SkyCity Entertainment Group
Annual Report 2021

Plain-text annual report

2021 Annual Report Year ended 30 June 2021 Contents GENERAL Report from the Chair and Chief Executive Officer About this Annual Report Year in Review Managing the Impacts of COVID-19 Creating Value Performance An Award-Winning Business Diversity Snapshot Group Strategy About SkyCity Auckland Adelaide Hamilton Queenstown International Business Online Our Values Refreshing Our Brand Risk Profile and Management Our Board Our Senior Leadership Team SUSTAINABILITY Sustainability Our Customers Our People Our Communities Our Suppliers Our Environment 4 9 10 12 16 20 22 24 26 34 36 40 44 45 46 47 48 49 50 60 64 70 78 88 102 108 116 Independent Limited Assurance Statement 126 CORPORATE GOVERNANCE STATEMENT AND OTHER DISCLOSURES Corporate Governance Statement Remuneration Report 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 Index to the Notes to the Financial Statements RECONCILIATION OF NORMALISED RESULTS TO REPORTED RESULTS GRI CONTENT INDEX GLOSSARY DIRECTORY 128 138 150 153 155 159 166 167 168 170 171 172 218 219 223 227 228 ANNUAL MEETING The 2021 SkyCity Annual Meeting will be held virtually via an online platform on 29 October 2021 commencing at 1.00pm (New Zealand time). Instructions and further details on how shareholders can participate in the virtual Annual Meeting will be included in the Notice of Meeting. Report from the Chair and Chief Executive Officer The 2021 financial year was a challenging one for SkyCity – responding to external events arising from the COVID-19 pandemic, opening the Adelaide expansion in an uncertain environment and running the business in a volatile operating and regulatory landscape. It has taken significant skill, energy and dedication from our team and support from stakeholders to deliver a satisfactory performance for the business. Despite the ongoing disruption and volatility, SkyCity has maintained a strong financial position over the period, delivered credible operating performance when open and protected the health and wellbeing of our people. The SkyCity Board and management have considered the regulatory and governance environment in which the Group now operates. The Board’s intention, endorsed by management, is that SkyCity will maintain a casino and entertainment business which is characterised by high levels of: • service and facility quality; • • • • customer enjoyment and safety; staff safety, inclusion, diversity and satisfaction; social and environmental responsibility; economic performance and investment returns; and • ethical conduct in all respects. Critically, the SkyCity Board and management team recognise the importance of protecting our casino licences and enhancing our social licence to operate. Moreover, maintaining a strong balance sheet, meeting the interests of all stakeholders and keeping a disciplined allocation of capital to provide appropriate risk-adjusted returns to shareholders over the long term remain key priorities. The key features of the year can be summarised as: Management and Board • The appointment of Michael Ahearne as the new Chief Executive Officer in November 4 2020 following an internal succession process (replacing the outgoing Chief Executive Officer, Graeme Stephens). Michael brings strong operational knowledge of the SkyCity business, as well as international gaming and entertainment experience, to the role and has put in place a refreshed Senior Leadership Team. • The retirement of Bruce Carter from the SkyCity Board in March 2021. SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Impact of COVID-19 • • COVID-19 continued to significantly impact the business and operations at each of SkyCity’s properties over the period. Government mandated lockdowns in New Zealand and South Australia resulted in the closure of SkyCity Auckland for 29 days and SkyCity Adelaide for 3.5 days. When permitted to reopen, the properties initially operated under significant constraints due to restrictions on mass gatherings and physical distancing requirements. The Trans-Tasman border between New Zealand and Australia reopened from 19 April 2021 (although subject to restrictions as pandemic outbreaks have occurred) – however, the broader international borders remain closed, significantly impacting our tourism-related businesses. Strategy and Major Projects • • • A refreshed Group strategy was announced at the time of our interim results in February 2021. Our strategic plan prioritises a focus on our core business, executing our major projects in Adelaide and Auckland, delivering on the omnichannel opportunity and the efficient allocation of capital. In December 2020, SkyCity completed its A$330 million expansion of the SkyCity Adelaide property transforming it into an integrated resort of international scale and quality. The project (including Eos by SkyCity, a new 120-room boutique hotel, and new gaming, hospitality and entertainment areas) was completed on-time and on-budget and has been well received by customers with consistent operating performance when open. Ongoing delays continue to the New Zealand International Convention Centre (NZICC) and Horizon Hotel project, exacerbated by the fire in October 2019 and COVID-19. SkyCity continues to work closely with Fletcher Construction on the project and has secured an extension to the long stop date to complete the NZICC to 15 December 2027 with the New Zealand Government. Although Fletcher Construction’s latest draft programme indicates completion of the NZICC in late 2024, SkyCity considers it prudent to retain a buffer between the programme and the long stop date. Report from the Chair and Chief Executive Officer 5 • The renewal of the SkyCity Board was confirmed during March 2021 with the subsequent appointment of three new directors – Silvana Schenone, Julian Cook and Chad Barton – in June 2021. The new directors bring diverse skills, backgrounds and experience to the Board. The Board will be conducting a thorough review of its effectiveness during the 2022 financial year. • • SkyCity Auckland opened new food and beverage facilities on the main gaming floor, improved VIP gaming facilities on Levels 8 and 9 of the main site and welcomed the arrival of the All Blacks Experience and Weta Workshop Unleashed, two world-class attractions, to the precinct. A strategic review into the International Business division was undertaken during April 2021. SkyCity has decided to permanently cease dealing with junket operators, but to continue to operate the division under a revised operating model where SkyCity will deal directly with patrons after appropriate know your customer (KYC) and customer financial due diligence requirements are satisfied. Regulatory and Compliance • • Steady progress was made with initiatives to enhance SkyCity’s host responsibility and anti-money laundering (AML) control frameworks. Minimising harm to customers remains a key focus with appropriate effort, resource and capital allocated to support this initiative, such as increased resourcing and investment in bespoke ICT systems (including facial recognition technology and specialised customer screening tools). SkyCity is committed to ensuring that it provides safe and responsible experiences and environments and places significant importance on its host responsibility and AML obligations. In June 2021, SkyCity was informed by the Australian Transaction Reports and Analysis Centre (AUSTRAC) that it had identified potential serious non-compliance by SkyCity Adelaide with the Australian AML legislation and that a formal enforcement investigation into the compliance of SkyCity Adelaide had been initiated. The SkyCity Board and management team take the concerns raised by AUSTRAC seriously and have taken immediate steps to investigate and appropriately address the concerns raised. SkyCity will continue to fully cooperate with AUSTRAC with regards to its inquiries and with the investigation of SkyCity Adelaide. Financial Performance, Balance Sheet and Distributions • • • • Group reported EBITDA and NPAT were $317.3 million and $156.1 million respectively, down from the prior comparable period due to the ongoing impact of the New Zealand International Convention Centre fire and the gain from the sale of the Auckland car park concession . Group normalised EBITDA and NPAT of $252.0 million and $90.3 million respectively are at the top end of the guidance provided to the market during June 2021, but are still well below pre COVID-19 earnings in FY19. SkyCity’s financial position remains strong post implementation of our funding plan from mid-2020. SkyCity has satisfied its financial covenants for the 30 June 2021 testing period and will pay a dividend of 7 cents per share during September 2021. SkyCity’s BBB- credit rating from S&P Global Ratings was upgraded to “Stable” from “Negative” Outlook during April 2021. Following the issue of $175 million of six-year, unsecured, unsubordinated, fixed rate bonds in New Zealand in May 2021, SkyCity remains well positioned to fund future capital and operating commitments. The financial result for the year was complicated by property closures and other restrictions imposed by COVID-19, which limit comparability with the prior comparable period. SkyCity has also been aided by Government responses in the form of wage subsidies and other assistance measures over the period, a portion of which SkyCity has elected to repay reflecting improved financial performance. The Group delivered a solid financial performance, despite the challenging operating environment. Local gaming has performed well when open and operating without restrictions while our tourism-related businesses, including hotels, food and beverage and International Business, had a weaker result primarily due to ongoing international and domestic (Australia) border closures. 6 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G At a property level, SkyCity Auckland delivered resilient local gaming activity, but this was offset by non-gaming performance being significantly impacted by COVID-19. SkyCity Hamilton and SkyCity Queenstown delivered strong EBITDA performances led by local gaming revenue growth combined with disciplined cost management. SkyCity Adelaide’s performance prior to the expansion opening was impacted by COVID-19 disruption, but when open has significantly improved across all activities. SkyCity has been making operational adjustments to the business when necessary and we continue to adhere to all Government guidance to ensure our employees and customers are managed safely. SkyCity has continued to operate its offshore online casino venture, SkyCity Online Casino, with Gaming Innovation Group Inc, despite operational constraints. Performance has exceeded our expectations with significant growth in revenue and EBITDA and in excess of 45,000 active customers currently. SkyCity supports the regulation of online gaming in New Zealand with an emphasis on strong host responsibility and delivering community benefits in New Zealand and we continue to prepare for a regulated industry which ensures responsible gambling. Growth in online gambling continues to be a significant global industry theme with numerous international jurisdictions regulating online gambling (or intending to do so) to safely address the transition from physical to online entertainment. SkyCity has continued to create and support a positive employee culture over the period, focusing on initiatives to enhance workplace flexibility, wellbeing and diversity. To this end, SkyCity was pleased to receive the Diversity and Inclusion Leadership Award at the 2020 Deloitte Top 200 Awards for the second time in three years for Project Nikau, an initiative to employ and develop career pathways for youth with a focus on Māori and Pasifika. SkyCity has also made progress on refocusing the SkyCity Community Trusts in New Zealand on initiatives that will enhance the employability and advancement of youth and has upweighted strategies to ensure its supply chain is ethical and supports local businesses. In terms of outlook for FY22, given the current unpredictable operating environment and uncertain near-term outlook due to COVID-19, SkyCity is unable to provide detailed earnings guidance at this time, but this will remain under regular review. Our performance over the next year will be underpinned by the ongoing recovery of local gaming, optimising SkyCity Adelaide post expansion and robust cost control across all activities. We wish to take the opportunity to publicly thank the SkyCity Board and management team and, in particular, the broader SkyCity family for effectively meeting the challenges over the past year and for continuing to support the business as it recovers − your efforts are greatly appreciated. The SkyCity Board and management are aligned in responding to the challenges at hand, managing the risks faced by the business and addressing strategic opportunities as they arise. Finally, and most importantly, thank you to our external stakeholders – from our shareholders, financiers, suppliers, through to our customers. SkyCity doesn’t exist without you − a big thank you for your ongoing support. Rob Campbell Chair Michael Ahearne Chief Executive Officer Report from the Chair and Chief Executive Officer 7 The iconic Sky Tower celebrated its 24th birthday on 2 August 2021 with a light show illuminating the Auckland skyline. About this Annual Report L A R E N E G This annual report is a review of SkyCity Entertainment Group Limited (SkyCity or the company and, together with its subsidiaries, the Group) and its subsidiary companies’ performance for the financial year ended 30 June 2021. Where appropriate, information is also provided in relation to activities that have occurred after 30 June 2021, but prior to publication of this annual report. This annual report has been prepared in accordance with the NZX Listing Rules and Corporate Governance Code, the New Zealand Companies Act 1993 and the New Zealand Financial Markets Conduct Act 2013 and, although SkyCity is not required to comply with ASX Listing Rule 4.10 (which requires entities to include certain prescribed information in their annual reports) as it has a ‘Foreign Exempt Listing’ status on ASX Limited, substantially reflects the ASX Listing Rules and the Corporate Governance Principles and Recommendations (Fourth Edition) of the ASX Corporate Governance Council. This annual report has also been prepared with due consideration of the International Integrated Reporting Council’s International Integrated Reporting Framework. Integrated reporting applies principles and concepts that are focused on bringing greater cohesion and efficiency to the reporting process and adopting ‘integrated thinking’ as a way of breaking down internal silos and reducing duplication. 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 223 – 226 of this annual report. The financial statements have been prepared in accordance with the International Financial Reporting Standards. This annual report includes both reported and normalised financial information. Our objective in providing normalised financial information is to provide data that is useful to the investment community in understanding the underlying operations of the SkyCity Group – the intention being 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 the inherent volatility (or 'luck' factor) from International Business, which has variable turnover and actual win percentage period to period; eliminating structural differences in the business between periods; and eliminating known different treatments with other New Zealand and Australian publicly listed casino companies. Normalised numbers are a non-GAAP financial measure. A reconciliation of reported and normalised earnings and a description of the differences are provided on pages 219 – 222 of this annual report. An electronic copy of this annual report is available in the Investor Centre section of the company’s website at www.skycityentertainmentgroup.com. If you have any feedback and questions in relation to SkyCity’s sustainability framework and/or reporting, please contact SkyCity at sustainability@skycity.co.nz. Unless otherwise stated, all dollar amounts in this annual report are expressed in New Zealand dollars. Certain totals, subtotals and percentages stated in this annual report may not agree throughout due to rounding. This annual report is dated 25 August 2021 and is signed on behalf of the SkyCity Board by: Rob Campbell Chair of the SkyCity Board Jennifer Owen Chair of the Audit and Risk Committee 9 Year in Review • SkyCity completes a • SkyCity Auckland’s casino $50 million share purchase plan as part of a $230 million equity raising announced in June 2020 to strengthen SkyCity’s balance sheet in response to uncertainty around the impacts of COVID-19 and entertainment facilities closed from 12 – 30 August in response to the COVID-19 Alert Level in Auckland increasing to Alert Level 3 2020 JULY AUGUST • SkyCity welcomes in the New Year with a fireworks display from the top of the Sky Tower involving 500 kilograms of pyrotechnics, 3,800 effects, 1.6 tonnes of equipment and 14 kilometres of computer control cabling JANUARY 2021 • SkyCity Auckland’s casino and entertainment facilities closed from 14 – 17 February and 28 February – 6 March in response to the COVID-19 Alert Level in Auckland increasing to Alert Level 3 • SkyCity Auckland celebrates its 25 year anniversary • S&P Global Ratings revises the outlook for SkyCity's long term issuer credit rating and its debt issue rating from 'Negative' to 'Stable' and affirms SkyCity's long term issuer credit rating and its debt issue ratings as BBB- FEBRUARY APRIL • SkyCity redeems 125 million ‘Series 2015’ corporate bonds at $1.0280 per bond • A new VIP gaming offering, VIP BLACK and Ultra, opens at SkyCity Auckland as part of a $50 million upgrade of SkyCity Auckland’s gaming facilities • Flare bar and Food Republic (a new food court) open on the SkyCity Auckland main gaming floor • SkyCity confirmed as the official accommodation and hospitality partner of the 2020 Aotearoa Music Awards SEPTEMBER OCTOBER • The A$330 million SkyCity Adelaide expansion project officially opens (completed on-time and on-budget), including the new 120-room luxury hotel Eos by SkyCity • The All Blacks Experience and Weta Workshop Unleashed attractions open at SkyCity Auckland • Michael Ahearne appointed as Chief Executive Officer, replacing outgoing Chief Executive Officer Graeme Stephens • SkyCity Adelaide closed from 19 – 22 November in response to state-wide COVID-19 restrictions DECEMBER NOVEMBER • Julie Amey appointed as Chief Financial Officer, replacing outgoing Chief Financial Officer Rob Hamilton • SkyCity issues $175 million of six-year, unsecured, unsubordinated, fixed rate bonds maturing on 21 May 2027 • Free sanitary products made available in all female and gender-neutral employee bathrooms across SkyCity’s New Zealand properties • Silvana Schenone, Julian Cook and Chad Barton appointed as non-executive directors of SkyCity Entertainment Group • SkyCity informed by AUSTRAC of potential AML non-compliance by SkyCity Adelaide MAY JUNE L A R E N E G 11 Managing the Impacts of COVID-19 The global COVID-19 pandemic has continued to significantly impact SkyCity’s business and operations at each of its properties over the last financial year. Government mandated lockdowns in New Zealand and South Australia resulted in the closure of the SkyCity Auckland casino and entertainment facilities for a total of 29 days over the period and the SkyCity Adelaide property for a total of 3.5 days over the period. These collective measures have meant that SkyCity has been well positioned to deal with the events of the last financial year and quickly respond when our properties have been permitted to reopen. Pleasingly, our core domestic gaming business has proved resilient. However, the ongoing health and safety risks of COVID-19 have significantly altered the commercial landscape for SkyCity's land-based properties in both New Zealand and South Australia. The SkyCity Wharf property has remained closed in Queenstown since initially closing on 23 March 2020 (just prior to the initial COVID-19 lockdown in New Zealand) as the ongoing border restrictions continue to have a detrimental effect on the local Queenstown economy in particular, which is largely dependent on tourism. When permitted to reopen, our properties have initially operated with significant operational constraints due to restrictions on mass gatherings and physical distancing requirements. Significant operational effort has been required to rapidly close and reopen our properties with rigorous health and safety measures in place. Fortunately, due to the significant efforts of the SkyCity team and the strength of our business continuity framework, SkyCity has been able to quickly and successfully respond to the ongoing challenges that the COVID-19 pandemic has presented and manage the impacts to SkyCity’s business and operations. Fortunately, development work on the A$330 million SkyCity Adelaide expansion project and associated master planning projects, the New Zealand International Convention Centre and Horizon Hotel projects and the $50 million upgrade of the SkyCity Auckland gaming facilities was able to continue over the period. The completed SkyCity Adelaide expansion project, including Eos by SkyCity – a new 120-room luxury hotel, was officially opened in December 2020. SkyCity Online Casino, SkyCity’s offshore online casino platform based in Malta, continued to trade over the period without interruption and saw strong growth in its customer base during lockdown periods in New Zealand. SkyCity’s continuing focus is on managing the post COVID-19 recovery and operating sustainability as a smaller, domestically focused business pending the gradual recovery of international visitors as international borders reopen. Impact of COVID-19 – FY21 vs FY19 Performance International visitation to New Zealand down 95% 12 Auckland hotel occupancy down 38% Sky Tower visitation down 71% SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G We developed and implemented a COVID-19 Health Management Framework and Operating Plan for our business and operations. SkyCity’s New Zealand properties were amongst the first casino operations in the world to reopen (at COVID-19 Alert Level 2) during the global pandemic with robust health management strategies in place. We introduced a new SkyCity Flex framework for our employees to enable flexible working and restructured our New Zealand workforce (downsizing it by around 25%). We refocused SkyCity as a smaller, domestically focused business and adjusted our operating model to reflect the new COVID-19 operating environment, including minimising our operating costs, reducing operating hours across our precincts and significantly reducing capital expenditure. We executed a $230 million equity raising in mid-2020 as part of a comprehensive funding plan to strengthen SkyCity’s balance sheet in response to uncertainty around the impacts of COVID-19 and secured the support of existing lenders by way of covenant waivers/relief, extensions to $170 million of upcoming debt maturities and $160 million in additional debt facilities. In May 2021, we also issued $175 million of six-year, unsecured, unsubordinated, fixed rate bonds to institutional investors and New Zealand retail investors, the proceeds of which were used to reduce the SkyCity Group's drawings on its bank facilities. We were assisted by the New Zealand and Australian Governments in the form of Wage Subsidy and JobKeeper payments (which SkyCity has subsequently determined to partially refund). 13 Impacts of COVID-19 Alert Level Changes The New Zealand Government introduced a four-tiered COVID-19 Alert System in March 2020 to manage and minimise the risk of COVID-19 in New Zealand and to help people understand the current level of risk and corresponding legal restrictions. The following table shows the impacts of the various COVID-19 Alert Levels on SkyCity’s New Zealand properties. ALERT LEVEL EFFECTIVE DATE OF CHANGE IN ALERT LEVEL AUCKLAND HAMILTON QUEENSTOWN 28 February 2020 First COVID-19 case reported in New Zealand 19 March 2020 21 March 2020 21 March 2020 1.30pm, 23 March 2020 11.59pm, 25 March 2020 11.59pm, 27 April 2020 11.59pm, 13 May 2020 11.59pm, 8 June 2020 12.00pm, 12 August 2020 11.59pm, 30 August 2020 11.59pm, 21 September 2020 11.59pm, 23 September 2020 11.59pm, 7 October 2020 13 November 2020 11.59pm, 14 February 2021 11.59pm, 17 February 2021 11.59pm, 22 February 2021 6.00am, 28 February 2021 6.00am, 7 March 2021 12.00pm, 12 March 2021 14 New Zealand border closed to all but New Zealand citizens and permanent residents Alert Level system introduced 2 3 4 3 2 1 3 2.5 2.5 2 1 Auckland CBD closed 3 2 1 3 2 1 2 3 4 3 2 1 2 2 1 1 1 1 2 1 1 2 1 1 2 3 4 3 2 1 2 2 1 1 1 1 2 1 1 2 1 1 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Alert Levels LEVEL 4 LEVEL 3 Full closure (excluding the SkyCity Auckland hotels) Full closure (excluding the SkyCity Auckland hotels), but construction work permissible LEVEL 2/2.5 Open with significant operational constraints due to restrictions on mass gatherings and physical distancing requirements LEVEL 1 Open with no restrictions on mass gatherings or physical distancing requirements In Adelaide, COVID-19 restrictions have been implemented as required by the South Australian Government in response to the level of risk at the relevant times and businesses are required to have a COVID Management Plan, approved by SA Health (the South Australian Government), and/or a COVID-Safe Plan in place outlining how high-risk activities will be managed to reduce the risk of transmission of COVID-19 between patrons/attendees and staff. An approved COVID Management Plan is in place for the SkyCity Adelaide property. To comply with physical distancing requirements, each move from Alert 1 to Alert 2 (and vice versa) in Auckland has required the construction (and deconstruction) of 11 separate zones within the main casino floor and involved: • moving approximately 400 electronic gaming machines and 370 hoarding panels • 15 dedicated staff members over two days L A R E N E G 15 Creating Value Our Business (as at 30 June 2021) GAMING HOTELS 4,259staff 5 land-based casino licences 755hotel rooms HOSPITALITY 5properties across New Zealand and Australia 309table games 18restaurants 331 automated table games 15bars SKY TOWER 1online casino 3,456 electronic gaming machines 328metres tall FY21 REVENUE BY BUSINESS ACTIVITY Local Gaming International Gaming Online Gaming Hotels and Conventions Food and Beverage Other Reported Normalised % 75% 2% 2% 5% 10% 6% % 77% 3% 2% 4% 9% 5% L A R E N E G FY21 Outputs and Financial Results FY21 revenue and annual visitation GAMING HOTELS CONTRIBUTIONS $585.4 million including online (reported) $666.1 million* including online (normalised) 1.9million visits from loyalty card members to our land-based casinos** HOSPITALITY $77.9million 3.4 million restaurant/bar covers $29.5million 142,067 rooms coccupied SKY TOWER $7.3million 166,096 visits $112.1 million in taxes to Governments (including GST, gaming tax and income tax) $278.7 million in remuneration and benefits to staff $53.2million in dividends declared for shareholders (in relation to the FY21 period) $12.3million in community contributions, levies and sponsorships $293.8million to suppliers $177.5million of capital invested $38.7million in interest paid to lenders *Includes gaming GST. ** 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. 17 FY21 Outcomes and Impacts OUR CUSTOMERS OUR PEOPLE OUR COMMUNITIES Implemented ‘Phase 2’ of facial recognition technology at the SkyCity Auckland and SkyCity Hamilton casinos to enable SkyCity to better identify customers who remain within the casino for extended periods of time. 133 additional cameras installed within our casino properties for Phase 2 of facial recognition in FY21 1,373 customers identified within our casino properties in breach of their exclusion orders during FY21 FY20 – 1,757 1,077 exclusion orders issued across our casino properties during FY21 FY20 – 982 Provided increased support for employee mental health and wellbeing as employees cope with the challenges and uncertainty that has been a feature of the past year with the impact of COVID-19. 80% of our employees participated in our biennial Speak Up employee engagement survey with an engagement score of 85% favourable achieved ZERO fatalities or life altering injuries FREE sanitary products provided to all employees – with the initial pilot phase rolled out in New Zealand in May 2021 and in Adelaide in July 2021 Since establishing the first SkyCity Auckland Community Trust in 1996, SkyCity has awarded nearly 5,000 grants totalling over $61.7 million to various community groups and organisations in New Zealand, large and small, through the four SkyCity Community Trusts. $4.1 million paid to the SkyCity Community Trusts FY20 – $3.7 million $39.2 million paid in gaming taxes and problem gaming levies FY20 – $33.1 million Over $2.2 million raised for Leukaemia and Blood Cancer New Zealand in two Firefighter Sky Tower Stair Challenges 18 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Our sustainability vision recognises that, to be a sustainable business, we must be a responsible business actively protecting and promoting the people we serve and the places we share, whilst creating value for our shareholders. SkyCity’s sustainability initiatives are therefore focused on doing good for our customers, our people, our communities, our suppliers, our environment and our shareholders. L A R E N E G OUR SUPPLIERS OUR ENVIRONMENT OUR SHAREHOLDERS Refined our sourcing strategy by developing clear definitions for what constitutes “local” in the context of our supplier and product classifications. Over $426 million paid to suppliers of goods and services during FY21 (including capital expenditure) FY20 – over $530 million Around 600 key ongoing significant suppliers across the SkyCity Group FY20 – around 800 71 active suppliers had completed an EcoVadis assessment/audit process as at 30 June 2021 FY20 – 79 active suppliers Achieved carbon zero status for the SkyCity Group for FY21 by way of offset through Toitū Envirocare. 16,750 tonnes CO2e total carbon footprint FY20 – 15,137 tonnes CO2e 43.4% reduction in waste sent by SkyCity to landfill since 2015 148 tonnes of food waste from our SkyCity Auckland kitchens sent to be commercially composted to aid the New Zealand horticulture industry FY20 – 292 tonnes 7 cents dividend per share (fully imputed) declared in relation to FY21 FY20 – 10 cents per share Eligible shareholders in New Zealand and Australia were invited to participate in a $50 million share purchase plan – with 21,008,403 new ordinary shares issued in July 2020 at $2.38 per share, a 2.5% discount to the five-day volume weighted average price of SkyCity’s shares traded on the NZX during the last five days of the offer period Creating Value 19 Performance FY21 Highlights SkyCity’s result for the financial year ended 30 June 2021 was significantly impacted by the New Zealand International Convention Centre fire and COVID-19 pandemic (as was the case in the financial year ended 30 June 2020), with normalised EBITDA and NPAT for the Group for the period to 30 June 2021 negatively impacted. The key features of the FY21 result are: EBITDA Reported NPAT Reported $317.3 million FY20 – $348.3 million $156.1million FY20 – $235.4 million Normalised Normalised $252.0 million $90.3 million FY20 – $200.7 million FY20 – $66.3 million DIVIDEND FY21 dividend* (fully imputed) of 7 cents per share to be paid during September 2021 FY20 – 10 cents per share BONDS $175 million of six-year, unsecured, unsubordinated, fixed rate bonds issued in May 2021 * An interim dividend was not declared for FY21 due to restrictions in the covenant waivers/relief secured as part of a funding plan announced by the company in June 2020. 20 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021BONDS Our Performance History Group Revenue L A R E N E G n o i l l i m $ 1,200 1,000 800 600 400 200 0 1,029 878 1,101 1,119 816 822 1,125 780 952 822 FY17 FY18 FY19 FY20 FY21 Reported Normalised (Including gaming GST) Group EBITDA 320 307 338 310 343 298 n o i l l i m $ 350 300 250 200 150 100 50 0.0 348 201 317 252 Reported Normalised FY17 FY18 FY19 FY20 FY21 Earnings Per Share (EPS) and Dividend Per Share (DPS) 35.4 25.4 25.3 25.6 20.0 20.0 21.4 20.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 e r a h s r e p s t n e C 23.4 6.8 20.6 11.9 10.0 10.0 7.0 Reported EPS Normalised EPS Declared DPS FY17 FY18 FY19 FY20 FY21 Enterprise Value n o i l l i m $ 3,500 3,000 2,500 2,000 1,500 1,000 500 0.0 3,072 349 3,196 447 2,723 2,749 3,036 488 2,548 3,258 590 2,668 2,308 541 1,767 FY17 FY18 FY19 FY20 FY21 Equity Value Net Debt 21 An Award-Winning Business SkyCity’s vision is to be the leader in gaming, entertainment and hospitality in our communities. As a major employer with more than 4,200 staff across our properties in New Zealand and Adelaide, South Australia, we play a significant role in our communities and are immensely proud of the contribution we make to the communities we operate in, and our staff continue to do us proud, year-on-year. Winning Employment Opportunities • • Winner of the Diversity and Inclusion Leadership Award at the 2020 Deloitte Top 200 Awards and the Diversity and Inclusion Award at the 2021 NZ HR Awards for Project Nikau, SkyCity’s pathway to employment programme for vulnerable young people targeting Māori and Pasifika SkyCity Hamilton was awarded a Workbridge ‘Above and Beyond Employer Award’ in 2020 which recognises employers who are committed to creating a more inclusive workplace by supporting workers with disabilities Winning Experiences • The Grand by SkyCity named Oceania's Leading Business Hotel at the 27th World Travel Awards • • 2021 Tripadvisor Travellers' Choice Award for the SkyCity Hotel, The Grand by SkyCity, MASU, The Grill, Orbit, Depot and Huami 2020 Tripadvisor Travellers' Choice Award for the Sky Tower, The Sugar Club, MASU, The Grill, Orbit, Gusto and Depot • MASU, Depot and Huami named in Viva’s ‘Top 50’ restaurants in Auckland for 2021 • MASU and Huami named in Metro Magazine’s ‘Top 50’ bars in Auckland for 2021 • MASU, Depot, Huami and Fed Deli named in the 2021 Denizen Hospo Heroes • The Sugar Club named in Zufolo’s ‘Top 50’ Auckland restaurants for 2020-2021 • Fed Deli named ‘Best under $50’ in Remix Magazine’s 2021 Lifestyle Awards Tripadvisor gives a Travellers’ Choice Award to accommodation, attractions and restaurants that consistently earn great reviews from travellers and are ranked within the top 10% of properties on Tripadvisor 22 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Winning Teams • • • • • Winner of the Best Social Responsibility category at the 2020 CBD Celebration Awards, recognising SkyCity Hamilton’s commitment to community, customers, diversity and sustainability Awarded the Excellence in Treasury Award and named a finalist in the Market Leaders Best Investor Relations Award at the 2021 INFINZ Awards Awarded an Excellence Award in the In-House Lawyer of the Year category and the In-House Team of the Year category at the 2020 New Zealand Law Awards Awarded a Gold Award in the 2021 Australian Reporting Awards General Award, and a Silver Award in the 2021 Australian Reporting Awards Sustainability Reporting Awards, for the 2020 SkyCity Annual Report Finalist in the 2020 New Zealand Events Awards in the Best Not-for-Profit or Cause-related Event category (for the Firefighter Sky Tower Stair Challenge), Best Event Sponsorship category (for Vertical Pursuit) and Best Music or Entertainment Event category (for New Year's Eve) Winning Partnerships Over the last financial year, we were proud to sponsor and partner with great organisations in our communities: L A R E N E G 23 Diversity Snapshot At SkyCity, 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 SkyCity’s workforce as at 30 June 2021 and, where relevant, as a comparison against our workforce numbers as at 30 June 2020. 4,259 STAFF (full-time, part-time and casual) 62% of our workforce are 36 years old and under 34YEARS – average age of our workforce FY20 – 3,817 FY20 – 58% FY20 – 36 years 76YEARS – age of our oldest staff member 1% identify as having a disability 37% of leadership roles held by women FY20 – 79 years FY20 – 1% FY20 – 39% 49% of total workforce are women 51% of total workforce are men 0% of total workforce are gender diverse FY20 – 48% FY20 – 51% FY20 – 1% AGE BREAKDOWN 24.4% 37.8% 28.3% 9.5% 0% Generation Z (<23 years) Millennials (24–36 years) Generation X (37–53 years) Baby Boomers (54–75 years) Veterans (76–93 years) FY20 – 19.2% FY20 – 38.4% FY20 – 31.4% FY20 – 10.9% FY20 – 0.1% 24 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021PLEDGING SUPPORT TO THE 40:40 VISION Although women make up around half of SkyCity’s workforce, female representation remains challenging at higher levels of the organisation, particularly in senior leadership roles. In May 2021, SkyCity signed up to the 40:40 Vision, pledging a commitment to achieve gender balance across its executive leadership by 2023. 40:40 Vision is an investor and business-led initiative to achieve 40% women, 40% men and 20% any gender across the executive leadership teams of all ASX200 companies by 2030. See page 95 of this annual report for the gender composition of SkyCity’s directors, officers, senior executives and total workforce as at 30 June 2021. L A R E N E G OUR TOP 10 ETHNICITIES STAFF IDENTIFY WITH 15% 14% 14% 8% 7% Chinese Australian New Zealander Indian Filipino FY20 – 17% FY20 – 11% FY20 – 15% FY20 – 11% FY20 – 6% 7% 6% 4% 4% 4% Other Asian Māori Other South East Asian Samoan European FY20 – 7% FY20 – 8% FY20 – 1% FY20 – 3% FY20 – 6% Given as a percentage of those staff members who provided details about their ethnicity and those who elected “prefer not to say”. 6% identify as being a member of the LGBTTI+ community 61languages spoken and/or written by staff FY20 – 6% FY20 – 57 Mandarin Tagalog (Philippines) Hindi our top 3 non-English languages FY20 – Mandarin, Tagalog, Hindi 25 L A R E N E G Group Strategy Key Strategic Pillars (core focus) Operational excellence at our core Complete major projects and optimise portfolio Pursue the omnichannel opportunity Culture of protecting and enhancing social licence – responsible gaming, anti-money laundering, community, sustainability and people Capital allocation framework Key financial settings (dividends, credit rating, etc) Sustainable total shareholder return growth Financial Strategy A Refreshed Group Strategy In February 2021, following the appointment of Michael Ahearne as the new Chief Executive Officer in November 2020, SkyCity announced a refreshed Group strategy. Our refreshed strategy prioritises a focus on our core business, executing our major projects in Adelaide and Auckland and delivering on the omnichannel opportunity, whilst focusing on protecting and enhancing our social licence to operate to secure our future success across various financial, social and human capitals. SkyCity continues to monitor and evaluate adjacent opportunities in the casino industry as they arise. 27 This section provides a summary of SkyCity’s performance and strategic positioning to create value during the financial year ended 30 June 2021 and our priorities for the year ahead. FY21 Performance – Our Business Goals Operational Excellence at our Core During the past financial year, SkyCity continued to face significant challenges from the impact of the COVID-19 pandemic. Pleasingly, we have been able to leverage a more flexible and resilient operating model to effectively manage an uncertain domestic and international environment. The benefits of our investment in new gaming product, product management and changes to the gaming floor layout continue to be realised across the Group, particularly in Auckland with the opening of new premium gaming rooms and in Adelaide post the opening of the new expansion project from December 2020. SkyCity continues to leverage its complementary assets to drive gaming visitation and our properties have benefitted from increased domestic tourism in New Zealand and South Australia as local customers continue to have limited opportunities to travel internationally. SkyCity continues to focus on tactical marketing and loyalty activations as a cost-effective tool to drive higher quality visitation with marketing expenditure as a percentage of revenue significantly down across all properties. Changes to SkyCity’s operating model in response to COVID-19 and an ongoing focus on cost control are delivering efficiencies across the Group, with operating margins up compared to pre COVID-19 levels at all properties on a like-for-like basis. The resilient performance of our local gaming businesses, particularly in New Zealand, has been pleasing given its importance to Group earnings and hence value. Both SkyCity Hamilton and SkyCity Queenstown delivered strong EBITDA performances for the full year underpinned by strong local gaming activity (particularly electronic gaming machines) and good cost execution. When operating at Alert Level 1 in New Zealand, local gaming activity at SkyCity Auckland was consistently above pre COVID-19 levels, particularly during weekend and holiday peaks. Performance at SkyCity Adelaide post the opening of the expansion project has been consistent with strong local gaming activity, particularly from premium customers (with electronic gaming machine market share around 9%) and new non-gaming facilities proving popular with customers. Good cost execution has seen property margins ahead of expectations at around 20%. We continue to make good progress on our ICT investment and enhancing our digital capability, focusing on initiatives to improve customer experience, centred around loyalty, customer relationship management (CRM) and data analytics. Complete Major Projects and Optimise Portfolio We have progressed a number of key initiatives to optimise our existing portfolio over the last financial year. Adelaide Expansion Project The A$330 million SkyCity Adelaide expansion project was delivered on-time and on-budget in December 2020 and included significant master planning works at the existing property within the historic Railway Station building to restore the building and improve the layout and experience for customers. The new gaming spaces, Eos by SkyCity (the new 120-room luxury hotel) and a majority of the new food and beverage venues were opened in a staged manner from early December 2020, reflecting customer demand - with the focus initially on local and interstate customers given the ongoing international border closures. The expansion delivers significantly expanded gaming and entertainment facilities with a multi-level casino podium, contemporary gaming spaces (both main floor and premium) and a 30% increase in gaming product. 28 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G New regulatory reforms were implemented in time for the expansion opening, permitting the use of banknote acceptors, ticket-in ticket-out (TITO) functionality on the main gaming floor and a multi-protocol gaming system. Walker Corporation has now completed a 1,500-space car park as part of its redevelopment of the Festival Plaza adjacent to the SkyCity Adelaide precinct and, in June 2021, handed over 750 car park spaces for SkyCity’s exclusive use. The Festival Plaza car park will be a key asset to drive visitation to the precinct and to address the convenience offered by suburban venues in metropolitan Adelaide – in 2019, around A$500 million of electronic gaming machine revenue was generated by venues within a 50 kilometre radius of SkyCity Adelaide. Trading at SkyCity Adelaide has been consistent when open and SkyCity continues to expect a meaningful earnings uplift over the medium-term. New Zealand International Convention Centre and Horizon Hotel Project The fire at the NZICC site during October 2019 and the COVID-19 pandemic have made the NZICC and Horizon Hotel project more complex, resulting in further significant project delays. Reinstatement works post the fire are progressing (with over 300 Fletcher Construction personnel currently on site), but slower than expected. The latest draft construction programme from Fletcher Construction now indicates completion of the Horizon Hotel during 2024 and the NZICC in late 2024. Despite the impact of the fire and COVID-19 on the project timetable, we remain comfortable with our contractual position – Fletcher Construction is required to complete the project, insurance is responding to the damage caused by the fire and, in July 2021, we secured an extension to the long stop date to complete the NZICC (to 15 December 2027) with the New Zealand Government. As previously reported, we still expect the total cost to reinstate the NZICC and Horizon Hotel to be covered by insurance or Fletcher Construction and accordingly there is no material change to previous guidance for the total project costs (of around $750 million). As at 20 August 2021, around $120 million of project costs (excluding fire reinstatement costs) still remained to be spent. Whilst the further delays on the project are regrettable, the NZICC will support long term growth in tourism expenditure in New Zealand and be a significant demand driver for our Auckland precinct, in addition to having secured the extension of the Auckland casino venue licence out to 2048. Other Projects Significant long term option value remains embedded in our Auckland and Hamilton precincts. Future options for our two Queenstown properties continue to be evaluated, but with the current focus on optimising SkyCity Queenstown and leveraging strong domestic tourism whilst the Wharf Casino remains closed due to ongoing international border closures. A range of smaller growth projects were completed during the period, including a major refurbishment and expansion of our premium gaming facilities in Auckland. As an entertainment and hospitality provider, SkyCity is challenged to stay relevant in relation to new forms of entertainment. In addition to launching the SkyCity Online Casino, in late 2020 the former SkyCity Auckland Convention Centre became home to the All Blacks Experience and Weta Workshop Unleashed. These two world-class attractions provide unique, interactive customer experiences and will help to ensure the long term relevance to the Auckland precinct. SkyCity remains focused on effective capital discipline and, following implementation of our funding plan in mid-2020, the balance sheet is in a strong position to deliver on our medium term strategic plan. We have significant liquidity to fund commitments, and withstand slower recovery in New Zealand and Australia, one-off events and/or further COVID-19 disruptions. SkyCity has satisfied its financial covenants for the 30 June 2021 testing period and will pay a dividend of 7 cents per share during September 2021, following dividends being suspended whilst in reliance on covenant waivers/relief secured during 2020. SkyCity remains committed to its BBB- credit rating from S&P Global Ratings which was upgraded to “Stable” from “Negative” Outlook during April 2021. Group Strategy 29 Pursue the Omnichannel Opportunity SkyCity has continued to optimise the SkyCity Online Casino with Gaming Innovation Group Inc (GiG) despite operational constraints. Performance of the offshore online casino has exceeded our expectations with significant growth in revenue and EBITDA and in excess of 45,000 active customers. GiG continues to provide SkyCity with a full-suite online casino solution, which includes a technical platform, gaming content, managed services and front-end development. SkyCity remains supportive of future regulation of online gaming in New Zealand with an emphasis on strong host responsibility and delivering community benefits and we continue to prepare for a regulated industry to deliver on the omnichannel opportunity for the Group. Growth in online gambling continues to be a significant global industry theme with numerous international jurisdictions regulating online gambling (or intending to do so) to address the transition from physical to online entertainment, which has been exacerbated by the impact of COVID-19. Following a public consultation which commenced during 2019, the New Zealand Department of Internal Affairs continues to develop a policy framework for potential regulation. Regulation of the New Zealand online gaming market would enable SkyCity to pursue the omnichannel opportunity and address a fast-growing category which is highly complementary to our land-based activities whilst offering customers a varied gaming experience (both physical and digital). FY21 Performance – Our Character and Culture Goals Culture of Protecting and Enhancing our Social Licence At SkyCity, we need to continually focus on protecting and enhancing our social licence to operate. A feature of the past financial year has been the steady progress made with the many initiatives under SkyCity’s ESG/sustainability framework. Steady progress has also been made to enhance SkyCity’s host responsibility and AML control frameworks. Minimising harm to customers remains a key focus with appropriate effort, resource and capital allocated to support this initiative, such as increased resourcing and investment in bespoke ICT systems (including facial recognition technology and specialised customer screening tools). SkyCity is committed to ensuring that it provides safe and responsible experiences and environments and places significant importance on its host responsibility and AML obligations. We continue to deliver on our health and safety strategy, which is centred around preventing harm and building wellness, particularly in response to the risks posed by COVID-19 in our communities. SkyCity has continued to create and support a positive employee culture over the period, focusing on initiatives to enhance workplace flexibility, wellbeing and diversity. To this end, SkyCity was pleased to be awarded the Diversity and Inclusion Leadership Award at the 2020 Deloitte Top 200 Awards for the second time in three years for Project Nikau, an initiative to employ and develop career pathways for youth with a focus on Māori and Pasifika. SkyCity has also made progress on refocusing the SkyCity Community Trusts in New Zealand on initiatives that will enhance the employability, wellbeing and advancement of youth and has upweighted strategies to ensure its supply chain is ethical (including the implementation of a modern slavery statement, approved by the Board in October 2020) and supports local businesses. We continue to meaningfully reduce our gender pay gap across the New Zealand businesses and thefinal instalment of our ‘$20 by 2020’ wage initiative was implemented in New Zealand at the end of 2020. We remain proud of, and rely on, our culture of compliance, which encourages people to focus on doing the right thing by themselves, their teammates, the company and stakeholders. To ensure our future success across various financial, social and human capitals, it is important to continue conducting the business holistically within the terms of our ESG/sustainability framework. 30 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Bowl and Social at SkyCity Hamilton L A R E N E G 31 Our Business Goals FY22 Priorities Operational excellence at our core Complete major projects and optimise portfolio • • • • • • • • • • • • • Continue to manage the COVID-19 recovery, including maintaining a flexible operating model to respond to the operating environment Continue growth in the local gaming business, particularly electronic gaming machines Continue to pursue operating efficiencies and cost savings Improve loyalty and marketing execution with an increased focus on customer experience management (CXM) Optimise the SkyCity Adelaide expansion and integration of the new assets Ongoing review and appraisal of gaming floor optimisation, including product, layout and technology Ongoing review and assessment of potential licence renewal and/or relocation in Queenstown and Hamilton Complete asset review and develop holistic property strategy Deliver the NZICC and Horizon Hotel project in line with market guidance of around $750 million and consistent with the revised timetable Develop and refine the long term master plans for each property Explore leasing and/or sale opportunities for non-operational property assets, particularly in Auckland Deliver asset maintenance plan Support the new entertainment attractions (All Blacks Experience and Weta Workshop Unleashed) in Auckland Pursue the omnichannel opportunity • Progress the opportunity for a regulated online casino market in New Zealand • Continue to optimise our offshore venture (SkyCity Online Casino) with GiG • Resource the online business and progress with pre-regulation planning and preparedness • Explore new product verticals, such as Bingo and Poker 32 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Our Character and Culture Goals FY22 Priorities Responsible gaming leadership and anti-money laundering • Respond to the AUSTRAC enforcement investigation into SkyCity Adelaide • Deliver best practice anti-money laundering standards across all properties • Deliver best practice host responsibility standards across all properties • • Finalise long play detection trials and implement technology and enhance facial recognition systems Promote awareness of SkyCity’s anti-money laundering, know your customer and host responsibility obligations, and training and education amongst staff Community and sustainability • Focus on building staff resilience, morale and motivation • Ongoing improvements in health, safety and wellbeing strategies • • Deliver on gender and ethnicity diversity targets in leadership/talent pipeline Increase understanding of/participation in flexibility at work programme • Ongoing reduction of employee turnover • Ongoing improvements in gender and ethnic pay equality • Deliver employment opportunities for youth through our Project Nikau programme • Implement the 'SkyCity Sustainable Wage' in New Zealand • Refine our sustainable sourcing strategy for our supply chain • Maintain labour standards commensurate with an employer of choice • Increase awareness of modern slavery risks and mitigations for employees working in areas impacted by these risks • Measure, report and offset SkyCity's carbon footprint • Implement initiatives to reduce waste to landfill and water usage Group Strategy 33 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, South Australia – each featuring casino gaming facilities and premium restaurants and bars, which appeal to both domestic and international visitors alike. SkyCity also offers premium hotel accommodation in Auckland and Adelaide. In addition to its land-based casino operations, SkyCity Online Casino (based out of Malta) offers New Zealanders an exciting online gaming experience. SkyCity Online Casino Malta OUR HISTORY AT A GLANCE 2019 SkyCity sells SkyCity Darwin SkyCity Online Casino launches offshore SkyCity sells long term concession (licence to operate) over SkyCity Auckland car parks to Macquarie Principal Finance Group A significant fire breaks out at the New Zealand International Convention Centre (under construction) 2021 SkyCity Auckland celebrates its 25th anniversary 2016 The first sod is turned on the New Zealand International Convention Centre/Horizon Hotel site 2012 SkyCity acquires full ownership of SkyCity Queenstown 2021 2020 2015 2010 2018 Construction commences on the SkyCity Adelaide expansion project 2013 SkyCity acquires SkyCity Wharf in Queenstown 2020 COVID-19 pandemic temporarily closes all SkyCity properties in New Zealand and Adelaide, South Australia SkyCity Adelaide expansion project officially opens 34 and Australia5 ONLINE CASINO1 PROPERTIES across New Zealand HOTELS3 L A R E N E G SkyCity Auckland and Group Head Office SkyCity Adelaide SkyCity Hamilton SkyCity Queenstown and SkyCity Wharf* 2005 SkyCity acquires full ownership of SkyCity Hamilton 2002 SkyCity Hamilton opens 1999 SkyCity lists on the Australian stock exchange 1997 Sky Tower opens in Auckland * Wharf Casino has been closed since March 2020. 