15 Revenue from Contracts with
Customers (“NZIFRS 15”) for the first
time. This accounting standard was
applied to both FY19 and FY18 within
the Group’s financial statements.
The main impact of adopting NZIFRS
15 was to reduce both revenue
and expenses by the amount of
International Business junket
commissions. This does not impact
EBITDA, EBIT or NPAT.
This adjustment adds back
International Business commissions
and increases both revenue and
expenses. This adjustment does not
impact EBITDA, EBIT or NPAT.
Add gaming GST to
reported revenue ($95.2m
in FY19 and $91.8m in FY18)
Reported revenue included within
the financial statements of the Group
excludes GST. This adjustment adds
back GST associated with gaming so
that normalised revenue equals the
amount bet by gaming customers.
Apply theoretical win rate
of 1.35% for IB vs. actual
win rate of 1.00% (FY19) and
1.32% (FY18)
This adjustment recalculates gaming
win from International Business to
the theoretical win rate. The vast
majority of International Business play
is baccarat. Statistically, over the long
term the casino expects to win 1.35% of
all bets taken on baccarat. However,
in any particular reporting period
the actual results of play will vary
depending on “luck”.
The 1.35% win rate is used by all
publicly listed New Zealand and
Australian casino companies in
addition to casino companies in Asia
and the United States. For FY19 the
actual win rate was 1.00% and in
FY18 the win rate was 1.32%. SkyCity’s
average win rate over the last 10 years
is 1.27% (or 1.33% excluding FY19).
This adjustment has been made to
maintain the relationship between
turnover and the theoretical win
rate of 1.35% when determining
normalised revenue.
This adjustment is consistent
with how all New Zealand and
Australian publicly listed casino
companies present revenue for
International Business.
By making this adjustment, SkyCity
is enabling the user of its financial
information to more easily compare
results to other casino companies.
SkyCity believes this enhances the
user’s understanding of comparative
results and enables the user to better
understand normalised International
Business results.
All publicly listed New Zealand and
Australian casino companies include
GST associated with gaming within
their revenue results. Including
gaming GST within reported revenue
is not consistent with GAAP and, from
FY19, SkyCity has ceased to include
gaming GST within revenue in its
financial statements.
However, SkyCity does include gaming
GST within its normalised revenue.
By making this adjustment, SkyCity
is enabling the user of financial
information to more easily compare
results to other casino companies.
This adjustment does not impact
EBITDA, EBIT or NPAT.
In order to understand the long term
results within International Business
there is the need to eliminate the
inherent volatility or “luck” factor.
By adjusting win to the theoretical
win rate, the users of the financial
information are able to understand
the underlying performance of
International Business and form a
view on the future performance of this
business activity.
For internal purposes, including
budgeting and determination of staff
incentives, the theoretical win rate of
1.35% is used.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
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Adjustment
Explanation
Rationale
Adjustment
Explanation
Rationale
Reconciliation of Normalised Results to Reported Results
177
Eliminate the impact of
disposing the Darwin
operations (classified as
discontinued operations
from 8 November 2018 and
sold on 4 April 2019)
The disposal of Darwin is a significant
and one-off transaction that has
impacted the comparability of the
FY19 result with prior years.
The adjustments detailed are
designed to show, in the normalised
results, the Darwin operations in
FY19 in a manner consistent with
prior years.
SkyCity considers this provides more
useful information for assessing the
current year performance against
prior years.
In FY20, Darwin will be fully excluded
from both FY20 and FY19 normalised
results to enable appropriate
comparisons between these years.
During FY19, SkyCity sold its
Darwin operations.
In the Group’s financial statements,
this has resulted in Darwin being
treated as a discontinued operation
from 8 November 2018 (the date
of signing the sale and purchase
agreement). As a result of this
treatment, the impact of the Darwin
operations for both FY19 and FY18 is
reduced to a single line, net of tax, in
the Income Statement (refer note 23
of the Group’s financial statements).
