11 February 2016

Client Market Services
NZX Limited
Level 1, NZX Centre
11 Cable Street
WELLINGTON

Dear Sir/Madam
RE :

SKYCITY ENTERTAINMENT GROUP LIMITED – SKC
INTERIM RESULT (FOR THE SIX MONTHS ENDED 31 DECEMBER 2015)

Please find attached the following information relating to SKYCITY Entertainment
Group Limited’s interim result for the six month period ended 31 December 2015:
1.

Appendix 1 (as required by Listing Rule 10.3.2) detailing the preliminary
announcement;

2.

FY16 Interim Result presentation;

3.

Appendix 7 (as required by Listing Rule 7.12.2) detailing the interim dividend
of NZ 10.5 cents per ordinary share to be paid on 18 March 2016 to those
shareholders on the company’s share register as at 5.00pm on 4 March 2016.
The company’s Dividend Reinvestment Plan will be activated in respect of the
interim dividend, with a 2% discount being offered;

4.

Financial statements and notes; and

5.

Media release.

Yours faithfully

Rob Hamilton
Chief Financial Officer

 SKYCITY Entertainment Group Limited
Results for announcement to the market
Reporting Period
1 July 2015 to 31 December 2015
Previous Reporting Period
1 July 2014 to 31 December 2014
Reported
Reported revenue including
gaming GST from ordinary
activities
Reported revenue from ordinary
activities 1
Reported profit (loss) from
ordinary activities after tax
attributable to security holder
Reported net profit (loss)
attributable to security holders

Amount (000s)
Percentage change
NZ$566,112

Normalised
Normalised revenue including
gaming GST from ordinary
activities
Normalised revenue from ordinary
activities
Normalised profit (loss) from
ordinary activities after tax
attributable to security holder
Normalised net profit (loss)
attributable to security holders

Amount (000s)
Percentage change
NZ$561,964

14.2%

NZ$513,730

13.8%

NZ$71,019

30.2%

NZ$71,019

30.2%

10.2%

NZ$510,630

10.1%

NZ$85,417

28.4%

NZ$85,417

28.4%

Note: Normalised results sets International Business win to theoretical win rate of 1.35% and
adjust for certain revenue and expense items. Reconciliation between reported and normalised
financial information is provided at the end of this document.

1

On the Income Statement this is the total of Revenue and Other Income

 Interim Dividend

Amount per security

Imputed amount per security

NZ$ 0.105

-

Record Date
Payment Date

4 March 2016
18 March 2016

Comments:

SKYCITY’s FY16 interim performance is set out in
the Company’s Result Presentation which is attached
to this announcement. It provides detail and
explanatory comment on operating and financial
performance for each business unit and the Group as a
whole and various other relevant aspects of the
financial performance for the six months ended 31
December 2015.
The Result Presentation will be available on the
Company’s website from 11 February 2016.

NTA Backing

Net tangible asset backing per ordinary
share

2015

2014

-16.4¢

44.5¢

25.6¢

25.9¢

68.3¢

n/a

77.5¢

70.4¢

Adjusted for:
Impact of initial recognition of the Adelaide
casino licence enhancements (14 February
2014)
Impact of initial recognition of the
Auckland casino licence enhancements (11
November 2015)
Adjusted net tangible asset backing per
ordinary share

Net tangible asset backing per ordinary share has declined as a result of the increase in the
carrying values of the Adelaide casino licence and Auckland casino licence (intangible assets
which are excluded from the calculation) and the associated deferred licence values (liabilities
which are not excluded from the calculation). If the deferred licence values are also excluded
the net tangible asset backing per ordinary share would be 77.5 cents per share as at 31
December 2015.