1994 Construction of the SkyCity Auckland complex commences 2005 2000 1995 1994 2004 SkyCity acquires SkyCity Darwin 2000 SkyCity Queenstown opens SkyCity acquires SkyCity Adelaide 1998 Harrah’s management contract ends and SkyCity becomes a New Zealand- managed operation 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 35 Auckland Property Property Manager SkyCity Auckland, New Zealand Opened 1996 Casino Venue Licence Runs until 2048* Callum Mallett, Chief Operating Officer New Zealand Facilities • Casino • Hotels • Sky Tower • Theatre • Food and beverage • Telecommunications and • Entertainment • Car parking broadcasting facilities Licensed Gaming Product • 1,877 electronic gaming machines** Workforce FY21 Revenue • 150 table games** • 240 automated table games*** ~2,500 staff $436.4 million^ (reported) $488.2 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. **This allowance may be alternatively utilised to enable automated table game terminals. ***This allowance may be alternatively utilised to enable table games. ^Excludes New Zealand International Convention Centre fire income and liquidated damages received. SkyCity Auckland is the flagship property of the SkyCity Entertainment Group, featuring a casino, two award-winning hotels – The Grand by SkyCity and SkyCity Hotel, bars and restaurants, a 700-seat theatre and the iconic Sky Tower. Located in the heart of Auckland’s CBD, the SkyCity Auckland precinct occupies ~295,000sqm of gross floor area across the majority of three city blocks (~3.5 hectares). Opened in 1997, the 328-metre tall Sky Tower is an icon of Auckland’s skyline and the tallest free-standing structure in the Southern Hemisphere. Visitors can enjoy breathtaking views right across Auckland from the observation decks or any of the 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. 36 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G During the last financial year, SkyCity completed a $50 million upgrade within the SkyCity Auckland casino with the opening of Flare bar, Food Republic (a three-restaurant food court) and a new VIP BLACK and Ultra gaming machine area that provides an unrivalled VIP offering and experience to SkyCity’s domestic VIP customers. Two new attractions also opened within the SkyCity Auckland precinct – the All Blacks Experience, a joint venture between New Zealand Rugby and Ngāi Tahu Tourism that provides visitors with a state-of-the-art, interactive experience showcasing the All Blacks through the use of innovation and technology, and Weta Workshop Unleashed, an immersive film effects workshop created by Academy Award-winning design and effects company Weta Workshop. SkyCity is currently investing around $750 million within the SkyCity Auckland precinct to develop the New Zealand International Convention Centre, an adjacent laneway, over 1,250 additional car parking spaces, and Horizon Hotel – a new 300-room, 5-star hotel. This development was originally expected to be completed in 2019 – however, due to delays by the contractor, the significant fire that broke out at the New Zealand International Convention in October 2019 and the subsequent impacts of the COVID-19 pandemic, Horizon Hotel is now expected to be completed during 2024 and the New Zealand International Convention Centre and adjacent laneway are expected to be completed in late 2024. When open, 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. FY21 PERFORMANCE SkyCity Auckland celebrated its 25-year anniversary in February 2021 and delivered a satisfactory performance for the full year period with earnings up 4.9% compared to the prior comparable period, despite operational constraints arising due to the impact of COVID-19. The property was closed for 29 days during the period due to COVID-19 lockdowns in August 2020 and February/March 2021, and operated for 48.5 days under Alert Levels 2 and/or 2.5 restrictions during the period with limits on gatherings and mandatory social distancing requirements which significantly reduced capacity, particularly in the gaming business. Local gaming performance remained resilient over the period and, when operating at Alert Level 1 (with no restrictions, except at the border), electronic gaming machine activity was consistent with or above pre COVID-19 levels, particularly during weekend and holiday peaks. The property continues to benefit from new product and an improved floor layout, in addition to the new premium gaming rooms which have been well received by customers. Our tourism-related businesses in Auckland continue to be impacted by ongoing international border closures, but performance improved progressively over the period and benefitted from ongoing strong domestic tourism across New Zealand as customers continue to have limited options for international travel. Our hotels remain profitable and continue to outperform the competitor set, but RevPAR and earnings were well down on pre COVID-19 levels. Our food and beverage and attraction businesses were at broadly break-even contribution. Pleasingly, operating margins at the property remained stable compared to the prior comparable period leveraging cost saving initiatives implemented during 2020. About SkyCity 37 Weta Workshop Unleashed All Blacks Experience 38 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Food Republic VIP BLACK Flare About SkyCity 39 Adelaide Property Property Manager SkyCity Adelaide, Australia Acquired 2000 Licensing Agreement Runs until 2085* David Christian, Chief Operating Officer Australia Facilities • Casino • Hotel • Food and beverage • Entertainment • Conventions Licensed Gaming Product • 1,080 electronic gaming machines (allowance for 1,500) Workforce FY21 Revenue • 118 table games (allowance for 200)** • 91 automated table games (allowance for 300) ~1,350 staff A$183.2 million (reported) A$196.9 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. **This allowance may be alternatively utilised to enable automated table game terminals. Located in and around the historic Railway Station building on the banks of the Torrens River, SkyCity Adelaide is South Australia’s only casino destination on the Festival Plaza forecourt adjacent to the Adelaide Festival Centre and Adelaide Convention Centre and near the Adelaide Oval. In December 2020, SkyCity completed a A$330 million expansion project at the Adelaide property, transforming SkyCity Adelaide into a world-class integrated entertainment hub. Designed by The Buchan Group in association with Hecker Guthrie Walter Brooke, and built by Hansen Yuncken, the new development includes a 120-room luxury hotel – Eos by SkyCity, wellness centre with a day spa, pool, sauna and gym, VIP gaming facilities, function and conference facility for up to 650 guests, two new bars (including a rooftop bar) and four additional signature restaurants. A spectacular three-storey glass atrium connects the Railway Station building seamlessly with the adjoining new development. As part of the transformation, the existing SkyCity Adelaide business, housed in the iconic Adelaide Railway Station, was also extensively revitalised and restored to improve the layout and experience for customers, and now includes a new live entertainment space (The District at SkyCity) and Australia’s first fully functional microbrewery within a casino (operated by Pirate Life). As part of the South Australian Government’s broader review of gambling regulation in South Australia, in October 2020, SkyCity Adelaide introduced ticket-in ticket-out (TITO) technology on the main gaming floor and banknote acceptors across the casino. 40 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G FY21 PERFORMANCE SkyCity Adelaide’s performance prior to the expansion opening in December 2020 was impacted by operational constraints due to COVID-19 and construction disruption, but performance since opening the new facilities significantly improved across all activities. Strict social distancing measures were required due to COVID-19 for a large part of the full year period and the property was closed for 3.5 days in late November 2020 in response to a local COVID-19 outbreak. Performance at SkyCity Adelaide when open has been consistent with strong local gaming activity, particularly from premium customers (with electronic gaming machine market share of around 9%) and new non-gaming facilities proving popular with customers. Property revenue during 2H21 was up around 50% compared to the comparable periods (including FY19 for April through to June 2021 due to the property being closed in the FY20 prior comparable period). Good cost execution has seen property margins ahead of expectations at around 20%. SkyCity Adelaide received a one-off benefit from the Australian Jobkeeper scheme (around A$11 million EBITDA impact) during the period which was treated as other income. A partial repayment will be made to reflect SkyCity’s improved financial performance in FY21. About SkyCity 41 A NEW ERA OF LUXURY IN ADELAIDE The A$330 million SkyCity Adelaide expansion development opened to the public in December 2020. Eos by SkyCity is Adelaide’s most luxurious hotel, with rooms ranging from 50sqm – 230sqm and opulently appointed to meet the growing demand for quality hotel rooms from both domestic and international visitors. 42 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G About SkyCity 43 Hamilton Property General Manager Opened Casino Venue Licence Facilities SkyCity Hamilton, New Zealand Michelle Baillie 2002 Increased ownership from 70% to 100% in 2005 Runs until 2027* • Casino • Food and beverage • Conventions • Car parking • Entertainment • Tenpin bowling Licensed Gaming Product • 339 electronic gaming machines** Workforce FY21 Revenue • 23 table games** ~300 staff $65.0 million (reported) $73.5 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. **This allowance may be alternatively utilised to enable automated table game terminals. Situated within Hamilton’s historic Chief Post Office, a building designed to maximise its superb riverside location on the banks of the Waikato River, SkyCity Hamilton features a casino, bars and restaurants, a conference centre and Hamilton’s only tenpin bowling alley – Bowl and Social. Over the last financial year, SkyCity has continued to invest in its core casino and hospitality businesses with a range of improvements across the SkyCity Hamilton property, including a new Baccarat Lounge and a refurbished function space, The Garden Room. A key focus has been on product and layout optimisation within the casino to maintain SkyCity Hamilton’s market leader position and manage high demand for electronic gaming machines (which remain capacity constrained at peak times). SkyCity Hamilton is a key member and supporter of the local community and is committed to being the Waikato region’s premier entertainment destination. We were therefore thrilled to have been named the winner of the Best Social Responsibility category at the Hamilton Central Business Association’s 2020 CBD Celebration Awards, recognising SkyCity Hamilton’s commitment to community, customers, diversity and sustainability, and the runner-up in the Community Contribution category at the 2020 Waikato Business Awards. FY21 PERFORMANCE SkyCity Hamilton delivered a strong revenue and earnings result for a full year period, underpinned by strong local gaming activity and cost control, despite 51 days operating under Alert Level 2 restrictions over the period. Consistent with prior periods, Hamilton delivered strong electronic gaming machine activity, despite capacity constraints, benefitting from improved product mix and new gaming areas, particularly for VIP customers. The property has shown resilience to the impacts of COVID-19 over the last financial year due to having a predominantly domestic (and gaming) focused business and supportive external factors, including population growth, an increasingly diverse local economy (less reliance on the primary sector) and improved connectivity to the Auckland region. The Waikato region has also benefitted from strong domestic tourism activity in New Zealand as international borders remain closed. A focus on cost control and operating efficiencies delivered significant margin improvement compared to the prior comparable period. 44 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Queenstown Property General Manager SkyCity Queenstown and SkyCity Wharf, New Zealand L A R E N E G Jono Browne Opened/Acquired Opened Queenstown in 2000 and increased ownership from 60% to 100% in 2012 Casino Venue Licence Runs until 2025* for Queenstown Acquired Wharf in 2013 Facilities Runs until 2024* for Wharf • Casino • Food and beverage • Entertainment • Conventions Licensed Gaming Product • 86 electronic gaming machines (Queenstown)** Workforce FY21 Revenue • 12 table games (Queenstown)** • 74 electronic gaming machines (Wharf)** • 6 table games (Wharf)** ~50 staff $10.9 million (reported) $12.3 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. **This allowance may be alternatively utilised to enable automated table game terminals. SkyCity’s two Queenstown casinos, SkyCity Queenstown and SkyCity Wharf, are located in central Queenstown surrounded by the majestic Southern Alps. Whilst the larger SkyCity Queenstown property reopened on 14 May 2020 after the first COVID-19 lockdown in New Zealand, the smaller SkyCity Wharf property has remained closed since initially closing on 23 March 2020 as ongoing border restrictions continue to have a detrimental effect on the local Queenstown economy in particular, which is largely dependent on tourism. FY21 PERFORMANCE SkyCity Queenstown delivered a strong earnings result for a full year period, underpinned by strong electronic gaming machine activity, positive domestic tourism into the region, particularly during peak holiday periods, and effective cost control. This strong performance was despite 51 days operating under Alert Level 2 restrictions over the period and ongoing international border closures. The Wharf Casino remained closed over the period and is expected to remain so for the foreseeable future. Good cost execution over the period delivered a significant increase in operating margins – an onerous lease benefit of $986,076 was realised during 1H21 when the decision was made to keep the Wharf Casino closed. Future options for our two Queenstown properties continue to be evaluated, with the current focus on optimising SkyCity Queenstown and leveraging strong domestic tourism trends. About SkyCity 45 International Business General Manager Facilities FY21 Revenue Stewart Neish Premium gaming facilities at SkyCity Auckland, SkyCity Adelaide and SkyCity Queenstown $17.8 million (reported) $22.1 million (normalised) SkyCity’s International Business division caters for high-net worth international players who visit casinos as part of their leisure activities. The flagship SkyCity Auckland property features several premium gaming spaces, including 1,800 sqm of luxury high-end gaming space above the SkyCity Hotel featuring four luxurious gaming salons for exclusive use and four private accommodation suites. 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. Additional VIP luxury gaming facilities were opened in December 2020 as part of the A$330 million SkyCity Adelaide expansion. In April 2021, SkyCity announced, following completion of a strategic review into its International Business division, that it would permanently cease dealing with junket operators and continue to operate its International Business division under a revised operating model where SkyCity will deal directly with International Business patrons after appropriate know your customer and customer due diligence requirements are satisfied. FY21 PERFORMANCE Our International Business division continues to be significantly impacted by COVID-19 and ongoing international border closures resulting in negligible international tourism activity over the period. Cost control and modest interstate tables activity in Adelaide post expansion reduced expected losses, with 2H21 performance slightly EBITDA positive. Our International Business team has continued to focus on proactive customer engagement to prepare the business for when borders reopen and customers can return to our properties. 46 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Online Managing Director Facilities FY21 Revenue Steve Salmon Online casino $13.1 million (reported) $13.1 million (normalised) Launched in August 2019, SkyCity Online Casino provides New Zealanders with an offshore online casino platform, featuring over 1,600 online games. complementary to our land-based activities whilst offering customers a varied gaming experience (both physical and digital). FY21 PERFORMANCE SkyCity continued to optimise its online casino venture with GiG over the period, despite operational constraints. SkyCity Online Casino’s performance over the year has exceeded expectations with significant growth in revenue and EBITDA and in excess of 45,000 active customers currently. With gross gaming revenue of $27.9 million (and net revenue attributable to SkyCity of $13.1 million) and reported EBITDA of $9.1 million for the period, SkyCity Online Casino is now making a meaningful contribution to the Group. EBITDA margin for the period was in line with expectations due to operating leverage and effective management of customer acquisition costs. SkyCity Online Casino is operated out of Malta by international iGaming company Gaming Innovation Group Inc (GiG) on behalf of SkyCity Malta Limited, an independently operated subsidiary of the SkyCity Entertainment Group, and led by a Managing Director based in Europe. GiG provides a full-suite online casino solution, including a technical platform, gaming content, managed services and front-end development. SkyCity remains supportive of future regulation of online gaming in New Zealand with an emphasis on strong host responsibility and delivering community benefits in New Zealand and we continue to prepare for a regulated industry to deliver on the omnichannel opportunity for the Group. Growth in online gambling continues to be a significant global industry theme with numerous international jurisdictions regulating online gambling (or intending to do so) to address the transition from physical to online entertainment, which has been exacerbated by the impact of COVID-19. Following a public consultation which commenced during 2019, the Department of Internal Affairs (the New Zealand gambling regulator) continues to develop a policy framework for potential regulation. Regulation of the New Zealand online gaming market would enable SkyCity to pursue the omnichannel opportunity and address a fast-growing category which is highly Our Values Our people-centric values represent what it means to succeed at SkyCity – they identify what is expected from us when we come to work and define the important role we all play in creating magic at SkyCity. We all have a unique set of skills with which we do our part for SkyCity. Own your role, embrace it with passion and energy, act with integrity, be genuine with your interactions and be accountable for your work. Be proud of your successes. Take responsibility for your mistakes and learn from them to keep improving. We're all a part of the SkyCity team. Be a passionate member of your team and work towards your shared goals. Help others along the way, treat your colleagues and customers fairly and with respect. Be honest and connect with others to build strong relationships. Be inclusive and embrace diversity. Be enthusiastic and take pride in working for SkyCity. Always strive to deliver exceptional customer experiences. Seek out ways to go the extra mile and leave a lasting impression. Help us to continually improve and create the best version of SkyCity. 48 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Refreshing Our Brand In June 2021, SkyCity Auckland launched a new brand campaign, Feel It, across outdoor, online video and print media channels. Designed to remind Aucklanders and visitors from the rest of New Zealand that SkyCity offers a range of memorable experiences, the campaign celebrates the feelings SkyCity creates for its visitors across its extensive range of offerings. The campaign features many of SkyCity’s most iconic attractions, as well as several less well known experiences. Feel It unifies the many and varied parts of SkyCity under the many and varied feelings they create, be that a delicious meal, a relaxing massage or yoga class, a walk around the outside of the Sky Tower, or a jump off it, a stay in one of our hotels, or a night at the roulette table – all of these activities create memorable feelings that are celebrated in this campaign. 49 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. SkyCity 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, assurance planning, and ongoing business improvements. Management reports to the SkyCity Board and the Board’s Audit and Risk Committee on the effectiveness of the company’s management of its material business risks at least annually. The SkyCity Board and management recognise that a positive culture is fundamental to an effective risk management framework and instils and promotes a culture which values the principles of honesty, fairness, cooperation, diversity and inclusion, and accountability – as reflected in the SkyCity Group’s Code of Conduct (available in the Governance section of the company’s website at www.skycityentertainmentgroup.com). The Group Risk team monitors the company’s culture for indications on how well the risk culture is performing and/or areas for improvement by way of: • • • • • leadership risk culture surveys conducted annually across the SkyCity Group; mini risk culture surveys conducted as part of each assurance and risk review; bi-annual reviews of various metrics to help provide a proxy view of risk culture; bi-annual presentation of a risk culture dashboard to the Audit and Risk Committee; and regular discussions with management on risk culture. Our Material Risks SkyCity operates a combined assurance model which is led by the Group Risk team and includes a combination of business self-assurance (production and maintenance of business unit risk registers), internal audit activity, and the selected outsourcing of a number of independent reviews. The overall effectiveness of the combined assurance model is monitored and assessed by, and all significant assurance findings are communicated to, the Audit and Risk Committee. SkyCity’s ability to create and preserve value for its shareholders requires the successful execution of its business strategy, while maintaining a sound culture and practices to maintain compliance with responsible gaming frameworks. 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 in the table overleaf. L A R E N E G 51 Material Exposure Risk Management Highly Regulated Industry SkyCity operates in the casino industry, which is highly regulated. The regulatory framework in which the business operates is not only complex but also subject to change from time to time, which may impact the environment in which SkyCity operates and increase the costs and complexities of operating its business. In addition, there is an increased regulatory focus by different regulators of the casino industry, as well as ongoing pressure to keep improving SkyCity’s standards. Potential examples of such changes include unfavourable changes to gaming and/or smoking legislation and regulations, licence conditions and gaming taxes and levies. Such changes may be introduced for a variety of reasons, including in response to the behaviour of others operating in the industry or increased government and regulatory conservatism in relation to the casino industry in New Zealand and Australia. For example, over the past financial year there has been an increased focus on additional consumer protection requirements and regulatory oversight of land-based casino operators in New Zealand and Australia (including in respect of anti-money laundering and host responsibility obligations) and on SkyCity’s ‘social licence’ to operate – see page 58 of this annual report for more details. Pandemic Preparedness and Business Continuity As with any large, distributed business, SkyCity must be prepared for a wide range of events that have the potential to cause significant disruption and/or temporary closure of one or more of its sites. The COVID-19 pandemic and related actions taken in response by the New Zealand, Australian and other Governments (including national lockdowns and border controls/travel restrictions) and the effects of the pandemic on global and domestic economies have had, and are likely to continue to have, a material adverse effect on SkyCity, its financial performance and outlook, liquidity and/or share price. The regulatory risk is mitigated by close monitoring of the evolving regulatory landscape, including maintaining frequent and transparent engagement with the governments and regulators in each jurisdiction in which SkyCity operates and with industry stakeholders to ensure that expectations are met and high standards of compliance are maintained. 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 also supports a robust compliance culture and framework to ensure compliance with licence conditions and applicable legislation and regulations. To mitigate this risk, SkyCity maintains a comprehensive business continuity framework, which supports preparedness and response to a wide range of critical events, including natural disasters, fire, emergency incidents and pandemics. The business continuity framework is subject to ongoing monitoring to ensure management readiness and capability (including undertaking simulated crisis response drills on a regular basis to test management readiness and capability) and improvement to enhance resilience. Due to the strength of the business continuity framework, the SkyCity Board and management have worked well in responding to and managing the ongoing impacts of the global COVID-19 pandemic to date. 52 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Material Exposure Risk Management Liquidity and Solvency Risk SkyCity’s ability to achieve its business objectives is dependent on it being able to effectively manage its liquidity and solvency throughout a period of no and/or significantly diminished revenue and earnings. SkyCity 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. There is significant complexity related to managing those matters, including as a consequence of a number of matters being outside of SkyCity's control. Such unexpected matters could result in SkyCity's financial position and future performance being adversely impacted. SkyCity’s ability to demonstrate fiscal resilience during these times is critical to maintaining long term investor and regulatory confidence. 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. SkyCity also maintains close and transparent relationships with its lenders (including banks and United States private placement noteholders). In June 2020, SkyCity announced a comprehensive funding plan to strengthen its balance sheet and secure additional liquidity in response to the uncertainty around the impacts of COVID-19. The funding plan was successfully implemented in June and July 2020 and ensured that SkyCity had an appropriate level of equity capital for the medium to long term and sufficient liquidity to fund its committed investment in its two major projects in Auckland and Adelaide. In May 2021, as part of its ongoing capital management strategy, SkyCity issued $175 million of six-year, unsecured, unsubordinated, fixed rate bonds – the proceeds of which were used to reduce the SkyCity Group's drawings on its bank facilities. Given the cautious economic outlook and that significant risk and uncertainty still exists around COVID-19, SkyCity continues to adopt a conservative approach to capital management. SkyCity has mitigated this risk by securing an extension of the Auckland casino licence to 30 June 2048. The SkyCity 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. SkyCity has an excellent history of compliance over 20 years and is committed to working cooperatively with its regulators on matters of concern. Risk Profile and Management 53 Material Exposure Risk Management Economic and Business Volatility The general economic conditions in the markets that SkyCity operates in, in addition to volatility in certain parts of the business, can significantly influence the financial performance of the company. To mitigate these risks, SkyCity continually monitors its external environment, including the geo-political and global economic landscape, 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. 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 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. 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. SkyCity’s operations are dependent on a number of key systems. There is a risk that the security of critical systems may be compromised and/or information is accessed without authorisation, deleted or corrupted, which could impact SkyCity’s ability to operate critical systems and result in costs to resolve or repair, potential downtime of operations, potential breaches of privacy and/or reputational impacts. Master planning also continues to be progressed for each of the SkyCity sites to explore opportunities for food and beverage, new gaming spaces and entertainment offerings. 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 (particularly around ensuring improved levels of ICT disaster recovery preparedness) and to keep abreast of the latest cybersecurity issues and security patches. Additionally, there is a strong, ongoing focus on technology project governance, risk management and assurance. A management-led Privacy and Cybersecurity Steering Committee has been established to govern the development of SkyCity’s privacy and cybersecurity strategy and programme, prioritise mitigation initiatives against the cybersecurity risk matrix, prioritise the operational initiatives to lift SkyCity’s security posture, and review and respond to major cyber and privacy incidents and oversee the proposed measures to prevent recurrence. Penetration testing is undertaken regularly to test system resilience and identify any security vulnerabilities that could be exploited. Simulated phishing emails are also regularly sent within the organisation to raise security awareness amongst employees. 54 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Material Exposure Risk Management L A R E N E G Development and Project Risk (including Return from Major Projects) SkyCity has a significant project still underway (the New Zealand International Convention Centre and Horizon Hotel development in Auckland). Potential project risks include project delays, supply chain constraints and project cost overruns. The COVID-19 pandemic has significant implications for return on capital invested in major projects. For example, the ongoing closure of Australian interstate and international borders over the short to medium future is expected to impact visitation and occupancy for the recently opened SkyCity Adelaide expansion project. Health and Safety Risk SkyCity has Health and Safety Risk Registers in place that identify risks in 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 and trips and cuts from manual task related injuries. SkyCity seeks to mitigate these risks by continually monitoring progress by contractors against contractual obligations, and maintaining robust project management. SkyCity has established strong governance and oversight frameworks for both current and future major growth projects. SkyCity also ensures robust governance over capital allocation and shareholder returns. 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 its 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 is committed to delivering robust health and safety standards to manage the ongoing risks associated with COVID-19 and has developed and implemented a COVID-19 Health Management Framework for its business operations. Both New Zealand and Australia have achieved relative success in ensuring a low level of infection and mortality compared to many other countries around the world. However, the ongoing health and safety risks of COVID-19 have significantly altered the commercial landscape for SkyCity's land-based properties in both jurisdictions. Given the nature of SkyCity’s operations, SkyCity does not have a material exposure to environmental risks in its usual day-to-day operations. SkyCity nonetheless recognises the criticality of climate related risks to its operations. Further details on these risks and SkyCity's approach to climate change risk management and reporting are outlined on page 122 of this annual report. Risk Profile and Management 55 Tackling Financial Crime SkyCity is committed to ensuring that it provides entertaining and profitable, yet safe and responsible, experiences and environments. The New Zealand Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and the Australian Anti Money Laundering and Counter Terrorism Financing Act 2006 (Cth) place obligations on certain organisations, including financial institutions and casinos, to detect and deter money laundering and terrorism financing and requires them to take appropriate measures to guard against money laundering and terrorism financing. Money laundering is how criminals disguise the illegal origins of their money. Financers of terrorism use similar techniques to money launderers to avoid detection by authorities and to protect the identity of those providing and receiving the funds. At SkyCity, we place great importance on our anti-money laundering (AML) and countering financing of terrorism (CFT) obligations throughout every part of the organisation. As a casino operator and reporting entity for the purposes of the AML/CFT legislation in New Zealand and Australia, SkyCity has the following measures in place across its land-based casinos: an assessment of the money laundering and financing of terrorism risks that SkyCity could face in the course of running its business; AML/CFT Programmes in New Zealand and Australia that include procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism; an AML Compliance Officer appointed in each of New Zealand and Australia to administer and maintain the AML/CFT Programmes; • suspicious activity reporting, threshold transaction reporting and auditing of systems and processes. For example, SkyCity reports any suspicious activity that may be related to illegal activity, and cash transactions over $10,000, to the New Zealand Police and the Australian Transaction Reports and Analysis Centre (AUSTRAC) (as applicable); and • regular internal and external audits and reviews of AML/CFT compliance. The Audit and Risk Committee is a dedicated Board committee that has responsibility for ensuring compliance with AML/CFT requirements in New Zealand and Australia and discusses, as a standing agenda item at each scheduled Audit and Risk Committee meeting, matters relating to the Group’s AML/CFT obligations. Within the business, a specialist AML team oversees the Group’s ongoing compliance with AML/CFT requirements and a management-led AML Senior Management Group provides enhanced governance to AML/CFT related matters across the Group and supports the effective implementation of SkyCity’s AML/CFT obligations across the Group. SkyCity senior managers and employees engaged in AML/CFT related duties also receive training on AML/CFT matters. SkyCity’s online gaming site, SkyCity Online Casino, is operated from Malta in partnership with international iGaming company Gaming Innovation Group Inc (GiG). GiG has in place an AML/CFT Policy that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism, customer due diligence processes (including customer identification and verification of identity), and suspicious activity reporting, auditing and annual reporting systems and processes. A Money Laundering Reporting Officer administers and maintains the AML/CFT Policy. customer due diligence processes, including customer identification and verification of identity; We continue to explore available technology solutions and seek expert advice where required to deliver best practice AML/CFT standards at SkyCity. • • • • 56 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Senior Management Governance & Oversight • An AML Senior Management Group meets regularly to discuss AML issues relevant to the Group • An Adelaide AML Senior Management Committee oversees AML issues specific to the Adelaide operations Learning & Development AML training programmes for staff Board Governance & Oversight SkyCity Board and Audit and Risk Committee oversight of anti-money laundering (AML) compliance SkyCity Anti-Money Laundering Control Framework AML Roles & Duties A specialist AML team (including designated AML Compliance Officers) within the business oversees the Group’s ongoing day-to-day compliance with AML requirements External Advisors Assisted by experienced external AML advisors AML Programmes AML Programmes established in New Zealand and Adelaide outlining SkyCity’s AML processes and procedures for customer screening, transaction monitoring, regulatory reporting, customer due diligence and enhanced due diligence (subject to regular internal and external review) AML Risk Assessment Each AML Programme contains a risk assessment identifying the money laundering and terrorism financing risks that SkyCity may reasonably expect to face in the course of its business Independent Assurance An independent review is carried out every 2–3 years in New Zealand and Adelaide to monitor compliance with the AML Programmes IT Systems • Internal IT systems (Bally and iTrak) used for AML record keeping • An external specialist AML system (Jade ThirdEye) used to facilitate customer screening and reporting Risk Profile and Management 57 Increased Focus on the Casino Industry Over the last financial year, there has been an increased focus on casino operators in Australia as a consequence of the New South Wales Independent Liquor and Gaming Authority’s inquiry into the operation of Crown Casino in Sydney, the Royal Commission established by the Western Australian Government to inquire into and report on the affairs of the Crown Casino Perth and related matters and the Royal Commission established by the Victorian Government to inquire into the suitability of Crown Melbourne Limited to hold a casino licence. These inquiries have led to increased focus and scrutiny on SkyCity and other casino operators and could lead to more stringent regulations for casino operators in Australia and New Zealand in relation to money laundering and other financial crimes. As a result, there are heightened expectations on SkyCity around its obligations under AML/CFT legislation and regulations, monitoring cash and third-party transactions, and undertaking enhanced due diligence checks on higher risk customers. Banks in both New Zealand and Australia are also signalling to casinos that they have a significantly reduced risk appetite for accepting cash deposits from higher risk customers. In April 2021, SkyCity announced, following completion of a strategic review of its International Business division, that it would permanently cease dealing with all junket operators, effective immediately, and continue to operate its International Business division under a revised operating model where SkyCity will deal directly with International Business patrons after appropriate know your customer and customer due diligence requirements are satisfied. AUSTRAC Enforcement Investigation In June 2021, SkyCity was informed by AUSTRAC’s Regulatory Operations Team that it had identified potential serious non-compliance by SkyCity Adelaide Pty Limited with the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) and it had, consequently, referred the matter to AUSTRAC’s Enforcement Team which had initiated a formal enforcement investigation into the compliance of SkyCity Adelaide. The potential non-compliance includes concerns relating to ongoing customer due diligence, adopting and maintaining an AML/CTF Programme and compliance with Part A of an AML/CTF Programme. These concerns were identified in the course of a compliance assessment which AUSTRAC commenced in September 2019 focusing on SkyCity Adelaide’s management of customers identified as high risk and politically exposed persons over the periods from 1 July 2015 – 30 June 2016 and 1 July 2018 – 30 June 2019. AUSTRAC has made clear that it has not made a decision regarding the appropriate regulatory response that it may apply to SkyCity Adelaide, including whether or not enforcement action will be taken. The SkyCity Board and management team take the concerns raised by AUSTRAC very seriously and took immediate steps to investigate and appropriately address AUSTRAC's concerns, including: • • establishing a Steering Committee (led by the Chair of the SkyCity Board) to oversee SkyCity Adelaide's engagement with AUSTRAC throughout the investigation process and its response to addressing the concerns raised by AUSTRAC; and engaging an independent expert to conduct a comprehensive review of SkyCity Adelaide’s AML/CTF Programme and broader AML function in light of the concerns raised by AUSTRAC to assist SkyCity where appropriate to enhance and improve the AML/CTF Programme and AML function. SkyCity has also devoted substantial further resources to reviewing these matters with a view to identifying and implementing appropriate improvements to SkyCity’s AML function. These reviews have not been limited in their scope to matters specifically raised by AUSTRAC - they have also been directed to identifying areas where SkyCity Adelaide’s AML/CTF Programme and AML function could be enhanced or uplifted more generally. SkyCity will continue to fully co-operate with AUSTRAC in relation to its inquiries and with its investigation into SkyCity Adelaide. 58 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Risk Profile and Management 59 Our Board ROB CAMPBELL Chair SUE SUCKLING Director Member of the Audit and Risk Committee Member of the People and Culture Committee Member of the Sustainability 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 Tourism Holdings Limited, New Zealand Rural Land Company Limited, Ara Ake Limited and WEL Networks Limited and a director of 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. He was made a Companion of the New Zealand Order of Merit (CNZM) in the New Year Honours 2020 list for his services to governance and business. Rob holds a Bachelor of Arts with First Class Honours in Economic History and Political Science and a Master of Philosophy in Economics. Chair of the Sustainability Committee Member of the Governance and Nominations Committee Appointed a director of SkyCity in May 2011 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, 5th Element Limited, Eat My Lunch Limited, Rubix Limited, Jade Software Corporation Limited and Taska Prosthetics 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. 60 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G JENNIFER OWEN Director MURRAY JORDAN Director Chair of the Audit and Risk Committee Member of the People and Culture Committee Member of the Governance and Nominations Committee Appointed a director of SkyCity in December 2016 Chair of the People and Culture Committee Member of the Audit and Risk Committee Member of the Sustainability Committee Member of the Governance and Nominations Committee Appointed a director of SkyCity in December 2016 Jennifer Owen has more than 30 years’ experience in the areas of accountancy, audit, finance, treasury and equities research. She has specific specialist knowledge of the New Zealand and Australian gaming and entertainment sectors through her previous 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 focusing on the tourism/leisure sector, and a wide network within the gaming industry and a strong understanding of industry and investor issues. Jennifer is currently a Principal of Owen Gaming Research, an independent research firm specialising in the gaming and wagering markets, and a director of Aspire Child Care (Mascot) Pty Limited. Jennifer holds a Bachelor of Business from the Queensland Institute of Technology and a Master of 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. Murray Jordan is currently a director of Metlifecare Limited, Chorus Limited, Metcash Limited, Stevenson Group Limited, Asia Pacific Village Group Limited, Southern Cross Benefits Limited, Southern Cross Hospitals Limited and the Southern Cross Medical Care Society. He is also a trustee of Southern Cross Health Trust, 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 Master’s degree in Property Administration from the University of Auckland. Murray will retire from the SkyCity Board effective from 30 September 2021. 61 SILVANA SCHENONE Director JULIAN COOK Director Member of the People and Culture Committee Member of the Sustainability Committee Member of the Governance and Nominations Committee Member of the Audit and Risk Committee Member of the People and Culture Committee Member of the Governance and Nominations Committee Appointed a director of SkyCity in June 2021 Appointed a director of SkyCity in June 2021 Silvana Schenone is a corporate partner at MinterEllisonRuddWatts in Auckland where she leads the firm’s Corporate division. She has extensive expertise in mergers and acquisitions, private equity investments, takeovers, scheme of arrangements, capital raisings and corporate governance matters. Silvana is recognised internationally for her commercial acumen and negotiation skills, and is a thought leader on corporate governance issues. Prior to joining MinterEllisonRuddWatts in 2007, Silvana was a corporate lawyer at Sullivan & Cromwell LLP in New York and prior to that at Cariola Diez Pérez-Cotapos in Chile. Committed to championing greater diversity, Silvana is a founding member of OnBeingBold. She is also a Board member of the New Zealand Takeovers Panel and holds a Master of Laws from Harvard University. Julian Cook was Chief Executive Officer of Summerset Group Holdings Limited from 2014 to March 2021 and, prior to becoming Chief Executive Officer, Summerset’s Chief Financial Officer where he oversaw the company’s transition to become a publicly listed company on the New Zealand and Australian stock exchanges. Prior to joining Summerset in 2010, Julian was an Associate Director at Macquarie Group where he gained significant experience in the energy, industrial services, tourism and aged care sectors over a 12-year career. Julian is currently a director of WEL Networks Limited and holds a Master of Finance from Victoria University and a Master of Science from the University of Waikato. 62 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G Our Board 63 CHAD BARTON Director Member of the Audit and Risk Committee Member of the People and Culture Committee Member of the Governance and Nominations Committee Appointed a director of SkyCity in June 2021 Chad Barton has extensive experience across finance, capital markets, mergers, acquisitions and property development. He is currently the Interim Chief Financial Officer of Nuix Limited, an ASX-listed global software company, and was the Chief Financial Officer of ASX-listed companies The Star Entertainment Group Limited from 2014 to 2019 and Salmat Limited from 2009 to 2014. Prior to this, he was Chief Financial Officer of the Australia and New Zealand business of Electronic Data Systems from 2006 to 2009. Chad, as founding Chairperson, established Women in Gaming & Hospitality Australasia to achieve gender equity and support the development and success of women in the gaming industry. Chad is currently a director of NeuRA (Neuroscience Research Australia) Foundation and a member of the Australian Institute of Company Directors and Chartered Accountants ANZ and holds a Bachelor of Business from the University of Technology in Sydney. Our Senior Leadership Team 64 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G FROM LEFT TO RIGHT: Nirupa George, Claire Walker, Callum Mallett, Matt Ballesty, Michael Ahearne, Julie Amey, Jo Wong, Simon Jamieson and Glen McLatchie Absent: David Christian Our Senior Leadership Team 65 MICHAEL AHEARNE Chief Executive Officer CALLUM MALLETT Chief Operating Officer New Zealand Michael was appointed Chief Executive Officer in November 2020. He joined SkyCity in December 2017 as Group Chief Operating Officer and was responsible for driving value across SkyCity’s properties in New Zealand and Australia. Michael also led SkyCity’s online gaming strategy, including overseeing the establishment of SkyCity Online Casino in 2019. Michael’s extensive global experience in the gaming industry spans over 20 years across multiple sectors, including land-based and online casinos, as well as retail and online sports betting. Prior to joining SkyCity, Michael held a number of senior commercial, operational and product leadership roles at Paddy Power Betfair, one of the world leaders in sports betting and gaming. Michael was formerly the Chief Operating Officer for Aristocrat in the Australia and New Zealand regions and has held several senior management positions at The Star Casino in Sydney. Michael is a qualified accountant and holds a Master of Business Administration from the University of Technology, Sydney. JULIE AMEY Chief Financial Officer Julie joined SkyCity as Chief Financial Officer in May 2021 and is responsible for the financial management of SkyCity, including reporting, treasury, risk management and corporate development. She also oversees SkyCity’s Information and Communications Technology function and helps to drive the strategic direction of the SkyCity Group. Julie joined SkyCity from Shell Australia where she held the role of Vice President Finance Integrated Gas. She has also held a number of senior finance roles with the Shell Group around the world since 2001, including as Vice President Finance Qatar Shell, Chief Financial Officer for Shell & Turcas A.S. Turkey and Business Finance Manager and Financial Controller for Upstream Middle East in the United Arab Emirates. Prior to joining Shell, she held finance roles at Fletcher Challenge Energy, BBC Worldwide Publishing and Deloitte & Touche. Julie is a chartered accountant and holds a Bachelor of Management Studies from the University of Waikato. Callum was appointed Chief Operating Officer New Zealand in February 2021 and has operating responsibility for SkyCity’s New Zealand businesses, including the day-to-day operations of SkyCity Auckland. Callum has significant gaming and hospitality experience having held a number of senior roles at SkyCity since joining in 2009, including as General Manager of SkyCity Darwin, General Manager SkyCity Auckland Hotels, Convention Centre and Sky Tower, and Executive General Manager of Hospitality for SkyCity Auckland. Prior to joining SkyCity, Callum held numerous senior leadership roles across the hospitality, retail and financial investment sectors. He holds a Bachelor of Commerce from Victoria University of Wellington, and has completed studies with Cornell University, The London Business School and the University of Nevada. DAVID CHRISTIAN Chief Operating Officer Australia David was appointed Chief Operating Officer Australia in February 2021 and is responsible for SkyCity’s Adelaide business and overseeing the Australian interstate gaming business. David has more than 30 years’ experience in hospitality, hotel and casino management, including working in several Australian States and Singapore. He has held a number of senior roles during his career with SkyCity since joining in 2005, including General Manager SkyCity Adelaide (where he was responsible for overseeing the construction and opening of the A$330 million Adelaide expansion development), General Manager SkyCity Darwin, General Manager SkyCity Auckland and General Manager SkyCity Hamilton. David holds a Master of Business Administration from Deakin University, Victoria, and a Diploma of Hospitality Management from Drysdale House, Tasmania. 66 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021L A R E N E G CLAIRE WALKER Chief People and Culture Officer SIMON JAMIESON General Manager NZICC Since joining SkyCity in September 2007, Simon has held a number of roles, including General Manager SkyCity Adelaide, 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 SkyCity’s development projects in New Zealand and health and safety. With more than 35 years’ experience in large-scale hospitality businesses, Simon brings a wealth of commercial, property, project and tourism experience to the SkyCity business. 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 over 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 is a member of the Institute of Directors in New Zealand, a board member of Auckland charity Big Brothers Big Sisters and an advisory board member of Cyber Research NZ. Glen holds a Master of Information Systems from Swinburne University, Australia, and a Bachelor of Business Studies from Massey University, New Zealand. Claire was appointed in August 2016, bringing more than 20 years’ experience in human resource management gained across a number of different sectors, and holds the position of Chief People and Culture Officer. She is responsible for leading the development and implementation of best practice people and culture strategy across the SkyCity Group and 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. Claire holds a governance role on the advisory board of the Sustainable Business Council in New Zealand. JO WONG General Counsel and Company Secretary Jo joined SkyCity as Senior Legal Counsel in January 2009 and was appointed as General Counsel and Company Secretary in September 2016. She is responsible for SkyCity’s legal, company secretarial, regulatory affairs and anti-money laundering functions and is designated as SkyCity’s Chief Privacy Officer. Jo has over 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 was a finalist in the In-House Lawyer of the Year category in the 2019 and 2020 New Zealand Law Awards and was recognised in New Zealand Lawyer’s 2019 and 2020 In-House Leaders lists as one of the leading lawyers across 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 from Victoria University of Wellington. Our Senior Leadership Team 67 MATT BALLESTY Chief Casino Officer NIRUPA GEORGE Chief Corporate Affairs Officer Matt was appointed Chief Casino Officer in February 2021 and is responsible for managing the casino operations at SkyCity’s largest property in Auckland and providing strategic direction on all gaming products across the SkyCity Group. Matt has over 25 years’ experience in the gaming and hospitality sector having held senior executive positions in Australia, New Zealand, Macau and Canada. Matt joined SkyCity originally in 2005, leading the Auckland gaming machines business and returned in 2013 as General Manager Group Gaming Strategy after gaining international gaming and hospitality experience in Macau. Nirupa joined SkyCity as Chief Corporate Affairs Officer in June 2021 and is responsible for leading SkyCity’s corporate affairs activities, including government, community and industry stakeholder relations and SkyCity’s public policy and advocacy. Before joining SkyCity, Nirupa was Chief of Staff to the Mayor of Auckland responsible for running his office and executing the Mayor’s political priorities. Prior to this, she ran Mayor Phil Goff’s successful mayoral campaign in 2016 and worked in Parliament as a Political and Media Advisor. Early in her career, Nirupa was a Senior Solicitor specialising in refugee and humanitarian law. Nirupa is currently a board member of Amnesty International Aotearoa New Zealand and holds a Bachelor of Laws and a Bachelor of Health Science from the University of Auckland. BOARD AND SENIOR LEADERSHIP TEAM STRUCTURE SkyCity is committed to maintaining the highest standards of corporate behaviour and responsibility and has adopted governance policies and procedures reflecting this. Our corporate governance framework ensures Board accountability to shareholders and provides for an appropriate delegation of responsibilities to the Chief Executive Officer and Senior Leadership Team. The SkyCity Board has responsibility for the affairs and activities of the company, which in practice is achieved through delegation to the Chief Executive Officer and Senior Leadership Team who are charged with the day-to-day leadership and management of the company. Further information on SkyCity’s corporate governance framework is set out on pages 128 – 137 of this annual report. SkyCity’s constitution and relevant charters and policies are available in the Governance section of the company’s website at www.skycityentertainmentgroup.com. SKYCITY BOARD STANDING BOARD COMMITTEES Governance and Nominations Committee Audit and Risk Committee People and Culture Committee Sustainability Committee CHIEF EXECUTIVE OFFICER Michael Ahearne SENIOR LEADERSHIP TEAM Chief Financial Officer Julie Amey Chief Operating Officer New Zealand Callum Mallett Chief Operating Officer Australia David Christian Chief People and Culture Officer Claire Walker General Counsel and Company Secretary Jo Wong General Manager NZICC Simon Jamieson Chief Information Officer Glen McLatchie Chief Casino Officer Matt Ballesty Chief Corporate Affairs Officer Nirupa George L A R E N E G AD-HOC BOARD SUB-COMMITTEES (established to oversee SkyCity’s major projects) SkyCity Hamilton is located on the banks of the Waikato River. 