Furthermore, as a result of classifying
Darwin as a discontinued operation,
no depreciation was booked between
8 November 2018 and 4 April 2019.
This adjustment:
•
•
•
adds back the results of Darwin’s
operations in both FY19 and FY18 to
revenue, EBITDA and EBIT;
reverses the net loss on disposal
(~$28m); and
calculates a depreciation charge
from 8 November 2018 to 4 April
2019 (~$5m) and reduces normalised
results by this amount.
Eliminate benefit from
gain on sale of Federal
Street car park ($17.4m),
April 2019
The reported results include a
significant, one-off gain relating to
the Federal Street car park disposal.
The adjustment reverses this gain.
The disposal of the Federal Street
car park is a significant and one-off
transaction that has impacted the
comparability of the FY19 results with
prior years. SkyCity considers this
provides more useful information
for assessing the current year
performance against prior years.
Reverse impact of
revaluation (reduction
of $3.2m) of Auckland
properties recently
acquired
During FY18 and FY19, SkyCity
acquired a number of investment
properties in Auckland. In accordance
with the appropriate accounting
standard, these investment properties
will be revalued by an independent
expert every year and the carrying
value adjusted within the Group’s
financial statements.
This adjustment reverses the FY19
decline in value of these properties.
The revaluation is non-cash and
unrelated to the operations of
the Group.
This adjustment will be made each
year to determine the Group’s
normalised results.
SkyCity considers that reversing this
valuation adjustment provides more
useful information for assessing
performance year-on-year.
These items do not significantly
change SkyCity’s future tax expense.
For the purposes of the normalised
results, these items have been
reversed from the FY19 tax expense
in order to show SkyCity’s underlying
effective tax rate (when combined
with other tax adjustments outlined in
this reconciliation) .
SkyCity considers that this net
adjustment provides more useful
information for assessing potential
future performance of the Group.
Eliminate significant tax
events (net $9.5m decrease
normalised NPAT)
During FY19, SkyCity had a number
of significant tax events which have
impacted the reported effective tax rate.
ATO tax review
The Australian Tax Office (ATO)
undertook a Streamlined Assurance
Review of SkyCity’s Australian
operations. This is part of the
ATO’s plan to conduct Streamlined
Assurance Reviews over the top 1,000
Australian companies.
As a result of this review, SkyCity and
the ATO agreed to settle differences
of opinion on the treatment of certain
financing arrangements. As a result
of this settlement, SkyCity made a
A$3.5 million payment to the ATO.
This payment relates to historical
items only and does not change
SkyCity’s future tax payments or
tax expense.
Auckland car parks deferred tax
During FY19, the Group announced
it had agreed to sell a concession
over the Auckland main site and
New Zealand International Convention
Centre car parks. This transaction
will be completed on 19 August 2019.
However, as at 30 June 2019, the car
park assets associated with a part of
the transaction have been classified as
“assets classified as held for sale”.
This classification changes the
calculation of deferred tax associated
with these assets and as a result
a $11.5m reduction in tax expense
was booked within the FY19
Income Statement.
Share of partnership expenditure
– tax election
In the current year, SkyCity made
a New Zealand tax election for
the SkyCity Australian Limited
Partnership. This resulted in a one-off
benefit in the FY19 tax expense.
Summary
This adjustment eliminates the net
reduction (from the above items) in
tax expense for the purpose of the
normalised results.