 Auditors
This report is based on accounts that have been the subject of a review by the company’s
auditor. Their review report is provided with this preliminary final report.
Earnings per share

Reported
Normalised

Amount (cents per
share)
12.0
14.5

Percentage change
29.0%
27.2%

Reported earnings per share for the six months to 31 December 2015 were 12.0 cents per share
(31 December 2014: 9.3 cents per share). Normalised earnings per share for the six months to
31 December 2015 were 14.5 cents per share (31 December 2014: 11.4 cents per share).
“Normalised” eliminates certain revenue and expense items and adjusts International VIP
commission business win rate to theoretical.
Dividends
There are no imputation or franking credits attached to the 1H16 dividend.

 Reconciliation between Reported and Normalised Financial Information
1H16
Revenue EBITDA
EBIT
$m
$m
$m

Normalised

NPAT
$m

1H15
Revenue EBITDA
EBIT
$m
$m
$m

NPAT
$m

562.0

178.2

132.3

85.4

510.0

154.4

111.2

66.6

International Business at Theoretical

4.1

(6.6)

(6.6)

(4.6)

(14.5)

(11.1)

(11.1)

(8.2)

International Business Adjustments

4.1

(6.6)

(6.6)

(4.6)

(14.5)

(11.1)

(11.1)

(8.2)

Adelaide redevelopment costs

-

-

-

-

-

(1.5)

(1.5)

(1.0)

NZICC interest and other costs

-

-

-

-

-

(0.3)

(0.3)

(2.3)

Asset write-offs

-

-

(10.4)

(9.8)

-

-

-

-

Restructuring costs

-

-

-

-

-

(0.5)

(0.5)

(0.4)

Auckland project costs

-

-

-

-

-

(0.2)

(0.2)

(0.1)

0.0

0.0

(10.4)

(9.8)

(2.5)

(2.5)

(3.8)

566.1

171.6

115.3

71.0

140.8

97.6

54.6

Total Other Adjustments
Reported

495.5

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.
Gaming revenue figures reflect gaming win (inclusive of gaming GST). Non-gaming revenues
are net of GST. Total revenues are gaming win plus non-gaming revenues.
This approach facilitates Australasian and period-on-period comparisons and is consistent with
the treatment adopted by major Australian casinos.
Other Key Adjustments are:
1H16 Adjustments
 Write-off of the Hamilton Hotel project costs as this project is no longer proceeding
($2.7mof capitalised costs incurred over 2011 to 2014)
 Write-off of 101 Hobson Street and the Nelson Street car park to make way for the NZICC
($7.6m book value)
1H15 Adjustments
 Adelaide redevelopment costs – Structural redundancies and launch costs for new facilities
(Sean’s Kitchen and Madame Hanoi)
 NZICC – Interest on purchase of New Zealand International Convention Centre (NZICC)
land bank (calculated using the group’s average cost of debt of 6.7% on an average balance
of $85m) and other costs specific to this project
 Restructuring costs – Costs associated with changing the staffing structures under an
approved restructuring plan
 Auckland project costs – Federal Street launch and Federal Street fire costs

IB win rate at 1.41% for 1H16 (1H15: 1.04%).
During FY16 the application of the Group’s non-GAAP financial information policy was
tightened to further restrict the number of adjustments between Reported and Normalised
results

 SKYCITY
Entertainment
Group Limited

Half-Year Result Presentation

Six months ended 31 December 2015

11 February 2016

 SKYCITY Results 1H16
1H16 Results Overview

3

1H16 Property Updates

12

January 2016 Trading Update

33

Interim Dividend

35

Major Projects Update

37

Funding

43

Conclusion

47

Appendices

49

www.skycityentertainmentgroup.com

2

 1H16 Results Overview
1H16

1H15

$m

$m

Movement
$m

%

Normalised Revenue (incl Gaming GST)

562.0

510.0

52.0

10.2%

Normalised EBITDA

178.2

154.4

23.8

15.4%

Normalised NPAT

85.4

66.6

18.8

28.2%

14.5 cps

11.4 cps

3.1 cps

27.2%

1H16

1H15

$m

$m

$m

Reported Revenue (incl Gaming GST)