69 In July 2021, the Sky Tower was once again awarded the 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. 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. As a casino operator, we must continually focus on our social licence to operate. 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. Our sustainability initiatives are focused on doing good for our customers, our employees, our communities, our suppliers, our environment and our shareholders. 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 Sustainability Framework and Strategy 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. These were subsequently refined in 2018 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. In early 2020, we commenced a review of our materiality matrix to prioritise the issues most important to our business and stakeholders and to ensure the issues were appropriately weighted in our sustainability strategy. As part of this review, internal and external stakeholders were asked to prioritise issues material to SkyCity’s business from a long list of potentially material issues via a desktop review. SkyCity’s sustainability strategy was subsequently refreshed to reflect the priorities identified in that review and to incorporate financial performance alongside social and environmental performance. “ Part of being a responsible business is understanding the impacts arising from our operations ” Y T I L I B A N A T S U S I 71 Our Material Issues (as prioritised by our internal and external stakeholders) Responsible hosting Employee engagement Customer experience Return on investment Operational efficiency Theft & fraud Business continuity Diversity Organisational structure Health & safety Regulatory risk Business model Cyber- security Sustainable portfolio Climate change Community & Iwi engagement Community investment i w e V s s e n i s u B 4.60 4.50 4.40 4.30 4.20 4.10 Growth 4.00 Technology innovation 3.90 3.80 3.70 3.60 3.00 3.20 3.40 3.60 3.80 4.00 4.20 4.40 4.60 Stakeholder View 72 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 Y T I L I B A N A T S U S I Despite the challenges presented by the COVID-19 global pandemic, SkyCity’s current sustainability strategy and strategic pillar goals, plans and priorities (as validated by the feedback from our stakeholders as part of the materiality review in 2020) remain relevant today. We continue to focus on embedding our sustainability pillars into all levels of the organisation and in the way SkyCity operates. The material issues identified have influenced our focus on managing SkyCity’s risks and have informed our sustainability strategy and priorities, which underpin our reporting on our non-financial performance. Governance 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 Sustainability 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 Sustainability 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 Sustainability 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 priorities, objectives and activities for each of the sustainability pillars – ‘Our Customers’, ‘Our People’, ‘Our Communities’, ‘Our Suppliers’ and ‘Our Environment’, 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 2021. Commentary on the ‘Our Shareholders’ pillar is provided in an overarching way throughout the entirety of our financial and non-financial disclosures. The areas identified as priority issues are those considered highly material for SkyCity’s business and for our stakeholders. Our objectives and activities 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. FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) has confirmed that SkyCity Entertainment Group has been independently assessed according to the FTSE4Good criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index Series. Created by the global index provider FTSE Russell, the FTSE4Good Index Series is designed to measure the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE4Good indices are used by a wide variety of market participants to create and assess responsible investment funds and other products. Sustainability 73 74 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Our Sustainability Vision To be a sustainable business, we must be a responsible business actively protecting and promoting the people we serve and the places we share, whilst creating value for our shareholders. Y T I L I B A N A T S U S I PLE O E P nity u m m o C s i b l e n o B e r e s p O f f e r a g r e a t a n d s a f e p l a c e t o w ork P e o ple P R O F I T S h a r e h o l d e r s Suppliers l e a ders in our com m u niti e s t s r fi s r e m o st u A l w a ys put c v ir o n n E m ent Customers PLACE PEOPLE PLACE PROFIT Inspire our people Protect our environments Create sustainable value Create a great place to work where people are empowered to grow and achieve Respect and protect our physical environments for future generations Ensure business continuity through operational efficiency, sustainable investment and customer focus Great, safe place to work Sustainable success Reliable return on investment Sustainability 75 CUSTOMERS | Always put customers first | Be responsible leaders in our community Ensure safe and enjoyable experiences for our customers, employees and communities Our Priorities Our Plan Leading host responsibility • Maintain industry-leading harm minimisation practices • Host Responsibility Programme performance and problem gambling indicators • Industry benchmarking of SkyCity’s Host Responsibility Programmes • Leverage technology to enhance the identification of actual or potential problem gamblers and act on that information Material Issues • Responsible hosting • Customer experience • Cybersecurity and data privacy • Regulatory risk Customer experience and engagement • Employee Host Responsibility training completion rates • Accelerate customer experience and engagement through improved data, digital and loyalty capability Community awareness of harm minimisation practices • Increase in community knowledge and understanding of SkyCity’s harm minimisation practices • Customer data security and privacy practices SUPPLIERS | Be responsible leaders in our communities Source ethically and locally Our Priorities Our Plan Low carbon supply chain • Encourage suppliers to set science-based targets and strive to achieve zero carbon by 2050 Material Issues • Ethical sourcing Buy local and seasonal • Serve meals from a sustainable supply chain to employees and customers • Source animal products responsibly (eg. free range eggs) • Track and report on local vs international procurement spend • Support supplier diversity (indigenous economy) and working conditions Connect to the circular economy • Remove single-use plastics from our supply chain Progress initiatives to eliminate modern slavery • Develop and maintain a modern slavery statement for the purposes of the Modern Slavery Act 2019 (Cth) Ethical supply chain • Progressively work towards an end-to-end understanding of our supply chain, ensuring that all suppliers meet the standards of our Ethical Sourcing Code ENVIRONMENT | Be responsible leaders in our communities Offer a great and safe place to work Active commitment to reducing our environmental footprint Our Priorities Our Plan Climate change/ emissions reduction • Measure, report and offset SkyCity’s carbon emissions Material Issues • Climate change Reducing waste • Reduction of waste and diversion from landfill Employee activation • Employee-led Green Fund Reduction in water use • Implement initiatives to reduce water use 76 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I COMMUNITY | Be responsible leaders in our communities Serve a social purpose by investing in our local economies and communities Material Issues • Community investment • Community and Iwi engagement Our Priorities Our Plan Economic contribution • Measure and evaluate SkyCity’s economic contribution to the communities in which we operate, through local procurement spend Building communities by developing people • In collaboration with the SkyCity Community Trusts, make a positive impact on youth development, employment and career paths Investing in our communities through the SkyCity Community Trusts in New Zealand Developing deeper connections with Iwi and indigenous peoples • Community based partnerships that achieve sustainable social change • Report on community outcomes through narrative and case studies accompanied by quantitative results • Build SkyCity’s confidence and capability to engage authentically with Māori and indigenous peoples PEOPLE | Offer a great and safe place to work A great place to work where our people are empowered to grow and achieve Our Priorities Our Plan Employee engagement • Employee engagement pulse checks Meaningful career and development pathways • Internal promotions and development opportunities Diversity, inclusion and belonging Health, safety and wellbeing • Leverage the competitive advantage SkyCity’s diverse workforce provides • Ethnicity and gender reporting, including gender equality of pay, and representation • Health, safety and wellbeing scorecards Material Issues • Employee engagement • Meaningful career and development pathways • Diversity, inclusion and belonging • Health, safety and wellbeing SHAREHOLDERS | Improve our operating performance | Optimise our existing portfolio | Grow and diversify our business | Always put customers first Create value and maintain our social licence to operate Our Priorities Our Plan Material Issues Business continuity • Strengthen and maintain good relationships with all stakeholders, including shareholders and debt providers Improve operating performance • Grow gaming visitation and spend and develop complementary activities that drive gaming Optimise existing portfolio • Achieve operating efficiencies which protect and grow margins • Business continuity • Return on investment • Operational efficiency • Sustainable portfolio • Regulatory risk Grow and diversify our business • Develop digital businesses and leverage investment in technology • Capital allocation balances short term returns and long term sustainability • Ownership of assets balances strategic control and return on capital • Monitor and evaluate regional merger and acquisition opportunities in our industry Sustainability 77 Be responsible hosts Ensure safe and enjoyable experiences for our customers, employees and communities. Y T I L I B A N A T S U S I Our Customers At our core, SkyCity is a provider of casino entertainment. The promotion of responsible gaming and safe consumption of alcohol are therefore topics at the heart of our business. We take our responsibilities to minimise risk and harm from problem gambling very seriously. Priority Issues FY21 Performance Highlights • • • Leading host responsibility Customer experience and engagement Community awareness of harm minimisation practices • • Key Stakeholders • Customers (existing and potential) • Department of Internal Affairs • Gambling Commission • Office of Liquor and Gambling Commissioner • Consumer and Business Services • • Government Ministers, agencies and officials, including the Ministry of Health Treatment service providers and public health providers, including Asian Family Services, Problem Gambling Foundation, Salvation Army, Raukura Hauora o Tainui and Hāpai Te Hauora in New Zealand and Relationships Australia, Overseas Chinese Association, PEACE Multicultural Services and OARS SA in South Australia • Australasian Gaming Council • Police • Local councils Successfully trialled and implemented ‘Phase 2’ of facial recognition technology at the SkyCity Auckland and SkyCity Hamilton casinos to enable SkyCity to better identify customers who remain within the casino for extended periods of time Restructured our host responsibility function and resourcing in New Zealand to enhance the quality and effectiveness of our host responsibility practices, including an increase in host responsibility staffing numbers at the SkyCity Auckland, SkyCity Hamilton and SkyCity Queenstown casinos • Redesigned and launched a new staff host responsibility training programme in New Zealand, including online modules FY21 Key Challenges • • • Maintaining best practice host responsibility has been more challenging in a COVID-19 operating environment Alignment of host responsibility and harm minimisation practice and culture across the SkyCity casinos remains challenging due to differences from site to site With changing behaviours and multiple delivery channels, it is important for SkyCity to regularly review the most effective way to educate and inform customers about our host responsibility practices FY22 Focus Areas • • • Continue to embed a culture of customer care within SkyCity Maximise the use of existing host responsibility technologies across all SkyCity properties and investigate new technologies entering the market Review internal host responsibility processes to ensure SkyCity is providing the highest standard of customer care across all areas of the business 79 Board Governance & Oversight SkyCity Board and Sustainability Committee governance and oversight of performance of harm minimisation framework Senior Management Governance & Oversight A Host Responsibility Governance Group meets monthly to discuss host responsibility matters Host Responsibility Programmes Site-specific programmes outlining SkyCity’s host responsibility obligations (approved by the regulator) Reports to the Regulator Annual reporting to the regulator on the effectiveness of SkyCity’s Host Responsibility Programmes Communications & Brand An internal brand communications campaign to promote awareness of host responsibility Facial Recognition Technology Use of facial recognition and alert technology to detect excluded patrons Host Responsibility Roles & Duties Roles and activities focused on customer care and host responsibility monitoring Software and Algorithms to Monitor Gaming Machine Play Blended software for analysis and insight into player behaviour and spend/visitation traits, including real time monitoring of continuous use of gaming machines Independent Assurance • An independent audit is carried out every two years at each land-based casino to monitor compliance with its Host Responsibility Programme • Internal independent assurance programme (internal audit and continuous improvement) • Mystery shopping programme SkyCity Group Harm Minimisation Framework Learning & Development Framework A suite of host responsibility modules for staff, including online courses, in-person courses, and annual refresher courses iTrak Monitoring & Reporting A record management tool for host responsibility incidents and assessments, including reports for ongoing oversight 80 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I 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. This section largely focuses on SkyCity’s approach to host responsibility across its land-based casinos. Due to limitations in the New Zealand Gambling Act 2003, SkyCity launched its online gaming site, SkyCity Online Casino, offshore in August 2019 via its Maltese subsidiary, SkyCity Malta Limited, in partnership with international iGaming company Gaming Innovation Group Inc (GiG). GiG provides a full-suite online casino solution, which includes a technical platform, gaming content, managed services, front-end development and best-in-class host responsibility procedures. SkyCity Malta Limited has tailored the host responsibility tools available from its offshore platform to align wherever possible with SkyCity’s land-based practices and, in some cases, has developed new processes specifically applicable to the New Zealand market such as the casino age restriction and contact information for support services. Further details of SkyCity Online Casino’s host responsibility practices are available at www. skycityentertainmentgroup.com/our-commitment/ responsible-gambling for all customers and staff. Commitment to Host Responsibility At SkyCity, we place great importance on host responsibility throughout every part of the organisation. 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 Sustainability Committee is responsible for overseeing and monitoring the company’s host responsibility and responsible gambling programme and initiatives and monitoring licensing and regulatory compliance in respect of such matters. At each scheduled Sustainability Committee meeting, progress against host responsibility and responsible gambling measures and targets is reported and discussed as a standing agenda item. Within the business, a management-led Host Responsibility Governance Group meets monthly to discuss and review host responsibility matters that have arisen or may arise in the future across the SkyCity Group. The principle objectives of the Governance Group are to: • • • • provide collective guidance to SkyCity management on host responsibility matters of interest; enable senior management to discuss any relevant topics and to receive advice, support and ongoing learnings in a confidential environment; expose senior management personnel to host responsibility topics that may have bearing or impact on SkyCity’s regulatory environs, customers, their site/jurisdiction of operation or its employees; and develop initiatives that will collectively benefit SkyCity customers and shareholders by way of discussion, provision or endorsement of responsible gambling and/or harm prevention components. A robust Host Responsibility Programme is in place at each of our physical sites, and within SkyCity Online Casino, to prevent and minimise harm from problem gambling. All SkyCity Board members and staff receive training in problem gambling awareness. A dedicated team of experienced host responsibility specialists are employed at each of SkyCity’s land-based casinos and, through our partnership with GiG, an experienced harm minimisation team is in place for SkyCity Online Casino. Our Customers 81 An outline of SkyCity’s commitment to host responsibility and detailed individual site-related information, including the Host Responsibility Programme for each site and SkyCity Online Casino, is available at www.skycityentertainmentgroup.com/ our-commitment/responsible-gambling. Maintaining Leading and Best Practice Host Responsibility 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 and that we have the highest standard of host responsibility best practice. Over the past financial year, we implemented additional host responsibility technology measures to improve our ability to detect continuous presence and play within our casinos, including: • • the implementation of ‘Phase 2’ of facial recognition technology at the SkyCity Hamilton casino in November 2020, and at the SkyCity Auckland casino in March 2021, to enable SkyCity to better identify customers who remain within the casino for extended periods - see further details below; and the introduction of ‘Live View’ system technology at the SkyCity Queenstown casino to assist in identifying uncarded continuous play on electronic gaming machines. This technology was earlier introduced at the larger SkyCity Auckland and SkyCity Hamilton casinos during the financial year ended 30 June 2020. Over the past financial year, we also: • restructured our host responsibility function and resourcing in New Zealand to enhance the quality and effectiveness of our host responsibility practices, including an increase in host responsibility staffing numbers at the SkyCity Auckland, SkyCity Hamilton and SkyCity Queenstown casinos; and • redesigned and launched a new staff host responsibility training programme in New Zealand, including new online modules. 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. Independent Assurance An independent audit is carried out every two years at each land-based casino to monitor compliance with SkyCity’s relevant Host Responsibility Programme. SkyCity also has an internal independent assurance programme in place to monitor and improve compliance with SkyCity’s land-based harm minimisation framework and undertakes internal mystery shopping training exercises across its land-based casinos to test the robustness of its host responsibility practices. Each SkyCity Host Responsibility Programme is also subject to audit by the relevant gambling regulator. Embracing Technology Facial Recognition After trialling different available technology solutions from late 2018, SkyCity successfully implemented a full facial recognition technology solution across all its land-based casinos in November 2019 using cameras positioned at all entry points to the gambling areas. This technology assists SkyCity to recognise customers who have been excluded from re-entering its casinos by notifying SkyCity personnel when an individual matching an image from SkyCity’s database of excluded patrons re-enters a SkyCity gambling area. Prior to the introduction of facial recognition technology in November 2019, staff recall was the primary mechanism for identifying excluded persons returning to the casino in breach of their exclusion orders. The new technology is proving to be useful in assisting SkyCity to identify excluded customers from re-entering SkyCity’s casinos, with a marked increase in the number of excluded persons identified returning to a SkyCity casino in breach of their exclusion orders during the financial years ended 30 June 2020 and June 2021 in comparison to preceding periods. In the second half of 2020, we commenced a trial of ‘Phase 2’ of facial recognition technology at the SkyCity Hamilton casino in conjunction with 26 82 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I additional cameras installed within the casino to assist SkyCity in identifying customers who remain within the casino for extended periods. The trial proved successful and the initiative was rolled out at the SkyCity Hamilton casino in November 2020 and at the larger SkyCity Auckland casino (in conjunction with 107 additional cameras installed within the casino) in March 2021. This initiative is intended to be rolled out at the SkyCity Adelaide casino by the end of the financial year ending 30 June 2022. The introduction of facial recognition technology and other technological solutions significantly bolsters and assists SkyCity’s ongoing efforts to detect and prevent excluded customers from re-entering its casinos and to detect continuous presence and play – however, despite our best efforts and host responsibility measures and initiatives, there is no guarantee that facial recognition technology will be effective in each and every case and some individuals may nonetheless find ways to elude staff. Predicative Algorithm Since 2014, SkyCity has operated a predictive algorithm risk model created by Focal Research at SkyCity’s largest and busiest casino in 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 and again in June 2020 with the addition of Focal Research’s ‘ALeRT BETTOR Protection System’ software to enhance and improve SkyCity’s ability to identify potential at-risk gamblers. The ALeRT BETTOR Protection System software uses routinely stored customer data to create complex models for identifying and managing high-risk play (the algorithm) that otherwise may not be outwardly visible to operators or customers. In June 2020, the algorithm (including the ALeRT BETTOR Protection System software) was rolled out and implemented at the SkyCity Hamilton casino. Number of Excluded Persons Identified Returning to a SkyCity Property in Breach of an Exclusion Order 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 1,410 940 774 703 51 33 39 81 57 33 182 109 56 226 148 59 FY18 FY19 FY20 FY21 Auckland Hamilton Queenstown Adelaide The reduction in the number of exclusion-related breaches from FY20 to FY21 is likely due to changes in excluded patron behaviour following the introduction of facial recognition technology in 2020. 83 Consistency of Responsible Gaming Culture and Practice Customer Experience and Engagement 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 have different regulatory environments in which they operate in. 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 in the same way 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 promotes a range of tools in order to facilitate responsible gambling – however, exclusion is an equally important host responsibility offering for those who may be vulnerable to problem gambling. Our casinos offer extensive information to customers about exclusion options and referral details for 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. With the size of our customer base and premises, it can be a challenge to identify individuals immediately and, despite our best efforts and measures, some individuals may nonetheless find ways to elude staff and re-enter a SkyCity casino. 84 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I Community Knowledge Given that a material issue to our internal and external stakeholders 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 up-to-date 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 work together to minimise harm. During the past financial year, we continued to engage with community stakeholders, both at their request and through more formal bi-monthly Host Responsibility Community Liaison Group meetings in Auckland attended by treatment service providers, public health providers and Government agencies. In December 2020, SkyCity participated in Gambling Harm Awareness Week in New Zealand, partnering with treatment service providers and stakeholders to promote support and harm minimisation initiatives with customers within our SkyCity Auckland and SkyCity Hamilton casinos. We also invite treatment service providers to attend our internal host responsibility training programmes wherever possible. Exclusions at SkyCity Properties The following graph summarises the number of exclusions issued by each of the SkyCity properties over the 2017–2021 financial years: 900 800 700 600 500 400 300 200 100 0 806 696 766 620 678 131 138 59 29 66 25 61 44 169 189 112 61 217 124 58 FY17 FY18 FY19 FY20 FY21 Auckland Hamilton Queenstown Adelaide Our Customers 85 “ Host responsibility shows that SkyCity cares about its customers. Facial recognition is an additional tool that helps us to recognise customers who may need a helping hand. I get to meet new people, but also check in and ensure that they are enjoying their time with us in a really safe way. I get to know more about our customers, many of whom visit us from out of Auckland. If there are any issues, I can assist them straight away”. Pam Lanumata Table Games Pam has been with SkyCity for 22 years and is a key member of our Table Games team at SkyCity Auckland. She joined SkyCity as a young mother and, during her career with us, has progressed from being a table games dealer to a ‘dual rate’ dealer where she can step up into a Supervisor role during a shift depending on customer demand and business needs. Pam is a natural leader and has an innate passion for SkyCity’s customers. She has completed training on facial recognition technology, a key part of SkyCity’s host responsibility framework. Pam has made lifelong friends at SkyCity and, prior to the COVID-19 pandemic, often travelled to SkyCity Queenstown to serve as a dealer for our International Business customers. Working at SkyCity has enabled her to raise her family and has provided many opportunities to learn and develop new skills. 86 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y Y T T I I L L I I B B A A N N A A T T S S U U S S I I Our Customers 87 Inspire our people A great place to work where our people are empowered to grow and achieve. Y T I L I B A N A T S U S I Our People As a major employer with over 4,200 staff, we know that taking care of our people is the key to creating a great place to work. We are committed to providing our employees with sustainable career paths at SkyCity and want our staff to grow their careers with us. Priority Issues • • Employee engagement Meaningful career and development pathways • Diversity, inclusion and belonging • Health, safety and wellbeing Key Stakeholders • Employees (existing, former and potential) • Union representatives • Ministry of Business, Innovation and Employment • Ministry of Social Development • Ministry of Health • • Department of Education, Skills and Employment Accident Compensation Corporation • WorkSafe NZ • SafeWork SA • ReturnToWorkSA • Immigration New Zealand • Women’s Refuge • Women in Gaming and Hospitality Australasia • Gender Tick • Rainbow Tick • Southern Cross Healthcare FY21 Performance Highlights • • • • Awarded the Diversity and Inclusion Leadership Award at the 2020 Deloitte Top 200 Awards and the Diversity and Inclusion Award at the 2021 NZ HR Awards for Project Nikau, SkyCity’s pathway to employment programme for vulnerable young people targeting Māori and Pasifika Made a commitment to contribute to eliminating period poverty by providing free sanitary products to all employees – with the initial pilot phase rolled out in New Zealand in May 2021 Achieved Gender Tick and Rainbow Tick reaccreditation 80% of our employees participated in our Speak Up employee engagement survey – with an engagement score of 85% favourable achieved FY21 Key Challenges • • • • No face-to-face leadership development programmes were delivered due to the disruption from COVID-19. Instead, personalised talent development conversations and bespoke interventions were deployed where appropriate Project Nikau was put on hold during the first half of the year due to the limited opportunity to hire new staff following the COVID-19 related impacts on the New Zealand business SkyCity’s Australian and New Zealand operations have faced very constrained candidate markets due to the border closures, making it challenging to fill vacant roles Providing increased support for employee mental health and wellbeing as employees cope with the challenges and uncertainty that has been a feature of the past year with the impact of COVID-19 FY22 Focus Areas • • • Strengthening SkyCity’s commitment to Iwi relationships and improving our understanding of Te Ao Māori, Te Reo Māori and tikanga in New Zealand whilst contributing to employment opportunities for indigenous peoples in Australia Providing support to employees to strengthen mental health and wellbeing Using the insights gained from our Speak Up employee engagement survey to further enhance employee engagement 89 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 and Developing Meaningful Career Pathways 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. Speak Up Employee Engagement Survey Our Speak Up survey is a biennial Group-wide employee engagement survey – the purpose of which is to understand employee engagement and to prioritise Group-wide initiatives to maintain and improve employee engagement. Employee engagement is defined as the levels of enthusiasm and connection employees have with SkyCity – it is a measure of how motivated people are to put in discretionary effort for SkyCity and a sign of how committed they are to stay. Our most recent Speak Up survey was completed in April 2021, with 80% of employees responding to the survey (up seven points on 2019). Pleasingly, we achieved an engagement score of 85% favourable (up one point on 2019) – meaning that, on average, 85% of SkyCity employees answered that they either “agreed” or “strongly agreed” with nine engagement specific questions. To maintain and improve employee engagement, the survey results support continued investment in diversity, inclusion and belonging, our role in the communities we operate in, living our values, and health and safety. The results also suggest opportunity for improvement in ensuring people feel recognised for a good job, change management at a team level, scheduling and staffing, and providing feedback to improve performance. Tahuna Te Ahi – Ignite the Fire Recognising the special standing of Māori as tangata whenua and the indigenous people of Aotearoa, SkyCity launched Tahuna Te Ahi, a tailored programme developed by New Zealand company Indigenous Growth Limited, for our New Zealand-based employees in 2018. The programme 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. SkyCity was awarded the 2018 Deloitte Top 200 Diversity and Inclusion Leadership Award for the programme in November 2018 and was named as a Platinum winner in the ‘Best Learning & Development Project – Leadership Capability’ category at the 2019 LearnX Asia Pacific Awards for the programme in June 2019. 15 employees commenced the Tahuna Te Ahi programme during the last financial year. Health, Safety and Wellbeing 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. Our character and culture goal is to provide a great and safe place to work. 90 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021• • • 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. Health and Safety Over the last financial year, our primary objective has been to keep our people and guests safe from COVID-19 and support Government initiatives to minimise the risk of COVID-19 in our communities. We have implemented extensive processes to plan, manage and review our COVID-19 health management response. We also continued to implement initiatives to achieve the strategic goals outlined in our FY19–21 Group Health and Safety Strategy (adopted in 2018), which has allowed us to develop strong foundations for sustainable safety change. Our Group Health and Safety Strategy for FY19–21 centres around the mission “Prevent Harm and Build Wellness” and the following 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; Y T I L I B A N A T S U S I 91 FY21 Health and Safety Scorecard Indicator Target FY21 Performance Safety Success Indicator 1 Zero fatalities or life altering injuries Achieved – no fatalities or life altering injuries FY18-21 OUR PROGRESS OUR PROGRESS OUR PROGRESS OUR PROGRESS OUR PROGRESS OUR PROGRESS OUR PROGRESS Safety Success Indicator 2 FY18-21 Safety Success Indicator 3 FY18-21 OUR LAST THREE YEARS - STRATEGY IN REVIEW The final TRIFR and hazard reporting results were significantly impacted by the COVID-19 disruptions and closures, which significantly reduced the total number of hours worked. OUR PROGRESS OUR PROGRESS OUR PROGRESS OUR PROGRESS Increase hazard reports by 10% from FY18-21 the FY20 baseline FY18-21 FY18-21 FY18-21 FY18-21 OUR LAST THREE YEARS - STRATEGY IN REVIEW OUR LAST THREE YEARS - STRATEGY IN REVIEW OUR LAST THREE YEARS - STRATEGY IN REVIEW Reduce Total Recordable Incident Frequency Rate (TRIFR) by 10% from FY18-21 FY18-21 the FY20 baseline Not achieved – increased by 23.36% Not achieved – increased by 3.22% FY18-21 OUR LAST THREE YEARS - STRATEGY IN REVIEW OUR LAST THREE YEARS - STRATEGY IN REVIEW OUR LAST THREE YEARS - STRATEGY IN REVIEW OUR LAST THREE YEARS - STRATEGY IN REVIEW INDUSTRY LEADING SAFETY CULTURE INDUSTRY LEADING SAFETY CULTURE INDUSTRY LEADING INDUSTRY LEADING INDUSTRY LEADING SAFETY CULTURE SAFETY CULTURE SAFETY CULTURE Active and Visible Safety Leadership OUR LAST THREE YEARS - STRATEGY IN REVIEW OUR LAST THREE YEARS - STRATEGY IN REVIEW GOAL 1 GOAL 4 Industry Leading Health and Safety Culture Wellbeing HEALTH & INDUSTRY LEADING WELLBEING SAFETY CULTURE Key Achievements Key Achievements (FY19-21) (FY19-21) HEALTH & INDUSTRY LEADING WELLBEING SAFETY CULTURE Active and Visible Safety Leadership OUR LAST THREE YEARS - STRATEGY IN REVIEW GOAL 3 GOAL 2 Sustainable Systems Effective Risk and Processes Management SUSTAINABLE SYSTEMS SUSTAINABLE SYSTEMS EFFECTIVE EFFECTIVE AND PROCESSES AND PROCESSES RISK MANAGEMENT RISK MANAGEMENT Key Achievements Key Achievements (FY19-21) (FY19-21) EFFECTIVE SUSTAINABLE SYSTEMS SUSTAINABLE SYSTEMS EFFECTIVE EFFECTIVE EFFECTIVE RISK MANAGEMENT AND PROCESSES RISK MANAGEMENT AND PROCESSES RISK MANAGEMENT RISK MANAGEMENT Effective Risk Effective Risk Management Management EFFECTIVE RISK MANAGEMENT HEALTH & WELLBEING HEALTH & WELLBEING Occupational Health Prevention of Illness Occupational Health Prevention of Illness Compliant Health and Safety Management System Compliant Health and Safety Management System Key achievements All leaders have mandatory Health and Safety targets. Targets are cascaded based on responsibility Interactive dashboards are available to leaders providing a snapshot of Health and Safety performance Key achievements Key achievements Active and Visible Safety Leadership All leaders have mandatory Health and Safety targets. Targets are cascaded Key achievements Key achievements based on responsibility Key achievements Establishment of divisional risk registers, owned and managed by the business Key achievements owner Key achievements Key achievements Key achievements Effective Risk Active and Visible Key achievements Key achievements Key achievements Compliant Health Compliant Health Occupational Health Extensive surveys of our • Safety management • Effective Risk Effective Risk Active and Visible Active and Visible Establishment of • All leaders have • Effective Risk Active and Visible Effective Risk Management Safety Leadership and Safety and Safety Prevention of Illness Management Management Safety Leadership Safety Leadership Management Safety Leadership Management Management System Management System noise risks to prevent systems audited against mandatory health and divisional risk registers – Safety management systems audited Safety management systems audited Extensive surveys of our noise risks to Establishment of divisional risk registers, All leaders have mandatory Health and hearing loss related ACC and Australian against ACC & Australia standards owned and managed by safety targets. Targets against ACC & Australia standards prevent hearing loss related injuries owned and managed by the business Safety targets. Targets are cascaded Key achievements Key achievements Key achievements Key achievements Key achievements Key achievements achieving 3 successful audit results achieving 3 successful audit results based on responsibility owner injuries standards – achieving 3 Key achievements the business owner are cascaded based on Improvements to the management of successful audit results responsibility Establishment of divisional risk registers, All leaders have mandatory Health and Improvements to the • • Significant investment Extensive surveys of our noise risks to Safety management systems audited Establishment of divisional risk registers, Safety management systems audited Establishment of divisional risk registers, All leaders have mandatory Health and All leaders have mandatory Health and Design and deployment of new Health processes involving biological risks Design and deployment of new Health Significant investment in higher level risk Significant investment in higher level risk Interactive dashboards are available to Interactive dashboards are available to Establishment of divisional risk registers, All leaders have mandatory Health and Establishment of divisional risk registers, owned and managed by the business Safety targets. Targets are cascaded management of processes Design and deployment • prevent hearing loss related injuries against ACC & Australia standards owned and managed by the business against ACC & Australia standards owned and managed by the business Safety targets. Targets are cascaded Safety targets. Targets are cascaded and Safety Management software in higher level risk Interactive dashboards • (cooling towers, swimming pools, air and Safety Management software controls of our critical risks aimed at controls of our critical risks aimed at leaders providing a snapshot of Health leaders providing a snapshot of Health owned and managed by the business Safety targets. Targets are cascaded owned and managed by the business owner based on responsibility achieving 3 successful audit results owner achieving 3 successful audit results owner based on responsibility based on responsibility creating single point for Health and quality) creating single point for Health and removing dependencies on low level removing dependencies on low level and Safety performance and Safety performance of new Health and Safety involving biological owner based on responsibility owner are available to leaders controls of our critical Improvements to the management of safety activities and performance safety activities and performance controls controls Management software risks (cooling towers, providing a snapshot risks aimed at removing Significant investment in higher level risk Interactive dashboards are available to processes involving biological risks Design and deployment of new Health Significant investment in higher level risk Design and deployment of new Health Significant investment in higher level risk Interactive dashboards are available to Interactive dashboards are available to Visual ergonomic risk assessments to Health and Safety communications plans Health and Safety communications plans Significant investment in higher level risk Interactive dashboards are available to Significant investment in higher level risk controls of our critical risks aimed at leaders providing a snapshot of Health creating single point for swimming pools and air of health and safety dependencies on low (cooling towers, swimming pools, air and Safety Management software controls of our critical risks aimed at and Safety Management software controls of our critical risks aimed at leaders providing a snapshot of Health leaders providing a snapshot of Health Significant increases in reported reduce risk of fatigue in CCTV control Significant increases in reported Introduction of safety assurance Introduction of safety assurance developed and regularly reviewed developed and regularly reviewed controls of our critical risks aimed at leaders providing a snapshot of Health controls of our critical risks aimed at removing dependencies on low level and Safety performance health and safety activities quality) performance level controls quality) creating single point for Health and removing dependencies on low level creating single point for Health and removing dependencies on low level and Safety performance and Safety performance incidents through driving changes to rooms incidents through driving changes to programme over all Construction and programme over all Construction and removing dependencies on low level and Safety performance removing dependencies on low level controls safety activities and performance controls safety activities and performance controls reporting behaviours and performance reporting behaviours development activities development activities controls controls Visual ergonomic risk • Introduction of safety • Visual ergonomic risk assessments to Introduction of safety assurance assessments to reduce risk Significant increases assurance programme reduce risk of fatigue in CCTV control Significant increases in reported Introduction of safety assurance Significant increases in reported Introduction of safety assurance Introduction of safety assurance programme over all Construction and in reported incidents of fatigue in CCTV control over all construction and rooms incidents through driving changes to programme over all Construction and incidents through driving changes to programme over all Construction and programme over all Construction and development activities through driving changes rooms reporting behaviours development activities reporting behaviours development activities development activities development activities Reduce Low Consequence Reduce Low Consequence Learning and Learning and to reporting behaviours High Frequency High Frequency Improvement Improvement (LCHF) Events (LCHF) Events Health and safety Health and Safety communications plans communications plans developed and regularly reviewed developed and regularly reviewed Introduction of safety assurance programme over all Construction and development activities Health and Safety communications plans Health and Safety communications plans Health and Safety communications plans developed and regularly reviewed developed and regularly reviewed developed and regularly reviewed Wellness – Promotion Of Healthier Bodies Positive Safety Culture Positive Safety Culture • • Key achievements Occupational Health Prevention of Illness Extensive surveys of our noise risks to prevent hearing loss related injuries Key achievements Improvements to the management of Extensive surveys of our noise risks to processes involving biological risks prevent hearing loss related injuries (cooling towers, swimming pools, air quality) Improvements to the management of processes involving biological risks Visual ergonomic risk assessments to (cooling towers, swimming pools, air reduce risk of fatigue in CCTV control quality) rooms Visual ergonomic risk assessments to reduce risk of fatigue in CCTV control rooms Wellness – Promotion Of Healthier Bodies Health and Safety communications plans developed and regularly reviewed Key achievements Positive Safety Positive Safety Positive Safety Positive Safety Culture Culture Culture Culture Introduction of safety leadership walks for leaders and our Board of Directors Key achievements Positive Safety Culture Reduce Low Consequence Key achievements Key achievements Reduce Low Consequence Reduce Low Consequence Reduce Low Consequence High Frequency Learning and High Frequency High Frequency High Frequency (LCHF) Events Improvement (LCHF) Events Refined and simplified induction (LCHF) Events (LCHF) Events Deployment of a online chemical Introduction of safety leadership walks for training to focus on the basics management system for all operations leaders and our Board of Directors Key achievements Key achievements Reduce Low Consequence Learning and High Frequency Improvement (LCHF) Events Refined and simplified induction Deployment of a online chemical training to focus on the basics management system for all operations Key achievements Wellness – Promotion Of Healthier Bodies Key achievements Wellness – Promotion Of Healthier Bodies Wellness initiatives and promotions to continue improving our peoples health Wellness initiatives and promotions to continue improving our peoples health Key achievements Key achievements Key achievements Key achievements Introduction of safety leadership walks for leaders and our Board of Directors Established the annual Chairmans Health & Introduction of safety leadership walks for Introduction of safety leadership walks for Safety Award for Safety Excellence and Introduction of safety leadership walks for leaders and our Board of Directors leaders and our Board of Directors Innovation leaders and our Board of Directors Key achievements Key achievements Introduction of safety • Established the annual Chairmans Health & leadership walks for Introduction of safety leadership walks for Safety Award for Safety Excellence and leaders and our Board of Directors leaders and the Board Innovation • Established the annual Chairmans Health & Safety Award for Safety Excellence and Innovation Established the annual Chairmans Health & Established the annual Established the annual Chairmans Health & Established the annual Chairmans Health & Simplified safety learning activities to Simplified safety learning activities to Established the annual Chairmans Health & Safety Award for Safety Excellence and Chairman’s Health Safety Award for Safety Excellence and Safety Award for Safety Excellence and promote stronger culture promote stronger culture Safety Award for Safety Excellence and Innovation Innovation Innovation and Safety Award for Innovation Safety Excellence and Simplified safety learning activities to Innovation promote stronger culture Simplified safety learning activities to Simplified safety learning activities to Simplified safety learning activities to promote stronger culture promote stronger culture promote stronger culture Simplified safety learning activities to promote stronger culture • Key achievements Key achievements Key achievements Key achievements Key achievements Key achievements Key achievements Wellness initiatives and • Refined and simplified • Deployment of an online • Rolled out new training programmes Rolled out new training programmes Over 400 individual physical health A focus on flooring upgrades to slip and A focus on flooring upgrades to slip and Deployment of a online chemical promotions to continue induction training to management system for Refined and simplified induction Refined and simplified induction Wellness initiatives and promotions to Deployment of a online chemical Deployment of a online chemical with use of new technology. I.e. fire with use of new technology. I.e. fire checks as part of wellbeing programme trip hazard areas trip hazard areas Deployment of a online chemical Deployment of a online chemical management system for all operations training to focus on the basics training to focus on the basics continue improving our peoples health management system for all operations management system for all operations simulators, VR learning improving our peoples’ focus on the basics all operations simulators, VR learning management system for all operations management system for all operations Over 2000 vaccinations delivered for as Roll out of sit/stand workstations to our Roll out of sit/stand workstations to our health A focus on flooring upgrades to slip and Rolled out new training A focus on flooring Rolled out new training programmes Rolled out new training programmes Over 400 individual physical health A focus on flooring upgrades to slip and A focus on flooring upgrades to slip and Celebrated World Day for Safety at Work Celebrated World Day for Safety at Work part of Group wide vaccination administration divisions administration divisions A focus on flooring upgrades to slip and A focus on flooring upgrades to slip and trip hazard areas Over 400 individual • programmes with the upgrades to slip and trip with use of new technology. I.e. fire with use of new technology. I.e. fire checks as part of wellbeing programme trip hazard areas trip hazard areas with onsite information days with onsite information days programme trip hazard areas trip hazard areas simulators, VR learning simulators, VR learning physical health checks use of new technology hazard areas Introduction of fit for work programme Introduction of fit for work programme Roll out of sit/stand workstations to our Over 2000 vaccinations delivered for as Roll out of sit/stand workstations to our Roll out of sit/stand workstations to our in our Australian property in our Australian property as part of our wellbeing (including fire simulators Roll out of sit/stand workstations to our administration divisions Rollout of sit/stand Celebrated World Day for Safety at Work Celebrated World Day for Safety at Work part of Group wide vaccination administration divisions administration divisions administration divisions programme and VR learning) workstations to our with onsite information days with onsite information days programme Introduction of fit for work programme Over 2,000 vaccinations • Celebrated World Day administrative divisions Introduction of fit for work programme Introduction of fit for work programme Introduction of fit for work programme in our Australian property in our Australian property in our Australian property delivered as part of the for Safety at Work with in our Australian property Introduction of a fit for Group-wide vaccination onsite information days work programme at our programme Adelaide property • Introduction of fit for work programme in our Australian property Roll out of sit/stand workstations to our administration divisions • • • Key achievements Over 400 individual physical health Wellness initiatives and promotions to checks as part of wellbeing programme continue improving our peoples health Over 2000 vaccinations delivered for as Over 400 individual physical health part of Group wide vaccination checks as part of wellbeing programme programme Over 2000 vaccinations delivered for as part of Group wide vaccination programme 92 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I Employee Wellbeing Staff Support Programmes SkyCity has programmes in place to promote healthy behaviours and personal responsibility for mental and physical health. The programmes aim to promote healthy lifestyles, increase physical activity, reduce absenteeism and improve productivity. In response to the COVID-19 pandemic, SkyCity has established a specialist Health and Hygiene team to provide staff with up-to-date information on the global pandemic, support in dealing with anxiety and stress relating to the pandemic, and training and awareness on health management relating to the pandemic. Following periods of lockdown, we also focused on physical and mental health work conditioning. These programmes were aimed at minimising harm in an environment involving significant disruptions to our operations. Over the last financial year, we also: • • • launched a physical health check programme where employees can participate in a 30 minute health consultation with a nurse – with over 400 health checks being carried out to date; conducted a ‘People Pulse Survey’ on mental health and wellbeing with 700 employees responding to the survey. The results identified that our people leaders wanted more training on how to support employees, and employees wanted more information on personal coping skills for stress management. In response to this feedback, EAP Services delivered 15 workshops to 146 managers on how to support better mental health outcomes for employees; and supported the World Day for Safety and Health at Work by hosting a special event in partnership with the NZ Business Leaders Health & Safety Forum in Auckland. To coincide with this day, a pocket guide on 'How to have a conversation about Mental Health' was launched. This guide is based on the NZ Mental Health Foundation's work and is designed to empower our people to have safe conversations and be able to identify certain behaviours, approaching colleagues with empathy and a willingness to listen. As part of SkyCity’s wellness programme, all SkyCity employees are invited to receive a free flu vaccination. This service is offered annually to employees onsite at the beginning of the flu season to ensure all staff have easy access to the vaccinations. Around 600 vaccinations have been delivered in 2021. SkyCity has a range of services designed to assist employees who may need a helping hand. At our Auckland and Hamilton sites, SkyCity 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 and, where appropriate, assist employees in working with agencies outside of SkyCity who may be able to help. The Group-wide Employee Assistance Programme (delivered via EAP Services) 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. Employee Hardship Fund Like many other businesses, the COVID-19 pandemic has adversely impacted SkyCity’s business and operations and necessitated significant changes across the SkyCity business from March/April 2020, including significantly reducing capital expenditure, minimising operating costs and restructuring SkyCity’s workforce. In April 2020, the SkyCity Employee Hardship Fund was established to initially assist SkyCity’s departing employees in New Zealand who found themselves in financial difficulties that could not fully be addressed by their redundancy payments. The Fund was established using funds contributed by the Senior Leadership Team and other senior executives across the business via voluntary reductions in their salaries from 1 April – 30 June 2020 and from voluntarily contributions by other staff members. As at 30 June 2021, a total of $223,407 had been granted (with no obligation for repayment) to 123 affected employees. Our People 93 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. 