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
GRI Content Index
General Standard Disclosures
SECTION
Organisational
profile
ASPECT / GRI
DISCLOSURE DESCRIPTION
PUBLICATION
PAGE(S) LIMITATIONS
EXTERNAL
ASSURANCE
102-1
Name of organisation
Annual Report 2019:
Company Disclosures
123
102-2
Activities, brands, products
and services
Annual Report 2019:
About SkyCity
25–35
102-3
Location of headquarters
102-4
Location of operations
Annual Report 2019:
Directory
183
Annual Report 2019:
About SkyCity
25–35
102-5
Ownership and legal form Annual Report 2019:
139
Notes to the Financial
Statements
118–119
Annual Report 2019:
Shareholder and
Bondholder
Information
Annual Report 2019:
About SkyCity
25–35
102-6
Markets served
102-7
Scale of organisation
i. Total number of
employees
Annual Report 2019:
Our People
12, 70
Yes
ii. Total number of
operations
Annual Report 2019:
About SkyCity
25–35
iii. Net sales
iv. Total capitalisation
Annual Report 2019:
Income Statement
Annual Report 2019:
Balance Sheet
134
136
v. Quantity of products
and services provided
Annual Report 2019:
About SkyCity
25–35
Additional information
Annual Report 2019
102-8
Information on employees
and other workers
Annual Report 2019:
Our People
70–71
Note 1
Yes
GRI Content Index
179
SECTION
Organisational
profile
ASPECT / GRI
DISCLOSURE DESCRIPTION
102-9
Supply chain
PUBLICATION
PAGE(S) LIMITATIONS
Annual Report 2019:
Our Suppliers
79–83
EXTERNAL
ASSURANCE
Yes
102-10
102-11
Significant changes to the
organisation and its
supply chain
Annual Report 2019:
Delivering Our
Group Strategy
19–21
Precautionary principle
or approach
SkyCity Ethical
Sourcing Code
102-12
External initiatives
Annual Report 2019:
Our Sustainability
80
49
Strategy
102-14
Statement from senior
decision-maker
Yes
Yes
Annual Report 2019:
Our People
59–69
Annual Report 2019:
Our Environment
85–90
14–15
Annual Report 2019:
Chief Executive
Officer's Review and
Chairman's Review
Ethics and
Integrity
102-16
Values, principles,
standards and norms
of behaviour
SkyCity Code
of Conduct
100
www.skycityentertainmentgroup.com
Governance
102-18
Governance structure Annual Report 2019:
93–104
Corporate Governance
Statement and Other
Disclosures
Stakeholder
engagement
102-40
List of stakeholder groups
SkyCity Code
of Conduct
100
www.skycityentertainmentgroup.com
102-41
102-42
102-43
102-44
102-45
102-46
Reporting
practice
Collective bargaining
agreements
Annual Report 2019:
Our People
71
Identifying and selecting
stakeholders
SkyCity Code
of Conduct
100
www.skycityentertainmentgroup.com
Approach to stakeholder
engagement
SkyCity Code
of Conduct
100
www.skycityentertainmentgroup.com
Key topics and
concerns raised
Annual Report 2019:
Our Sustainability
49–51
Entities included in the
consolidated financial
statements
Annual Report 2019:
Notes to the Financial
Statements
140, 171
Defining report content
and topic boundaries
Annual Report 2019:
Our Sustainability
49–51
102-47
List of material topics
Annual Report 2019:
Our Sustainability
51
102-48
Restatements of
information
Annual Report 2019:
Our Environment
89–90
102-49
Changes in reporting
Annual Report 2019:
Notes to the Financial
Statements
2,
140–142
102-50
Reporting period
Annual Report 2019
Cover Page
102-51
Date of most recent report
Annual Report 2019
2
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
GRI Content Index
181
SECTION
Inspire Our
People
ASPECT / GRI
DISCLOSURE DESCRIPTION
PUBLICATION
PAGE(S) LIMITATIONS
EXTERNAL
ASSURANCE
GRI 405-1
Governance and employee
diversity
Annual Report 2019:
Our People
65–69
SkyCity Diversity and
Inclusion Policy
www.skycityentertainmentgroup.com
Host Responsibly GRI 103
Customer health and
safety management
approach
Annual Report 2019:
Our Customers
53–57
GRI 416-1
GRI 416-2
GRI 103
GRI 419-1
Assessment of health and
safety of products and
services
Annual Report 2019:
Our Customers
53–57
Non-compliance incidents
related to health and safety
of products and services
Annual Report 2019:
Our Customers
53–57
Socio-economic
compliance management
approach
Non-compliance with
socio-economic laws and
regulations
Annual Report 2019:
Our Customers
53–57
Annual Report 2019:
Our Customers
53–57
Note 1
Limitations:
Note 1 – The reporting of GRI 419-1 on Non-compliance with Socio-Economic Laws and Regulations does
not include economic laws and regulations.