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 2022 are to: • continue to ensure strong female candidates are identified in the recruitment process for all Board and senior executive roles; • • • • • • • maintain a gender balance across the population of employees who make up the top four levels of the organisation hierarchy; continue to review gender and ethnic pay equality and deliver an organisation-wide programme that removes any risk of bias or inequality; leverage and grow diverse talent pools to develop a more ethnically diverse leadership population; maintain certification with specialist organisations who represent minority groups within the SkyCity workforce (for example Rainbow Tick) to reiterate our commitment to, and support of, these minority groups’ interests; build the capability of all leaders in understanding and leveraging diversity of thought through ensuring appropriate learning and development solutions are delivered; continue to work with a panel of advisors and experts to provide informed perspectives and guidance to the Chief Executive Officer and Inclusion Council on diversity and inclusion matters; and continue to provide support and education to employees and managers to promote mental health awareness and wellbeing. Gender Composition Over the last financial year, SkyCity has challenged itself to increase female representation, particularly in senior leadership roles, and has maintained a gender balance across the top four levels of the organisation. This has been driven by initiatives which support the development of our female talent pipeline and by ensuring strong female candidates are identified in the recruitment process for all executive roles and any systemic bias in recruitment, development and promotion processes are removed. 94 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I The gender composition of SkyCity’s directors, officers, senior executives and total workforce as at 30 June 2021 and, comparatively as at 30 June 2020, is set out below: Female Male 2021 Number Directors Officers Senior Executives Total Workforce 3 4 5 2,082 2020 Number Female Directors Officers Senior Executives Total Workforce In the above tables: 2 3 4 1,832 % 43% 50% 45% 49% % 40% 43% 40% 48% Number 4 4 6 2,167 Number 3 4 6 1,980 Male % 57% 50% 55% 51% % 60% 57% 60% 52% Total 7 8 11 4,249 Total 5 7 10 3,812 • • • ‘officers’ are the Chief Executive Officer and those directly reporting to the Chief Executive Officer, other than the Executive Assistant; ‘senior executives’ are , with the exception of the Chief Executive Officer, those who hold a strategic position (as determined by the People and Culture Committee from time to time); and the ‘total workforce’ number does not include those who identify as gender diverse and those who elected not to identify as being female, male or gender diverse. 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 whose purpose is to bring to life SkyCity’s diversity and inclusion objectives. The Employee Resource Groups sit on a forum to discuss priorities and proposed actions with senior leadership on a quarterly basis. The five core Employee Resource Groups are Women in Leadership, NZ Asian Leaders, SkyCity Pride, Pasifika Leaders and Te Roopū Māori o SkyCity. The leaders of the Employee Resource Groups bring together their respective communities, confirming their priorities and work together to drive initiatives that impact the groups they represent. Te Roopū Māori o SkyCity continues to provide a significant amount of support and guidance to SkyCity management, and the broader workforce, with the aim of delivering better outcomes for Māori. In September 2020, the Roopū celebrated Te Wiki o Te Reo (Māori language week) with the delivery of an online te reo Māori lesson to SkyCity employees and, in association with Te Taura Whiri i te Reo Māori (the Māori Language Commission), projected a hei tiki on the Sky Tower – which received recognition as a stand-out moment from Te Taura Whiri i te Reo Māori. Te Roopū Māori o SkyCity has also supported cultural elements of SkyCity events over the last financial year, including the official pōwhiri for Michael Ahearne into the role of Chief Executive Officer and Matariki celebrations, launched a new Te Roopū Māori o SkyCity logo and established an employee whānau room. In the last financial year, a SkyCity Inclusion Council was also established in SkyCity Adelaide with three core Employee Resource Groups - Women in Leadership, LGBTTIQA+ and Disability/Ability. Eliminating Period Poverty With our ongoing focus on gender equality and inclusion, one key area SkyCity has identified where it can make a difference is the elimination of period poverty by removing one of the barriers to women participating in work with the same conveniences as their male colleagues. Period poverty is when someone cannot access the menstrual products (such as pads, tampons or cups) they need for their period. There are many barriers to access - the biggest is usually cost. Other barriers include convenience (being caught short) absence of basic equipment (such as sanitary bins), different cultural beliefs and community stigma. Our People 95 Since May 2021, we have provided free sanitary products in all female and gender-neutral employee bathrooms across the SkyCity properties in New Zealand to ensure that our female employees feel empowered and engaged to come to work and perform their very best without facing any barriers or being inconvenienced. SkyCity Adelaide has provided free sanitary products in all female employee bathrooms from July 2021. Supporting Our Rainbow Community SkyCity has maintained a Rainbow Tick for its Auckland and Hamilton properties for a sixth year, and our Queenstown site was awarded the Pride Pledge in 2020. 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. Through the Inclusion Council at SkyCity Auckland, the SkyCity Pride Employee Resource Group has driven a range of initiatives through Pride Week and celebrated Wear It Purple Day, an awareness day specifically for young people who identify as LGBTTIQA+ and IDAHOBIT Day, the International Day against Homophobia, Biphobia and Transphobia. Our Adelaide site maintained its Pride in Diversity programme membership, which reiterates our commitment to our lesbian, gay, bi-sexual, trans-sexual and intersex Australian-based staff. SkyCity Queenstown has 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. The Gender Tick was reconfirmed in June 2020 and July 2021. Gender Tick is a New Zealand-based accreditation for businesses to demonstrate their commitment to gender equality in the workplace. 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. Pay Equality SkyCity continues to monitor and report on remuneration outcomes by gender to ensure pay equality. In the last financial year, SkyCity also conducted gender pay equality analysis for like positions (being 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. We remain focused on increasing the representation of women in senior roles across the business through a gender balanced talent pipeline. These initiatives, in addition to a strategy deployed over the past three years to lift the hourly wage rate of SkyCity’s lowest paid staff, has contributed to a reduction to SkyCity’s gender pay gap in New Zealand. While our Australian gender pay gap remains well below the Australian National Gender Pay Gap, the changes to our Australian business over the financial year ended 30 June 2021 have seen a significant increase to our Australian gender pay gap. We are undertaking extensive root cause analysis on this change in Australia and remain committed to reducing both our Australian and New Zealand gender pay gaps. We are developing further enhancements to our pay transparency approach and believe this will have a positive impact on our gender pay gap across Australia and New Zealand. In the last financial year, SkyCity conducted an ethnic pay gap analysis for the first time. As part of this, and to ensure our data and insights accurately reflect our workforce and continue to inform our priorities, we commenced a programme to increase employee ethnicity data capture which resulted in an increase in data capture from 60% of SkyCity’s workforce to 83% (excluding individuals who elected ‘prefer not to say’). 96 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I The following table illustrates the SkyCity gender pay gap as at 30 June 2021 and as a comparison against the prior periods and the respective national gender pay gaps: 2021 2020 2019 New Zealand Australia SkyCity Gender Pay Gap (as at 30 June) National Gender Pay Gap SkyCity Gender Pay Gap (as at 30 June) 6.9% 7.5% 8.2% 9.5% (August 2020) 9.3% (August 2019) 9.2% (August 2018) 6.1% 1.5% 1.5% National Gender Pay Gap 13.4% (November 2020) 13.9% (November 2019) 14.1% (November 2018) Percentage difference between the median hourly rate for women compared to the median hourly rate for men as at 30 June 2020. Includes permanent and temporary employees. The following table illustrates the SkyCity ethnic pay gap as at 30 June 2021: SkyCity Ethnic Pay Gap as compared to Pakeha Men (as at 30 June 2021) National Ethnic Pay Gap* New Zealand Pakeha Women Māori Women Pacific Women Asian Women 7.9% 18.9% 16.6% 11.3% * The New Zealand Household Labour Force Survey pay gaps (to Pakeha men) as at 30 June 2020. 11.9% 22.0% 25.4% 19.0% European Asian Women 2.0% 13.3% SkyCity Ethnic Pay Gap as compared to European Men (as at 30 June 2021) Australia Women in Gaming and Hospitality Australasia SkyCity is a Platinum Partner of Women in Gaming and Hospitality Australasia. SkyCity’s partnership broadened the industry body’s reach into New Zealand and Adelaide. Women in Gaming and Hospitality Australasia is dedicated to achieving an inclusive industry and promoting gender equitable outcomes in the workplace. Its purpose is to achieve an inclusive industry and promote positive outcomes for women in the gaming, hospitality and gaming related industries by encouraging the development and success of women through education, mentorship and networking opportunities and providing tools and support for organisations wishing to develop or enhance their gender diversity and inclusion initiatives – all of which aligns strongly with SkyCity’s values. Our People 97 Performance Against FY21 Board Diversity and Inclusion Objectives SkyCity performed well against the measurable objectives set by the Board to promote diversity and inclusion for the financial year ended 30 June 2021: Objective Progress Made Continue to ensure strong female candidates are identified in the recruitment process for all Board and senior executive roles 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 Recruitment briefs for the Board recruitment process during the past financial year explicitly specified that SkyCity required female candidates to be identified wherever possible. In the past financial year, three new Board members have been appointed, one of whom is female. This brings our total gender composition for the Board to 43% female and 57% male. Recruitment briefs for the senior leadership recruitment process explicitly specified that SkyCity required female candidates to be identified wherever possible. In the past financial year, six senior executive appointments have been made, four of which were internal and two external. Whilst the four internal appointments are male, both external appointments are female – bringing SkyCity’s ‘Senior Executive’ gender composition to 45% female and 55% male and ‘Officer’ gender composition to 50% female and 50% male, where: • • ‘Senior Executives’ are, with the exception of the Chief Executive Officer, those who hold a strategic position (as determined by the People and Culture Committee from time to time); and ‘Officers’ are the Chief Executive Officer and those directly reporting to the Chief Executive Officer, other than the Executive Assistant. During the past financial year, gender balance has been maintained across the top four levels of the organisation hierarchy with 46% of employees being female and 54% being male, demonstrating a balanced gender representation in our talent pipeline. SkyCity continues to monitor and report on remuneration outcomes by gender to ensure pay equality. 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 focused on increasing the representation of women in senior roles across the business through a gender balanced talent pipeline. SkyCity’s New Zealand overall gender pay gap decreased to 6.9% (at 30 June 2021) from 7.5% (at 30 June 2020). SkyCity’s Australian overall gender pay gap increased to 6.1% (at 30 June 2021) from 1.5% (at 30 June 2020). 98 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I Objective Progress Made Leverage and grow diverse talent pools to develop a more ethnically diverse leadership population Maintain certification with specialist organisations who represent minority groups within the SkyCity workforce (for example Rainbow Tick) to reiterate our commitment to and support of these minority groups’ interests Build the capability of all leaders in understanding and leveraging diversity of thought through ensuring appropriate learning and development solutions are delivered Identify and appoint an advisory panel to provide informed perspectives and guidance to the Chief Executive Officer and Inclusion Council on diversity and inclusion matters Continue to provide support and education to employees and managers to promote mental health awareness and wellbeing Several initiatives were delivered during the past financial year with the objective of developing a more ethnically diverse leadership population: • • • SkyCity continued to offer its Māori leadership programme, Tahuna te Ahi, in partnership with Indigenous Growth Limited; SkyCity continued as a major partner of TupuToa, hosting four summer interns for three months within our corporate business, two of whom have been appointed to permanent positions; and SkyCity continued its sponsorship of the New Zealand Asian Leaders Forum. Rainbow Tick certification was achieved for our Auckland and Hamilton sites, and our Queenstown site was awarded the Pride Pledge. Our Adelaide property maintained its Pride in Diversity membership. SkyCity New Zealand sites achieved reaccreditation of Gender Tick, an accreditation for businesses to demonstrate their commitment to and progress for gender equality. The SkyCity Inclusion Council continued to encourage employee-led initiatives and provide strong executive visibility and sponsorship across the New Zealand properties. Five core groups continue to be represented, including Women in Leadership, NZ Asian Leaders, SkyCity Pride, Pasifika Village and Te Roopū Māori o SkyCity. SkyCity Adelaide has launched an Inclusion Council, which replicates the model already established in New Zealand, with three core groups represented, including Women in Leadership, LGBTTIQA+ and Disability/Ability. SkyCity Adelaide has launched online learning modules for people leaders to build understanding of diversity and inclusion and unconscious bias and provide suggested actions to remove bias. SkyCity conducted an employee ‘Pulse Check’ on mental health and wellbeing, which identified that people leaders were seeking more training on how to support employees and employees were seeking more information on personal coping skills for stress management. SkyCity partnered with EAP Services to deliver workshops to people leaders building greater awareness of mental health and wellbeing and launched a range of tools and executive team sponsorship as part of Mental Health Awareness week. SkyCity supported the World Day for Safety and Health at Work by hosting a special event in partnership with the NZ Business Leaders Health & Safety Forum in Auckland. To coincide with this day, a pocket guide on 'How to have a conversation about Mental Health' was launched. The guide is based on the NZ Mental Health Foundation's work and is designed to empower our people to identify certain behaviours, approaching colleagues with empathy and a willingness to listen. A number of specialists have been engaged to provide perspectives and guidance to both management and Employee Resource Groups from the Inclusion Council, with a focus on building cultural understanding and competence. 99 Our Staff Numbers Worked Full-Time Equivalent (FTE)* by Site Site Number of Employees % Adelaide Auckland Hamilton Queenstown FY21 733 1,726 185 43 FY20 FY21 FY20 616 27% 24% 1,696 64% 67% 179 38 7% 2% 7% 2% Total 2,687 2,529 100% 100% 27% Adelaide 64% Auckland * 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. 7% Hamilton 2% Queenstown Total Headcount for Group Site Number of Staff % Adelaide Auckland Hamilton Queenstown FY21 1,346 FY20 FY21 FY20 1,059 32% 28% 2,562 2,414 60% 63% 293 58 290 54 7% 1% 8% 1% Group Total 4,259 3,817 100% 100% 32% Adelaide 60% Auckland 7% Hamilton 1% Queenstown Employment Contract Type for Group Contract Type Number of Employees % Permanent Temporary FY21 3,784 475 FY20 FY21 FY20 3,462 89% 91% 355 11% 9% Group Total 4,259 3,817 100% 100% 89% Permanent 11% Temporary 100 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I Employment Contract Type by Gender Contract type Female Gender Diverse Male Group Total Permanent Temporary FY21 89% 11% FY20 FY21 FY20 FY21 FY20 91% 9% 100% 100% 88% 90% 0% 0% 12% 10% FY21 89% 11% FY20 91% 9% Employment Contract Type by Site Contract type Adelaide Auckland Hamilton Queenstown Permanent Temporary* FY21 68% 32% FY20 72% 28% FY21 98% 2% FY20 FY21 FY20 FY21 FY20 98% 100% 99% 100% 100% 2% 0% 1% 0% 0% *Adelaide defines casual employees as temporary whereas the New Zealand sites define employees with a fixed end date as temporary. Employment Type by Gender Contract type Female Gender Diverse Male Group Total Full-Time On Demand Part-Time FY21 49% 21% 30% FY20 54% 20% 26% FY21 50% 33% 17% FY20 FY21 FY20 25% 50% 25% 60% 62% 18% 22% 17% 21% FY21 54% 20% 26% FY20 58% 19% 23% Employees in Collective Agreements by Site Contract type Adelaide Auckland Hamilton Queenstown Group Total* Yes No FY21 77% 23% FY20 74% 26% FY21 20% 80% FY20 26% 74% FY21 3% 97% FY20 FY21 FY20 FY21 FY20 4% 0% 0% 96% 100% 100% 37% 63% 37% 63% *Group total percentages are weighted proportionately based on site Worked FTE. Employee Absenteeism* Contract type Adelaide Auckland Hamilton Queenstown Group Total** FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 FY20 Absenteeism 4.06% 3.08% 3.76% 3.95% 3.62% 3.09% 2.32% 1.83% 3.78% 3.70% *As a percentage of scheduled days. **Group total percentages are weighted proportionately based on site Worked FTE. Our People 101 Grow our communities Serve a social purpose by investing in our local economies and communities. Y T I L I B A N A T S U S I 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 FY21 Performance Highlights • • • • Economic contribution Building communities by developing people Investing in our communities Developing deeper connections with Iwi and indigenous peoples Key Stakeholders • Community groups • Sponsorship partners, including Leukaemia & Blood Cancer New Zealand and Variety – The Children’s Charity • Community partnerships • Recipients of SkyCity Community Trust grants • Philanthropy New Zealand • Local Iwi • Ministry of Social Development • Te Puni Kōkiri • TupuToa • First Foundation • • • • In our Speak Up employee engagement survey, employees rated “being proud of the role SkyCity plays in the community” as a key driver of engagement The Firefighter Sky Tower Stair Challenge raised over $2.2 million for Leukaemia and Blood Cancer New Zealand across the two events held in FY21 (including the postponed 2020 event) SkyCity Hamilton continued its support of women’s sport by sponsoring women’s cricket team, the Northern Spirit, and netball team, Waikato Bay of Plenty Magic SkyCity contributed a total of $4.1 million to the four SkyCity Community Trusts for distribution to community groups and organisations in the Auckland, Waikato and Queenstown Lakes regions • Seven Project Nikau cadets were employed at SkyCity Auckland FY21 Key Challenges • • Onboarding new Trustees for the SkyCity Community Trusts, developing a new funding strategy and communicating this to our communities Due to COVID-19 related business disruption, there were limited opportunities to employ Project Nikau rangatahi (young people) in the first half of the year FY22 Focus Areas • • Project Nikau has a target of employing, developing and retaining 100 rangatahi over the next three years, moving from a pilot programme to an integral part of SkyCity's recruitment and retention strategy, with continued focus on Māori and Pasifika from the "Not in Employment, Education or Training" cohort SkyCity will continue to deepen its relationships with indigenous peoples in New Zealand and Australia with a formal Te ao Māori advisory agreement in place with Ngāti Whātua Ōrakei in New Zealand and support to Career Trackers, an organisation which supports pathways for indigenous university graduates into corporate internships in Adelaide 103 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 with 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 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 impacts 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 2021, SkyCity spent approximately $153 million on operational goods and services, the bulk of which was spent with local suppliers – with over $33 million on food and beverage items across New Zealand and Australia. Partnerships Leukaemia & Blood Cancer New Zealand Each year, firefighters from communities across New Zealand join forces to raise money 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 Firefighter Sky Tower Stair Challenge, 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 $2.2 million during the last financial year, and in excess of $10 million over the 17 year partnership, through the Step Up and Firefighter Sky Tower Stair Challenges. Variety – The Children’s Charity SkyCity has continued its 21-year partnership with Variety – The Children’s Charity through delivering 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. Over the last financial year, SkyCity has worked with Variety – The Children’s Charity to raise more than $157,000, and in excess of $4.7 million over the 21 year partnership. The Cookie Project The Cookie Project is an Auckland based social enterprise that creates ethical employment for people living with disabilities, ensuring their workers are paid at least the adult minimum wage. Over the first year of our partnership, SkyCity purchased more than 15,000 cookies for our customers and internal teams, generating almost 200 hours of employment for disabled workers. During the current year, SkyCity has committed to more than doubling its order to 40,000 cookies, which will generate close to 500 hours of paid employment for people with disabilities. 104 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I 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 opportunities for unskilled, unemployed youth at risk of poor employment outcomes 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 Project Nikau, a youth employment programme with a focus on developing work-ready skills. SkyCity worked in collaboration with Te Puni Kōkiri, the Ministry of Social Development and a community-based provider to design a work ready programme – with the first cohort of 15 cadets joining the SkyCity Auckland pilot programme in June 2019. Whilst the programme was not operational during the first half of the last financial year, since February 2021 seven cadets have been employed - bringing the total number of Project Nikau cadets employed to 19. SkyCity has designed and implemented a wraparound youth mentoring support for each cohort and, in partnership with Te Puni Kōkiri, has co-designed individualised learning and development plans for each cadet. SkyCity was awarded the Diversity and Inclusion Leadership award in the 2020 Deloitte Top 200 Awards in December 2020 and the Diversity and Inclusion Award at the 2021 NZ HR Awards in May 2021 for Project Nikau. In addition, through collaboration with the SkyCity Auckland Community Trust, greater social impact has been achieved in the areas of youth advancement and development through the Trust's prioritisation of initiatives that support youth development, wellbeing and employability. SkyCity committed to its fourth First Foundation Scholarship in 2021. Applications were open to dependents from the SkyCity employee network in New Zealand and were managed by the First Foundation, where strict criteria had to be met to ensure eligibility. The scholarship supports an academically talented student, from a low decile school and low-income family, through tertiary study. We continue to be a major partner of TupuToa, an organisation focused on ensuring corporate New Zealand is representative of the country, by developing and empowering young Māori and Pasifika peoples and building the cultural capability of their partners. In the last financial year, SkyCity hosted four summer interns for three months within its corporate teams. Developing Deeper Connections with Māori Iwi Māori relationships have been initiated to support and guide Project Nikau, SkyCity’s youth employment programme. 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 Roopū Māori o SkyCity (an internal Employee Resource Group) has been established to support authentic engagement with Māori staff. In addition, SkyCity formally engaged an experienced and licensed Māori translator to build our capability across our New Zealand sites and put in place a formal advisory agreement with Ngāti Whātua Ōrakei for the SkyCity Auckland property. 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 Our Communities 105 organisations carry out community assistance and development work, focusing on supporting families to thrive and communities to prosper, with a specific focus on youth development. SkyCity contributed a total of $4.1 million to the four SkyCity Community Trusts for distribution to community groups and organisations in the Auckland, Waikato and Queenstown Lakes regions for the financial year ended 30 June 2021 - of which $2.4 million was distributed by the Trusts in the financial year ended 30 June 2021. Since establishing the first SkyCity Auckland Community Trust in 1996, SkyCity has awarded nearly 5,000 grants totalling over $61.7 million to various community groups and organisations in New Zealand, large and small, through the four SkyCity Community Trusts. SkyCity Community Trust Recipients in FY21 SkyCity Auckland Community Trust SkyCity Hamilton Community Trust Diversity Counselling Halo Charitable Trust Hamilton Christian Nightshelter Trust Mental Health Solutions Ltd – (Here 2 Help U) Society of St Vincent de Paul Hamilton The Serve Waikato Environment Centre – (Kaivolution) SkyCity Queenstown Community Trust Alpine Community Development Trust – operating as Community Needs Wanaka Mana Tāhuna Queenstown Community Hub Trust Wakatipu Community Foundation - Greatest Needs Fund Auckland City Mission Auckland Sexual Abuse HELP Foundation Christians Against Poverty New Zealand Crescendo Trust of Aotearoa EVolocity Limited Far North Safer Community Council Society Incorporated First Foundation Glen Innes Family Centre Charitable Trust Grandparents Raising Grandchildren Trust NZ Great Potentials Foundation InZone Education Foundation Just Move Charitable Health Trust Mad Ave Community Trust Papatūānuku Kōkiri Marae Ranui 135 Leadership Team The Kindness Institute The Lifewise Trust The Middlemore Foundation for Health Innovation The Rising Foundation Trust The TYLA Trust (Turn Your Life Around) TupuToa Yes Disability Resource Centre Services Trust Youth in Transition Charitable Trust Youthline Auckland Charitable Trust Zeal Education Trust 106 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I “ Our rangatahi come to the programme with a low sense of self, minimal skills and experience. They come through the programme realising that, despite their personal challenges, barriers and, for some, a generational cycle of unemployment, they have shown resilience, gained employability skills and developed a strong work history which sets them up well for the next phase of their life – be it progressing in their role, transitioning into another role or deciding to leave and study, which is all defined as success.” Lua Mika Youth Development and Employment Lua leads our Youth Development and Employment team and returned to SkyCity in 2019 as a Youth Mentor for Project Nikau after initially working at SkyCity as a Food and Beverage Stock Controller from 2002 to 2004. Project Nikau is SkyCity’s pathway to employment programme for youth with a focus on Māori and Pasifika. The programme was developed following a conversation that recognised youth employment was a significant challenge in the communities that SkyCity operates in, especially for Māori and Pasifika young people. “Project Nikau has informed the business of an alternative approach when supporting and retaining our young Māori and Pasifika employees. A key component to supporting rangatahi (young people) at work is pastoral care during the initial phase of employment”, says Lua. “In the two years that Project Nikau has been operating, SkyCity has shown a real commitment to youth pathways and embedding this focus into our recruitment process. Through our early learnings, and feedback from people leaders and rangatahi, we have a more blended approach when onboarding rangatahi. The collective support from across the business has contributed to the successful outcomes for Project Nikau - it has helped transform and shift mindsets over time. The exciting part from a young person’s lens is overcoming adversity during their journey and the pride and mana that comes from the realisation that they can do it. The transformation and growth I’ve seen in our existing Project Nikau rangatahi has far exceeded the narrative that we hear and read of so often that our disadvantaged youth are not worth the opportunities given to them and that they’re just a product of their communities that are rife with poverty and crime”. Lua is grateful for the opportunities to build strong connections with people in the business that have helped him to do what he does well - “the success of this programme has been a team effort right across SkyCity. Our values and culture are about people”. Project Nikau has been recognised on a national level for its innovative approach to youth employment and is a testament to the work Lua and operational leaders have done to ensure the programme is embraced across SkyCity. Our Communities 107 Sourcing responsibly Source ethically and locally. 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 supply chain • Low carbon supply chain • Buy local and seasonal • Connect to the circular economy • Progress initiatives to eliminate modern slavery Key Stakeholders • Suppliers (existing and potential) FY21 Performance Highlights • • • Refined our sourcing strategy by developing clear definitions for what constitutes “local” in the context of our supplier and product classifications and embedded regular reporting of the top 100 suppliers at each SkyCity property around local procurement Reactivated the EcoVadis programme (after having been paused in FY20 due to COVID-19) and commenced the rollout of the programme across SkyCity’s Australian suppliers The SkyCity Board approved a modern slavery statement in October 2020 • EcoVadis FY21 Key Challenges • Managing product sourcing and supply chain issues/challenges arising from the impacts of COVID-19, including mandated property closures • Educating suppliers on SkyCity’s Ethical Sourcing Code • Given the complexity of SkyCity's supply chain, while we expect our suppliers to ensure that their suppliers have an ethical approach, it can be challenging to verify that an ethical supply chain is being maintained beyond first tier suppliers FY22 Focus Areas • • • Influencing our major suppliers to set science-based targets by 2023 Testing specific international product supply chains to ensure products are being sourced ethically Strengthening our awareness of modern slavery risks and mitigations Y T I L I B A N A T S U S I 109 SkyCity has approximately 600 key ongoing significant suppliers across the SkyCity 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 $153 million with a vast array of suppliers of goods and services in the financial year ended 30 June 2021), 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. Approximately $153 million of the total spend (of over $426 million in the financial year ended 30 June 2021) relates to operational goods and services – a breakdown of which is shown in the graphs below: 35.4% 13.2% 5.5% Food, Beverage & Retail Marketing Repairs & Maintenance FY20 – 33% FY20 – 12% FY20 – 5% 12.3% 6.9% 1.2% Utilities, Rates & Rent Operating Consumables Travel & Entertainment FY20 – 13% FY20 – 6% FY20 – 4% 9.3% 10.3% 5.9% Professional Fees & Insurance ICT Other Expenses FY20 – 9% FY20 – 9% FY20 – 9% 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, which are derived from the Universal Declaration of Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption. Whilst it is not a compliance measure in itself, SkyCity requests its suppliers to acknowledge our commitment to the principles of the Ethical Sourcing Code. Through distribution of our Ethical Sourcing 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. Ethical and Responsible Sourcing Strategy Our ethical and responsible sourcing 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. As a significant player in Australasia’s hospitality industry, SkyCity has an opportunity to promote responsible sourcing practices. SkyCity’s ethical sourcing strategy focus areas are outlined in the diagram overleaf. The focus areas represent the impact and activity areas that SkyCity believes to be the most relevant to the business and supply chain. Each focus area is located within an ambition level which represents the level of positive impact that SkyCity seeks to achieve. For ‘Basics’ focus areas, SkyCity aims to establish a combination of minimum standards for the supply chain and pilot initiatives to gain knowledge. In ‘Good practice’ focus areas, SkyCity aims to focus on specific product and service categories where these focus areas are most significant. Finally, ‘Signatory Level’ focus areas are 110 35.4%12.3%9.3%13.2%6.9%10.3%5.5%1.2%5.9%SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I Shift to low carbon Buy local and seasonal SIGNATORY LEVEL Leading the industry and shaping the supply chain Connect to the circular economy Serve meals from a sustainable supply chain GOOD PRACTICE Meeting customer expectations beyond legal compliance Support supplier delivery and working conditions Source animal products responsibly Processes and tools BASICS Compliance with minimum standards and build knowledge where SkyCity intends to implement initiatives broadly across the SkyCity Group, thereby helping to positively influence its entire supply chain. 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 complete a questionnaire and provide supporting evidence. Founded in 2007, EcoVadis has grown to become the world’s largest provider of business sustainability ratings, creating a global network of more than 75,000 rated companies. Each 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. Participation in the EcoVadis assessment/audit process was initially encouraged – however, 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. During the 2020 financial year, we paused the EcoVadis assessment/audit for suppliers due to the impacts of COVID-19 but continued to actively use the information collected to date to improve the performance of existing suppliers. The EcoVadis assessment/audit process recommenced during the 2021 financial year. As at 30 June 2021, 71 suppliers to SkyCity's New Zealand properties representing over $33 million of our total annual procurement spend had completed the EcoVadis assessment/audit process. Of SkyCity’s $20 million annual food and beverage procurement spend in New Zealand, 81% is captured under the EcoVadis process – an increase from 76% in the 2020 financial year. 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, together with 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 and ensure that our procurement teams continue to have strong relationships with the businesses we procure from. Our Suppliers 111 Modern Slavery Act The Modern Slavery Act 2018 (Cth) came into force in Australia on 1 January 2019 and requires reporting entities to disclose the risks of modern slavery practices in the operations and supply chains of the reporting entity, and any entities that the reporting entity owns or controls. The Modern Slavery Act applies to SkyCity Entertainment Group Limited, being an entity based, or operating, in Australia having an annual consolidated revenue of more than A$100 million. SkyCity’s first modern slavery statement was published on the Australian Government’s online Register for Modern Slavery Statements in November 2020 and is available at https://www.modernslaveryregister.gov.au/ statements/299/ and in the Governance section of the company’s website at www.skycityentertainmentgroup.com. SkyCity is fully supportive of the Modern Slavery Act and its intention to eliminate modern slavery in all its forms, including trafficking in persons, slavery, servitude, forced marriage and forced labour. SkyCity has zero tolerance towards modern slavery. We are committed to implementing and enforcing effective systems and controls to seek to ensure that modern slavery is not taking place anywhere in our business or supply chains. SkyCity operates primarily in New Zealand and Australia with limited supply chains and, as such, we believe that our exposure to the risks of modern slavery is low. However, we still recognise that there is scope for modern slavery to occur and our modern slavery statement sets out the steps we have taken to minimise this risk. SkyCity always aims to obtain a clear picture of a potential suppliers’ supply chain to ensure that it will align with SkyCity’s high expectations around ethical procurement practices. All new suppliers are asked about their supply practices prior to becoming an approved supplier. SkyCity has several policies, practices and procedures in place to assist in conducting supply chain due diligence which, in turn, enables SkyCity to take significant measures to mitigate the risks of modern slavery. Over the last financial year, we updated the Ethnical Souring Code to include mitigating the risks of modern slavery as defined in the Modern Slavery Act. Local Suppliers As part of a major information technology upgrade implemented in April 2019, SkyCity is able to categorise items in some detail, including location of the supplier. 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. This 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. Our primary focus is procuring from businesses operating in the same countries in which SkyCity operates, thus supporting local economies even where, in some instances, goods are imported. Our secondary focus is procuring local products and produce from businesses that are geographically close to our businesses. In the financial year ended 30 June 2021, SkyCity spent over $33 million on food and beverage items across New Zealand and Adelaide. This equates to over 22% of our operational spend. We will continue 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. SkyCity engages local contractors wherever possible for its construction projects who, in turn, procure local products, materials and subcontractors where 112 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I feasible. Many of the gaming products and equipment required by SkyCity for its casino operations are not able to be manufactured or sourced locally - in sourcing these items internationally, SkyCity's focus is on procuring such items from ethical suppliers. In 2020, we refined our sourcing strategy by developing clear definitions for what constitutes “local” in the context of our supplier and product classifications. Using these definitions, we reviewed (and regularly review) the top 100 suppliers (by spend) at each of the SkyCity properties to understand where our products are being sourced. Category Suppliers Same country Locally based Majority locally owned Products Locally manufactured Locally produced and/or manufactured Definition Products procured from businesses in the same country Products procured from businesses in the same region as the relevant SkyCity property (for example, the Waikato region for SkyCity Hamilton) Products procured from businesses with greater than 50% local ownership Products manufactured locally, but from imported products Entire product is manufactured from locally sourced products Top 100 Suppliers Per Site (as at 30 June 2021) Same Country Locally Based Majority Locally Owned Auckland Hamilton Queenstown Adelaide 94% 89% 94% 96% 79% 44% 40% 64% 62% 67% 72% 64% S a m e country L o c a l l y b a s e d cally y lo d e n w o it r o j a M m a L o n c u f a ally ctured d d y p r o d uce u facture n L o c a l l a n d / o r m a Our Suppliers 113 Sleeping Easy SkyCity sources a range of luxury bedding made from recycled plastic bottles by Vendella, a New Zealand owned and operated business, for SkyCity’s Auckland hotels. Through its participation in our EcoVadis assessment/audit process, Vendella was awarded a silver rating by EcoVadis. A three-step recycling process transforms plastic bottles into a microfibre for Vendella’s luxury bedding range. Plastic bottles are sterilised and reduced from their raw waste state into small flakes. These small flakes are spun into a yarn and then transformed into premium, hypoallergenic, microfibre that has a high loft and luxurious softness. In 2017, Vendella threw its support behind Keep New Zealand Beautiful, forming The Dream Green Initiative partnership. For every eight ‘Dream 900’ pillows sold, Vendella funds the planting of a native seedling. Since 2017, the initiative has funded the planting of over 4,000 native trees throughout New Zealand. Since September 2015, SkyCity has purchased over 7,700 pillows, duvet inners, mattress protectors, quilts and blankets from Vendella – the equivalent of around 194,000 plastic bottles. Save the Planet while you sleep We are part of ‘The Dream Green Initiative’ that helps Kiwi accommodation providers, like us, to provide more sustainable options during your stay! To date, the SkyCity Hotels Group has helped recycle: 194,000 Plastic Bottles Dreamticket Bliss Pillow 25 Bottles Dreamticket Dream Pillow 23 Bottles Dreamticket Duvet Inner Dreamticket Mattress Protector Dreamticket Snug Quilt 25-46Bottles 5-12 Bottles 37 Bottles 114 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I “ The fundamental features of a sustainable supply chain are social, environmental, and financial responsibility. Developing my knowledge about each feature was the first step for me in understanding the expectations that SkyCity has in making our supply chain more sustainable and aligned across the business.” Shonan Pereira Procurement Shonan joined SkyCity in 2017 as National Procurement Coordinator and is currently a Procurement Specialist in our Procurement team. For Shonan, the most exciting and rewarding feature of her time at SkyCity is he tāngata, he tāngata, he tāngata - the people, the people, the people. “The relationships I’ve built with my internal and external stakeholders is an extremely rewarding part of my role. Being able to take them on the journey to achieve a goal that’s beneficial to the team and the overall business is so important and fulfilling”. In her role managing three key portfolios - Property Services, Corporate and Marketing, Shonan is mindful of the commitments and responsibilities SkyCity has when she engages with key stakeholders. “Taking a hands-on, grassroots approach to supplier engagement is a positive way of engaging with others. One-on-one engagement always helps build understanding between parties and aligns supplier goals with SkyCity’s sustainability pillar. It’s about building relationships and being able to understand people, their business goals and requirements and their challenges as well. People and businesses become loyal to brands that they share their values with and here at SkyCIty we invest in and promote sustainable practices that help reduce waste and use ethically sourced materials – our long standing supplier relationships are a testament to this. The work I do helps me assign accountability for myself and the suppliers we align with. Personal accountability is as equally important as holding others accountable, especially in a procurement role. Our documentation, language and procurement processes reflect SkyCity’s values and, when we’re in negotiations, our expectations are made clear”. 115 Protect the environment Active commitment to reducing our environmental footprint. 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 FY21 Performance Highlights • Climate change/emissions reduction • Reducing waste • Reducing water use • Employee activation Key Stakeholders • KiwiHarvest • Toitū Envirocare • Climate Leaders Coalition • Energy Efficiency and Conservation Authority • SUEZ-ResourceCo • Beca • Sustainable Business Council • EnviroWaste • • Appointed Beca to produce a de-carbonisation roadmap which will guide SkyCity towards its science-based targets Continued reduction in the use of single-use plastics across all SkyCity properties (against the 30 June 2020 baseline), with: – SkyCity Adelaide achieving a 60% reduction in plastic volume – SkyCity Auckland achieving a 37% reduction in plastic volume – SkyCity Hamilton achieving a 46% reduction in plastic volume – SkyCity Queenstown achieving a 48% reduction in plastic volume • • Continued reduction in electricity use with assistance from the B-Tune programme Achieved carbon zero status for the SkyCity Group (by way of offset thorough Toitū Envirocare) FY21 Key Challenges • • Introducing food waste composting across all SkyCity properties Lack of alternatives to certain single use plastics, making zero single use plastics difficult to achieve FY22 Focus Areas • Continued focus on carbon reduction emissions across the Group • Continued focus on reducing water use across the Group • • Deliver a zero waste technology solution for the SkyCity Auckland site Deliver a green waste composting solution for all SkyCity properties Y T I L I B A N A T S U S I 117 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 Since 2015, SkyCity has reduced its waste sent to landfill by 43.4%, in part due to the mandated property closures during FY20 and FY21 (in response to the COVID-19 pandemic). Food Donations and Composting In Auckland, SkyCity continued to support KiwiHarvest, a national food rescue charity that redistributes excess food, free of charge, to community groups and social service agencies, with donations of food from its Auckland property. During the past financial year, the SkyCity Auckland property donated around 150kgs of food to KiwiHarvest. 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 148 tonnes of food waste to be commercially composted - bringing the total amount collected and composted since the programme began in April 2017 to over 1,000 tonnes. Pleasingly, SkyCity’s focus on reducing food wastage has resulted in a reduction of food waste being composted each year since the programme began. Upcycling Textiles In the last financial year, our SkyCity Hamilton Wardrobe team (with assistance from a small group of supporters from other departments) repurposed approximately 230 metres of fabric from old uniforms into face masks for staff, door stops, dining table phone holders for staff, cushions for staff areas and kitten hammocks for cat rescue operators. 118 As part of the A$330 million SkyCity Adelaide development project (which officially opened in December 2020), iconic South Australian fashion designer Liza Emanuele was commissioned to design a range of new uniforms for SkyCity Adelaide. This uniform refresh resulted in over 13,000 obsolete garments, which were donated to three important charities – St Vincent de Paul (Vinnies) and two local Adelaide charities, Hutt St Centre and Dressed for Success Adelaide. The Hutt St Centre is a place of hope and opportunity for people facing homelessness to rebuild their lives without judgement. Dressed for Success is an organisation empowering women to achieve economic independence by providing a network of support and professional attire to help them thrive in work and life. Uniforms donated to international charity St Vincent de Paul have been shipped to Africa where they will be distributed throughout much needed regions. SkyCity Adelaide Wardrobe Manager, Caterina Goglia, and SkyCity Adelaide employee, Bianca White, oversaw the donation of over 13,000 obsolete garments to three charities. SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I Plastics SkyCity continues to transition 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. The goals of SkyCity’s Zero Waste Strategy are to eliminate waste sent to landfill and improve the efficiency of resource use through reduction and recycling. Stage one involves the removal of all customer facing single-use plastics, such as water bottles and Styrofoam cups. Stage two is the development of a plan to remove plastic packaging from the Sky Tower gift shop in Auckland. The third stage involves quantifying all non-customer facing plastics, which are used by suppliers of goods to SkyCity, and developing a collaborative plan to reduce or replace these with more sustainable alternatives. From 1 March 2021, single-use plastic straws, cutlery and stirrers have been prohibited from sale, supply or distribution in South Australia (including bioplastic alternatives) under the Single-Use and Other Plastic Products (Waste Avoidance) Act 2020 (SA) - the first legislation of its kind in Australia. From 1 March 2022, expanded polystyrene cups, bowls, plates and clamshell containers will also be prohibited from sale, supply or distribution in South Australia under the Act. These items are not utilised in SkyCity’s properties. During the last financial year, we have continued to reduce our use of single-use plastics across SkyCity’s properties, with: • • • • SkyCity Adelaide achieving a 60% reduction in plastic volume (driven by the introduction of the Single-Use and Other Plastic Products (Waste Avoidance) Act 2020 (SA)); SkyCity Auckland achieving a 37% reduction in plastic volume; SkyCity Hamilton achieving a 46% reduction in plastic volume; and SkyCity Queenstown achieving a 48% reduction in plastic volume, (in each case as a comparison against the 30 June 2020 baseline). Whilst there is a lack of alternatives to certain single-use plastics, SkyCity continues to transition from traditional plastic to commercially compostable food and beverage packaging wherever possible. Eliminate Waste to Landfill Over the last financial year, we have continued to consider and progress the feasibility for a waste converter for SkyCity Auckland, the largest and busiest property within the SkyCity Group. The waste converter is a zero waste to landfill option which can process nearly all waste materials (with the exception of construction waste and batteries). Materials that can be composted or that SkyCity receives a rebate from (such as cardboard), would continue to be recycled through existing avenues as would glass and HDPE plastics. The residual product from the converter has calorific value that is suitable to be made into an energy source or a building material (similar to MDF). The key objectives of the converter are to achieve zero waste to landfill, reduce associated costs of disposing waste to landfill and to ensure that the end product will be recycled in New Zealand. If achieved, SkyCity Auckland would be the first casino in the world to achieve a zero waste to landfill status. In Adelaide, SkyCity has engaged SUEZ to assist SkyCity Adelaide in achieving zero waste to landfill. SUEZ offers recycling and commercial food composting solutions with the remaining dry general waste being diverted to SUEZ-ResourceCo (a joint venture between SUEZ and ResourceCo). The Suez-ResourceCo facility processes commercial, industrial and construction waste into Processed Engineered Fuel (PEF) which is then used as a fuel source by Adelaide Brighton Cement instead of using traditional fossil fuels. PEF is used to power cement kilns, reducing carbon emissions by 30%. SUEZ-ResourceCo has the capacity to convert up to 350,000 tonnes of raw material per annum into 180,000 tonnes of PEF, and reducing carbon emissions by 30%. Since commencing this partnership with Suez in December 2020, SkyCity Adelaide has significantly increased its waste diversion from landfill from an average of 30% to an average of 92% in the first 7 months – resulting in: • 92 tonnes of dry waste being processed at the Suez-ResourceCo facility (preventing 37 tonnes of CO2 being emitted into the atmosphere) – enough to produce 199 tonnes of clinker blocks or 685m3 of concrete; and Our Environment 119 • 132 tonnes of organic food waste being collected by SUEZ for reuse in soil compost by many of SkyCity Adelaide’s suppliers, creating a circular economy and second use of our food waste. Climate Change and Emissions Although SkyCity is not, through its usual day-to-day operations, a major emitter of greenhouse gases, we recognise the role that we need to play in reducing our impacts. We are committed to progressing initiatives to reduce emissions and taking action to combat climate change. As part of SkyCity’s commitment to climate action, we have measured, audited and verified SkyCity’s carbon footprint for FY15–FY21 through the Certified Emissions Measurement and Reduction Scheme programme operated by Toitū Envirocare, a government-owned environmental certifications body in New Zealand. 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 was 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. Funds from the levy are used to offset SkyCity’s carbon footprint to net zero by investing in emission reduction projects selected by Toitū Envirocare. The SkyCity Green Fund has also accrued and invested 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 have had 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. Pleasingly, SkyCity was among the first major New Zealand companies to go carbon neutral and was certified carbonzero by Toitū Envirocare in New Zealand in October 2019 following the payment by SkyCity of $86,000 to offset the equivalent of 12,866 tonnes of carbon (measured in FY19). The carbon credits purchased through Toitū Envirocare are generated by international projects, which will fund 48,000 solar household cookers for rural communities in China and help build wind farm capacity in India to replace fossil fuel alternatives. As planned, the SkyCity Adelaide property also became carbon neutral, alongside SkyCity’s New Zealand sites, when the emissions generated during the year ended 30 June 2020 (5,518 tonnes of carbon) were offset by purchasing carbon credits through Toitū Envirocare in September 2020. In total, SkyCity paid $131,238 to offset the equivalent SkyCity has 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 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. 120 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I of 15,137 tonnes of carbon in respect of the Group's FY20 carbon emissions. The emissions generated by the SkyCity Group during the year ended 30 June 2021 (16,750 tonnes of carbon) were offset by the purchase of $166,663 in carbon credits through Toitū Envirocare in August 2021. Reductions in Water and Electricity Use SkyCity has continued to implement water saving initiatives at its largest SkyCity Auckland property in response to water use restrictions in Auckland City (imposed since May 2020), including: • • • • washing buildings and windows using buckets of water rather than hoses; reusing water for other outdoor cleaning tasks; using dishwashers only when full and turning off taps in the kitchens; making staff and hotel guests aware of the water restrictions; and • restrictions on cooling tower usage. A number of initiatives led by the Property Services team at our Auckland site, including continuous commissioning and finetuning of the Building Management System (BMS) and the B-Tune programme (building tune), have cumulatively generated significant reductions in SkyCity Auckland’s use of utilities reducing our overall carbon emissions and spend on electricity, gas and water. 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. The New Zealand Government published its first National Climate Change Risk Assessment in August 2020 and, in April 2021, introduced legislation (in the form of the Financial Sector (Climate-related Disclosure and Other Matters) Amendment Bill) to make climate-related disclosures aligned with the Recommendations of the Task-Force on Climate-related Financial Disclosures (TCFD) mandatory for some organisations, including publicly listed companies (such as SkyCity) and large insurers, banks, non-bank deposit takers and investment managers. If approved by Parliament, the legislation will require climate-related disclosures for financial years commencing in 2022, with disclosures being made in 2023 at the earliest. The New Zealand Government is also due to issue a National Adaptation Plan in August 2022, which is expected to provide further guidance on how local and central government will respond to climate change risks. These documents and legislation will be a critical resource for SkyCity to take its climate change strategy, planning and reporting to the next stage. SkyCity is committed to progressing towards TCFD-compliant reporting and aims to progress with detailed scenario analysis as part of its ongoing journey towards TCFD-compliant reporting. SkyCity is 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 businesses has 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. Our Environment 121 SkyCity Climate Related Risks Nature of Risk Physical risks Description and Impact Rise in global temperatures Increase in violent weather events, including cyclone, sea surge, tornado Rise in sea levels 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 Salt intrusion in soils impacting supply chain Market and reputational risks and opportunities • 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 Policy and legal risks Economic risks and opportunities 122 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Y T I L I B A N A T S U S I FY21 Carbon Footprint Inventory 67%* 21% 1% 4% 7% Electricity Gas Flights Waste Other FY20 – 53% FY20 – 24% FY20 – 10% FY20 – 4% FY20 – 9% *The increase in electricity usage from FY20 to FY21 is due to a reduction in COVID-19 closures and the completion of the SkyCity Adelaide expansion. FY15–FY21 Performance The following graphs summarise SkyCity's key environmental performance data for FY15–FY21. SkyCity has continued efforts to reduce its carbon footprint – with Scope 1 and 2 emissions combined reducing by 18.7% since FY15 and emissions from waste reducing by 52.7%, in part due to the mandated property closures and travel restrictions during FY20 and FY21 (in response to the COVID-19 pandemic). The increase in absolute carbon from FY18 to FY19 was due to increased air travel across the Group, which SkyCity reduced in FY20 and FY21 through better utilisation of Skype for Business and economy class flights and due to COVID-19 related international border restrictions. Total Emissions (Scope 1, 2 and 3) (Tonnes CO2e) – by Site 12,000 10,000 10,093 8,000 7,290 6,000 4,000 2,000 0 8,786 8,934 6,598 6,226 7,506 8,047 7,102 5,158 1,119 314 955 311 903 281 658 292 833 644 FY15 * FY18 FY19 FY20 FY21 Adelaide Auckland Hamilton Queenstown *SkyCity's science-based reduction targets are set from our FY15 base year. Our Environment 123 Scope 1 and 2 Emissions (Tonnes CO2e) – Group 17,333 15,270 15,129 12,207 10,629 10,367 15,196 10,784 12,822 8,085 5,126 4,640 4,761 4,736 4,412 17,500 15,000 12,500 10,000 7,500 5,000 2,500 0.0 FY15* FY18 FY19 FY20 FY21 Scope 1 Scope 2 Scope 1 & 2 Scope 3 Emissions (Tonnes CO2e) – Group 2,137 1,425 1,477 1,298 2,747 1,152 3,000 2,500 2,000 1,500 1,000 500 0 1,520 654 654 122 FY15* FY18 FY19 FY20 FY21 Waste Flights *SkyCity's science-based reduction targets are set from our FY15 base year. 124 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Scope Definitions Through the Toitū carbonreduce certification (formerly the Certified Emissions Measurement and Reduction Scheme) operated by Toitū Envirocare, 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). Y T I L I B A N A T S U S I 125 Independent Limited Assurance Statement to the Management and Directors of SkyCity Entertainment Group Limited Our Conclusion: Ernst & Young Limited (‘EY’, ‘we’) have been engaged by SkyCity Entertainment Group Limited (‘SkyCity’) to perform a limited assurance engagement, as defined by the International Standard on Assurance Engagements (New Zealand), 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial Information (‘ISAE (NZ) 3000’), hereafter referred to as the ‘engagement’, over selected disclosures included in SkyCity’s 2021 Annual Report (‘Report’) for the year ended 30 June 2021. Based on our procedures and the evidence obtained, as of 23 August 2021 we are not aware of any material modifications that should be made to the selected disclosures included in our review in order for the disclosures to be in accordance with the criteria. What our review covered We reviewed SkyCity’s selected disclosures (subject matter), listed below, as disclosed in the Report, for the year ended 30 June 2021. Selected disclosures / r e m o t s u C e l b i s n o p s e R t s o H Customer exclusions issued at SkyCity casinos (#) Customers identified in breach of their exclusion orders in FY21 (#) l Zealand staff (%) e Gender pay gap for Australia and New p o e P r u O Workforce diversity statistics Metric 1,077 1,373 Aus - 6.1% NZ - 6.9% Top 10 Ethnicities Reduction in waste to landfill volume FY15-FY21 (tonnes) 43.4% Contributions by SkyCity casinos to the SkyCity Community Trusts (NZ$) 4.1 million (NZ$) Total procurement spend on food and beverage from Australia and New Zealand-based suppliers (NZ$) 33,857,375 (NZ$) Total FY21 spend excluding construction (%) 213,262,178 (NZ$) t n e m n o r i v n E y t i n u m m o C s r e i l p p u S Criteria applied by SkyCity In preparing the selected disclosures, SkyCity applied: ► Global Reporting Initiative’s (GRI) Standards; and ► SkyCity’s own published criteria (the Criteria). SkyCity’s responsibilities in accordance with SkyCity’s management (‘Management’) was responsible for selecting the Criteria, and for presenting the selected disclosures that Criteria. This responsibility included establishing and maintaining internal controls and adequate records and making estimates that are relevant to the preparation of the subject matter, such that it is free from material misstatement, whether due to fraud or error. EY’s responsibilities Our responsibility is to express a limited assurance conclusion on selected disclosures included in the Report based on the evidence we obtained. We conducted our engagement in accordance with the International Standard on Assurance Engagements (New Zealand), 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial Information (‘ISAE (NZ) 3000’) and the terms of reference for this engagement as agreed with SkyCity on 8 July 2021. The standard that we plan and perform our engagement to obtain limited assurance about whether, in all material respects, the subject matter is presented in accordance with the Criteria, and to issue a report. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risk of material misstatement, whether due to fraud or error. requires We believe that the evidence obtained is sufficient and appropriate to provide a basis for our limited assurance conclusions. Key suppliers completed an EcoVadis assessment/audit process as at 30 June 71 EY’s independence and quality control 2021 (#) A member firm of Ernst & Young Global Limited 126 independent of SkyCity We are in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board, and we SkyCity Entertainment Group Annual Report Year Ended 30 June 2021have fulfilled our other ethical responsibilities in accordance with these requirements. description suggested that they should have been classified as recordable incidents The firm applies Professional and Ethical Standard 3 (Amended) and, accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Description of procedures performed 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 limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. Our procedures were designed to obtain a limited level of assurance on which to base our conclusion and do not provide all the evidence that would be required to provide a reasonable level of assurance. in a Although 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. A limited assurance engagement consists of making enquiries, primarily of persons responsible for preparing the selected disclosures and related information, and applying analytical and other review procedures including: ► Conducting interviews with key personnel to understand SkyCity’s process for collecting, collating and reporting the selected disclosures during the reporting period ► Checking that the Criteria has been reasonably applied in preparing the selected disclosures ► Checking the reasonableness of assumptions ► Inquiring of personnel to identify risks of underreporting and quality controls ► Undertaking data analytics to check the reasonableness of the data supporting disclosures, such as analysis of month on month changes in the consumption of various energy sources ► Performing recalculations of performance metrics to confirm quantities stated were replicable, such as performing a recalculation of greenhouse gas emissions using source data and the relevant emissions factor as defined by the Criteria ► Assessing evidence on a sample basis, such as selecting a sample of non-recordable health and safety incident incidents and assessing whether the A member firm of Ernst & Young Global Limited ► Checking aggregation of selected disclosures and transcription to the Report ► Checking the appropriateness of the presentation relating to the selected disclosures. Use of our Assurance Statement We disclaim any assumption of responsibility for any reliance on this assurance statement, or on the selected disclosures to which it relates, to any persons other than the management and the Directors of SkyCity, or for any purpose other than that for which it was prepared. Our review included web-based information that was available via web links as of the date of this assurance statement. We provide no assurance over changes to the content of this web-based information after the date of this assurance statement. Ernst & Young Auckland, New Zealand 23rd August 2021 Pip Best Partner 127 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 (Fourth 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 (Fourth Edition) of the ASX Corporate Governance Council. Notwithstanding, SkyCity has taken into account ASX Listing Rule 4.10 when preparing this annual report and considers its corporate governance practices and principles have substantially reflected 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 2021. 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 (Fourth 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. 128 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C Specific responsibilities of the Board include: the addition of value to the company. • • • • • • • • 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 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. The areas of expertise and experience determined by the Board as being the key competencies required to meet these objectives are: • gaming industry experience and understanding; • understanding of Asia and Asian consumers; • local market knowledge; • government relations; • public relations and communications; • investment banking; • property and real estate acumen; • • hospitality industry experience and understanding; law; • finance and accounting; • mathematical fluency; • human resources; • health and safety; • marketing; • digital capability and exposure; • sustainability; and • millennial understanding. Corporate Governance Statement 129 In June 2021, Board members completed a self-assessment survey to identify the Board’s overall competency in relation to the agreed areas of expertise and experience. The results of the survey are set out in the graph 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 60 – 63 of this annual report. 4.29 4.29 4.29 4.00 4.00 4.00 4.14 4.14 4.14 4.00 4.00 3.57 3.29 3.14 2.71 4.29 3.71 3.86 3.43 3.57 g n i t a R e g a r e v A 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 y t e f a S & h t l a e H s e c r u o s e R n a m u H y c n e u l F l a c i t a m e h t a M g n i t n u o c c A w a L n e m u c A e t a t s E l a e R i g n k n a B t n e m t s e v n I s m m o C & R P l s n o i t a e R t v o G i e d a e d A l n o t l i m a H l d n a k c u A g n i t e k r a M n w o t s n e e u Q i s l a n n e l l i M m s i r u o T / y t i l a t i p s o H y t i l i i b a n a t s u S s r e m u s n o C n a i s A y t i l i b a p a C l a t i g D i y r t s u d n I i g n m a G Where there is an identified gap in expertise and/or experience, the Board seeks to address that gap through learning and personal development, the use of independent expert advisors in specific areas of perceived need when necessary, or by the appointment of a director or directors with the relevant expertise and experience. 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. 130 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 E C N A N R E V O G E T A R O P R O C 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 Group 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 (Fourth Edition) (ASX Independence Guidelines). At its June 2021 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. 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. Corporate Governance Statement 131 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 or more regularly if required. 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. Board and Committee Membership 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 2021 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 60 – 63 of this annual report. BOARD Chair Members Rob Campbell Sue Suckling Jennifer Owen Murray Jordan Silvana Schenone Julian Cook Chad Barton APPOINTMENT TO OFFICE 25 June 2017 9 May 2011 5 December 2016 5 December 2016 8 June 2021 8 June 2021 8 June 2021 AUDIT AND RISK COMMITTEE PEOPLE AND CULTURE COMMITTEE Chair Members Jennifer Owen Rob Campbell Murray Jordan Julian Cook Chad Barton Chair Members Murray Jordan Rob Campbell Jennifer Owen Silvana Schenone Julian Cook Chad Barton SUSTAINABILITY COMMITTEE GOVERNANCE AND NOMINATIONS COMMITTEE Chair Members Sue Suckling Rob Campbell Murray Jordan Silvana Schenone Chair Members Rob Campbell Sue Suckling Jennifer Owen Murray Jordan Silvana Schenone Julian Cook Chad Barton 132 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C Board and Committee Meeting Attendance 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 2021. BOARD AUDIT AND RISK PEOPLE AND CULTURE SUSTAINABILITY GOVERNANCE AND NOMINATIONS TOTAL NUMBER OF MEETINGS Rob Campbell Sue Suckling Jennifer Owen Murray Jordan(1) Bruce Carter(2) Silvana Schenone(3) Julian Cook(3) Chad Barton(3) 12 12 11 12 12 4 3 3 3 6 6 – 6 1 5 – 1 1 5 5 – 5 5 – 2 1 2 4 4 4 – 1 3 1 – – 1 1 1 1 1 1 – – – (1) Murray Jordan was appointed a member of the Audit and Risk and Sustainability Committees effective from 23 March 2021. (2) Bruce Carter resigned as a director effective from 20 March 2021. (3) Prior to their appointment on 8 June 2021, Silvana Schenone, Julian Cook and Chad Barton attended Board and Committee meetings from 29 March 2021 in their capacity as advisors. 3. Integrity and Ethical 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 periodically 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 the company’s commitment to care activities and is responsible for developing and maintaining SkyCity’s sustainability policies. The Sustainability Committee focuses on the agreed pillars of the company’s sustainability strategy, which are described in further detail on pages 70 – 125 of this annual report together with details of SkyCity’s sustainability activities. Code of Conduct 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. Corporate Governance Statement 133 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. The most recent annual confirmations were provided by senior managers in August 2021. Trading in Securities The company maintains a Securities Trading Policy (available in the Governance section of the company’s website at www.skycityentertainmentgroup.com) for directors and employees that sets out guidelines in respect of trading in, or giving recommendations concerning, the company’s securities, including derivatives of such listed securities. Details of any securities trading by directors or executives who are subject to the company’s Securities Trading Policy are notified to the Board. In addition, directors and officers of the company must comply with the disclosure obligations under subpart 6 of the New Zealand Financial Markets Conduct Act 2013 and the NZX Main Board Listing Rules and formally disclose their SkyCity shareholdings and other securities holdings to the NZX and, consequently, ASX within prescribed timeframes. Conflicts of Interest SkyCity expects its directors and employees to avoid conflicts of interest in their decisions and to avoid any direct or indirect interest, investment, association, or relationship which is likely to, or appears to, interfere with the exercise of their independent judgement. Where conflicts of interest may arise (or where potential conflicts of interest may arise), directors must formally advise the company or, in the case of an employee, their manager about any matter relating to that conflict (or potential conflict) of interest. Gaming Prohibition Directors and employees are not permitted to participate in any gaming or wagering activity at any SkyCity land-based casino. 4. Safeguard the Integrity of the Company’s Financial Reporting The Board is responsible for ensuring that effective policies and procedures are in place to provide 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. 134 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C 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 2021 are set out in note 7 to the financial statements. Fees for audit and other assurance work for the financial year ended 30 June 2021 represented 74% of total PricewaterhouseCoopers fees. 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. The company’s annual report (including this annual report) is prepared by the General Counsel for the SkyCity Entertainment Group with input from the Chief Executive Officer and other senior management who bear responsibility for the topics covered in the annual report with a view to ensuring the contents are materially accurate, balanced and provide investors sufficient information about SkyCity and its performance over the relevant financial year. The Board also contributes to and approves the contents of the annual report. 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 and Governance sections of the company’s website at www.skycityentertainmentgroup.com; Corporate Governance Statement 135 • • • • • posting stock exchange announcements in the Investor Centre section of the company’s website promptly after they have been disclosed to the market; giving shareholders the option to receive communications from, and send communications to, the company and its security registry, Computershare, electronically; engaging in a programme of regular interactions with institutional investors, shareholder associations and proxy advisers; promoting two-way interaction with shareholders, by encouraging shareholders to attend general meetings of the company; 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 2021. 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, while maintaining a sound culture and practices to maintain compliance with responsible gaming frameworks. 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 51 – 59 of this annual report. 136 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C 8. Performance Evaluation 9. Remunerate Fairly and Evaluation of the Board and its Committees The Board and committee charters require an evaluation of the Board’s 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. The annual evaluation of the Board’s and its committees’ performance is generally carried out in the form of a self-evaluation questionnaire completed by each of the directors and select management. From time to time, an independently facilitated evaluation process may be carried out, in addition to or in substitution of the self-evaluation process, for the purpose of evaluating the performance of the Board and its committees. During the last financial year, the annual evaluation of the Board’s and its committees’ performance was carried out by way of self-evaluation questionnaires in October/November 2020, with the results discussed by the Board in December 2020. 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. Responsibly 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. 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. Corporate Governance Statement 137 Remuneration Report As Chair of the People and Culture Committee of the Board, I am pleased to present our remuneration report for the financial year ended 30 June 2021. This remuneration report outlines SkyCity’s remuneration frameworks and plans, including detailed information on Group executives and non-executive director remuneration and outcomes for the financial year ended 30 June 2021. Detailed in this remuneration report are the employment and remuneration arrangements as they pertain to Michael Ahearne, appointed Chief Executive Officer in November 2020. Given the ongoing impact of COVID-19 on our business and the economy, the Board, on advice from the People and Culture Committee, has determined a remuneration package with arrangements that focus on the mid to long term recovery and success of SkyCity, by way of an annual grant of equity as well as inclusion in the 2018 SkyCity Executive Long Term Incentive Plan. Mr Ahearne does not have a short term incentive component in his remuneration package at this point in time, again reflective of the current focus of aligning the Chief Executive Officer’s reward to SkyCity’s mid to long term success. In the interests of greater transparency and disclosure, the Board has elected to provide the remuneration arrangements of the Chief Financial Officer, the Chief Operating Officer New Zealand and the Chief Operating Officer Australia. Also detailed is the remuneration received by Graeme Stephens relating to the period of the financial year he was Chief Executive Officer of SkyCity, the remuneration paid to him on his retirement as part of his contractual entitlements, as well as the equity incentive entitlements still under issue to him. Although the financial gateway for the SkyCity Performance Incentive Plan and the SkyCity Short Term Incentive Plan (being the normalised Group NPAT result for the financial year ended 30 June 2021 meeting or exceeding the normalised Group NPAT result for the immediately preceding financial year) was met, the Board exercised its discretion in relation to awards under the plans by applying one financial measure and outcome to all participants instead of participants receiving an individual financial outcome dependent on the performance of their business unit against budget. The financial measure was determined by measuring the normalised Group NPAT for the financial year ended 30 June 2019 against the normalised Group NPAT for the financial year ended 30 June 2021, adjusted to account for one-offs and changes in SkyCity’s business (such as the earnings attributable to the operation of the car park in the financial year ended 30 June 2019). Key considerations for the Board in exercising its discretion was the need to meet shareholder expectations by controlling cost, given the ongoing impact of the COVID-19 pandemic, as well as consideration of the potential implications of the AUSTRAC enforcement investigation into SkyCity Adelaide, balanced with the need to retain and reward employees for their performance and outcomes in a challenging year. An explanation of the mechanics and discretion applied to the plans is provided within this remuneration report. In light of the economic impact of the COVID-19 pandemic, the company will not be seeking shareholder approval to increase the non-executive director fee pool at the 2021 annual meeting on 29 October 2021, noting the non-executive director fee pool was last increased by shareholders at the 2018 annual meeting, and prior to that, at the 2014 annual meeting. As such, the People and Culture committee did not seek independent benchmarking of the non-executive director fee pool and fees this year but did commission external remuneration benchmarking specialists to provide remuneration benchmarking for senior executives. Senior executives’ salaries have been frozen for the financial year ended 30 June 2021. Details of the various employee incentive plans are available in the Remuneration Policy Statement in the Governance section of the company’s website at www.skycityentertainmentgroup.com or can be obtained by contacting the Company Secretary. I hope you find the detail contained within this remuneration report useful and, as always, I welcome your feedback. Murray Jordan Chair People and Culture Committee 138 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C Non-Executive Directors Fees This section details the fees paid to non-executive directors. The company’s Policy on Non-Executive Director Remuneration (available in the Governance section of the company’s website at www.skycityentertainmentgroup.com or by contacting the Company Secretary) 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. 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. 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 2021: APPROVED POSITION FEES (PER FINANCIAL YEAR) Board Chair Non-Executive Director Audit and Risk Committee Chair Member People and Culture Committee Chair Member Sustainability Committee Chair Member $280,000 $128,500 $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. In addition to remuneration paid for services in their capacity as directors of the company, SkyCity meets the expenses incurred by directors in relation to company matters, which are incidental to the performance of their duties, including travel. Individuals who are invited by the SkyCity Board to join the Board as non-executive directors are appointed subject to the company obtaining the approval of the regulatory authorities in each of the gaming jurisdictions in which the company operates, a process which usually takes some months to conclude. Until such approvals are obtained, individuals assist the Board in an advisory capacity and are entitled to receive remuneration for consultancy services provided to the company (subject to the maximum remuneration amount which has been approved by the shareholders of the company as noted above). Remuneration Report 139 Non-Executive Director Fees for the Year Ended 30 June 2021 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 2021 are as listed below: BOARD AND COMMITTEE FEES OTHER BENEFITS TOTAL Rob Campbell 2021 2020 Bruce Carter 2021 2020 Sue Suckling 2021 2020 Jennifer Owen 2021 2020 Murray Jordan 2021 2020 Silvana Schenone 2021 Julian Cook 2021 Chad Barton 2021 $280,000.00 $245,000.00 (1) (2) $151,209.68 (1) $178,333.40 – – – – $280,000.00 $245,000.00 $151,209.68 $178,333.40 $163,500.00 $143,062.50 (1) $4,523.82(3) $3,429.70(3) $168,023.82 $146,492.20 $164,534.95 $138,687.50 (1) – $14,850.00(4) $164,534.95 $153,537.50 $171,887.10 $143,062.50 (1) – $4,050.00(5) $171,887.10 $147,112.50 $10,126.39 (6) $29,618.24(7) $39,744.63 $10,126.39 (6) $29,618.24(7) $39,744.63 $10,126.39 (6) $29,618.24(7) $39,744.63 The figures shown are gross amounts and exclude GST where applicable. (1) Non-executive directors elected to waive 50% of their Board and Committee fees for the final quarter of the financial year ended 30 June 2020. (2) Bruce Carter retired as a director effective from 20 March 2021. (3) 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). (4) Being fees payable for consultancy services provided by Jennifer Owen in relation to the SkyCity Adelaide expansion project, which were provided as additional services outside of her capacity as a director of the company. This includes fees for consultancy services provided in FY19 but paid in FY20. (5) Being fees payable for consultancy services provided by Murray Jordan 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. (6) Silvana Schenone, Julian Cook and Chad Barton were appointed directors effective from 8 June 2021. (7) Being fees payable for consultancy services provided to the company for the period from 29 March to 7 June 2021 (inclusive) prior to their appointment as directors on 8 June 2021. Share Ownership in SkyCity 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. 140 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 E C N A N R E V O G E T A R O P R O C Remuneration of Employees 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 2021. Chief Executive Officer and 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 remuneration arrangements for the Chief Executive Officer are detailed in the ‘Chief Executive Officer’s Remuneration’ section below. 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 2021 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 2021. Fixed Remuneration 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. 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 Group executives and senior managers in 2018. 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. STI Scheme Component of PIP 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 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. Remuneration Report 141 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 Business Practice, 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. 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 death. In the case of select Group executives however, if they cease 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 their employment, then they will continue to be eligible to have shares transferred to them 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. Participants do not have the right to receive dividends in respect of restricted share rights, however if any restricted share rights vest and shares are issued or transferred to a participant, then that participant may receive, at the Board’s sole discretion, a cash payment equivalent to the cash dividends declared and paid from the date of issue of the restricted share rights to the date the shares are issued or transferred to that participant. The cash payment will not include any imputation credits, franking credits or similar benefits in respect of such dividends. 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). Board Discretion Exercised under the PIP and Short Term Incentive (STI) Plan For the financial year ended 30 June 2021, the Board exercised its discretion under the PIP and STI plan by amending the mechanics that determine the individual financial objective. Under the plan rules, the following financial goals must be satisfied for the financial goal component (being 70% of the target award) to be awarded: • • the normalised Group NPAT result for the financial year must meet or exceed the normalised Group NPAT result for the immediately preceding financial year; and the participant’s business unit and/or department must achieve at least 95% of its financial target. In relation to the financial year ended 30 June 2021, the first financial goal was met and the majority of the business units exceeded their financial goals - allowing for a multiplier of up to 150% of the financial objective target to be applied under the plan rules. However, the Board recognised that this outcome would not take into consideration shareholder expectations in relation to controlling cost, given the ongoing impact of the COVID-19 pandemic, as well as consideration of the potential implications of the AUSTRAC enforcement investigation into SkyCity Adelaide. The Board therefore determined that an equitable outcome for all participants under the PIP and STI plan was to put in place one financial measure for all participants, instead of a financial measure depending on the performance of each individual participant’s business unit and/or department. This approach recognises that some business units were more impacted by COVID-19 restrictions, such as lockdowns, but that all participants should be recognised for the overall financial performance of SkyCity. 142 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C The financial measure was determined by measuring the normalised Group NPAT for the financial year ended 30 June 2019 against the normalised Group NPAT for the financial year ended 30 June 2021, adjusted to account for one-offs and changes in our business (such as the earnings attributable to the operation of the car park in the financial year ended 30 June 2019) as well as the impact of the receipt of Government wage subsidies relating to the COVID-19 pandemic. This resulted in a financial multiplier of 59.7%, which is 41.8% of the 70% financial target. The mechanics relating to individual non-financial objectives (being a target of 30%) followed the plan rules, meaning participants could earn between 50% and 150% of the non-financial target depending on their achievement of individual objectives and behaviour goals. For the financial year ending 30 June 2022, 448 employees will be invited to participate in the PIP for the opportunity to earn a cash payment under the STI scheme – 100 of whom also have the opportunity to acquire restricted share rights under the deferred STI scheme. Long Term Incentive Remuneration Two LTI plans were in operation during the financial year ended 30 June 2021 for the company’s most senior employees, including the Group executives. These plans were the SkyCity Senior Executive Long Term Incentive Scheme and the 2018 SkyCity Executive Long Term Incentive Plan. Copies of the plan documents and rules are available in the Governance section of the company’s website at www.skycityentertainmentgroup.com. In the financial year ended 30 June 2021, 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 provides participants 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 the following performance hurdles are tested: • • • 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. 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 2021, a total of 1,353,423 shares were issued under the 2018 SkyCity Executive Long Term Incentive Plan and held by the Public Trust on behalf of six 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 SkyCity Executive Long Term Incentive Plan is 100% of the relevant grant allocation. Remuneration Report 143 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. 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 SkyCity Executive Long Term Incentive 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. 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 SkyCity Executive Long Term Incentive Plan. As at 30 June 2021, the Public Trust held a total of 3,394,058 shares – 2,104,306 of which were allocated and held on behalf of eligible participants and 1,289,752 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. Chief Executive Officer's Remuneration The total remuneration earned by Michael Ahearne for duties relating to the Chief Executive Officer position for the financial year ended 30 June 2021 is outlined in the following table (covering the period from 16 November 2020 to 30 June 2021): SALARY AND BENEFITS EQUITY BASED REMUNERATION BASE SALARY KIWISAVER BENEFITS SUBTOTAL ANNUAL SHARE ENTITLEMENT(1) LTI GRANT(2) SUBTOTAL TOTAL REMUNERATION $912,994 $29,680 $2,783 $945,457 $500,000 Nil $500,000 $1,445,457 (1) Calculated on the basis of 166,003 SkyCity shares issued to Mr Ahearne on his commencement in the role of Chief Executive Officer. For more details, please refer to the 'Employment Agreement' section within this remuneration report. (2) Mr Ahearne will be allocated shares under the 2018 SkyCity Executive Long Term Incentive Plan in September 2021 for his role as Chief Executive Officer. The total remuneration earned by Mr Ahearne for duties relating to the Chief Operating Officer position for the financial year ended 30 June 2021 is outlined in the following table (covering the period from 1 July 2020 to 15 November 2021): SALARY AND BENEFITS PIP OUTCOME BASE OTHER SALARY KIWISAVER BENEFITS PAYMENTS(1) SUBTOTAL CASH STI DEFERRED STI LTI GRANT(2) SUBTOTAL TOTAL REMUNERATION $384,946 $12,556 $1,996 $33,488 $432,986 $92,160 $92,160 $204,950 $389,270 $822,256 (1) Reflects payments equivalent to the cash dividends declared and paid by SkyCity from the date of issue of restricted share rights under the Restricted Share Rights Plan and the SkyCity Performance Incentive Plan to the date they were transferred to Mr Ahearne. (2) Calculated on the basis of 69,711 SkyCity shares allocated to Mr Ahearne under the 2018 SkyCity Executive Long Term Incentive Plan in September 2020. 144 E C N A N R E V O G E T A R O P R O C (a) Equity Based Incentives Vested in the Financial Year Ended 30 June 2021 The following equity-based incentives vested to Mr Ahearne in the financial year ended 30 June 2021: PLAN GRANT YEAR VESTING DATE SECURITIES PERFORMANCE PERIOD PERFORMANCE MEASURE VESTING OUTCOME SHARES VESTED VALUE ON VESTING Restricted Financial 01/07/2020 Restricted 01/07/2017 – Financial and 100% 49,066 $120,996.76(1) Share Rights Year 2018 Plan Share Rights 30/06/2018 Non-Financial vested Objectives SkyCity Financial 07/09/2020 Restricted 01/07/2018 – Financial and 100% 28,101 $73,911.25(2) Performance Year 2019 Incentive Plan Share Rights 30/06/2019 Non-Financial vested Objectives (1) Determined by multiplying the number of ordinary SkyCity shares transferred to Mr Ahearne by the volume weighted average price over the last five trading days ending on (and including) 1 July 2020 (being $2.4660 per share). (2) Determined by multiplying the number of ordinary SkyCity shares transferred to Mr Ahearne by the volume weighted average price over the last five trading days ending on (and including) 7 September 2020 (being $2.6302 per share). The graphs below show the mix of remuneration that was earned by Mr Ahearne for his performance over the financial year ended 30 June 2021 for his position as Chief Executive Officer, alongside graphs illustrating the target and maximum remuneration mixes: FY21 Actual Remuneration (b) Pay Gap Mr Ahearne’s base salary remuneration ratio to the median annualised employee base salary is 26. (c) LTI Grant Mr Ahearne was granted an allocation of 69,711 shares in the company equal to $204,950 under the 2018 SkyCity Executive Long Term Incentive Plan in September 2020. This allocation relates to Mr Ahearne’s position as Chief Operating Officer. 65% 35% (d) Employment Agreement FY21 Target Remuneration 65% 35% FY21 Maximum Remuneration 65% 35% Fixed Remuneration Equity Based Remuneration Mr Ahearne’s employment agreement for the position of Chief Executive Officer is dated 13 November 2020 and reflects standard conditions that are appropriate for a senior executive of a listed Australasian company. Mr Ahearne’s employment agreement may be terminated by: • • • either Mr Ahearne 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 Ahearne or the Board otherwise wishes to terminate his employment when he is not at fault (including a redundancy situation or medical incapacity). Remuneration Report 145 The remuneration and benefits under Mr Ahearne’s employment agreement for the position of Chief Executive Officer include a base annual salary of $1,500,000 (inclusive of KiwiSaver contributions), an annual allocation of SkyCity Shares to the value of $500,000 with a 12-month restrictive period, and an annual allocation under the 2018 SkyCity Executive Long Term Incentive Plan to the value of $500,000, the first of which grant will take place in September 2021. Mr Ahearne is not a participant in the Performance Incentive Plan in his position of Chief Executive Officer. However, he received an award under that Plan for the year ended 30 June 2021 for his role as Chief Operating Officer for the period from 1 July 2020 to 15 November 2020. Other Group Executives’ Remuneration The total remuneration earned by Julie Amey for the period of the financial year ended 30 June 2021 she was employed in the position of Chief Financial Officer is outlined in the following table (covering the period from 2 May 2021 to 30 June 2021): FIXED REMUNERATION PIP OUTCOME(2) BASE SALARY(1) KIWISAVER OTHER BENEFITS SUBTOTAL CASH STI DEFERRED STI LTI GRANT SUBTOTAL RELOCATION TOTAL REMUNERATION $99,231 $2,977 $943 $103,151 $20,888 $20,888 – $41,776 $10,530 $155,457 (1) Reflects actual salary payments made to Ms Amey for the period from 2 May 2021 to 30 June 2021. (2) Reflects pro-rated entitlement under the PIP for STI and deferred STI for the period Ms Amey was employed in the postion as Chief Financial Officer. Ms Amey will be granted an allocation of SkyCity shares under the 2018 SkyCity Executive Long Term Incentive Plan in September 2021 relating to the financial year ending 30 June 2022. The total remuneration earned by Callum Mallett for the period of the financial year ended 30 June 2021 he was employed in the position of Chief Operating Officer New Zealand is outlined in the following table (covering the period from 1 February to 30 June 2021): FIXED REMUNERATION PIP OUTCOME(2) BASE SALARY(1) KIWISAVER OTHER BENEFITS SUBTOTAL CASH STI DEFERRED STI LTI GRANT SUBTOTAL TOTAL REMUNERATION $228,462 $6,854 $2,423 $237,738 $53,765 $53,765 – $107,530 $345,268 (1) Reflects actual salary payments made to Mr Mallett for the period from 1 February 2021 to 30 June 2021. (2) Reflects pro-rated entitlement under the PIP for STI and deferred STI for the period Mr Mallett was employed in the position of Chief Operating Officer New Zealand. Mr Mallett will be granted an allocation of SkyCity shares under the 2018 SkyCity Executive Long Term Incentive Plan in September 2021 relating to the financial year ending 30 June 2022. The total remuneration earned by David Christian for the period of the financial year ended 30 June 2021 he was employed in the position of Chief Operating Officer Australia is outlined in the following table (covering the period from 1 February to 30 June 2021): FIXED REMUNERATION PIP OUTCOME(2) BASE SALARY(1) SUPERANNUATION SUBTOTAL CASH STI DEFERRED STI LTI GRANT SUBTOTAL TOTAL REMUNERATION A$197,762 A$18,787 A$216,549 A$45,514 A$45,514 – A$91,028 A$307,577 (1) Reflects actual salary payments made to Mr Christian for the period from 1 February 2021 to 30 June 2021. (2) Reflects pro-rated entitlement under the PIP for STI and deferred STI for the period Mr Christian was employed in the position of Chief Operating Officer Australia. Mr Christian will be granted an allocation of SkyCity shares under the 2018 SkyCity Executive Long Term Incentive Plan in September 2021 relating to the financial year ending 30 June 2022. 146 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C Remuneration and Benefits for Graeme Stephens Graeme Stephens retired as Chief Executive Officer effective from 30 November 2020. The total remuneration received by Mr Stephens for duties relating to the Chief Executive Officer position during the financial year ended 30 June 2021 is outlined in the following table: FIXED ANNUAL REMUNERATION REMUNERATION AND BENEFITS RECEIVED ON TERMINATION BASE SALARY KIWISAVER BENEFITS SUBTOTAL PIP OUTCOME CASH STI(1) OTHER PAYMENTS(2) SALARY IN LIEU OF NOTICE(3) EX-GRATIA PAYMENT(4) ANNUAL LEAVE(5) OTHER BENEFITS(6) SUBTOTAL TOTAL REMUNERATION $637,093 $19,112 $1,614 $657,819 $436,389 $110,289 $759,836 $529,781 $140,145 $26,500 $1,456,263 $2,660,760 (1) Reflects entitlement under the PIP for STI for the financial year ended 30 June 2021. (2) Reflects payments equivalent to the cash dividends declared and paid by SkyCity from the date of issue of restricted share rights under the Restricted Share Rights Plan and the PIP to the date they were transferred to Mr Stephens. (3) Reflects six months’ salary in lieu of notice. (4) Reflects a payment equivalent to four months' salary. (5) Reflects entitled and accrued annual leave not taken by Mr Stephens. (6) Reflects a payment in lieu of the provision of health insurance, KiwiSaver contributions and unused flight benefits. In addition, Mr Stephens was awarded the following equity-based remuneration for the financial year ended 30 June 2021: • • 161,572 restricted share rights will be granted to Mr Stephens under the deferred STI component of the PIP in September 2021. The restricted share rights will vest to Mr Stephens in two equal tranches, with the first tranche vesting in September 2022 and the second tranche vesting in September 2023; and 361,827 SkyCity shares were allocated to Mr Stephens under the 2018 SkyCity Executive Long Term Incentive Plan in September 2020 with a testing date of 17 September 2023. These shares will only vest to Mr Stephens if the performance criteria, detailed under the ‘Long Term Incentive Remuneration’ section above, are met on the testing date. The following equity-based incentives vested to Mr Stephens in the financial year ended 30 June 2021: PLAN GRANT YEAR VESTING DATE SECURITIES PERFORMANCE PERIOD PERFORMANCE MEASURE VESTING OUTCOME SHARES VESTED VALUE ON VESTING Restricted Financial 01/07/2020 Restricted 01/07/2017 – Financial and 100% 251,238 $619,552(1) Share Rights Year 2018 Plan Share Rights 30/06/2018 Non-Financial vested Objectives SkyCity Financial 07/09/2020 Restricted 01/07/2018 – Financial and 100% 97,936 $257,591(2) Performance Year 2019 Incentive Plan Share Rights 30/06/2019 Non-Financial vested Objectives (1) Determined by multiplying the number of ordinary SkyCity shares transferred to Mr Stephens by the volume weighted average price over the last five trading days ending on (and including) 1 July 2020 (being $2.4660 per share). (2) Determined by multiplying the number of ordinary SkyCity shares transferred to Mr Stephens by the volume weighted average price over the last five trading days ending on (and including) 7 September 2020 (being $2.6302 per share). Mr Stephens continues to be eligible to have shares transferred to him: • • • under the SkyCity Executive Long Term Incentive Plan for allocations relating to the financial year ended 30 June 2018, subject to the performance conditions being satisfied on the relevant performance testing date; under the 2018 SkyCity Executive Long Term Incentive Plan for allocations relating to the financial years ended 30 June 2019, 30 June 2020 and 30 June 2021, subject to the performance conditions being satisfied on the relevant performance testing dates; and under the PIP, on the second anniversary of the Declaration Date for the year ended 30 June 2019 (being 6 September 2021). Remuneration Report 147 Group Executive Security Holdings The following table summarises the acquisitions and disposals of relevant interests in SkyCity securities during the period to 30 June 2021 by the current Chief Executive Officer and Chief Operating Officer Australia. No acquisitions or disposals were made during the period by the current Chief Financial Officer and Chief Operating Officer New Zealand. GROUP EXECUTIVE Michael Ahearne Chief Executive Officer David Christian Chief Operating Officer Australia NATURE OF RELEVANT INTEREST Beneficially owned Beneficially owned Beneficially owned Beneficially owned(3) Beneficially owned Beneficially owned(5) NATURE OF SECURITY DATE OF TRANSACTION DURING PERIOD CONSIDERATION (PER SECURITY) ACQUIRED/ (DISPOSED) Shares 01/07/2020 Nil(1) 49,066 Shares 09/07/2020 $2.38(2) 8,403 Shares 07/09/2020 Nil(1) 28,101 Shares (LTI 2020) 30/09/2020 $2.94 69,711 Shares 04/05/2021 Shares 04/05/2021 Nil(4) Nil(4) (94,261) 94,261 The above disclosures relate to each Group executive during such period as he/she held the relevant role. (1) Shares transferred pursuant to the terms of the 2018 SkyCity Restricted Share Rights Plan. (2) Acquisition of new shares pursuant to the share purchase plan announced by SkyCity on 17 June 2020. (3) Held by the Public Trust in accordance with the 2018 SkyCity Executive Long Term Incentive Plan. (4) Shares transferred pursuant to a personal reorganisation. (5) Shares held by Bond Street Custodians Pty Ltd. The following table summarises the relevant interests in SkyCity securities held by the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer New Zealand and Chief Operating Officer Australia as at 30 June 2021: GROUP EXECUTIVE Michael Ahearne Chief Executive Officer Julie Amey Chief Financial Officer Callum Mallett Chief Operating Officer New Zealand David Christian Chief Operating Officer Australia NATURE OF SECURITY TOTAL HELD AS AT 30 JUNE 2021 Shares Shares N/A Shares Shares Shares 120,570 166,084(1) Nil 85,819 30,000(2) 169,626(3) (1) Shares held by the Public Trust in accordance with the 2018 SkyCity Executive Long Term Incentive Plan. (2) Shares held by the Public Trust in accordance with the 2009 SkyCity Executive Long Term Incentive Plan. (3) Shares held by Bond Street Custodians Pty Ltd. LTI Vesting Calculations During the financial year ended 30 June 2021, the following vesting calculations were completed: August 2016 LTI: the third (and final) test was completed. No shares have vested to executives in respect of the 2016 allocation. All unvested shares were accordingly forfeited in accordance with the terms of the SkyCity Senior Executive Long Term Incentive Plan; and August 2017 LTI: the first and second tests were completed. To date, no shares have vested to executives in respect of the 2017 allocation. The third (and final) test will take place during August 2021 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. • • 148 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Employee Remuneration The number 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 2021, are listed in the table. For the purposes of the table, remuneration includes, where applicable (if any), (a) salary; (b) short term cash bonuses; (c) health insurance premiums and other health benefits; (d) the value of shares expected to vest under the 2020 SkyCity Performance Incentive 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 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. E C N A N R E V O G E T A R O P R O C REMUNERATION NUMBER OF EMPLOYEES $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 $310,000–$319,999 $320,000–$329,999 $330,000–$339,999 $340,000–$349,999 $350,000–$359,999 $390,000–$399,999 $400,000–$409,999 $420,000–$429,999 $430,000–$439,999 $450,000–$459,999 $520,000–$529,999 $560,000–$569,999 $580,000–$589,999 $590,000–$599,999 $630,000–$639,999 $640,000–$649,999 $730,000–$739,999 $1,790,000–$1,799,999 $2,620,000–$2,629,999 TOTAL 69 57 44 25 16 18 16 10 8 14 11 7 6 3 3 1 2 2 1 1 2 1 3 2 2 1 1 1 1 1 3 2 1 1 1 1 1 1 1 341 Remuneration Report 149 Twenty Largest Registered Shareholders as at 1 August 2021 1. HSBC Custody Nominees (Australia) Limited 106,157,389 13.96% NUMBER OF SHARES % OF SHARES 2. JP Morgan Nominees Australia Limited 3. Citicorp Nominees Pty Limited 4. HSBC Nominees (New Zealand) Limited – NZCSD 5. Citibank Nominees (New Zealand) Limited – NZCSD 6. Accident Compensation Corporation – NZCSD 7. HSBC Nominees (New Zealand) Limited A/C State Street – NZCSD 8. JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct – NZCSD 9. BNP Paribas Noms Pty Ltd 10. BNP Paribas Nominees Pty Ltd 11. BNP Paribas Nominees (NZ) Limited – NZCSD 12. HSBC Nominees A/C NZ Superannuation Fund Nominees Limited – NZCSD 13. ANZ Custodial Services New Zealand Limited – NZCSD 14. National Nominees Limited 15. New Zealand Depository Nominee Limited 16. BNP Paribas Nominees (NZ) Limited – NZCSD 17. ANZ Wholesale Australasian Share Fund – NZCSD 18. Citicorp Nominees Pty Limited 19. Masfen Securities Limited 20. PT (Booster Investments) Nominees Limited 89,129,857 60,731,654 53,585,486 46,714,257 35,070,066 32,261,558 19,821,588 19,147,212 18,839,987 18,012,059 16,131,421 13,323,928 12,318,845 12,132,394 11,543,997 8,810,026 6,782,190 5,750,986 5,525,682 11.72% 7.99% 7.05% 6.15% 4.61% 4.24% 2.61% 2.52% 2.48% 2.37% 2.12% 1.75% 1.62% 1.60% 1.52% 1.16% 0.89% 0.76% 0.73% Total 591,790,582 77.85% Total ordinary shares on issue as at 1 August 2021 were 760,205,209 of which 3,394,058 were held in aggregate by the 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. 150 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C Distribution of Ordinary Shares and Registered Shareholdings as at 1 August 2021 1–1,000 1,001–5,000 5,001–10,000 10,001–100,000 > 100,000 Total NUMBER OF SHAREHOLDERS 4,839 6,431 2,586 2,613 148 16,617 NUMBER OF SHARES 1,873,991 17,511,818 18,495,859 63,724,540 658,599,001 760,205,209 PERCENTAGE OF TOTAL ORDINARY SHARES IN THE COMPANY 0.25% 2.30% 2.43% 8.38% 86.64% 100% As at 1 August 2021, there were 1,517 shareholders (with a total of 92,385 shares) holding less than a marketable parcel of shares under the ASX Listing Rules, based on the closing share price of A$3.04. 