SECTION
Reporting
practice
ASPECT / GRI
DISCLOSURE DESCRIPTION
102-52
Reporting cycle
Annual Report 2019:
Our Sustainability
PUBLICATION
PAGE(S) LIMITATIONS
EXTERNAL
ASSURANCE
102-53
Contact point for questions
regarding the report
Annual Report 2019:
Our Sustainability
Annual Report 2019:
Directory
49
49
183
102-54
Claims of reporting in
accordance with the
GRI standards
Annual Report 2019
2
Limitations:
Note 1 – The reporting on GRI 102-8 on employees and other workers does not include ‘activities
performed by workers who are not employees’ and ‘significant variations in numbers reported’.
Specific Standard Disclosures
SECTION
ASPECT / GRI
DISCLOSURE DESCRIPTION
PUBLICATION
PAGE(S) LIMITATIONS
EXTERNAL
ASSURANCE
Conserve the
Environment
GRI 103
Energy management
approach
Annual Report 2019:
Our Environment
85–90
GRI 302-3
Energy intensity
Annual Report 2019:
Our Environment
85–90
GRI 103
Emissions management
approach
Annual Report 2019:
Our Environment
85–90
GRI 305-4
GHG emissions intensity
Annual Report 2019:
Our Environment
85–90
Source Ethically
and Responsibly
GRI 103
Ethical and sustainable
procurement management
approach
Annual Report 2019:
Our Suppliers
79–83
Inspire Our
People
GRI 103
Health and safety
management approach
GRI 403-2
Types and rates of injury
Annual Report 2019:
Our Risk Profile and
Management
39
Annual Report 2019:
Health and Safety
62–63
Annual Report 2019:
Our Risk Profile and
Management
39
GRI 103
Employee engagement
management approach
Annual Report 2019:
Our People
59–69
GRI 404-2
Employee programmes
Annual Report 2019:
Our People
59–69
GRI 103
Diversity, inclusion and
belonging management
approach
Annual Report 2019:
Our People
65–69
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
Glossary
Casino Win
EBIT
EBITDA
GAAP
the amount lost or spent by players, calculated as turnover minus amounts
awarded to players
earnings before interest and tax
earnings before interest, tax, depreciation and amortisation
generally accepted accounting principles
Hold or Win Rate
casino win expressed as a percentage of turnover
Normalised EBITDA
earnings before interest, tax, depreciation and amortisation adjusted to take
into account a theoretical win rate of 1.35% on International Business play and
other adjustments and calculated in accordance with SkyCity's Non-GAAP
Financial Information Policy
Normalised NPAT
net profit after tax adjusted to take into account a theoretical win rate of
1.35% on International Business play and other adjustments and calculated in
accordance with SkyCity's Non-GAAP Financial Information Policy
Normalised Revenue
revenue adjusted to take into account a theoretical win rate of 1.35% on
International Business play and other adjustments and calculated in
accordance with SkyCity's Non-GAAP Financial Information Policy
Normalised Win Rate
the expected long term average hold
NPAT
net profit after tax
Reported EBITDA
earnings before interest, tax, depreciation and amortisation calculated in
accordance with GAAP in New Zealand
Reported NPAT
net profit after tax calculated in accordance with GAAP in New Zealand
Reported Revenue
revenue calculated in accordance with GAAP in New Zealand
RevPar
Turnover
revenue per available room
total amount wagered by players
183
Directory
REGISTERED OFFICE
SUPERVISOR FOR BONDS
SkyCity Entertainment Group Limited
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 3
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
Level 13
99 Albert 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
AUDITOR
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
SkyCity Entertainment Group Annual Report Year Ended 30 June 2019
skycityentertainmentgroup.com