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 2021, 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. DATE OF SUBSTANTIAL SECURITY NOTICE RELEVANT INTEREST IN NUMBER OF SHARES % OF SHARES HELD AT DATE OF NOTICE The Vanguard Group, Inc Investors Mutual Ltd Yarra Management Nominees Pty Ltd and TA Universal Investment Holdings Ltd AustralianSuper Pty Ltd Commonwealth Bank of Australia 19/12/2018 08/12/2020 14/04/2021 05/05/2021 07/05/2021 36,018,413 42,319,188 65,593,783 45,844,429 46,350,211 5.278% 5.57% 8.6284% 6.03% 6.097% Substantial security holder notices received since 30 June 2021 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 2021 was 760,205,209. Shareholder and Bondholder Information 151 Bonds On 21 May 2021, the company issued 175 million unsecured, unsubordinated, fixed rate, six-year bonds at an issue price of $1.00 per bond. The bonds pay a fixed rate of interest of 3.02% per annum until the maturity date and are quoted on the NZX Debt Market under the ticker code ‘SKC050’. Twenty Largest Registered Bondholders as at 1 August 2021 NUMBER OF BONDS % OF BONDS 1. Forsyth Barr Custodians Limited 2. Custodial Services Limited 3. FNZ Custodians Limited 4. Hobson Wealth Custodian Limited 5. BNP Paribas Nominees (NZ) Limited - NZCSD 6. National Nominees Limited - NZCSD 7. HSBC Nominees (New Zealand) Limited – NZCSD 8. Investment Custodial Services Limited 9. JBWere (NZ) Nominees Limited 10. BNP Paribas Nominees (NZ) Limited - NZCSD 11. FNZ Custodians Limited 12. Forsyth Barr Custodians Limited 13. Forsyth Barr Custodians Limited 14. FNZ Custodians Limited 15. Woolf Fisher Trust Incorporated 16. Falstaff Investments Limited 17. Tea Custodians Limited Client Property Trust Account – NZCSD 18. Custodial Services Limited 19. Kiwigold.co.nz Limited 20. Queen Street Nominees ACF Hobson Wealth - NZCSD 47,015,000 31,590,000 23,227,000 12,955,000 12,080,000 5,900,000 5,776,000 3,811,000 2,476,000 1,911,000 1,731,000 1,365,000 1,237,000 939,000 815,000 770,000 610,000 590,000 500,000 500,000 26.87% 18.05% 13.27% 7.40% 6.90% 3.37% 3.30% 2.18% 1.42% 1.09% 0.99% 0.78% 0.71% 0.54% 0.47% 0.44% 0.35% 0.34% 0.29% 0.29% Total 155,798,000 89.03% Distribution of Bonds and Registered Holdings as at 1 August 2021 NUMBER OF BONDHOLDERS NUMBER OF BONDS PERCENTAGE OF TOTAL BONDS ISSUED 1,000–5,000 5,001–10,000 10,001–100,000 > 100,000 Total 31 122 415 46 614 155,000 1,172,000 13,433,000 160,240,000 175,000,000 0.09% 0.67% 7.68% 91.56% 100% 152 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C 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 2021 (notices given by directors during the financial year ended 30 June 2021 are marked with an asterisk): Rob Campbell (Chair) Ara Ake Limited Murray Jordan Chair* Asia Pacific Village Group Limited Auckland University of Technology Chancellor* Asia Pacific Village Holdings Limited He Toutou Mo Te Ahika Trust Trustee* Chorus Limited Tourism Holdings Limited Chair and Shareholder New Zealand Rural Land Company Limited NZ Equity Partners Paua Wealth Management Limited Precinct Properties New Zealand Limited RC Custodian Limited Tutanekai Investments Limited Ultrafast Fibre Limited VGI Partners Limited WEL Networks Limited Sue Suckling 5th Element Limited Eat My Lunch Limited Insurance & Financial Services Ombudsman Scheme Commission Jacobsen Holdings Limited Jade Software Corporation Limited Rubix Limited Chair Foodstuffs’ Members Protection Trust Investment Committee Member Advisory Board Member Director and Shareholder Director Director and Shareholder Director Advisory Director* Chair Metcash Limited Metlifecare Limited Real Clarity Limited Southern Cross Benefits Limited Southern Cross Health Trust Southern Cross Hospitals Limited Southern Cross Medical Care Society Starship Foundation Stevenson Group Limited The Foodstuffs Co-operative Perpetuation Trust Silvana Schenone MinterEllisonRuddWatts New Zealand Takeovers Panel OnBeingBold Limited Sequin Family Trust Julian Cook Chair* Chair* Chair Chair Chair Chair Director* Director* Director Trustee Director Director* Director and Shareholder Director Trustee Director Director Trustee Director Trustee Partner* Member* Director* Independent Trustee* Sue Suckling Holdings Limited Managing Director Motutapu Investments Limited Taska Prosthetics Limited Chair* WEL Networks Limited Director* Director* Jennifer Owen Aspire Child Care (Mascot) Pty Ltd Owen Gaming Research Director Principal Chad Barton Bain & Company External Advisor* Casheaw Pty Limited Chair and Shareholder* Neurological Research Australia (NeuRA) Nuix Limited Director* Interim Chief Financial Officer* The following details included in the Interests Register as at 30 June 2020, or entered during the financial year ended 30 June 2021, have been removed during the financial year ended 30 June 2021: • Rob Campbell is no longer Chair of Summerset Group Holdings Limited; and • Sue Suckling is no longer Chair of Brannigans Consulting Limited, Soltians Limited or Zag Limited. Directors' Disclosures 153 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 Securities Transactions Directors disclosed, pursuant to section 148 of the New Zealand Companies Act 1993, the following acquisitions and disposals of relevant interests in SkyCity securities during the period to 30 June 2021: DIRECTOR Rob Campbell Bruce Carter(3) Sue Suckling Jennifer Owen Murray Jordan NATURE OF RELEVANT INTEREST Beneficially owned(1) Beneficially owned(1) Beneficially owned(1) Beneficially owned(4) Beneficially owned(5) Beneficially owned(6) Beneficially owned(6) Beneficially owned(7) NATURE OF SECURITY DATE OF TRANSACTION DURING PERIOD CONSIDERATION (PER SECURITY) ACQUIRED/ (DISPOSED) Shares 09/07/2020 $2.38(2) 21,008 Shares 04/09/2020 $2.60 5,000 Shares 23/02/2021 $2.90 5,000 Shares 09/07/2020 A$2.24(2) 20,983 Shares 09/07/2020 $2.38(2) 21,008 Shares 09/07/2020 A$2.24(2) 20,983 Shares 22/10/2020 A$2.79 20,000 Shares 09/07/2020 $2.38(2) 21,008 (1) Shares held by FNZ Custodians Limited on behalf of Tutanekai Investments Limited. (2) Acquisition of new shares pursuant to the share purchase plan announced by SkyCity on 17 June 2020. (3) Bruce Carter resigned as a director effective from 20 March 2021. (4) Shares held by Tarquay Pty Limited on trust for Tarquay Superannuation Fund. (5) Shares held by the trustees of The Sue Suckling Family Trust. (6) Shares held by the trustee of the Owen & Paull Retirement Fund. (7) Shares held by the trustees of Endeavour Trust. Disclosure of Directors’ Interests in Securities Directors disclosed the following relevant interests in SkyCity securities as at 30 June 2021: DIRECTOR Rob Campbell Sue Suckling Jennifer Owen Murray Jordan Silvana Schenone Julian Cook Chad Barton NATURE OF SECURITY TOTAL HELD AS AT 30 JUNE 2021 Shares Shares Shares Shares Fixed Rate Bonds Shares N/A 101,936(1) 60,949(2) 75,983(3) 94,706(4) 160,000(5) 100,000(6) Nil (1) Shares held by FNZ Custodians Limited on behalf of Tutanekai Investments Limited. (2) Shares held by the trustees of The Sue Suckling Family Trust. (3) Shares held by the trustee of the Owen & Paull Retirement Fund. (4) Shares held by the trustees of Endeavour Trust. (5) Non-beneficially owned bonds held by Silvana Schenone as independent trustee of the Sequin Family Trust. (6) Shares held by Motutapu Investments Limited. 154 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C 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 ‘SKC050’). SkyCity Entertainment Group Limited has been designated as ‘Non-Standard’ by the NZX due to the nature of the company’s constitution. In particular, the constitution places restrictions on the transfer of shares in the company in certain circumstances and provides that votes and other rights attached to shares may be disregarded and shares may be sold if these restrictions are breached, as more particularly described on pages 156 and 157 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 2021: DIRECTORS APPOINTMENT TO OFFICE Rob Campbell (Chair) 25 June 2017 Sue Suckling 9 May 2011 Subsidiary Companies The following persons held office as directors of subsidiaries of SkyCity Entertainment Group Limited as at 30 June 2021: NEW ZEALAND SUBSIDIARIES Directors Michael Ahearne, Jo Wong Companies Cashel Asset Management Limited Horizon Tourism (New Zealand) Limited Lets Play Live Media Limited New Zealand International Convention Centre Limited Otago Casinos Limited Queenstown Casinos Limited Sky Tower Limited SkyCity Action Management Limited SkyCity Auckland Limited SkyCity Auckland Holdings Limited SkyCity Casino Management Limited SkyCity Development Limited SkyCity Enterprises Limited SkyCity Hamilton Limited SkyCity Holdings Limited SkyCity International Holdings Limited SkyCity Investments Australia Limited SkyCity Investments Queenstown Limited SkyCity Management Limited SkyCity Precinct Limited SkyCity Projects Limited SkyCity Properties Limited SkyCity Properties Albert St Limited SkyCity Properties Victoria St Limited SkyCity Ventures Limited TNZ Esports Limited Jennifer Owen 5 December 2016 OVERSEAS SUBSIDIARIES Murray Jordan 5 December 2016 Directors Michael Ahearne, Jo Wong Silvana Schenone 8 June 2021 Julian Cook Chad Barton 8 June 2021 8 June 2021 Bruce Carter ceased to hold office as a director of SkyCity Entertainment Group Limited effective from 20 March 2021. Companies Horizon Tourism Limited SkyCity Investment Holdings Limited Directors Michael Ahearne, Jo Wong, David Christian Companies LPL Media Pty Limited 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 Company Disclosures 155 For the financial year ended 30 June 2021, SkyCity paid director’s fees of: €12,000 (plus VAT) to WH Partners for professional services provided by Joe Borg in relation to his directorship of SkyCity Malta Limited; and resolution put to the shareholders. There are no voting rights attached to SkyCity’s debt securities although bondholders are welcome to attend the annual meeting of shareholders. Limitations on Acquisitions of Ordinary Shares €6,000 (plus VAT) to WH Management Limited for professional services provided in relation to its directorship of SkyCity Malta Holdings Limited. The company’s constitution contains various provisions which are included to take into account the application of the: • • No director’s fees were paid to, or received by, any other director of a subsidiary company during the financial year ended 30 June 2021. • Gambling Act 2003 (New Zealand); • Casino Act 1997 (South Australia); 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 17 September 2019, NZX granted SkyCity a waiver from NZX Listing Rule 8.1.5 (which provides that no benefit or right attaching to a quoted financial product may be cancelled or varied by reason only of a transfer of that quoted financial product) to the extent that that rule would otherwise prevent SkyCity from suspending voting rights or requiring a transfer of shares in accordance with the provisions set out in the company’s constitution. Further details of those provisions are set out below. The waiver was granted following the introduction of new NZX Listing Rules on 1 January 2019 and effectively re-documents prior decisions of NZX Regulation in respect of the same matters; and a class waiver and ruling issued by NZX dated 3 April 2020 in relation to NZX Listing Rules 3.5.1, 3.5.3, 3.6.1 and 3.12.1, which, in light of the challenges posed by COVID-19, provided issuers with up to an additional 30 days to prepare and release results announcements (including preliminary interim and full year financial statements). All other waivers granted prior to the 12-month period preceding the balance date had ceased to have effect or were not relied upon during the period. Voting Rights Attached to Securities Each share gives the holder a right to attend and vote at a meeting of shareholders. Holders have the right to cast one vote per share on a poll of any • 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 11.12 of the constitution provides that if a transfer of shares results in the transferee, and the persons associated with that transferee: • • holding more than 5% of the shares in SkyCity; or increasing their combined holding further beyond 5% if: – they already hold more than 5% of the shares in SkyCity; and – the transferee has not been approved by the relevant regulatory authority as an associated casino person of any casino licence holder, then the votes attaching to all shares held by the transferee and the persons associated with that transferee are suspended unless and until either: • each regulatory authority advises that approval is not needed; or 156 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021E C N A N R E V O G E T A R O P R O C • • • 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 2021, the Board considered all such transfers and was satisfied in each case that the registration of the relevant transfer would not prejudice any casino licence. Donations Donations of $15,924.50 were made by the company during the financial year ended 30 June 2021 ($104,244 during the financial year ended 30 June 2020). 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. 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 remuneration report on pages 138 – 149 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. Credit Rating As at the date of this annual report, SkyCity Entertainment Group Limited has a BBB– rating (stable outlook) from S&P Global Ratings. Company Disclosures 157 Financial Statements and Notes for the year ended 30 June 2021 These financial statements were signed on 24 August 2021 on behalf of the Board of directors of SkyCity Entertainment Group Limited by: Rob Campbell Chair Jennifer Owen Chair of the Audit and Risk Committee 158 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited 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 Our opinion position of the Group as at 30 June 2021, its financial performance and its cash flows for the year then In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the ended in accordance with New Zealand Equivalents to International Financial Reporting Standards Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial (NZ IFRS) and International Financial Reporting Standards (IFRS). position of the Group as at 30 June 2021, 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). What we have audited The Group's financial statements on pages 166 to 217 which comprise: ● the balance sheet as at 30 June 2021; What we have audited The Group's financial statements on pages 166 to 217 which comprise: ● the income statement for the year then ended; ● the statement of comprehensive income for the year then ended; ● the balance sheet as at 30 June 2021; ● the statement of changes in equity for the year then ended; ● the income statement for the year then ended; ● the statement of cash flows for the year then ended; and ● the statement of comprehensive income for the year then ended; ● the notes to the financial statements, which include significant accounting policies and other ● the statement of changes in equity for the year then ended; explanatory information. ● the statement of cash flows for the year then ended; and ● the notes to the financial statements, which include significant accounting policies and other 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. explanatory information. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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. Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for 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. Independence Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing We are independent of the Group in accordance with Professional and Ethical Standard 1 market survey data relating to executive remuneration levels, the prior licensing of a software tool for International Code of Ethics for Assurance Practitioners (including International Independence subsidiary statutory financial statements’ preparation, other assurance services in relation to Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards compliance with banking and debt covenants and agreed-upon-procedure services in relation to the Board and the International Code of Ethics for Professional Accountants (including International allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. at the Annual General Meeting. 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, providing market survey data relating to executive remuneration levels, the prior licensing of a software tool for subsidiary statutory financial statements’ preparation, other assurance services in relation to compliance with banking and debt covenants and agreed-upon-procedure services in relation to the allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count at the Annual General Meeting. The provision of these other services has not impaired our independence as auditor of the Group. PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz 159 Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited 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. 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 2021, 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). ● the balance sheet as at 30 June 2021; ● Critically assessing the facts 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; How our audit addressed the key audit matter ● the statement of comprehensive income for the year then ended; estimated extent of damage and the estimated cost of reinstatement; We have performed an assessment of the Group’s estimates and related judgements, by: ● Reviewing the RLB expert reports on the Description of the key audit matter What we have audited Accounting for the NZICC fire The Group's financial statements on pages 166 to 217 which comprise: As disclosed in note 6 to the financial statements, the extent of damage and insurance recovery pertaining to the New Zealand International Convention Centre (NZICC) and adjacent Hobson Street Hotel (HSH) as a result of the fire, have been re- estimated by an independent external expert engaged by the Group, Rider Levett explanatory information. Bucknall Auckland Limited (RLB).These estimates, along with information provided by Fletcher Construction Company Limited (the Contractor) inform the Group’s view of the contracts work insurance recovery. Adjustments have been made by the Group to the cost of remediation estimate provided by RLB to exclude: pre-remediation expenses (site preparation and cleaning costs) which are recognised separately as other recoveries when incurred; and costs for which the recoverability has not been assessed as virtually certain. circumstances, assumptions and methodology underpinning the key estimates through ● the notes to the financial statements, which include significant accounting policies and other meetings with management and their expert, partaking on a guided tour of the NZICC and Basis for opinion HSH sites and comparison of RLB’s reports to We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs information provided by the Contractor; and (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. Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence independence and objectivity of the Group's Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards damage and insurance recovery estimate Board and the International Code of Ethics for Professional Accountants (including International expert; Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. Additionally, we have: ● Assessed the professional competence, management which supports the judgement the Group has made regarding the likelihood of We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis recovering other costs. for our opinion. As a result, in the year ended 30 June 2021 additional contract works insurance recovery of $43.6 million has been recognised as NZICC fire related income and an additional $34.7 million of capitalised work in progress has been derecognised, offset by a release from the deferred licence value liability of $7.5 million. Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing market survey data relating to executive remuneration levels, the prior licensing of a software tool for subsidiary statutory financial statements’ preparation, other assurance services in relation to ● Assessed the recoverability of the insurance compliance with banking and debt covenants and agreed-upon-procedure services in relation to the recoveries recognised giving consideration to allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper the credit risk of the respective insurers; Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count at the Annual General Meeting. The provision of these other services has not impaired our independence as auditor of the Group. ● Checked the mathematical accuracy of the underlying calculations of the fire related adjustments; ● Substantively tested a sample of other ● Reviewing legal advice obtained by recoveries back to supporting documentation to validate the amounts recorded during the year; Expert investigation in respect of the damage sustained and remediation works required remains ongoing and as a result, the estimates are highly sensitive and continue to be based on limited information. ● Reviewed the Group’s agreement with the Crown to extend the long stop date; and ● Considered the adequacy of the related financial statement disclosures. PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz PwC 160 2 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited S T N E M E T A T S L A C N A N I F I How our audit addressed the key audit matter 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 2021, 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). What we have audited The Group's financial statements on pages 166 to 217 which comprise: ● the income statement for the year then ended; ● 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 significant accounting policies and other Description of the key audit matter The most significant assumptions, and associated risk to the estimates provided, relate to the integrity of the structural steel, extent of damage to the facade of the NZICC, the percentage of contingency included in the estimates, and the timeline for remediation. Any changes to these and other assumptions can significantly impact the amounts recorded. ● the balance sheet as at 30 June 2021; Other recoveries of $127.2 million have also been recognised in the year, which primarily relate to site preparation, demolition and clean up costs on-charged by the Contractor. The assessment of recoverability of these costs as virtually explanatory information. certain is a key judgement and for some of these costs the judgement is supported by legal advice received by the Group. There is significant estimation uncertainty inherent in the balances recorded on the balance sheet and the amounts recognised in the income statement pertaining to the accounting implications of the fire. 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. Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. During the year, the Crown agreed to an extension of the Completion Long Stop Date included in the New Zealand International Convention Centre Project and Licensing Agreement. The revised date is 15 December 2027 and completion is expected before this date. Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing market survey data relating to executive remuneration levels, the prior licensing of a software tool for subsidiary statutory financial statements’ preparation, other assurance services in relation to For the Auckland and Hamilton CGUs, we compliance with banking and debt covenants and agreed-upon-procedure services in relation to the performed the following audit procedures: allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count ● Understood the process undertaken by at the Annual General Meeting. The provision of these other services has not impaired our independence as auditor of the Group. Impairment considerations in respect of goodwill and other intangible assets, including the ongoing impact of COVID-19 At 30 June 2021, the carrying amount of goodwill and casino licences totalled $585.4 million (30 June 2020: $589.5 million). Refer to note 24 of the financial statements. management to prepare the forecast cash flows; Accounting standards require an entity to assess at the end of each reporting period whether there is any indication that an asset may be impaired. There is also a requirement to perform an impairment assessment of goodwill and other indefinite life intangible assets at least annually. ● Compared the forecast cash flows used for FY22 to the Board approved business plan; ● Considered and challenged key assumptions, in particular those underpinning earnings before interest, tax, depreciation and amortisation (EBITDA) margin and the ongoing impacts of COVID-19; PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz ● Engaged our auditor’s valuation expert to assess management’s valuation conclusions and key assumptions, including the pre tax discount rates and terminal growth rates; and PwC 3 Independent Auditor's Report 161 ● the notes to the financial statements, which include significant accounting policies and other Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited Description of the key audit matter How our audit addressed the key audit matter ● Compared historical performance against Our opinion In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the budget, investigated material differences and Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial considered the impact on future cash flow position of the Group as at 30 June 2021, its financial performance and its cash flows for the year then forecasts. ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS). The Group performed an impairment assessment for the Auckland and Hamilton cash generating units (CGUs), both of which include indefinite life intangible assets. An assessment of the value in use using discounted cash flow forecast (DCF) models What we have audited was prepared for both of these CGUs. The Group's financial statements on pages 166 to 217 which comprise: For the Adelaide CGU, we performed the following audit procedures on the independent valuation prepared by management’s expert: ● Understood the process undertaken by ● the balance sheet as at 30 June 2021; ● the income statement for the year then ended; ● 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 An impairment assessment was also prepared in relation to the Adelaide CGU which includes a finite life intangible asset, the Adelaide casino licence. In the prior year, the Group recorded an impairment charge of $160.6 million against the Adelaide casino licence. The Group considered there to be indicators that the CGU may be further impaired due to the ongoing impact of the COVID-19 global pandemic on the business. explanatory information. management to prepare the forecast cash flows; ● Compared the forecast cash flows used for FY22 to the Board approved business plan; ● Considered the adoption by the Board of the five year forecast included in management’s expert’s valuation; ● Compared historical performance against Basis for opinion We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs budget, investigated material differences and (NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are considered the impact on future cash flow further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. forecasts; The Group engaged a valuation expert to perform an independent valuation of the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis ● Considered and challenged key assumptions Adelaide CGU which was prepared using a for our opinion. including the ongoing impacts of COVID-19, DCF model under the fair value less costs of international business strategy and the key Independence disposal (FVLCOD) method. drivers of EBITDA growth and overall business We are independent of the Group in accordance with Professional and Ethical Standard 1 performance, with reference to external International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards evidence where possible; Board and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. − Assess and challenge key assumptions, ● Engaged our auditor’s valuation expert to: Impairment testing is a key focus of our audit due to the materiality of the balances and the significant level of management estimation and judgement in determining the key assumptions used in the impairment assessments. The most significant of these judgements and sensitivities are disclosed in note 24. including the discount and terminal growth Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing rates; market survey data relating to executive remuneration levels, the prior licensing of a software tool for subsidiary statutory financial statements’ preparation, other assurance services in relation to compliance with banking and debt covenants and agreed-upon-procedure services in relation to the allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count at the Annual General Meeting. The provision of these other services has not impaired our independence as auditor of the Group. − Assess the reasonableness of the 2% cost of disposal assumption applied under the FVLCOD method; and In relation to the Auckland and Hamilton CGUs, the recoverable amount exceeds the carrying amount and no impairment has been recorded. − Evaluate the valuation conclusions and cross checks performed by management’s valuation expert with reference to external market evidence. In relation to Adelaide, the impairment review and independent valuation concluded on a valuation of the CGU within a reasonable range, the mid point of which implied a potential impairment reversal of $5.7 million at 30 June 2021 (with the low end of the range suggesting an increase in impairment of $16.9 million and the high end suggesting a reversal of impairment of $31.2 million). ● In conjunction with our auditor’s valuation expert, we met with management’s valuation expert to understand and challenge the valuation approach and key assumptions, including the ongoing impact of COVID-19, in particular the impact on international business; PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz PwC 162 4 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited S T N E M E T A T S L A C N A N I F I How our audit addressed the key audit matter ● Considered the key drivers for movements in Description of the key audit matter However, given the uncertainties associated with forecasting in a COVID-19 environment, and acknowledging the sensitivities of the valuation to small changes in assumptions as disclosed in note 24, management determined that the What we have audited current period valuation range did not The Group's financial statements on pages 166 to 217 which comprise: warrant a reversal of the impairment recognised in the prior period nor any additional impairment. Our opinion In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the both the independent valuation of the CGU and Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial the carrying value of the CGU from the prior position of the Group as at 30 June 2021, its financial performance and its cash flows for the year then year. Assessed whether the valuation ended in accordance with New Zealand Equivalents to International Financial Reporting Standards conclusion supports both no impairment (NZ IFRS) and International Financial Reporting Standards (IFRS). reversal and no further impairment, noting consistent with the prior year that there remains significant uncertainty in forecasting in a COVID-19 environment for the Group; and ● the income statement for the year then ended; ● the balance sheet as at 30 June 2021; ● Considered and challenged the extent of ● 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 disclosure provided in note 24 to the financial statements, with particular emphasis on the valuation sensitivities. explanatory information. For all CGUs, we assessed the appropriateness of ● the notes to the financial statements, which include significant accounting policies and other disclosures made in the financial statements including those for key assumptions and sensitivities. 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. Our audit approach Overview We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence Overall group materiality: $8.0 million, which represents We are independent of the Group in accordance with Professional and Ethical Standard 1 approximately 5% of weighted-average profit before tax from International Code of Ethics for Assurance Practitioners (including International Independence continuing operations over the past four years, excluding the net gain Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards on the Auckland car park concession transaction, NZICC fire related Board and the International Code of Ethics for Professional Accountants (including International income, NZICC fire related expenses and income from liquidated Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA damages, recorded in either or both the current and prior years. Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. We chose profit before tax from continuing operations, which is a Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing market survey data relating to executive remuneration levels, the prior licensing of a software tool for generally accepted benchmark, because in our view, it is the subsidiary statutory financial statements’ preparation, other assurance services in relation to benchmark against which the performance of the Group is most compliance with banking and debt covenants and agreed-upon-procedure services in relation to the commonly measured by users. allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count at the Annual General Meeting. The provision of these other services has not impaired our independence as auditor of the Group. We chose to use a weighted average of the last four years and to adjust it as described above because, in our view, it provides a more stable measure of the Group’s performance. Our Group audit focused on the major operating subsidiaries which were selected based on their contribution to the Group’s revenue. In aggregate, the subsidiaries selected for full scope audits contributed 96% of the Group’s revenue. We performed analytical review procedures over the other subsidiaries. As reported above, we have two key audit matters, being: ● Accounting for the NZICC fire ● PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand Impairment considerations in respect of goodwill and other T: +64 9 355 8000, www.pwc.co.nz intangible assets, including the ongoing impact of COVID-19. PwC 5 Independent Auditor's Report 163 Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made Our opinion subjective judgements; for example, in respect of significant accounting estimates that involved In our opinion, the accompanying financial statements of SkyCity Entertainment Group Limited (the making assumptions and considering future events that are inherently uncertain. As in all of our audits, Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial we also addressed the risk of management override of internal controls, including among other position of the Group as at 30 June 2021, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards matters, consideration of whether there was evidence of bias that represented a risk of material (NZ IFRS) and International Financial Reporting Standards (IFRS). misstatement due to fraud. ● the balance sheet as at 30 June 2021; What we have audited The Group's financial statements on pages 166 to 217 which comprise: Materiality The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance about whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. ● the statement of comprehensive income for the year then ended; ● the income statement for the year then ended; ● the statement of changes in equity for the year then ended; explanatory information. ● the statement of cash flows for the year then ended; and 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, ● the notes to the financial statements, which include significant accounting policies and other 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. 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. How we tailored our group audit scope 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 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis accounting processes and controls, and the industry in which the Group operates. for our opinion. The materiality levels applied in the full scope audits for selected subsidiaries are performed at a materiality level determined by reference to a proportion of Group materiality appropriate to the relative scale of the subsidiary concerned. Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards The structure of the Group means the majority of the audit work for the Group is performed by the Board and the International Code of Ethics for Professional Accountants (including International New Zealand Group audit team. Our Group audit team also included people based in Australia who Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA supported us in executing our audit procedures and brought knowledge of the trading environment Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. and legal and regulatory framework in Adelaide. Information other than the financial statements and auditor’s report The Directors are responsible for the other information. The other information comprises the information included in the Annual report, but does not include the financial statements and our auditor's report thereon. Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing market survey data relating to executive remuneration levels, the prior licensing of a software tool for subsidiary statutory financial statements’ preparation, other assurance services in relation to compliance with banking and debt covenants and agreed-upon-procedure services in relation to the allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count at the Annual General Meeting. The provision of these other services has not impaired our Our opinion on the financial statements does not cover the other information and we do not express independence as auditor of the Group. any form of audit opinion or assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial statements The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of 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. PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz PwC 164 6 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 S T N E M E T A T S L A C N A N I F I Independent auditor’s report To the shareholders of SkyCity Entertainment Group Limited 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 going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 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 2021, 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 (NZ IFRS) and International Financial Reporting Standards (IFRS). whole, are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the ● the statement of comprehensive income for the year then ended; economic decisions of users taken on the basis of these financial statements. What we have audited The Group's financial statements on pages 166 to 217 which comprise: ● the income statement for the year then ended; ● the balance sheet as at 30 June 2021; ● the statement of changes in equity for the year then ended; A further description of our responsibilities for the audit of the financial statements is located at the External Reporting Board’s website at: ● the statement of cash flows for the year then ended; and ● the notes to the financial statements, which include significant accounting policies and other https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1/ explanatory information. This description forms part of our auditor’s 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. Who we report to This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. The engagement partner on the audit resulting in this independent auditor’s report is Richard Day. Independence We are independent of the Group in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements. For and on behalf of: Our firm carries out other services for the Group in the areas of tax compliance, tax advisory, providing market survey data relating to executive remuneration levels, the prior licensing of a software tool for subsidiary statutory financial statements’ preparation, other assurance services in relation to compliance with banking and debt covenants and agreed-upon-procedure services in relation to the allocation of Community Trust Revenue, the application of revenue under the Australian JobKeeper Auckland Scheme, the reconciliation of normalised results to reported results and scrutineering of the vote count at the Annual General Meeting. The provision of these other services has not impaired our independence as auditor of the Group. Chartered Accountants 24 August 2021 PricewaterhouseCoopers, PwC Tower, 15 Customs Street West, Private Bag 92162, Auckland 1142 New Zealand T: +64 9 355 8000, www.pwc.co.nz PwC 7 Independent Auditor's Report 165 Income Statement For the year ended 30 June 2021 Continuing Operations Revenue Other income Share of losses from associates NZICC fire related income NZICC fire related expenses Employee benefits expense Asset impairment Other expenses Directors' fees Gaming taxes Direct consumables Marketing and communications Community contributions, levies and sponsorships Fair value adjustments on investment properties Earnings Before Interest, Tax, Depreciation and Amortisation Expenses (EBITDA) Depreciation and amortisation expense Depreciation on right-of-use assets Earnings Before Interest and Tax (EBIT) Net finance costs Profit Before Income Tax Income tax (expense)/benefit Profit from continuing operations Profit from discontinued operations Profit for the Year Attributable to Shareholders of the Company Earnings per share for Profit Attributable to the Shareholders of the Company Basic and diluted earnings per share The above income statement should be read in conjunction with the accompanying notes. 166 NOTES 3 4, 5 6(a) 6(b) 7 7 15 7 10 11 18 8 2021 $'000 713,216 67,936 – 170,727 (141,845) (269,126) (8,834) (108,482) (962) (36,253) (45,428) (18,718) (12,289) 7,386 317,328 (89,519) (1,894) 225,915 (32,455) 193,460 (37,334) 156,126 2020 $'000 641,653 98,924 (83) 384,500 (108,090) (284,867) (160,600) (91,332) (900) (30,254) (60,039) (16,184) (10,382) (14,055) 348,291 (85,446) (1,114) 261,731 (28,613) 233,118 2,152 235,270 – 118 156,126 235,388 CENTS 20.6 CENTS 35.4 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 S T N E M E T A T S L A C N A N I F I Statement of Comprehensive Income For the year ended 30 June 2021 NOTES Profit for the Year Other comprehensive income Items that will not be reclassified to profit or loss Asset Revaluation Reserve Asset revaluation reserve – revaluation on transfer to investment property 30 Asset revaluation reserve – income tax Items that may be subsequently reclassified to profit or loss Foreign Currency Translation Reserve Exchange differences on translation of overseas subsidiaries 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 cost Cost of hedging reserve – income tax Other Comprehensive Income for the Year, Net of Tax Total Comprehensive Income for the Year 30 30 30 The above statement of comprehensive income should be read in conjunction with the accompanying notes. 2021 $'000 156,126 8,755 (1,921) 6,834 2020 $'000 235,388 5,936 – 5,936 (4,669) 6,285 (24,859) 35,790 (3,076) (6) 463 (128) 3,515 10,349 166,475 9,154 (5,143) (1,239) (113) 462 (98) 9,308 15,244 250,632 Financial Statements 167 Balance Sheet As at 30 June 2021 ASSETS Current Assets Cash and bank balances Receivables and prepayments Derivative financial instruments Inventories Current tax receivables NZICC fire recoveries Assets held for sale Total Current Assets Non-current Assets Property, plant and equipment Intangible assets Finance lease receivable Derivative financial instruments Investment properties Deferred tax assets Right-of-use asset NZICC fire recoveries Total Non-current Assets Total Assets The above balance sheet should be read in conjunction with the accompanying notes. NOTES 26 25 31 6(c) 27 23 24 4 31 15 19 10 6(d) 2021 $'000 49,940 33,405 156 7,187 – 175,352 13,517 279,557 1,370,762 646,326 11,605 4,109 124,368 9,344 126,755 233,000 2,526,269 2,805,826 2020 $'000 54,224 42,252 53,288 6,628 1,989 49,571 11,019 218,971 1,528,902 649,531 10,574 23,100 72,400 6,877 51,967 227,000 2,570,351 2,789,322 168 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 S T N E M E T A T S L A C N A N I F I Balance Sheet (continued) As at 30 June 2021 LIABILITIES Current Liabilities Payables and provisions Interest bearing liabilities Current tax liabilities Derivative financial instruments Lease liabilities Deferred licence value Total Current Liabilities Non-current Liabilities Interest bearing liabilities Non-current payables Lease income in advance Derivative financial instruments Deferred tax liabilities Lease liabilities Deferred licence value Total Non-current Liabilities Total Liabilities Net Assets EQUITY Share capital Reserves Retained earnings Total Equity The above balance sheet should be read in conjunction with the accompanying notes. NOTES 2021 $'000 2020 $'000 28 13 31 10 16 12 22 31 20 10 17 29 30 200,165 48,031 16,256 – 3,014 1,963 269,429 221,842 302,509 776 6,113 485 153,165 684,890 440,964 282,731 20,317 36,310 7,528 57,031 115,793 207,436 885,379 1,154,808 1,651,018 10,569 39,815 24,375 45,175 52,188 214,972 669,825 1,354,715 1,434,607 1,338,223 1,288,287 (22,972) 335,767 1,651,018 (33,321) 179,641 1,434,607 Financial Statements 169 Statement of Changes in Equity For the year ended 30 June 2021 Balance as at 1 July 2019 Total comprehensive income Dividends paid Equity raising Share rights issued for employee service Net movement in treasury shares Buy back and cancellation of shares Balance as at 30 June 2020 Balance as at 1 July 2020 Total comprehensive income Equity raising Share rights issued for employee service Net movement in treasury shares NOTES SHARE CAPITAL RESERVES RETAINED EARNINGS TOTAL EQUITY $'000 $'000 1,126,996 (48,565) $'000 77,541 $'000 1,155,972 – – 177,160 3,698 436 (20,003) 1,288,287 1,288,287 – 48,737 3,253 (2,054) 9 29 29 29 29 29 29 15,244 235,388 250,632 – – – – – (33,321) (33,321) 10,349 – – – (133,288) (133,288) – – – – 179,641 179,641 156,126 – – – 177,160 3,698 436 (20,003) 1,434,607 1,434,607 166,475 48,737 3,253 (2,054) Balance as at 30 June 2021 1,338,223 (22,972) 335,767 1,651,018 The above statement of changes in equity should be read in conjunction with the accompanying notes. 170 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I Statement of Cash Flows For the year ended 30 June 2021 Cash Flows from Operating Activities Receipts from customers Payments to suppliers and employees Government grants Gaming taxes and levies paid Income taxes paid NOTES Net Cash Inflow from Operating Activities 38 Cash Flows from Investing Activities Capital additions Purchased intangible assets Auckland car park concession disposal NZICC fire related income NZICC fire related costs Lease income received in advance Net Cash Outflow from Investing Activities Cash Flows from Financing Activities Issue of new share capital Cash flows associated with derivatives New borrowings Repayment of borrowings Dividends paid to company shareholders Interest paid Lease interest paid Buy back of share capital Repayment of lease liabilities 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 Bank Balances at the End of the Year 9 14 26 The above statement of cash flows should be read in conjunction with the accompanying notes. 2021 $'000 718,898 (397,713) 28,643 349,828 (46,074) (15,569) 288,185 (171,673) (5,799) – 30,533 (108,040) – (254,979) 46,683 17,669 208,031 (267,447) – (35,857) (2,879) 2020 $'000 655,470 (480,613) 27,354 202,211 (40,988) (41,057) 120,166 (326,877) (20,515) 128,946 106,000 (26,638) 39,815 (99,269) 177,597 (2,327) 45,814 (34,127) (133,288) (41,444) – – (20,003) (3,690) (37,490) (4,284) 54,224 49,940 (469) (8,247) 12,650 41,574 54,224 Financial Statements 171 1 Summary of Significant Accounting Policies SkyCity Entertainment Group Limited (Company) and its subsidiaries (together, SkyCity or the Group) operate in the gaming, entertainment, hotel, convention, hospitality 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 Company is registered under the Companies Act 1993 and is an FMC reporting entity under Part 7 of the Financial Markets Conduct Act 2013. The address of its registered office is 99 Albert Street, Auckland. The Company is dual-listed on the New Zealand and Australian stock exchanges (NZX and ASX respectively). These consolidated financial statements were approved for issue by the Board of directors on 24 August 2021. For the purposes of complying with generally accepted accounting practice in New Zealand (GAAP), the Group is a for-profit entity. (a) Basis of Preparation The financial statements of the Group have been prepared in accordance with GAAP. They comply with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS), International Financial Reporting Standards (IFRS), the requirements of Part 7 of the Financial Markets Conduct Act 2013 and the NZX Main Board Listing Rules. The Group financial statements incorporate the assets and liabilities of all subsidiaries of the Group as at 30 June 2021 and the results of all subsidiaries for the year then ended. Measurement Basis These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets and liabilities, as identified in the accounting policies below and in the notes. Presentation Currency The financial statements are presented in New Zealand dollars, which is the Company's functional currency. Amounts are rounded to the nearest thousand dollars, unless otherwise stated. Non-GAAP Financial Information The Group’s standard profit measure prepared under GAAP is profit for the year. When discussing financial performance, the Group also uses non-GAAP financial information, which is not prepared in accordance with NZ IFRS and therefore may not be comparable to similar financial information presented by other entities. The directors and management believe that this non-GAAP financial information provides useful information to readers of the financial statements to assist in the understanding of the Group’s financial performance and is consistent with the information used internally to evaluate the performance of business units. Definitions of non-GAAP financial information used in these financial statements are: • EBITDA: Earnings before interest, tax, depreciation and amortisation; and • EBIT: Earnings before interest and tax Critical Accounting Estimates and Judgements The preparation of financial statements requires the use of certain critical accounting estimates and the exercise of judgement regarding the application of accounting policies. The critical estimates and judgements made in the preparation of these financial statements relate to the following: • • • • goodwill and casino licences that have an indefinite useful life are impairment tested annually, which requires the use of key estimates. Details of the estimates made are provided in note 24; the SkyCity Adelaide casino licence, which has a finite useful life, was impaired in the prior period and consequently was tested for impairment in the current period. This impairment testing required the use of key estimates, which are discussed in note 24(c); as reported in the Group’s 30 June 2020 financial statements, in October 2019 there was a significant fire at the construction site of the New Zealand International Convention Centre (NZICC). Accounting for the consequences of the fire has required the exercise of judgement and the use of estimates. Details of the judgements and estimates made are provided in note 6; investment properties are carried at fair value. Determining the fair value of properties requires the use of estimates. Details of estimates made are provided in note 15; and 172 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I There are inherent uncertainties in both New Zealand and Australia relating to forecasting earnings in the COVID-19 environment. That notwithstanding, due to the capital raise conducted in the prior year, and the funding available through the syndicated banking facility, the directors have determined that there are no material uncertainties related to SkyCity being a going concern. Accordingly, the directors have concluded that it is appropriate that these financial statements continue to be prepared on a going concern basis. (c) Principles of Consolidation Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed, 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. (d) Foreign Currency Translation (i) Transactions and Balances Items included in the financial statements of each Group entity are measured using that entity’s functional currency (which is the currency that best reflects the economic substance of the events and circumstances relevant to that operation). 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. • properties that were transferred from property, plant and equipment to investment properties at 30 June 2021 were revalued to fair value prior to the transfer, which required the use of key estimates. Details of estimates made are provided in note 15. (b) COVID-19 On 11 March 2020, the World Health Organization declared a global pandemic as a result of the outbreak and spread of COVID-19. As a result of the pandemic, SkyCity has faced a number of closures and other trading restrictions during the 2020 and 2021 financial years. In the comparative period, SkyCity took a number of actions to manage the impacts of COVID-19. Those actions included a rapid restructure of the New Zealand workforce, the implementation of cost and capital savings initiatives, an equity raising, the arrangement of new bank facilities and securing covenant waivers in relation to lending facilities. The financial impacts of COVID-19 in the comparative period included a reduction in revenue, the receipt of wage subsidies from the New Zealand and Australian Governments, increased impairment of accounts receivable, reductions in the fair value of investment properties and the impairment of the SkyCity Adelaide casino licence. Full details of the impacts of COVID-19 on the comparative period are disclosed in the 30 June 2020 financial statements. During the current year: • • • • the SkyCity Auckland site was closed from 12 August to 30 August 2020, 15 February to 17 February 2021 and 28 February to 6 March 2021 and operated with social distancing restrictions from 30 August to 8 October 2020, 18 February to 22 February 2021 and 7 March to 11 March 2021; the SkyCity Adelaide site was closed for three days from 18 November 2020 and operated under government social distancing restrictions for the majority of the remainder of the year; the Group has continued to receive both the New Zealand Government wage subsidy and Australian JobKeeper payments (note 5); and the SkyCity Board resolved to voluntarily return a portion of the New Zealand Government wage subsidy and Australian JobKeeper payments that it had received (note 5). Subsequent to the reporting date, the SkyCity Adelaide site has again been closed due to COVID-19 trading restrictions imposed by the South Australian Government, and all New Zealand sites have been closed due to restrictions imposed by the New Zealand Government (note 39). Notes to the Financial Statements 173 Translation differences on financial assets and liabilities carried at fair value through profit or loss are recognised in the Income Statement as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equity instruments classified at fair value through other comprehensive income are included in the Statement of Comprehensive Income. (h) Standards, Amendments and Interpretations to Existing Standards that are not yet Effective There are no published new or amended standards or interpretations that become effective on or after 1 July 2021 that would have a material impact on the Group’s financial statements. (ii) Foreign Operations The results and financial position of foreign entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as outlined below: • • • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates; and all resulting exchange differences are recognised 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. (e) Goods and Services Tax (GST) The Income Statement, Statement of Cash Flows, Statement of Comprehensive Income 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. (f) Statement of Cash Flows Cash flows associated with derivatives that are part of a hedging relationship are off-set against cash flows associated with the hedged item. (g) New Accounting Standards Adopted in the Year The accounting policies that materially affect recognition and measurement in the financial statements have been applied on a basis consistent with the prior year. (i) Future Change in Intangible Assets Accounting Policy In March 2021, the IFRS Interpretations Committee (Committee), which is responsible for interpreting the application of IFRS, issued an agenda decision that the costs incurred in configuring and customising software provided under software as a service arrangements (SaaS) must be expensed unless they: • • create an intangible asset, separate from the software, that the customer controls; or are paid to the supplier of the cloud-based software for significant customisation work, in which case the costs are recorded as a prepayment for services and amortised over the expected term of the SaaS arrangement. The Committee’s agenda decision was ratified by the International Accounting Standards Board in April 2021. Compliance with the Committee’s decision necessitates a change to SkyCity’s intangible assets accounting policy, as SkyCity has to date recognised such costs as intangible assets. Making this change will require a retrospective restatement of prior period financial statements in the year in which the revised accounting policy is adopted. To implement this change, SkyCity is currently examining all historically capitalised software configuration and customisation costs relating to SaaS arrangements to identify the level of restatement required. Given the number and complexity of the Group’s software arrangements, SkyCity has decided to implement the revised accounting policy in the 30 June 2022 annual financial statements, with full compliance in the 31 December 2021 interim financial statements. While the financial impact of the revised accounting policy is still being quantified, it is likely to be material for financial reporting purposes. The change will reduce intangible assets and associated amortisation, increase operating expenses, and reclassify the relevant spend from an investing to an operating cashflow. The change may also result in the recognition of prepayments. 174 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 2 Segment Information Operating segments are reported in a manner consistent with the internal reports that the Chief Executive Officer (CEO), who is the chief operating decision maker, uses to assess performance and allocate resources. (a) Primary Reporting Format – Business Segments 2021 Gaming revenue Online revenue Non-gaming revenue Other income NZICC fire income Liquidated damages Total revenue Expenses NZICC fire expenses Depreciation and amortisation Segment profit/(loss) (EBIT) Net finance costs Profit before income tax SKYCITY AUCKLAND OTHER NZ OPERATIONS SKYCITY ADELAIDE INTERNATIONAL BUSINESS CORPORATE /GROUP $'000 $'000 $'000 $'000 $'000 345,737 65,360 143,937 24,547 – 81,300 9,640 170,727 39,500 13,140 10,129 1,220 – – – 36,359 16,596 – – – 35 – – – – – – 980 – – TOTAL $'000 579,581 13,140 127,823 28,436 170,727 39,500 646,904 89,849 196,892 24,582 980 959,207 (243,805) (43,307) (154,622) (21,474) (36,826) (500,034) (141,845) (45,514) 215,740 – – (5,887) (22,794) – – – (141,845) (17,218) (91,413) 40,655 19,476 3,108 (53,064) 225,915 (32,455) 193,460 Segment assets 1,924,219 109,669 597,282 (15,679) 190,335 2,805,826 Net additions to non-current assets (other than financial assets and deferred tax) 2020 Gaming revenue Online revenue Non-gaming revenue Other income NZICC fire income Sale of Auckland car park concession 52,660 3,783 149,900 – 12,217 218,560 312,282 51,554 90,995 75,948 – 118,094 20,586 384,500 66,431 4,521 8,738 2,428 – – – 18,824 8,327 – – – – 8 – – – – – 530,779 4,521 145,656 1,144 32,493 – – 384,500 66,431 Total revenue 901,893 67,241 118,146 75,956 1,144 1,164,380 Shares of net profits/(losses) of associates – (83) – – – (83) Expenses (292,198) (41,625) (107,126) (72,184) (34,183) (547,316) Impairment of goodwill – NZICC fire expenses (108,090) – – (160,600) – Depreciation and amortisation (46,073) (6,159) (19,090) – – – – – (160,600) (108,090) (15,238) (86,560) Segment profit/(loss) (EBIT) 455,532 19,374 (168,670) 3,772 (48,277) 261,731 Net finance costs (including discontinued operations) Less: Discontinued operations before tax Profit before income tax from continuing operations (28,613) 118 (28,495) Segment assets 1,738,081 100,891 617,139 Net additions to non-current assets (other than financial assets and deferred tax) 147,380 9,573 229,369 – – 333,211 2,789,322 19,692 406,014 175 (b) Secondary Reporting Format – Geographical Segments New Zealand Australia TOTAL REVENUE NON-CURRENT ASSETS EXCLUDING FINANCIAL INSTRUMENTS AND DEFERRED TAX ASSETS 2021 $'000 2020 $'000 2021 $'000 2020 $'000 745,932 1,021,158 1,931,543 1,951,348 213,275 143,222 581,273 589,026 959,207 1,164,380 2,512,816 2,540,374 (c) Description of Segments The Group is organised into the following main operating segments: SkyCity Auckland This segment consists of the Group’s Auckland operations and includes casino operations, hotels and conventions (including the NZICC), food and beverage, Sky Tower, investment properties and a number of other related activities. This segment does not include International Business operations. Other NZ Operations This segment consists of the Group's operations at SkyCity Hamilton, SkyCity Queenstown and SkyCity Wharf, Lets Play Live Media and online gaming. This segment does not include International Business operations. SkyCity Adelaide This segment consists of the Group’s Adelaide operations, which comprise casino operations, hotel and food and beverage. This segment does not include International Business operations. International Business This segment comprises gaming operations for international customers, most of whom are from Asia. The revenue is generated at SkyCity's Auckland, Adelaide, Queenstown and Hamilton locations. The results of the segment include commission and complimentary play. No assets are allocated to this segment. Corporate/Group This segment includes head office functions and funding entities. It is not considered an operating segment. 176 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 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. Revenue is recognised at the conclusion of each game. International Business rebates are accounted for as a reduction in gaming revenue. The revenue from the online casino is from New Zealand based players using technology developed by and under a Malta gaming licence held by Gaming Innovation Group Inc (GiG). SkyCity is not the principal transacting with casino customers. Revenue is reported net of GiG costs allowable under the arrangement. Non-gaming revenues include revenues arising from hotels and conventions, food and beverage, Sky Tower, car parking and other sources. These revenues are recognised when the associated goods or services have been provided. Gaming Non-gaming Online gaming Total revenue 2021 $'000 572,253 127,823 13,140 713,216 2020 $'000 491,477 145,655 4,521 641,653 The Group provides complimentary hotel accommodation, food and beverage and other goods and services to certain groups of customers. As the goods and services offered under these arrangements are tailored to meet the needs of individual customers, it is not practical to allocate total revenue received to all of the goods and services provided. Consequently, this revenue is all recognised as gaming revenue. The retail value of complimentary items provided in the current year was $18.9 million (2020: $19.5 million). Reconciliation to the segment note Total revenue Gain on sale of Auckland car park concession Other income Government grants Liquidated damages NZICC fire income Total revenue as per Income Statement International Business rebates Total revenue as per segment note 4 Auckland Car Park Transaction Net gain on sale of the Auckland car park concession NOTES 3 4 5 5 5 6 2021 $'000 713,216 – 1,622 26,814 39,500 170,727 951,879 7,328 959,207 2021 $'000 – – 2020 $'000 641,653 66,431 3,310 29,183 – 384,500 1,125,077 39,303 1,164,380 2020 $'000 66,431 66,431 Notes to the Financial Statements 177 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 for $220.0 million, to be paid upfront in a lump sum on completion. The agreement: • • • gives Macquarie the right to undertake the operations and management of the approximately 3,200 car parks under the existing Auckland casino/hotel complex and the 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”). These car parks will also be available to the public. On 19 August 2019, the Auckland car park concession transaction was completed and SkyCity received $220.0 million. Macquarie took over the main site car park and the initial 600 NZICC car parks and was to be provided with approximately 650 further NZICC car parks no later than 31 December 2020. However, due to the NZICC fire (see note 6), that did not occur. Nested Car Parks The Group determined that it retains the significant risks and rewards of ownership of these car parks. As a result, the Group continued to recognise the car parks as its property, plant and equipment and has recognised its obligation to Macquarie as a financial liability. The liability was initially recognised at its fair value of $45.8 million. Main Site and Initial 600 NZICC Unnested Car Parks The Group determined, based on an evaluation of the terms and conditions of the arrangement, including the proportion of the $220.0 million concession payment relating to these car parks amounting to substantially all of the fair value of these car parks, that substantially all the significant risks and rewards of ownership of these unnested car parks passed to the concession holder on 19 August 2019. Therefore, this part of the concession payment has been accounted for as a finance lease (note 12). As a result of this determination, as at 19 August 2019: • • • • • the carrying value of these car parks of $96.6 million was derecognised; a finance lease receivable of $133.2 million for these car parks was recognised and immediately settled in cash by the upfront payment; a finance lease receivable of $9.9 million was recognised for the residual value of these car parks (the value beyond the period of the concession term); an adjustment to the deferred licence value liability associated with the NZICC of $24.2 million was recognised in the Income Statement; and a resulting gain of $66.4 million was recognised in the Income Statement. In determining the carrying value, judgement was required to distinguish the value of the unnested car parks from the value of the Auckland casino/hotel asset. Judgement was also required to determine the carrying value of the initial 600 NZICC car parks. Remaining Approximately 650 Further NZICC Unnested Car Parks At 30 June 2020, the Group determined, given the inability to determine when these car parks would be provided to Macquarie, that it was likely that this part of the concession should be treated as an operating lease and the car parks classified as investment property. On that basis, in 2020, $27.1 million of costs associated with these car parks were transferred from property, plant and equipment (note 23) to investment properties (note 15) and the Group treated $39.8 million of the $220.0 million concession payment as lease income received in advance. From January 2021, delay payments to Macquarie have been deducted from the $39.8 million allocation of the concession payment for the purposes of making the lease determination. As a result, the portion of the concession payment relating to these car parks would not amount to substantially all of the fair value of these car parks; consequently, classification as an operating lease remained appropriate. As a result of the updated NZICC damage estimates (see note 6), a further $2.2 million has been transferred from property plant and equipment (note 23) to investment properties (note 15) in the current year. 178 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 5 Other Income Net (loss)/gain on disposal of property, plant and equipment Dividend income Rental income from investment properties Government grants Liquidated damages Government Grants 2021 $'000 (528) 2 2,148 26,814 39,500 67,936 2020 $'000 348 9 2,953 29,183 – 32,493 As part of its COVID-19 response, the New Zealand Government introduced a wage subsidy scheme to enable businesses to retain employees. SkyCity met the eligibility criteria for that scheme and applied for, and received, $10.2 million of subsidies for the current financial year (30 June 2020: $20.9 million). The Australian Government also introduced wage subsidies (referred to as JobKeeper payments) as part of its response to the COVID-19 pandemic. SkyCity met the eligibility criteria for that scheme and applied for, and received, $16.6 million (A$15.4 million) of JobKeeper payments for the current financial year (30 June 2020: NZ$8.3 million, A$7.8 million). Despite having met all of the respective eligibility criteria for the New Zealand wage subsidy scheme and JobKeeper payments, in June 2021 the SkyCity Board resolved to make a voluntary repayment of $6.7 million of wage subsidies received from the New Zealand Government and $3.3 million (A$3.1 million) of JobKeeper payments received from the Australian Government. These amounts are recognised as an expense (note 7) and as a provision at 30 June 2021 (note 28). The $6.7 million voluntary repayment to the New Zealand Government was made on 27 July 2021. It is anticipated that the voluntary repayment to the Australian Government will be made in September 2021 (note 39). Liquidated Damages Included within the Fletcher Construction Company Limited (FCC or the Contractor) construction contracts for the NZICC and Horizon Hotel is the right to liquidated damages if certain milestones are not met. To 30 June 2020, SkyCity withheld $39.5 million from payments to FCC and disclosed this amount as a contingent asset for liquidated damages. As part of a settlement agreement signed on 30 November 2020, FCC agreed to not challenge retention of the amount, and accordingly $39.5 million has been recognised as other income in the current financial period. 6 NZICC Fire On 22 October 2019, there was a significant fire at the NZICC construction site. The fire caused extensive damage to the NZICC and also damaged Horizon Hotel, which is being constructed on the adjacent site. The Group has appointed an independent expert, Rider Levett Bucknall Auckland Limited (RLB), to assist with assessing the value of damage from the fire and the cost of remediation. The damage assessment and reconstruction scope process is still underway by the Contractor. The NZICC is being built under an agreement between the Group and the Crown. Under that agreement, the NZICC must be completed by a specified date, referred to as the completion long stop date. Subsequent to the reporting date, the Crown has agreed to an extension of the completion long stop date – the revised date is now 15 December 2027 (previously 2 January 2025). SkyCity expects to complete the NZICC before this date. Both NZICC and Horizon Hotel are insured, and the insurers have acknowledged the fire event and confirmed that SkyCity's contract works policy will respond in relation to damage caused by the fire. Any costs not covered by insurance are expected to be incurred by or sought from FCC who is the contractor constructing both buildings. Notes to the Financial Statements 179 In accounting for the impact of the fire, a number of significant judgements and estimates have been made. The most significant assumptions, and associated risk to the estimates provided, relate to the extent of the damage to the structural steel and facade of the NZICC building and the uncertain cost to remediate, the percentage of contingency included in the estimates, and the timeline for remediation. These judgements and estimates will continue to be reviewed as new information becomes available. It is possible that the actual financial impacts of the fire will differ from those included in these financial statements and those differences may be material. Details of further judgements and estimates made are provided throughout this note. (a) Income Other income Contract works insurance recovery Other recoveries Liquidated damages (Nelson Street car park access) 2021 $'000 43,600 127,127 – 170,727 2020 $'000 336,702 37,456 10,342 384,500 Contract Works Insurance Recovery The accounting treatment of the insurance recovery for the damage is dependent on the relationship between SkyCity, the insurers and the Contractor. Consequently, determining the nature of this relationship is a key judgement. It is the Group's view, supported by legal advice, that SkyCity is the principal in the insurance relationship and therefore receives, and has control over, all insurance proceeds. As a result of this relationship, the Group recognises the expected insurance proceeds for reconstruction of the fire damage as income and a receivable. Payments to the Contractor for the reconstruction are separately capitalised as the development of the new assets occurs over time. While the insurers have acknowledged the fire event and confirmed that SkyCity's contracts works policy will respond in relation to the damage caused by the fire to the NZICC and Horizon Hotel, the final insurance recovery for the reinstatement costs will be dependent on the final view of the insurer as the claims are presented. The damage assessment and reconstruction scope process is still underway by the Contractor so no complete reconstruction cost or damage estimates have been confirmed at this stage. Accordingly, the Group has engaged RLB to estimate reconstruction costs. These estimates along with information provided by the Contractor inform the Group's view of the contracts work insurance recovery. Adjustments have been made by the Group to the estimates provided by RLB to exclude pre-remediation expenses (site preparation and clearing costs), which are recognised separately as other recoveries when incurred and to remove costs for which the recoverability has not been assessed to be virtually certain at this stage. RLB’s estimates are based on limited information and are highly sensitive to the actual extent of damage and could be further affected by potential market movements in construction costs. RLB has been provided with various updates and briefings by the Contractor, SkyCity and its advisors to assist them in preparing their estimate. For the NZICC, the insurance recovery for the reconstruction costs after taking into account the above adjustments has been estimated to be between $365.0 million and $450.0 million (2020: between $330.0 million and $375.0 million). For Horizon Hotel, the insurance recovery for the reconstruction costs has been estimated at between $14.6 million and $21.0 million (2020: $6.0 million). The Group has assumed an insurance recovery for both buildings of $379.6 million (2020: $336.0 million), being the lower end of the NZICC and Horizon Hotel ranges. The Group considers recovery of this amount to be virtually certain. Given the uncertainty involved in making this assessment, both amounts include a significant contingency (the $365.0 million amount includes a 20% contingency, while the $450.0 million amount includes a 35% contingency). These estimates are highly sensitive to the actual extent of damage and the ultimate insurance recovery may differ, potentially materially, from the current assessment. 180 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I Other Recoveries In addition to recovery of the expected reconstruction costs, the Group seeks recovery of additional items, which are recognised as other recoveries when they are incurred and meet the virtual certainty threshold. These primarily relate to site preparation, demolition and clearing costs on-charged by the Contractor but also include: • • • • • business interruption costs and lost gross profit while the Auckland precinct was closed or affected by the fire; payments required to be made by SkyCity to Macquarie under the Auckland Car Park Concession Agreement (for lack of access to the NZICC car parks); costs of professional advisers assisting the Group as a result of the fire; insurance premiums and other project costs for additional periods due to construction delays; and additional ongoing costs as a result of the fire. In the current period, recovery of costs incurred of $127.1 million (2020: $37.5 million) has been assessed to be virtually certain with the recovery of an additional $14.4 million (2020: $8.9 million) assessed as probable and therefore disclosed as a contingent asset (note 36). The assessment of recoverability of these costs as virtually certain or probable is a key judgement and for some of these costs the judgement is supported by legal advice received by the Group (note 36). Initial recovery for these additional items will be sought from insurers where appropriate. To the extent recovery under the Group’s insurance policies is not available, recovery will be sought from the Contractor, including all insurance excesses. (b) Expenses Write-off of NZICC and Horizon Hotel capitalised work-in-progress Release from deferred licence value liability NZICC obligation Site preparation, demolition and other costs 2021 $'000 34,713 (7,536) (6,551) 121,219 141,845 2020 $'000 193,868 (165,785) 43,047 36,960 108,090 Write-off of NZICC and Horizon Hotel Capitalised Work-in-Progress materially once further assessment of the damage to both buildings has been completed. The fire is accounted for as the disposal of the damaged asset and the purchase of new or part replacement of repaired component parts. As a result, the carrying value of the damaged/destroyed parts of the NZICC and Horizon Hotel are expensed. As the investigation of the extent of damage continues, more damaged components may be identified and written off. Based on updated estimates provided by RLB, the Group has estimated that approximately 55% (30 June 2020: 52%) of the NZICC and 13% (30 June 2020: 5%) of the Horizon Hotel construction work to date has been destroyed and will need to be replaced. As a result, approximately $228.6 million of costs previously capitalised as work in progress in property, plant and equipment have been written off. This is an increase of $34.7 million in the current financial year (note 23). This estimate is highly sensitive to the actual extent of damage and the ultimate write off may differ Future costs (external and internal) related to the replacement of the derecognised asset components will be capitalised as incurred as a new asset. Release from Deferred Licence Value Liability In 2016, SkyCity accounted for the granting of the NZICC Auckland casino licence enhancements and recognised a deferred licence value liability of $405.0 million. Based on the Group’s accounting policy adopted in 2014 (at the time of recognising the Adelaide casino licence enhancements), this amount was to be accounted for as a reduction in the carrying value of the NZICC upon completion. The deferred licence value would normally be allocated against each component asset of the NZICC upon completion, and therefore when derecognising some components (as detailed above) there is also a requirement under the Group’s accounting policy to release a portion of the deferred licence value liability. 181 The amount of the release has been estimated at $173.3 million (30 June 2020: $165.8 million) based on the latest estimated percentage of damage to the NZICC. This represents 45.5% (30 June 2020: 43.5%) of the remaining deferred licence value liability (the NZICC was estimated to be 83% complete prior to the fire). The updated estimated damage percentage has resulted in a $7.5 million release of the deferred licence value liability in the current financial period The ultimate transfer of the deferred licence value liability is highly sensitive to the actual extent of damage and may differ from this assessment once further assessment of the damage to NZICC has been completed. As a result, it is possible the amount of the deferred licence value liability transferred may change materially. Refer to note 17 for details of the deferred licence value liability release. NZICC Obligation The Group has recognised a liability to reconstruct the assets associated with the initial 600 NZICC car parks that are required to be provided to Macquarie (note 4). The Group has estimated this to be $36.5 million (30 June 2020: $43.0 million), based on an estimate prepared by RLB. The ultimate cost for reconstructing these assets may differ materially from this assessment once detailed planning is completed and the actual extent of the damage is known. Site Preparation, Demolition and Other Costs These costs primarily relate to site preparation and clearing costs on-charged by the Contractor. These costs are generally recoverable from the insurers. To the extent that recovery of these costs is considered virtually certain, a matching amount is included in NZICC fire income above. (c) Current Assets Insurance recoveries for damages to the NZICC and Horizon Hotel Other recoveries Recovery of liquidated damages Payments received from the insurers Reclassification to non-current receivables (refer note below) These assets relate to: 2021 $'000 380,302 164,583 – (136,533) (233,000) 175,352 2020 $'000 336,702 37,456 8,413 (106,000) (227,000) 49,571 Insurance Recovery for Damage to the NZICC and Horizon Hotel Insurance recoveries to cover the reinstatement to the pre fire condition include amounts related to the damage to the NZICC ($365.0 million, 30 June 2020: $330.0 million), Horizon Hotel ($14.6 million; 30 June 2020: $6.0 million) and various ICT equipment ($0.7 million; 30 June 2020 $0.7 million). Other Recoveries These recoveries primarily relate to site preparation, demolition and clearing costs incurred and on-charged by the Contractor (note 6a). The Group believes that recovery of this amount is virtually certain. Payments Received from the Insurers To date, the Group has received payment from the insurers of $135.5 million towards site preparation, clearing costs and the cost of remediation. The Group has also received an initial $1.0 million payment from insurers towards its business interruption claim. 182 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I (d) Non-current Assets Insurance recoveries for damages to the NZICC and Horizon Hotel 2021 $'000 233,000 233,000 2020 $'000 227,000 227,000 The split between current and non-current is based on estimated cash flows associated with the anticipated timing of the reconstruction. 7 Expenses Other Expenses Utilities, insurance and rates Onerous contract expense (relating to the Wharf Casino lease) Other property expenses ICT related expenses Professional fees Other items Government grants repaid (note 5) Expenses relating to short-term leases and leases of low-value assets Impairment of receivables Depreciation and Amortisation (excluding right-of-use assets) Depreciation Casino licence amortisation (Adelaide) Computer software amortisation Gaming machine entitlements amortisation Impairment Impairment of property plant and equipment (note 23) Impairment of intangible assets (note 24) Reclassification of Expenses 2021 $'000 22,848 986 17,247 15,835 8,678 32,062 10,006 803 17 108,482 73,151 2,629 13,666 73 89,519 8,834 – 8,834 2020 $'000 21,949 958 13,325 13,796 8,376 26,043 – 1,203 5,682 91,332 67,459 5,507 12,480 – 85,446 – 160,600 160,600 In the current period, a number of expenses have been reclassified to more closely align with internal reporting. Expenses for the comparative period have also been reclassified to be consistent with the current year's expense classification. There has been no impact on total expenses or profit. Notes to the Financial Statements 183 Auditor's Fees During the year the fees outlined in the table below were incurred for services provided by the Company's auditor and its related practices. The Group employs PricewaterhouseCoopers (PwC) on assignments additional to their statutory audit duties where PwC's expertise and experience with the Group are important and auditor independence is not impaired. For other work, the Group's External Audit Independence Policy requires advisers other than PwC to be engaged wherever practicable. Tax advisory services relates to ad-hoc queries covering a range of tax related matters. PwC also undertook: • agreed-upon procedures in relation to the Group's Community Trust allocation of revenue; assessment of the application of revenue under the Australian JobKeeper scheme; assessment of the normalisation of revenue disclosed in the annual report; and scrutineering of the vote count at the Company's annual meeting; and • other assurance engagements in relation to compliance with banking and debt covenants. 2021 $'000 2020 $'000 (a) Assurance and Agreed upon Procedure Services Audit and review of financial statements PwC New Zealand PwC Australia PwC Hong Kong PwC Malta Total audit and review fees Performed by PwC New Zealand Other assurance services Agreed upon procedures Performed by PwC Australia Agreed upon procedures Total remuneration for other assurance services and agreed upon procedures 888 52 24 51 1,015 25 19 9 53 Total remuneration for assurance and agreed upon procedures services 1,068 (b) Other Services Performed by PwC New Zealand Tax compliance services Tax advisory services Provision of market survey data relating to executive remuneration levels Provision of software tool for subsidiary statutory financial statement preparation Performed by PwC Australia Tax compliance services Tax advisory services Performed by PwC Hong Kong Tax advisory services Performed by PwC Singapore Tax advisory services Total remuneration for other services Total fees expense 184 – 55 30 – 43 207 17 19 371 1,439 755 74 23 42 894 20 28 – 48 942 1 78 – 12 50 63 26 – 230 1,172 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 8 Earnings per Share Accounting Policy (i) Basic Earnings per Share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted Earnings per Share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 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 9 Dividends Accounting Policy 2021 Number 2020 Number 759,687,194 664,946,279 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) 2021 $'000 – – – – – 2020 $'000 66,867 66,421 133,288 10.0 10.0 Subsequent to the reporting date, the directors declared a dividend of 7.0 cents per share for the year ended 30 June 2021. Notes to the Financial Statements 185 Subsequent to initial recognition: • lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made; and • right-of-use assets are amortised on a straight-line basis over the remaining term of the lease (or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term). A small number of immaterial, short-term leases have not been included in the calculation of lease liabilities or right-of-use assets. Payments made in relation to these leases are recognised on a straight-line basis over the lease term. The Group has a small number of long term leases. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Extension and termination options are included in a number of leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. 10 Leases – SkyCity as the Lessee Accounting Policy Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • • • fixed payments (including in-substance fixed payments), less any lease incentives receivable; variable lease payments that are based on an index or a rate; and payments to be made under reasonably certain extension options. The lease payments are discounted using the interest rate implicit in the lease. If, as is generally the case, that rate cannot be readily determined, the Group's incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The incremental borrowing rate is calculated as follows; • • • where possible, uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received; uses a build-up approach that starts with a risk free interest rate adjusted for credit risk; and makes adjustments specific to the lease (eg. term, country, currency and security). The weighted average incremental borrowing rate for the Group's leases is 5.3% (with rates ranging from 3.3% to 6.0%). Right-of-use assets are measured at cost comprising the following: • • the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date; • any initial direct costs; and • restoration costs. 186 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I The balance sheet shows the following amounts relating to leases: Right-of-use assets net book value SkyCity Auckland – sub soil SkyCity Auckland – airbridges SkyCity Queenstown – Stratton House SkyCity Adelaide – Railway Building and extension SkyCity Adelaide – car park Lease liabilities Current Non-current Amounts recognised in the Income Statement are: Depreciation of right-of-use asset Interest expense on lease liabilities (part of net finance costs) 11 Net Finance Costs Finance costs Foreign exchange gains Interest income Debt restructuring costs (note 12) Capitalised interest (note 23) Total finance costs 2021 $'000 3,091 3,214 1,930 55,056 63,464 126,755 3,014 115,793 118,807 2021 $'000 1,894 3,566 2021 $'000 41,743 (388) (1,086) – (7,814) 32,455 2020 $'000 3,095 2,318 2,367 44,187 – 51,967 485 52,188 52,673 2020 $'000 1,114 3,088 2020 $'000 45,419 (195) (1,060) 7,506 (23,057) 28,613 12 Non-current Liabilities – Interest Bearing Liabilities Accounting Policy Interest bearing liabilities are initially recognised at fair value, net of transaction costs incurred. They 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. However, the interest margin on US dollar denominated United States private placement (USPP) notes maturing in March 2025 is accounted for as a fair value hedge and the carrying value of the borrowings is adjusted for fair value changes attributable to the risk being hedged. Borrowings are only classified as non-current liabilities if the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Notes to the Financial Statements 187 The interest margin on US dollar denominated USPP notes maturing in March 2025 is accounted for as a fair value hedge. The carrying values of the borrowings are adjusted for fair value changes attributable to the risk being hedged. Unsecured Interest Bearing Liabilities Car park concession (main site nested car parks) (note 4) USPP notes New Zealand bonds Deferred funding expenses Total Non-current Interest Bearing Liabilities (a) USPP Notes As at 30 June 2021, SkyCity had outstanding USSP notes of: • 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 maturity of US$100 million of notes on 15 March 2021 plus movements in exchange rates and interest rates. The US dollar USPP notes have been hedged to NZ 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 32. Fair value of USPP debt is estimated at NZ$243.4 million (2020: NZ$429.4 million) compared to a carrying value of NZ$221.8 million (2020: NZ$397.0 million). Fair value has been calculated based on the present value of future principal and interest cash flows, using market interest rates and credit margins at balance date. Fair value is calculated using inputs other than quoted prices that are observable for the liability, either directly (that is, as prices) or indirectly (that is, derived from prices). This is a level 2 valuation. (b) Syndicated Bank Facility The 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). 2021 $'000 47,167 221,811 175,000 (3,014) 440,964 2020 $'000 42,802 241,420 – (1,491) 282,731 As at 30 June 2021, SkyCity had in place revolving credit facilities of: • • • • A$280.0 million maturing 31 March 2022 (partially drawn at the reporting date); NZ$60.0 million maturing 15 June 2022 (undrawn at the reporting date); NZ$85.0 million maturing 15 June 2023 (undrawn at the reporting date); and NZ$85.0 million maturing 15 June 2024 (undrawn at the reporting date). Subsequent to balance date: In August 2021, the syndicated bank facility was restructured and extended to the following: • A$100.0 million maturing 15 June 2023; • NZ$115.0 million maturing 15 June 2024; and • NZ$115.0 million maturing 15 June 2025. (c) New Zealand Bonds $125 million of unsubordinated, unsecured, redeemable fixed rate bonds were redeemed on 28 September 2020 at $1.028 per bond, equating to a total redemption cost of $128.5 million. $175.0 million of six-year unsubordinated, unsecured redeemable fixed rate bonds were issued on 21 May 2021. The bonds are quoted on the NZDX. As at 30 June 2021, the closing price was $1.038 per $1 bond. The bonds are carried at amortised cost. The total fair value is $ 181.7 million and is a level 1 valuation as they are listed securities. 188 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I (d) Auckland Car Park Concession Incorporated in the Auckland car park concession is an interest-bearing liability of $47.2 million relating to the main site nested car parks. This liability will be amortised to nil over the life of the contract with the movements recognised in interest income. (e) 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 there are requirements for minimum guarantee group participation and financial covenants. All requirements of the negative pledge deeds have been met as at 30 June 2021. (f) CBA Revolving Credit Facility In July 2020, a NZ$100.0 million revolving credit facility was established with the Commonwealth Bank of Australia, maturing 31 December 2021. The facility was cancelled on 29 June 2021. (g) Weighted Average Interest Rate Interest bearing liabilities* 5.68% 610,798 6.39% 586,731 *The weighted average debt interest rate includes lease liabilities and the impact of interest rate and foreign currency hedging. 2021 % $'000 2020 % $'000 13 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 from the reporting date. Unsecured Interest Bearing Liabilities Syndicated bank facility USPP notes New Zealand bonds Car park concession (main site nested car parks) Total current interest-bearing borrowings 2021 $'000 48,031 – – – 48,031 2020 $'000 15,000 155,618 128,500 3,391 302,509 Refer note 12(a) for details concerning the USPP notes, note 12(b) for details concerning the syndicated bank facility, note 12(c) for details concerning the New Zealand bonds and note 12(d) for details concerning the car park concession. All financial covenants were met at 30 June 2021. Notes to the Financial Statements 189 14 Net Debt Reconciliation CASH AND BANK BALANCES BORROWINGS DUE WITHIN 1 YEAR BORROWINGS DUE AFTER 1 YEAR Net debt as at 1 July 2019 Movement in cash and cash equivalents Recognition of car park concession liability Revaluation of New Zealand bonds Revaluation of USPP notes Repayment of USPP notes Amortisation of deferred funding expenses Net movement in bank drawings Reclassification Initial recognition of lease liabilities Increase in lease liabilities Net debt as at 30 June 2020 Movement in car park concession liability Movement in New Zealand bonds Revaluation of USPP notes Repayment of USPP notes Amortisation of deferred funding expenses Net movement in bank drawings Movement in lease liabilities Increase in lease liabilities Net debt as at 30 June 2021 495,913 503,466 – (12,650) $'000 (41,574) (12,650) – – – – – – – – – $'000 49,127 – 3,391 3,500 6,230 (21,127) – (13,000) $'000 42,802 – 17,716 – 687 – 274,388 (274,388) 485 – 50,336 1,852 TOTAL $'000 46,193 3,500 23,946 (21,127) 687 (13,000) – 50,821 1,852 (54,224) 302,994 334,918 583,688 – (3,391) – 4,365 4,284 974 (128,500) 175,000 46,500 – (19,608) (19,608) (155,618) – (155,618) – (1,523) 33,031 2,529 – – 63,604 – (1,523) 33,031 66,133 – – – – – – – – – (49,940) 51,045 556,756 557,861 Movement in cash and cash equivalents 4,284 15 Non-current Assets – Investment Properties Accounting Policy Investment property, principally comprising freehold office buildings and display space, is held for long term rental yields. Completed 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 value are recorded in the Income Statement. Investment property under construction is carried at cost if its fair value is unable to be reliably determined during construction but will be reliably determinable when construction is complete. The NZICC car park is carried at cost on that basis. 190 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I The carrying value of investment property has been calculated as follows: Balance at the beginning of the year Acquisitions Net gain/(loss) from fair value adjustment Transfer from property, plant and equipment - Levels 4 and 5, 88 Federal Street Transfer from property, plant and equipment - NZICC car parks (note 4) Transfer from property, plant and equipment - 86 Federal Street Transfer from property, plant and equipment - 99 Albert Street Closing balance at 30 June (a) Amounts Recognised in Profit and Loss for Investment Property Rental income Direct operating expenses from property that generated rental income Net gain/(loss) from fair value adjustment 2021 $'000 72,400 937 7,386 – 2,245 9,750 31,650 124,368 2021 $'000 2,148 (2,455) 7,386 7,079 2020 $'000 40,660 2,252 (14,055) 16,420 27,123 – – 72,400 2020 $'000 2,953 (1,594) (14,055) (12,696) (b) Investment Properties held at 30 June 2020 in the valuation were: With the exception of the NZICC car park (which is referred to below), investment properties were valued to fair value on 30 June 2020 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. These properties were revalued to fair value on 30 June 2021 by CBRE, Registered Valuers and Members of the New Zealand Institute of Valuers and the Property Institute of New Zealand. All valuers had recent experience in the location and category of the property being valued. At 30 June 2020, the fair value of these investment properties (other than the NZICC car park) was $45.3 million. The significant assumptions used in the valuation were: • • capitalisation rate – range from 5.82% to 7.0%; and passing yield (calculated as net rent divided by fair value) – range from 5.04% to 10.33%. At 30 June 2021, the fair value of these investment properties (other than the NZICC car park) was $53.6 million. The significant assumptions used • • capitalisation rate – range from 4.00% to 5.88%; and passing yield (calculated as net rent divided by fair value) – range from 3.65% to 5.75%. The 30 June 2020 and 30 June 2021 valuations are sensitive to movements in estimated capitalisation rate and passing yield. If the assumed capitalisation rate increased, or passing yield decreased, fair value would decrease. (c) NZICC Car Park Approximately 650 car parks are due to be provided to Macquarie as part of the Auckland car park concession transaction (note 4). Given the delay in providing these car parks to Macquarie, this part of the concession has been treated as an operating lease, and the car parks have been classified as investment property. In 2020, $27.1 million of costs associated with these car parks was transferred from property, plant and equipment to investment properties. In 2021, an additional $2.2 million was transferred from property, plant and equipment to investment properties, as a result of updated NZICC damage estimates on the car parks prepared by RLB (note 6). Notes to the Financial Statements 191 (d) Transfer from Property, Plant and Equipment in 2021 86 Federal Street 99 Albert Street At 30 June 2020, 86 Federal Street was classified in its entirety as property, plant and equipment. At 30 June 2021, seven floors in the building were either tenanted, or being actively marketed for rental, and were consequently reclassified as investment property. The remaining floors of the building continued to be classified as property, plant and equipment. As SkyCity carries its property, plant and equipment under the cost model, and its investment property under the revaluation model, for each floor being transferred from property, plant and equipment to investment property, the difference between carrying value under the cost model and fair value was accounted for as a revaluation of property, plant and equipment (note 23). Immediately before reclassification, the building was revalued on a floor by floor basis by CBRE (who have recent experience in the location and category of the property being valued). At 30 June 2021, the floors of the building that are classified as investment property are carried at fair value ($9.8 million), which resulted in an increase of $4.3 million in the asset revaluation reserve (note 30). The following were the significant assumptions used in CBRE's valuation: • capitalisation rate of 5.88%; and • passing yield (calculated as net rent divided by fair value) – 1.32%. At 30 June 2020, the portion of 99 Albert Street owned by SkyCity was classified in its entirety as property, plant and equipment. At 30 June 2021, six floors in the building, car parks associated with those floors, and ground floor retail spaces, were either tenanted, or being actively marketed for rental, and were consequently reclassified as investment property. The remaining floors of the building, and associated car parks, continued to be classified as property, plant and equipment. Immediately before reclassification, the building was revalued to fair value on a floor by floor basis by CBRE (who have recent experience in the location and category of the property being valued). Those floors being transferred from property, plant and equipment to investment property were revalued to their fair value, with the revaluation being accounted for as a revaluation of property, plant and equipment. At 30 June 2021, the floors of the building that are classified as investment property are carried at fair value ($31.7 million), which resulted in an impairment of $4.0 million of land and an increase of $4.4 million in the asset revaluation reserve in relation to buildings (note 30). The following were the significant assumptions used in CBRE's valuation: • capitalisation rate of 5.88%; and • passing yield (calculated as net rent divided by fair value) – 3.29%. 16 Current Liabilities – Deferred Licence Value Accounting Policy Regulatory reforms granted which are specific to the Group are initially recognised at their fair value when it is probable that the reforms will be received and that the Group will comply with all conditions attached. Regulatory reforms are recognised as an intangible asset (note 24) and included within the value of casino licences. Where a regulatory reform is related to property, plant and equipment, once constructed the carrying value of that property, plant and equipment is reduced by the value of the regulatory reforms. Prior to completion of the related property, plant and equipment, the value of the regulatory reforms is accounted for as a deferred licence value. 192 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 2021 Opening Balance Exchange differences ADELAIDE $'000 153,165 494 TOTAL $'000 153,165 494 Transfer to property, plant and equipment (note 23) (143,323) (143,323) Transfer to intangible assets (note 24) Transfer to right-of-use assets (ROU) (note 10) Closing balance 2020 Opening balance Transfer from non-current liabilities (note 17) Closing balance (3,067) (5,306) 1,963 – 153,165 153,165 (3,067) (5,306) 1,963 – 153,165 153,165 The SkyCity Adelaide deferred licence value liability was initially recognised in 2014 following an amendment to the Adelaide Approved Licensing Agreement (ALA). The agreement to amend the ALA required SkyCity Adelaide to agree to undertake a A$350.0 million casino expansion and hotel development project and the deferred licence value liability relates to this requirement. In the current year, the majority of the SkyCity Adelaide deferred licence value was transferred to property, plant and equipment, due to the majority of the construction work having been completed and the casino being opened to the public. The remaining balance will be transferred to property, plant and equipment following the completion of the Adelaide expansion. 17 Non-current Liabilities – Deferred Licence Value 2021 Opening balance Impact of NZICC fire (note 6) Closing balance 2020 Opening balance Exchange rate movement Transferred to current liabilities (note 16) Adjustment to property, plant and equipment classified as held for sale Impact of NZICC fire (note 6) Closing balance SkyCity Auckland AUCKLAND ADELAIDE $'000 214,972 (7,536) 207,436 $'000 – – – TOTAL $'000 214,972 (7,536) 207,436 355,179 149,625 504,804 – – 3,540 3,540 (153,165) (153,165) 25,578 (165,785) 214,972 – – – 25,578 (165,785) 214,972 Following the NZICC fire, the damaged portion of the NZICC was disposed of for financial reporting purposes (refer note 6). As a result of this disposal and the estimates detailed in note 6, $165.8 million was released to the Income Statement in the year ended 30 June 2020 and a further $7.5 million was released in the year ended 30 June 2021. These amounts are based on the assessment of the damage from the NZICC fire (refer note 6) and may materially change as further information becomes available. Notes to the Financial Statements 193 18 Income Tax Expense/(Benefit) 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. (a) Income Tax Expense/(Benefit) Current tax Deferred tax Income tax (benefit)/expense (b) Numerical Reconciliation of Income Tax Expense/(Benefit) 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 Differences in overseas tax rates Assets held for sale Prior period adjustments NZICC fire capital (income)/expenses Auckland car park concession proceeds Adelaide casino licence impairment Fair value adjustments Reinstatement of New Zealand tax building depreciation Non-taxable settlement amount Controlled foreign company regime Other Income tax expense/(benefit) 2021 $'000 33,053 4,281 37,334 193,460 54,169 1,703 (2,138) 390 (1,502) (8,385) – – 2,138 – (11,060) 2,108 (89) 37,334 2020 $'000 26,115 (28,267) (2,152) 233,118 65,273 2,210 (3,402) (411) 243 (73,955) (20,062) 48,188 3,955 (24,145) – – (46) (2,152) The weighted average applicable tax rate was 19.3% (2020: -0.9%). The weighted average tax rate has been significantly impacted by: • NZICC fire capital (income)/expense; • Auckland car park concession proceeds; • Adelaide casino licence impairment; • fair value adjustments; • reinstatement of New Zealand tax building depreciation; and • non-taxable settlement amount. Excluding these items, the weighted average tax rate would have been 28.7% (2020: 27.4%). 194 SkyCity Entertainment Group Annual Report Year Ended 30 June 202119 Deferred Tax Assets The balance comprises temporary differences attributable to: Provisions and accruals Depreciation Foreign exchange variances Cash flow hedges Lease accounting Tax losses Other Net deferred tax assets Movements: Balance at beginning of the year Foreign exchange differences Charged to the Income Statement (note 18) Tax credited directly to other comprehensive income (note 30) Closing balance at 30 June Deferred tax assets relate to the Australian and other foreign operations. 20 Deferred Tax Liabilities The balance comprises temporary differences attributable to: Provisions and accruals Depreciation Lease accounting Cash flow hedges Asset revaluation reserve Other Net deferred tax liabilities Movements: Balance at beginning of the year Charged to the Income Statement (note 18) Tax debited directly to other comprehensive income (note 30) Closing balance at 30 June Deferred tax liabilities relate to the New Zealand operations. S T N E M E T A T S L A C N A N I F I 2021 $'000 8,112 (11,859) 4 453 (382) 12,441 575 9,344 6,877 17 2,729 (279) 9,344 2021 $'000 (9,388) 68,678 (246) (4,430) 1,921 496 57,031 45,175 7,010 4,846 57,031 2020 $'000 5,316 (7,723) 166 653 185 8,280 – 6,877 4,843 89 3,157 (1,212) 6,877 2020 $'000 (14,972) 64,702 (28) (7,355) – 2,828 45,175 70,160 (25,110) 125 45,175 Notes to the Financial Statements 195 21 Imputation and Franking Credits Balances available for use in subsequent reporting periods Imputation credit account (New Zealand) Franking credit account (Australia) (A$) 2021 $'000 51,601 13,951 2020 $'000 21,347 13,951 As required by relevant tax legislation, the imputation credit account had a credit balance as at 31 March 2021. 22 Non-current Liabilities – Lease Income in Advance Lease income in advance 2021 $'000 36,310 36,310 2020 $'000 39,815 39,815 As detailed in note 4, the approximately 650 further NZICC car parks to be delivered as part of the Auckland car park concession transaction have been determined to be an operating lease. The $220.0 million concession payment was allocated between the 450 nested car parks and the unnested car parks based on their respective fair values. The payment for the unnested car parks (refer note 6) was further allocated based on the number of car parks. At 19 August 2019, $39.8 million was allocated to these approximately 650 further NZICC car parks and was recognised as a lease payment in advance. 23 Property, Plant and Equipment Accounting Policy Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of their residual values, over their estimated useful lives, as below: Buildings and fitout Plant, equipment and motor vehicles Fixtures and fittings 5–75 years 2–75 years 3–20 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. 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. 196 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I At 1 July 2019 Cost BUILDINGS AND FITOUT PLANT, EQUIPMENT AND MOTOR VEHICLES FIXTURES AND FITTINGS CAPITAL WORK IN PROGRESS TOTAL $'000 $'000 $'000 $'000 $'000 LAND $'000 210,317 775,739 371,060 123,996 641,849 2,122,961 Accumulated depreciation – (324,786) (272,273) (89,645) – (686,704) Net book amount Year Ended 30 June 2020 210,317 450,953 98,787 34,351 641,849 1,436,257 Opening net book amount 210,317 450,953 98,787 34,351 641,849 1,436,257 Exchange differences Net additions/transfers Transfer to investment properties – existing convention centre (note 15) Transfer to investment properties – NZICC car parks (note 15) Reversal of 2019 assets held for sale NZICC fire disposal (note 6) Depreciation charge – 1,421 – – – – – 959 41,162 (10,484) – – – 421 90 4,123 5,593 25,461 3,681 257,460 329,185 – – – – – – – – – (10,484) (27,123) (27,123) 56,801 56,801 (193,868) (193,868) (25,126) (33,017) (9,316) – (67,459) Closing net book amount 211,738 457,464 91,652 28,806 739,242 1,528,902 At 30 June 2020 Cost 211,738 783,956 391,221 126,345 739,242 2,252,502 Accumulated depreciation – (326,492) (299,569) (97,539) – (723,600) Net book amount Year Ended 30 June 2021 211,738 457,464 91,652 28,806 739,242 1,528,902 Opening net book amount 211,738 457,464 91,652 28,806 739,242 1,528,902 Exchange differences Net additions/transfers Adelaide expansion Transfer of Adelaide deferred licence (note 16) Transfer to investment properties – 86 Federal Street (note 15) Transfer to investment properties – 99 Albert Street (note 15) (1,674) (3,765) (15,262) (11,944) Impairment (note 7) (8,834) Transfer to investment properties – NZICC car parks (notes 6 and 15) Assets held for sale (note 27) NZICC fire disposal Depreciation charge – – – – – – (272) – – – – – 159 55 8 1,115 1,337 44,852 36,600 12,642 41,874 135,968 296,760 53,583 35,514 (385,857) – (107,113) (21,956) (14,254) – – – – (262) – – – – – – – – – – – (143,323) (5,439) (27,206) (8,834) (2,245) (2,245) – (534) (34,713) (34,713) (27,199) (35,759) (10,193) – (73,151) Closing net book amount 185,968 648,942 123,913 52,523 359,416 1,370,762 At 30 June 2021 Cost 185,968 1,001,903 445,398 159,320 359,416 2,152,005 Accumulated depreciation – (352,961) (321,485) (106,797) – (781,243) Net book amount 185,968 648,942 123,913 52,523 359,416 1,370,762 Notes to the Financial Statements 197 (a) Capitalised Borrowing Costs Borrowing costs of $7.8 million have been capitalised in the current year relating to capital projects (2020: $23.1 million) using the Group's weighted average cost of debt of 5.68% across the year (2020: 6.36%). (b) Transfers to Investment Property 86 Federal Street At 30 June 2020, 86 Federal Street was classified in its entirety as property, plant and equipment. As at 30 June 2021, seven floors in the building were either tenanted, or being actively marketed for rental, and were consequently reclassified as investment property. The remaining floors of the building continued to be classified as property, plant and equipment (note 15). The reclassification of the seven floors from property, plant and equipment carried under the cost model, to investment property carried under the fair value model, was accounted for as a revaluation of property, plant and equipment and resulted in the recognition of a $4.3 million increase in the asset revaluation reserve. There was no change in carrying value of the floors that remained classified as property, plant and equipment. 99 Albert Street At 30 June 2020, the portion of 99 Albert Street owned by SkyCity, was classified in its entirety as property, plant and equipment. As at 30 June 2021, six floors in the building, car parks associated with those floors, and ground floor retail spaces, were either tenanted, or being actively marketed for rental, and were consequently reclassified as investment property. The remaining floors of the building, and associated car parks, continued to be classified as property, plant and equipment. The reclassification of the six floors, associated car parks, and ground floor retail spaces from property, plant and equipment carried under the cost model, to investment property carried under the fair value model, was accounted for as a revaluation of property, plant and equipment and resulted in the recognition of an impairment of $4.0 million of land and an increase of $4.4 million in the asset revaluation reserve in relation to buildings. Where the valuation of a floor that was being retained as property, plant and equipment was lower than the carrying value of that floor, the floor was written down to its revalued amount. This resulted in the recognition of an impairment of land of $4.8 million. (c) Capitalisation of Adelaide Expansion In the current year, the Adelaide casino expansion and hotel development was substantially completed and was opened to the public. As a result, the capital work in progress was capitalised in the Group's fixed asset register and allocated to the appropriate asset categories. This includes an allocation of the Adelaide deferred licence value of $151.7 million (A$141.2 million) to the extent the expansion is complete (note 16). (d) 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. 198 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 24 Intangible Assets Accounting Policy (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is included in intangible assets. Goodwill is not amortised but is instead 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. (ii) Acquired Software Acquired computer software licences are capitalised at cost (which includes acquisition cost and any costs incurred in bringing the software into use). Subsequent to initial recognition they are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated on a straight-line basis over the useful life, which ranges from three to 15 years. (iii) Gaming Machine Entitlements Gaming Machine Entitlements (GMEs) are required to operate gaming machines in South Australia. Each GME gives the licensee the right to own and operate a single gaming machine at the licensee’s venue. The number of GMEs held by a licensee cannot exceed the maximum number of gaming machines which have been approved for the venue. SkyCity Adelaide currently owns 1,080 GMEs and is licensed to hold a maximum of 1,500. GMEs can be purchased or sold during trading rounds by an eligible person via the South Australian Government’s approved trading system. Trading rounds are usually held at least twice a year at the discretion of the Liquor and Gambling Commissioner. The trading price of a GME is determined by a number of factors, including the number of sellers and buyers and the minimum and maximum prices offered. SkyCity Adelaide’s GMEs are treated as intangible assets. They are carried at cost less accumulated amortisation and impairment losses. They are amortised over the term of the exclusivity period, which is to 30 June 2035. (iv) Casino Licences and Associated Regulator Reforms The Group's casino licences that have: • a finite useful life are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged to profit or loss on a straight-line basis over the legal licence term; and • an indefinite useful life are carried at cost less accumulated impairment losses. Determining whether a casino licence has a finite or indefinite useful life is a key judgement and involves assessment of the terms and conditions, and in particular the renewal terms, of the relevant licence. Regulatory reforms granted by a government that are specific to the Group are accounted for as intangible assets arising from a government grant. Accordingly, the reforms are initially recognised at their fair value when there is reasonable assurance that the reforms will be received, and the Group will comply with all conditions attached to them. Regulatory reforms are recognised as an intangible asset and included within the value of casino licences. Where a regulatory reform is related to property, plant and equipment, once constructed the carrying value of that property, plant and equipment is reduced by the value of the regulatory reforms. Prior to completion of the related property, plant and equipment, the value of the regulatory reforms is accounted for as deferred licence value. (v) Impairment of Intangible Assets Intangible assets, including goodwill, that have an indefinite useful life are tested for impairment annually (or more frequently if events or changes in circumstances indicate that the asset might be impaired). Goodwill is allocated to cash generating units for the purpose of impairment testing. Intangible assets that have a finite useful life are assessed for indicators of impairment annually and tested for impairment if an indicator of impairment is found. Impairment testing is done by comparing the carrying value of the asset to its 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. Impairment on goodwill is not subsequently reversed, but impairment on other assets may be reversed. Notes to the Financial Statements 199 GOODWILL CASINO LICENCES COMPUTER SOFTWARE GAMING MACHINE ENTITLEMENTS $'000 $'000 $'000 $'000 At 1 July 2019 Cost 35,786 768,618 127,311 Accumulated amortisation – (57,726) (75,581) Net book amount 35,786 710,892 51,730 Movements in the Year Ended 30 June 2020 Exchange differences Additions Impairment charge Amortisation charge – 7,052 68 1,908 – 20,682 – – (160,600) (5,507) – (12,480) 60,000 Closing net book amount 37,694 551,837 At 30 June 2020 Cost 37,694 777,118 147,798 Accumulated amortisation – (225,281) (87,798) Net book amount 37,694 551,837 60,000 Movements in the Year Ended 30 June 2021 Exchange differences Additions Adelaide expansion Transfer of Adelaide deferred licence (note 16) – – – – Assets classified as held for sale (note 27) (1,908) 453 – – – – 9 8,868 5,740 (1,802) (20) Amortisation charge – (2,629) (13,666) TOTAL $'000 931,715 (133,307) 798,408 7,120 22,590 (160,600) (17,987) 649,531 962,610 (313,079) 649,531 462 8,868 8,828 (3,067) (1,928) (16,368) – – – – – – – – – – – – – 3,088 (1,265) – (73) Closing net book amount 35,786 549,661 59,129 1,750 646,326 At 30 June 2021 Cost 35,786 778,303 160,551 Accumulated amortisation – (228,642) (101,422) Net book amount 35,786 549,661 59,129 1,823 (73) 1,750 976,463 (330,137) 646,326 200 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I CASINO LICENCE CONTRACT TERM SkyCity Auckland Casino (indefinite useful life) SkyCity Adelaide (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 $430.0 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 carrying amount of the casino licence is $405.0 million (FY20: $405.0 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$130.6 million (FY20: A$133.0 million) (NZ$140.3 million and NZ$142.4 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 the 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 the Queenstown Wharf 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 (FY20: $4.4 million). Notes to the Financial Statements 201 (a) Impairment Tests for Intangibles with Indefinite Lives Goodwill and the casino licences of SkyCity Auckland, SkyCity Hamilton and SkyCity Wharf have indefinite useful lives and consequently are tested annually for impairment. 2021 Goodwill Casino licence Total 2020 Goodwill Casino licence Total SKYCITY AUCKLAND OTAGO CASINOS LIMITED* SKYCITY HAMILTON* $'000 $'000 $'000 TOTAL $'000 – – 35,786 35,786 405,000 405,000 4,391 4,391 – 409,391 35,786 445,177 – – 35,786 35,786 405,000 405,000 4,391 4,391 – 409,391 35,786 445,177 * SkyCity Hamilton and Otago Casinos Limited are included within the "Other NZ Operations" segment in note 2. Other than Otago Casinos Limited, 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. For all of these assets, the calculated value in use significantly exceeds carrying value. The value of the Wharf (Otago Casinos Limited) casino licence is the potential ability to utilise the licence to enhance the Group's gaming offering. Professional judgement has been made to treat the entire Auckland precinct as a single cash generating unit given the close and interconnected relationship of the cash flows across all of SkyCity’s Auckland businesses. Impairment testing has also been completed on the Adelaide casino licence (an amortising asset). Judgement was used to determine the valuation and resulting impairment charge. (b) Key Assumptions used for Value in Use Calculations of Cash Generating Units SkyCity Auckland SkyCity Hamilton EBITDA MARGIN 2021 2020 40.8% 47.9% 36.0% 41.4% TERMINAL GROWTH RATE PRE-TAX DISCOUNT RATE 2021 2.0% 2.0% 2020 2.0% 2.0% 2021 11.5% 11.5% 2020 11.0% 11.0% These assumptions are consistent with past experience adjusted for economic indicators. The discount rates are pre-tax and reflect specific risks relating to the relevant operating segment. The estimated impacts of COVID-19 have been factored into these assumptions. 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. (c) Impairment Review of the Adelaide Casino Licence In the prior year, the Group engaged Deloitte to independently determine the recoverable amount of the Adelaide cash generating unit, for the purposes of determining whether the SkyCity Adelaide casino licence was impaired. The recoverable amount was determined using the fair value less costs of disposal approach, with the fair value measurement being a Level 3 measurement in the fair value hierarchy. A key input into the assessment was the five year forecast for SkyCity Adelaide, which had been adopted by the Board. As a result of this assessment, the Adelaide casino licence was impaired by A$150.0 million (NZ$160.6 million). 202 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I The 2020 impairment arose as a result of: • • revised expectations regarding the time frame for Adelaide Casino to achieve its long term potential earnings following completion of the expansion project; and a reduced earnings outlook due to the expected future impacts of COVID-19, including an expectation that International Business activity may take some years to recover. In the current year, the Group again engaged Deloitte to independently determine the recoverable amount of the Adelaide cash generating unit, for the purposes of determining whether the SkyCity Adelaide casino licence was impaired. A key input to Deloitte's assessment was the updated Board approved five-year forecast for SkyCity Adelaide. The recoverable amount for the current year was determined using the fair value less costs of disposal approach (and the fair value measurement was again a Level 3 measurement in the fair value hierarchy). The valuation resulted in a range – taking the mid point of the range implies an impairment reversal of A$5.4 million (NZ$5.7 million) (with the low end of the range being an increase in impairment of A$15.7 million (NZ$16.9 million) and the high end of the range being a reversal in impairment of A$29.0 million (NZ$31.2 million)). Given the uncertainties associated with forecasting in a COVID-19 environment, including the ongoing impact to International Business, management determined that the current period valuation did not warrant either an increase in, or a reversal of, the impairment recognised in the prior period. The 2020 and 2021 independent valuations were based on the following key estimates: • compound annual EBITDA growth rate from FY19 to FY26 = 17.4% (2020: FY19 to FY25 = 21.1%) – note that the anticipated impacts of COVID-19 have been taken into account; • terminal growth rate = 2% (2020: 2%); and • discount rate = 10.8% (2020: 10.8%). EBITDA Growth Determining an appropriate growth rate is made difficult by the impact of COVID-19 on the current and prior periods' results and its expected impact on future years. A significant initial EBITDA uplift is expected from the opening of the Adelaide expansion. Further growth is then expected until the 2026 financial year, with growth expected to level off from then onwards. Growth estimates have considered a number of factors, including an expected increase in gaming machine market share, an expected increase in premium and VIP gaming activity, an expected increase in visitors to the area due to the new hotel and restaurants and an expected positive impact from recent and current developments in the surrounding precinct (including a new car park building). Discount Rate The discount rate has been independently calculated by Deloitte. It reflects the current market assessment of the risks specific to SkyCity Adelaide, taking into account the time value of money and individual risks of the underlying assets, including those arising from COVID-19, that have not been incorporated in the cash flow estimates. The impairment assessment is sensitive to changes in the discount rate and information on this sensitivity is provided below. Valuation Sensitivities The impact of COVID-19 on the Group has already been wide-ranging and significant. Given the unknown future impact of COVID-19, there is a heightened level of uncertainty at present which makes accurate forecasts of the future particularly challenging. The sensitivities below illustrate the impact on the impairment assessment of changes in the key assumptions: • • • an EBITDA increase of 5% would have resulted in an impairment reversal of approximately $31 million, while an EBITDA decrease of 5% would have increased impairment by approximately $20 million (2020: an increase/decrease of 5% would have decreased/increased impairment by approximately $27 million); a 0.5% increase in terminal growth rate (to 2.5%) would have resulted in an impairment reversal of approximately $24 million, while a decrease in terminal growth rate of 0.5% (to 1.5%) would have increased impairment by approximately $11 million (2020: an increase/decrease of 0.5% would have decreased/increased impairment by approximately $20 million); and a 0.5% increase in the discount rate (to 11.25%) would have increased impairment by approximately $16 million, while a decrease in discount rate of 0.5% (to 10.25%) would have resulted in an impairment reversal of approximately $29 million (2020: an increase/ decrease of 0.5% would have increased/decreased impairment by approximately $24 million). The valuation assumes no repeat of the previous COVID-19 lockdown in Adelaide, which is a key judgement and assumption. The actual valuation impact of a renewed lockdown (if any) would depend on the length of the lockdown, the nature of the lockdown restrictions and the Federal and State Government responses. Notes to the Financial Statements 203 Annual Impairment Review The Group will complete an annual impairment review of the SkyCity Adelaide casino licence going forward. Increases in the fair value less costs of disposal, or reductions in the carrying value of the Adelaide business, could result in a partial reversal of the impairment charge recognised in the prior period. Decreases in the fair value less costs of disposal may result in the recognition of an additional impairment charge. 25 Receivables and Prepayments Accounting Policy Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less impairment. Net trade receivables Trade receivables (gross) Impairment Trade receivables (net) Sundry receivables Prepayments Total receivables and prepayments 2021 $'000 13,606 (6,206) 7,400 1,898 24,107 33,405 Due to the short-term nature of these receivables, their carrying value approximates fair value. 26 Cash and Bank Balances Cash at bank Cash in house Total cash and bank balances 27 Assets Held for Sale Accounting Policy 2021 $'000 15,537 34,403 49,940 2020 $'000 50,069 (20,509) 29,560 256 12,436 42,252 2020 $'000 26,047 28,177 54,224 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. Land Buildings Plant and equipment Intangibles Total Assets held for sale consist of the Darwin Little Mindil site and Lets Play Live Media. 204 2021 $'000 8,965 2,359 265 1,928 13,517 2020 $'000 8,936 2,080 3 – 11,019 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 28 Payables and Provisions Accounting Policy Accounts payable are initially recognised at fair value, net of transaction costs, and thereafter carried at amortised cost. A provision is recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Trade payables Deferred income Accrued expenses Employee benefits NZICC obligation (note 6) Other provisions Total payables and provisions 2021 $'000 29,541 13,833 57,341 52,077 36,496 10,877 200,165 2020 $'000 65,680 22,422 49,430 40,405 43,047 858 221,842 Other provisions primarily relate to the repayment of the New Zealand Government wage subsidy and the Australian JobKeeper payments (note 5). The carrying amounts of trade and other payables approximates their fair value, due to their short-term nature. 29 Share Capital Opening balance of ordinary shares issued 739,196,806 672,351,166 1,288,287 1,126,996 2021 Shares 2020 Shares 2021 $'000 2020 $'000 Share rights issued for employee services Share buy back and cancellation Net issue of treasury shares Equity raising – – – – 3,253 3,698 (5,154,360) – (20,003) 21,008,403 72,000,000 – (2,054) 48,737 436 177,160 760,205,209 739,196,806 1,338,223 1,288,287 All ordinary shares rank equally with one vote attached to each fully-paid ordinary share. Included within the number of shares is 3,394,058 treasury shares (2020: 5,155,841) 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 33). Treasury shares may be used to issue shares under the Company's employee incentive plans or upon the exercise of share rights/options. Equity Raising The share purchase plan was completed on 9 July 2020 and involved the issue of 21,008,403 new shares at $2.38 per share raising a total of $50.0 million. Costs associated with the placement of $1.3 million were deducted from the share proceeds. Notes to the Financial Statements 205 30 Reserves Reserves Asset revaluation reserve Hedging reserve – cash flow hedges Foreign currency translation reserve Cost of hedging reserve Total reserves Movements Asset Revaluation Reserve Opening balance Revaluation Deferred tax Closing balance Hedging Reserve - Cash Flow Hedges Opening balance Revaluation Transfer to net profit - finance costs (net) Deferred tax Closing balance Foreign Currency Translation Reserve Opening balance Exchange difference on translation of overseas subsidiaries Closing balance Cost of Hedging Reserve Opening balance Revaluations Transfer to finance costs Deferred tax Closing balance 2021 $'000 12,770 (12,058) (22,471) (1,213) (22,972) 5,936 8,755 (1,921) 12,770 (19,913) (24,859) 35,790 (3,076) (12,058) (17,802) (4,669) (22,471) (1,542) (6) 463 (128) (1,213) 2020 $'000 5,936 (19,913) (17,802) (1,542) (33,321) – 5,936 – 5,936 (22,685) 9,154 (5,143) (1,239) (19,913) (24,087) 6,285 (17,802) (1,793) (113) 462 (98) (1,542) 31 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). 206 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I Fair Value Hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the Income Statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. 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. 2021 2020 2021 2020 $'000 Notional Value $'000 Notional Value $'000 Fair Value $'000 Fair Value Current Assets Cross currency interest rate swaps – cash flow hedges – 108,220 Forward foreign exchange contracts Total current derivative financial instrument assets Non-current Assets Cross-currency interest rate swaps - cash flow hedges* Total non‑current derivative financial instrument assets Current Liabilities Forward foreign currency contracts Interest rate swaps – cash flow hedges Total current derivative financial instrument liabilities Non-current Liabilities 30,826 30,826 142,898 142,898 – – – 2,152 110,372 155,618 155,618 133,932 194,223 328,155 Interest rate swaps - cash flow hedges 130,000 210,000 Total non‑current derivative financial instrument liabilities 130,000 210,000 – 156 156 4,109 4,109 – – – 7,528 7,528 53,218 70 53,288 23,100 23,100 192 5,921 6,113 24,375 24,375 Total net derivative financial instruments (3,263) 45,900 *A component of the interest margin in US$100.0 million of these cross currency interest rate swaps is treated as a fair value hedge. Notes to the Financial Statements 207 32 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 regularly. (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 USPP notes detailed in note 13) has been fully hedged by way of cross currency interest rate swaps (CCIRS), hedging US dollar exposure on both principal and interest. The CCIRS correspond in amount and maturity to the US dollar borrowings with no residual US dollar exposure. (ii) Interest Rate Risk The Group's interest rate risk arises from long-term borrowings. Interest rate swaps (IRS) and CCIRS are utilised to modify the interest repricing profile of the Group’s debt to match the profile required by Treasury Policy. All IRS and CCIRS are in designated hedging relationships that are highly effective. As the Group has no significant interest bearing assets, the Group’s revenue is substantially independent of changes in market interest rates. (iii) Summarised Sensitivity Analysis SkyCity manages its interest rate and foreign exchange rate exposure to minimise the impact of fluctuations in the market. The residual exposure is not considered material or significant. (b) Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its financial obligations. SkyCity is largely a cash based business and its material credit risks arise mainly from financial instruments utilised in funding and from International Business activity. Financial instruments (other than International Business discussed below) that potentially create a credit exposure can only be entered into with counterparties that are explicitly approved by the Board. Maximum credit limits for each of these parties are approved on the basis of long term credit rating (Standard & Poor’s or Moody’s). A minimum long term rating of A+ (Standard & Poor’s) or A1 (Moody’s) is required to approve individual counterparties. The maximum credit risk of any financial instrument at any time is the fair value where that instrument is an asset. All derivatives are carried at fair value in the balance sheet. Trade receivables are presented net of an allowance for estimated doubtful receivables. International Business activity is managed in accordance with accepted industry practice. Settlement risk associated with International Business customers is minimised through credit checking and a formal review and approval process. The Group has a significant receivable from the NZICC insurers (note 6). The lead insurer is a subsidiary of a leading global firm and has an AA- insurer financial strength rating given by S&P Global Ratings. Other than the NZICC fire insurance receivable, there are no other 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. 208 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Maturities of Committed Funding Facilities Debt maturities are detailed in note 12. LESS THAN 6 MONTHS 6–12 MONTHS BETWEEN 1 AND 2 YEARS BETWEEN 2 AND 5 YEARS OVER 5 YEARS $'000 $'000 $'000 $'000 $'000 TOTAL $'000 S T N E M E T A T S L A C N A N I F I 30 June 2021 Bank facility USPP notes New Zealand bonds Car park concession liability Lease liabilities Total committed debt facilities Total drawn debt Future contracted interest on drawn debt Future interest of lease liabilities Future contracted interest on CCIRS/IRS – – – – 1,400 1,400 1,400 7,280 1,702 1,101 360,752 85,000 85,000 – 530,752 – – – – – – 151,580 70,231 221,811 – – 175,000 175,000 47,167 47,167 1,615 3,457 11,513 100,822 118,807 362,367 88,457 248,093 393,220 1,093,537 49,645 3,457 163,092 393,221 7,157 1,453 1,083 14,433 36,096 10,769 2,567 1,626 5,557 1,040 329,625 340,904 – 4,850 610,815 75,735 Total drawn debt and derivatives 11,483 59,338 22,083 205,785 733,615 1,032,304 30 June 2020 Bank facility USPP notes New Zealand bonds Car park concession liability Lease liabilities – – 128,500 – 240 120,000 299,786 – 419,786 155,618 – – – – – 171,414 70,005 397,037 – – – 128,500 46,193 50,013 46,193 52,673 245 507 1,668 Total committed debt facilities 128,740 275,863 300,293 173,082 166,211 1,044,189 Total drawn debt 128,740 170,863 507 173,082 166,211 639,403 Future contracted interest on drawn debt 10,829 Future interest of lease liabilities Future contracted interest on CCIRS/IRS 1,317 3,620 6,589 1,306 2,162 9,635 2,578 4,088 27,145 7,443 7,644 9,579 63,777 301,989 314,633 1,093 18,607 Total drawn debt and derivatives 144,506 180,920 16,808 215,314 478,872 1,036,420 (d) Fair Value Estimation The financial instruments are measured in the balance sheet, or disclosed in their respective notes, 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 2 in the above fair value measurement hierarchy. The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Investment properties are valued using level 3 in the above fair value measurement hierarchy. Notes to the Financial Statements 209 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 31. (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 normalised EBITDA and interest coverage (normalised EBITDA relative to net interest cost). The primary ratios were as follows at 30 June: Gearing ratio Interest cover ratio 33 Share-Based Payments Accounting Policy 2021 2.3 x 6.2 x 2020 2.7 x 4.5 x 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 (LTI Plan) Under the LTI Plan, executives purchase ordinary 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 2021, the interest free loans relating to the LTI Plan total $7,152,885 (2020: $7,918,365). 210 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 2018 Chief Operating Officer Commencement Shares (COO Plan) Under the terms of his employment agreement dated 18 November 2017, the former Chief Operating Officer was issued 35,000 ordinary SkyCity shares on 27 November 2019. There were no performance targets associated with these shares (other than continued employment during the period from his commencement date to November 2019) and no right to dividends prior to the issuance of the shares. 2018 SkyCity Restricted Share Rights Plan (2018 RSR Plan) The 2018 Short Term Incentive Plan was replaced with the 2018 RSR Plan for 116 staff, with restricted share rights issued to staff after the finalisation of the Group's results. Each right conferred a right to receive one ordinary SkyCity share, which, unless otherwise agreed by the SkyCity Board, would only vest if the relevant employee remained continuously employed by SkyCity (or a company within the Group) from the date of issue until the vesting date on 1 July 2020. 2020 Chief Executive Officer Incentive Shares (CEO Plan) Under the terms of his employment agreement dated 13 November 2020, the CEO will be issued 166,003 ordinary SkyCity shares on 16 November 2021. There are no performance targets associated with these shares (other than continued employment during the period from his commencement date to November 2021). The CEO will also receive a cash payment equivalent to the cash dividends declared and paid by SkyCity on shares during the 12-month period preceding the anniversary of the commencement date. Performance Incentive Plan (PIP) The 2018 RSR Plan was replaced in 2019 with the PIP which includes both cash (the short term incentive scheme component of the PIP) and deferred equity components (the deferred short term incentive component of the PIP). The deferred short term incentive scheme under the PIP offers participants, subject to the relevant 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 short term incentive 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 short term incentive 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. Notes to the Financial Statements 211 Outstanding Share Rights Movements in the number of share rights outstanding are as follows: 11/09/18 01/07/20 1,808,708 GRANT DATE EXPIRY DATE 2021 LTI Plan 24/08/16 24/08/20 23/08/17 23/08/21 22/08/18 22/08/21 28/08/19 28/08/22 17/09/20 17/09/23 CEO Plan 16/11/20 16/11/21 2018 RSR Plan PIP 06/09/19 06/09/20 10/09/19 10/09/20 06/09/19 06/09/21 10/09/19 10/09/21 Total 2020 LTI Plan 26/08/15 28/08/19 24/08/16 24/08/20 23/08/17 23/08/21 22/08/18 22/08/21 28/08/19 28/08/22 COO Plan 18/11/17 18/11/19 2018 RSR Plan 11/09/18 01/07/20 PIP 06/09/19 06/09/20 10/09/19 10/09/20 06/09/19 06/09/21 10/09/19 10/09/21 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 380,000 850,883 434,035 484,638 – – – – – – 642,067 166,003 503,744 23,047 472,291 8,720 – – – – – – (1,808,708) (503,744) (23,047) (380,000) – (100,000) 750,883 (58,016) 376,019 (64,220) 420,418 (85,081) 556,986 – – – – 166,003 – – – – – (12,964) 459,327 – 8,720 – – – – – 4,966,066 808,070 (2,335,499) (700,281) 2,738,356 360,000 395,000 865,883 434,035 – – – – – 508,207 35,000 1,859,641 – – – – – – 508,296 23,047 498,004 8,720 – – – – – (360,000) – (15,000) 380,000 (15,000) 850,883 – 434,035 (23,569) 484,638 (35,000) – – – – – – – (50,933) 1,808,708 (4,552) 503,744 – 23,047 (25,713) 472,291 – 8,720 3,949,559 1,546,274 (35,000) (494,767) 4,966,066 The weighted average remaining contractual life of rights outstanding at the end of the period was 0.74 years (2020: 0.65 years). 212 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I Fair Values Fair Value of Share Rights Granted The assessed fair value at grant date of the rights granted on 17 September 2020 was $0.96 (28 August 2019 was $1.14). This was calculated using the single index model by Ernst & Young Transaction Advisory Services Limited. The valuation inputs for the rights granted on 17 September 2020 included: (a) rights are granted for no consideration; (b) exercise price: nil (2020: nil); and (c) share price at grant date: $2.94 (2020: $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 Incentive Shares The assessed fair value at grant date of the incentive shares at 16 November 2020 was $2.62. This was calculated using the European call option model by Ernst & Young Transaction Advisory Services Limited. The valuation inputs for the commencement shares on 16 November 2020 included: (a) no consideration; (b) exercise price: nil; and (c) share price at grant date: $2.96. 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 No rights were issued in respect of the year ended 30 June 2020. The assessed value of each 2019 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. Expenses Arising from Share-Based Payment Transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Rights issued under Share Rights Plans 34 Related Party Transactions (a) Key Management Personnel Compensation 2021 $'000 3,253 2020 $'000 3,698 Key management personnel compensation is set out below. The key management personnel are all the directors of the company, the CEO and the Senior Leadership Team. 2021 2020 SHORT TERM BENEFITS TERMINATION BENEFITS SHARE-BASED PAYMENTS $'000 11,618 7,372 $'000 1,456 – $'000 1,424 2,045 TOTAL $'000 14,498 9,417 (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. In the current year, consultancy services of $88,855 (2020: nil) were paid to new directors, for the period from 29 March to 7 June 2021 (inclusive), prior to their appointment. From time to time, certain directors provide additional consultancy services to the Group outside of their capacity as directors. No additional fees were paid in the current year (2020: $18,900). (c) Subsidiaries Interests in subsidiaries are set out in note 35. 213 35 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(c): Cashel Asset Management Limited New Zealand Ordinary 100% 100% Horizon Tourism New Zealand Limited (formerly SkyCity Wellington Limited) New Zealand Ordinary 100% 100% 2021 2020 % % Lets Play Live Media Limited New Zealand Ordinary New Zealand International Convention Centre Limited New Zealand Ordinary 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 Development Limited SkyCity Enterprises Limited SkyCity Hamilton Limited SkyCity Holdings Limited New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary 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 Precinct Limited SkyCity Projects Limited SkyCity Properties Limited SkyCity Properties Albert St Limited SkyCity Properties Victoria St Limited SkyCity Ventures Limited TNZ Esports Limited LPL Media Pty Limited SkyCity Adelaide Pty Limited SkyCity Australia Finance Pty Limited SkyCity Australian Limited Partnership SkyCity Australia Pty Limited SkyCity Treasury Australia Pty Limited Horizon Tourism Limited SkyCity Investment Holdings Limited SkyCity Malta Holdings Limited SkyCity Malta Limited New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary New Zealand Ordinary 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. 214 100% 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% 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 2021S T N E M E T A T S L A C N A N I F I 36 Contingencies (a) Contingent Liabilities The possibility exists for the Group to receive third party claims in respect to the NZICC fire. However, only minor claims have been received to date. It is the Group’s expectation that any claims received will be covered by either the insurers or the Contractor (FCC) (30 June 2021 and 30 June 2020: nil). SkyCity operates in an industry with a complex regulatory framework. During FY21, there was heightened focus from a range of regulators across New Zealand and, in particular Australia. SkyCity takes its obligations seriously, and continues to work proactively with its regulators and respond to their inquiries. On 4 June 2021, SkyCity was notified by AUSTRAC’s Regulatory Operations Team that it had identified potential serious non-compliance by SkyCity Adelaide Pty Limited (SkyCity Adelaide) with the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) and it had therefore referred the matter to AUSTRAC’s Enforcement Team, which had initiated a formal enforcement investigation into the compliance of SkyCity Adelaide. The potential serious non-compliance includes concerns relating to ongoing customer due diligence, adopting and maintaining an AML/CTF Program and compliance with Part A of an AML/CTF Program. These concerns were identified in the course of a compliance assessment which AUSTRAC commenced in September 2019 focusing on SkyCity Adelaide’s management of customers identified as high risk and politically exposed persons over the periods from 1 July 2015 - 30 June 2016 and 1 July 2018 – 30 June 2019. AUSTRAC has made clear that it has not made a decision regarding the appropriate regulatory response that it may apply to SkyCity Adelaide, including whether or not enforcement action will be taken. AUSTRAC has indicated that it will request information from SkyCity as part of its investigation. SkyCity will fully co-operate with AUSTRAC in relation to those inquiries and with the investigation of SkyCity Adelaide. No provision has been made in relation to this or other regulatory matters in the financial statements, as these matters do not meet the requirements for recognition as a provision. (b) Contingent Assets As detailed in note 6, the Group intends to seek recovery from the Contractor (FCC) for losses associated with the NZICC fire that are not covered by the insurers. These losses include insurance excesses, payments to Macquarie under the Auckland Car Park Concession Agreement and other items. To date, the Group has identified $23.3 million (2020: $8.9 million) of costs where it does not believe that recovery is virtually certain at this time and therefore no income has been recognised. However, recovery of these costs is considered probable and they are therefore included as a contingent asset. This is not the full extent of the expenses and losses that may be claimed from the NZICC or Horizon Hotel Contractor relating to the fire and construction delays. There are no other significant contingent assets at year end (2020: nil). 37 Commitments Capital Commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as set out below. Property, plant and equipment 2021 $'000 445,269 2020 $'000 440,342 The above commitments include the estimated cost of reinstating the NZICC and Horizon Hotel. The cost of reinstating the damage to the NZICC and Horizon Hotel arising from the NZICC fire is currently estimated to be $365.0 million to $450.0 million (2020: $330.0 million to $375.0 million) for the NZICC and $14.6 million to $21.0 million (2020: $6.0 million) for the Horizon Hotel. The actual costs may be materially different to these estimates. Further information is included in note 6. Notes to the Financial Statements 215 38 Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities 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 NZICC fire related income NZICC fire related costs Asset impairment Share of profits/(losses) of associates Change in operating assets and liabilities Change in receivables and prepayments Change in inventories Change in deferred tax asset Change in current payables Change in deferred tax liability Change in tax receivable – current Change in non-current payables Change in tax payable – current Investing and financing items included in working capital movements Net cash inflow from operating activities 2021 $'000 156,126 91,413 32,455 3,253 528 (7,386) (170,727) 141,845 8,834 – 8,847 (559) (2,467) (21,677) 11,856 1,989 9,748 15,480 8,627 288,185 2020 $'000 235,388 86,559 28,613 3,697 (66,779) 14,055 (384,500) 108,090 160,600 83 7,041 (169) (2,748) (6,270) (24,271) (1,059) 9,057 (13,877) (33,344) 120,166 216 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021S T N E M E T A T S L A C N A N I F I 39 Events Occurring after the Balance Sheet Date (a) Dividend On 24 August 2021, the directors resolved to provide for a dividend to be paid in respect of the year ended 30 June 2021. The fully imputed, unfranked dividend of 7.0 cents per share will be paid on 24 September 2021 to all shareholders on the Company's register at the close of business on 17 September 2021. (b) COVID-19 The SkyCity Adelaide casino and entertainment facilities were closed from midnight (Australian Central Standard Time) on 19 July 2021 and reopened in a staged manner from 10.00am (Australian Central Standard Time) on 28 July 2021 in response to the COVID-19 mandated restrictions imposed by the South Australian Government in connection with a new COVID-19 cluster in South Australia. On 17 August 2021, the New Zealand Government announced a lockdown of the whole of New Zealand, following the detection of a COVID-19 case in Auckland. The lockdown came into effect at 11:59pm on 17 August 2021 and required the closure of all non-essential businesses and organisations. All SkyCity facilities and offices in New Zealand closed on 17 August 2021, with the exception of the Auckland hotels, which remained open for guests, with food and beverage services available only through delivery to rooms. At the time of signing these financial statements, the lockdown is still in force and additional COVID-19 cases have been detected in Auckland and Wellington. (c) Long Stop Date The NZICC is being built under an agreement between the Group and the Crown. Under that agreement, the NZICC must be completed by a specified date, referred to as the completion long stop date. Subsequent to the reporting date, the Crown has agreed to an extension of the completion long stop date – the revised date is now 15 December 2027 (previously 2 January 2025). SkyCity expects to complete the NZICC before this date. (d) Recent Australian Employment Law In the interim financial statements, the Group disclosed a contingent liability in relation to the potential change in the treatment of some Australian casual employees that might arise from legal cases that were in progress. Subsequent to the reporting date, the Australian High Court delivered a judgment that means the definition of a casual employee will not change. As a result, no contingent liability is disclosed in these financial statements. (e) Partial Repayment of the New Zealand Government Wage Subsidy On 27 July 2021, the Group made a $6.7 million voluntary partial repayment of wage subsidies to the New Zealand Government (note 5). (f) Syndicated bank facility Subsequent to the reporting date, SkyCity’s syndicated bank facility was restructured (note 12). Notes to the Financial Statements 217 Index to the Notes to the Financial Statements NOTE NOTE 1 Summary of Significant Accounting Policies 2 Segment Information 3 Revenue 4 Auckland Car Park Transaction 5 Other Income 6 NZICC Fire (a) Income (b) Expenses (c) Current Assets (d) Non-current Assets 7 Expenses 8 Earnings Per Share 9 Dividends 10 Leases – SkyCity as the Lessee 11 Net Finance Costs 12 Non-current Liabilities – Interest Bearing Liabilities 13 Current Liabilities – Interest Bearing Liabilities 14 Net Debt Reconciliation 15 Non-current Assets – Investment Properties 16 Current Liabilities – Deferred Licence Value 17 Non-current Liabilities – Deferred Licence Value 172 175 177 177 179 179 180 181 182 183 183 185 185 186 187 187 189 190 190 192 193 18 Income Tax Expense/(Benefit) 19 Deferred Tax Assets 20 Deferred Tax Liabilities 21 Imputation and Franking Credits 22 Non-current Liabilities – Lease Income in Advance 23 Property, Plant and Equipment 24 Intangible Assets 25 Receivables and Prepayments 26 Cash and Bank Balances 27 Assets Held for Sale 28 Payables and Provisions 29 Share Capital 30 Reserves 31 Derivative Financial Instruments 32 Financial Risk Management 33 Share-Based Payments 34 Related Party Transactions 35 Subsidiaries 36 Contingencies 37 Commitments 38 Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating Activities 39 Events Occurring after the Balance Sheet Date 194 195 195 196 196 196 199 204 204 204 205 205 206 206 208 210 213 214 215 215 216 217 218 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 Reconciliation of Normalised Results to Reported Results 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 that: • 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” factor) from International Business, which has variable turnover and actual win percentage from period to period; • eliminating structural differences in the business between periods; and • eliminating known different treatments with other New Zealand and Australian publicly listed casino companies. SkyCity believes that, by making these adjustments, the users of the financial information will be able to understand the underlying performance of the Group and form a view on the future performance of the business. For internal purposes, including budgeting and determination of staff incentives, the normalised results are used. Non-GAAP information is prepared in accordance with the company’s Non-GAAP Financial Information Policy, which is reviewed and approved by the SkyCity Board at each reporting period. The Non-GAAP Financial Information Policy was applied consistently in respect of the financial years ended 30 June 2020 and 30 June 2021. The differences between the company’s FY21 and FY20 reported and normalised information is summarised in the table below: FY21 FY20 Revenue $m EBITDA $m EBIT $m NPAT $m Revenue $m EBITDA $m EBIT $m NPAT $m Reported 951.9 317.3 225.9 156.1 1,125.0 348.3 261.7 235.4 International Business revenue adjustment Gaming GST International Business at theoretical win rate 7.3 78.7 – – – – – – (5.3) (4.9) (4.9) (3.6) 39.3 73.4 (7.3) – – – – – – 0.1 0.1 0.2 Gain on sale – Auckland car parks Revaluation of Auckland properties – – (7.4) (7.4) (7.4) – – – (66.4) (66.4) (66.4) (66.4) – – 14.1 – 14.1 – 14.1 – Liquidated damages (39.5) (39.5) (39.5) (39.5) NZICC fire impacts Labour restructure Funding plan costs Deferred tax liability reversal Asset impairment Normalised (170.7) (22.4) (22.4) (24.2) (384.5) (269.4) (269.4) (268.5) – – – – – – – – – – – – – 8.8 8.8 8.8 – – – – 13.5 13.5 – – – – 9.7 5.4 (24.1) 160.6 160.6 160.6 822.3 252.0 160.6 90.3 779.5 200.7 114.2 66.3 219 Adjustment Discussion Treat International Business commissions as an expense rather than reduction in revenue which reduces both reported revenue and operating expenses within International Business (by $7.3 million in FY21 and $39.3 million in FY20) Add gaming GST to reported revenue (by $78.7 million in FY21 and $73.4 million in FY20) Apply theoretical win rate of 1.35% for International Business vs actual win rate of 1.67% (FY21) and 1.47% (FY20) • • • • • • This adjustment adds back International Business commissions (treated as a reduction from revenue in the reported results) and increases both revenue and expenses. This adjustment does not impact EBITDA, EBIT or NPAT. This adjustment has been made to maintain the relationship between turnover and the theoretical win rate of 1.35% when determining normalised revenue. 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. 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 SkyCity therefore does not do so. However, SkyCity does include gaming GST within its normalised revenue. • This adjustment does not impact EBITDA, EBIT or NPAT. • • • 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. In order to understand the long term results within International Business there is the need to eliminate the inherent volatility or “luck” factor. 220 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021Adjustment Discussion Eliminate net gain ($24.2 million post-tax) arising from impacts of NZICC fire ($268.5 million in FY20) Eliminate benefit ($39.5 million) arising from liquidated damages on NZICC/Horizon Hotel withheld due to late practical completion • • • • • • • • • • • On 22 October 2019, there was a significant fire at the construction site of the New Zealand International Convention Centre (NZICC) in Auckland. This fire has caused extensive damage to the NZICC and damage to the Horizon Hotel which is being constructed on the adjacent site. Both buildings are insured and all significant costs associated with the fire are expected to be covered. Any costs not covered by insurance are expected to be sought from Fletcher Construction. The fire has significant implications for the financial statements for the Group which were recognised in FY20 – these impacts are explained further on pages 184 – 188 in SkyCity’s FY20 financial statements which have been released to the NZX and ASX. The FY20 financial statements included a number of significant judgements and estimates to determine the appropriate accounting. These judgements and estimates have continued to be reviewed as new information has become available – following a revised damage assessment for the NZICC/Horizon Hotel, the expected insurance recovery relating to the asset has increased and is required to be recognised as income as SkyCity is principal in the insurance relationship. This income has been offset by an increase in costs relating to demolition and deconstruction of the site post fire that are required to be expensed as incurred. The NZICC fire (and associated accounting impact) is a significant, one-off event that has impacted the comparability of the FY21 result with the prior year. SkyCity entered into Building Works Contracts on the NZICC/Horizon Hotel projects in November 2015. Under the Building Works Contracts, liquidated damages apply for late delivery of contractual completion milestones. Given the significant delays to completion of the NZICC/Horizon Hotel, SkyCity has claimed and deducted liquidated damages under the Building Works Contracts of $39.5 million. Following several pre-fire claims being settled with Fletcher Construction during 1H21, recovery of the liquidated damages has been deemed virtually certain and hence the full amount is required to be accounted for as income in SkyCity’s interim financial statements. The liquidated damages are a significant, abnormal event – making this adjustment which eliminates the abnormal gain will enhance the reader’s understanding as this item does not impact the underlying operations of the Group. Reconciliation of Normalised Results to Reported Results 221 Adjustment Discussion Reverse impact of revaluation (increase of $7.4 million) of Auckland investment properties (FY20: reduction of $14.1 million) AA Centre (SkyCity HQ) impairment ($8.8 million) SkyCity Adelaide licence impairment (A$150 million) (FY20 only) Eliminate gain ($66.4 million) arising from Auckland car park concession sale (completed in August 2019) (FY20 only) Labour restructure ($13.5 million) and funding plan costs ($5.4 million post-tax) (FY20 only) • • • • SkyCity has 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 eliminates/reverses the increase/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. AA Centre • • In FY21, the Group impaired the AA Centre (SkyCity HQ), majority owned by SkyCity, by $8.8 million. The impairment arose due to revised expectations regarding the carrying value of the asset and the cost of significant improvements and remediation required to the building over the past year. • This adjustment eliminates this non-cash expense. SkyCity Adelaide • • In FY20, the Group impaired the SkyCity Adelaide casino licence by A$150 million ($160.6 million). The impairment arose due to revised expectations regarding the timeframe for SkyCity Adelaide to achieve its long term potential earnings following completion of the expansion project. The reduced earnings outlook for SkyCity Adelaide have been exacerbated in the short-to-medium term by the impacts of COVID-19, including an expectation that International Business activity may take some years to recover. • This adjustment eliminates this non-cash expense. • The FY20 reported results included a significant gain relating to the Auckland car park concession sale which settled in August 2019. • The adjustment reverses these gains. • As part of its response to COVID-19, SkyCity undertook a labour restructure in New Zealand and implemented a new funding plan in FY20. • This adjustment eliminates the costs associated with those actions. Deferred tax liability reversal ($24.1 million) (FY20 only) • As part of its response to COVID-19, the New Zealand Government reinstated tax depreciation for commercial properties, this resulted in a non-cash accounting reduction in the FY20 tax expense. • This adjustment eliminates this one-off reduction to tax expense. 222 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021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 2021: Company Disclosures 9 102-2 Activities, brands, products and services Annual Report 2021: About SkyCity 34 – 49 102-3 Location of headquarters 102-4 Location of operations 102-5 Ownership and legal form 102-6 Markets served 102-7 Scale of organisation Annual Report 2021: About SkyCity Annual Report 2021: Directory 34 228 Annual Report 2021: About SkyCity 34 – 49 Annual Report 2021: Directory Annual Report 2021: Notes to the Financial Statements 228 172 150 – 152 Annual Report 2021: Shareholder and Bondholder Information Annual Report 2021: About SkyCity 34 – 49 i. Total number of employees Annual Report 2021: Diversity Snapshot 24 Yes Annual Report 2021: Our People 88 – 89 ii. Total number of operations Annual Report 2021: Creating Value 16 – 17 iii. Net sales Annual Report 2021: About SkyCity Annual Report 2021: Income Statement 34 166 iv. Total capitalisation Annual Report 2021: Balance Sheet 168 – 169 v. Quantity of products and services provided Annual Report 2021: Creating Value 16 – 17 Annual Report 2021: About SkyCity 34 – 49 Additional information Annual Report 2021 16 – 25 102-8 Information on employees and other workers Annual Report 2021: Our People 88 – 101 Note 1 Yes 223 SECTION Organisational Profile ASPECT / GRI DISCLOSURE DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS EXTERNAL ASSURANCE 102-9 Supply chain 102-10 Significant changes to the organisation and its supply chain Annual Report 2021: Our Suppliers Annual Report 2021: Chair's Review, Chief Executive Officer's Review and Delivering Our Group Strategy 102-11 Precautionary principle or approach SkyCity Ethical Sourcing Code 108 – 113 Yes 4 – 7 27 – 33 110 102-12 External initiatives Strategy 102-14 Statement from senior decision-maker Annual Report 2021: Our Sustainability 70 – 77 Annual Report 2021: Our People 88 – 101 Annual Report 2021: Our Environment 116 – 125 Annual Report 2021: Chair's Review, Chief Executive Officer's Review and Delivering Our Group Strategy 4 – 7 27 – 33 Yes Yes Ethics and Integrity 102-16 Values, principles, standards and norms of behaviour SkyCity Code of Conduct www.skycityentertainmentgroup.com Governance 102-18 Governance structure Annual Report 2021: 64 – 68 Our Senior Leadership Team 128 – 137 Annual Report 2021: Corporate Governance Statement and Other Disclosures Stakeholder Engagement 102-40 List of stakeholder groups Annual Report 2021: Our Sustainability www.skycityentertainmentgroup.com 102-41 102-42 102-43 102-44 102-45 102-46 Collective bargaining agreements Annual Report 2021: Our People 88 – 101 Identifying and selecting stakeholders SkyCity Code of Conduct www.skycityentertainmentgroup.com Approach to stakeholder engagement SkyCity Code of Conduct www.skycityentertainmentgroup.com Key topics and concerns raised Annual Report 2021: Our Sustainability 70 – 77 Entities included in the consolidated financial statements Annual Report 2021: Notes to the Financial Statements 173 / 214 Defining report content and topic boundaries Annual Report 2021: About this Annual Report 34 – 49 102-47 List of material topics Annual Report 2021: Our Sustainability 70 – 77 Annual Report 2021: Our Sustainability 70 – 77 Reporting Practice 224 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 SECTION Reporting Practice ASPECT / GRI DISCLOSURE 102-48 DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS EXTERNAL ASSURANCE Restatements of information Not applicable N/A 102-49 Changes in reporting Annual Report 2021: Notes to the Financial Statements 172 – 174 102-50 Reporting period Annual Report 2021 102-51 Date of most recent report Annual Report 2021: About this Annual Report 102-52 Reporting cycle Annual Report 2021 Cover Page 9 Cover Page 102-53 Contact point for questions regarding the report Annual Report 2021: Our Sustainability 70 Annual Report 2021: Remuneration Report 138 Annual Report 2021: Directory 102-54 Claims of reporting in accordance with the GRI standards Annual Report 2021: About this Annual Report 228 9 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 Conserve the Environment ASPECT / GRI DISCLOSURE GRI 103 DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS EXTERNAL ASSURANCE Energy management approach Annual Report 2021: Our Environment 116 – 125 GRI 302-3 Energy intensity Annual Report 2021: Our Environment 116 – 125 GRI 103 Emissions management approach Annual Report 2021: Our Environment 116 – 125 GRI 305-4 GHG emissions intensity Annual Report 2021: Our Environment 116 – 125 Source Ethically and Responsibly GRI 103 Ethical and sustainable procurement management approach Annual Report 2021: Our Suppliers 108 – 115 GRI Content Index 225 SECTION Inspire Our People ASPECT / GRI DISCLOSURE GRI 103 Health and safety management approach DESCRIPTION PUBLICATION PAGE(S) LIMITATIONS EXTERNAL ASSURANCE GRI 403-2 Types and rates of injury Annual Report 2021: Our Risk Profile and Management Annual Report 2021: Health, Safety and Wellbeing Annual Report 2021: Our Risk Profile and Management Annual Report 2021: Health, Safety and Wellbeing 50 – 59 90 – 91 50 – 59 90 – 91 GRI 103 Employee engagement management approach Annual Report 2021: Our People 88 – 101 GRI 404-2 Employee programmes GRI 103 Diversity, inclusion and belonging management approach Annual Report 2021: Our People 88 – 101 Annual Report 2021: Our People 88 – 101 GRI 405-1 Governance and employee diversity Annual Report 2021: Our People 88 – 101 Yes SkyCity Diversity and Inclusion Policy www.skycityentertainmentgroup.com Host Responsibly GRI 103 Customer health and safety management approach Annual Report 2021: Our Risk Profile and Management 50 – 59 Annual Report 2021: Our Customers 78 – 87 GRI 416-1 Assessment of health and safety of products and services Annual Report 2021: Our Risk Profile and Management 50 – 59 78 – 87 78 – 87 Annual Report 2021: Our Customers Annual Report 2021: Our Customers Annual Report 2021: Our Customers 78 – 87 Annual Report 2021: Our Customers 78 – 87 Note 2 GRI 416-2 GRI 103 GRI 419-1 Non-compliance incidents related to health and safety of products and services Socio-economic compliance management approach Non-compliance with socio-economic laws and regulations Limitations: Note 2 – The reporting of GRI 419-1 on Non-compliance with Socio-Economic Laws and Regulations does not include economic laws and regulations. 226 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021 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 227 Directory REGISTERED OFFICE SKYCITY LOCATIONS SkyCity Entertainment Group Limited SKYCITY AUCKLAND NEW ZEALAND Level 13 99 Albert Street Auckland New Zealand Telephone: +64 9 363 6000 AUSTRALIA North Terrace Adelaide SA 5000 Australia Telephone: +61 8 8212 2811 Email: sceginfo@skycity.co.nz www.skycityentertainmentgroup.com Corner Victoria and Federal Streets Auckland 1010 New Zealand Telephone: +64 9 363 6000 SKYCITY HAMILTON 346 Victoria Street Hamilton 3204 New Zealand Telephone: +64 7 834 4900 SKYCITY QUEENSTOWN Level 2, Stratton House 16–24 Beach Street Queenstown 9300 New Zealand Telephone: +64 3 441 0400 SKYCITY QUEENSTOWN WHARF Steamer Wharf 88 Beach Street Queenstown 9300 New Zealand Telephone: +64 3 441 1495 SKYCITY ADELAIDE Railway Building North Terrace Adelaide SA 5000 Australia Telephone: +61 8 8212 2811 228 SkyCity Entertainment Group Annual Report Year Ended 30 June 2021AUDITOR PricewaterhouseCoopers Level 27 15 Customs Street West Private Bag 92162 Auckland 1010 SUPERVISOR FOR BONDS Public Trust Private Bag 5902 Wellington 6140 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 229 skycityentertainmentgroup.com 

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