566.1

495.5

70.6

14.2%

Reported EBITDA

171.6

140.8

30.8

21.9%

71.0

54.6

16.4

30.0%

Reported EPS

12.0 cps

9.3 cps

2.7 cps

29.0%

Interim Dividend

10.5 cps

10.0 cps

0.5 cps

5.0%

Normalised EPS

Reported NPAT

Movement
%

• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147
• Weighted average number of shares 1H16 = 590,191,246 and 1H15 = 584,692,624

3

 1H16 Results Overview – Key Points

(page 1 of 6)

Group Result


Normalised revenue up 10.2% to $562.0m, normalised EBITDA up 15.4% to $178.2m and normalised NPAT up 28.2% to
$85.4m
•



Record revenue and earnings for a six-month period, at the upper-end of guidance given on 19 January 2016

Strong group result underpinned by improved performance across all properties
•

Continued strong growth in Auckland

•

Significantly improved performance in Adelaide

•

Sustained revenue and EBITDA growth in Hamilton

•

EBITDA growth in Darwin despite a challenging local market

•

Strong International Business (“IB”) growth – with turnover in excess of $7bn for the period



Significantly lower funding costs due to lower interest rates, lower average debt and capitalisation of interest on
projects now proceeding



Strong growth in operating cashflows, ensuring stable debt levels despite significant investment across the group



10.5cps interim dividend declared, up 5% reflecting strong growth in earnings per share vs. the pcp



Dividend Reinvestment Plan will be available with a 2% discount

4

 1H16 Results Overview – Key Points

(page 2 of 6)

Property Updates
Auckland


Auckland continues to perform strongly, with normalised revenue up 7.4% to $324.9m and EBITDA up 8.9% to $135.4m.
Excluding IB, Auckland’s revenue increased 6.4% to $273.9m and EBITDA 10.7% to $124.3m



Continuation of recent positive momentum across all business segments, with the property now having delivered 8
consecutive quarters of EBITDA growth on the pcp



On-going focus on cost management contributed to a further improvement in normalised EBITDA margin to 41.7%



New NZICC gaming concessions were activated in mid-November 2015



Benefits from cashless gaming, TITO and increased EGM numbers have been pleasing, with EGM revenue up ~10% over
December and January vs. the pcp



Early indicators suggest the concessions will result in higher revenue during peak trading periods



Auckland continues to benefit from positive external influences which are supportive of further medium-term growth

Other NZ


SKYCITY Hamilton continues to deliver strong underlying growth resulting in revenue up 9.9% to $27.7m and EBITDA
up 18.4% to $11.6m, underpinned by strong local gaming activity



Combined Queenstown operations are delivering record growth, underpinned by significant IB and local gaming
activity, with normalised revenue up 107.6% to $13.7m and normalised EBITDA up 420% to $2.6m

5

 1H16 Results Overview – Key Points

(page 3 of 6)

Adelaide


Significantly improved performance in Adelaide with normalised revenue up 18.7% to A$103.6m, which together with
cost savings during the period resulted in normalised EBITDA up 58.5% to A$21.4m with improved EBITDA margins



The improved result was underpinned by a significant increase in IB activity, with turnover up ~146% to A$1.9bn and
the on-going success of the new signature restaurants



Local gaming revenue was down marginally, consistent with trends observed in the broader Adelaide market

Darwin


Darwin delivered EBITDA growth of 6.9% for the period, despite flat local revenue in a challenging market



IB volumes showed strong growth over the period, up 69.4% to $700m, reinforcing Darwin’s appeal and potential as
an attractive destination for VIP customers



The NT Government completed its gaming tax review for SKYCITY Darwin in July 2015, the net impact of which was
an increase in operating costs for Darwin of approximately A$1m per annum (vs. FY15)

International Business


SKYCITY’s International Business delivered record activity for the period, with group turnover and normalised
revenue up 51.4% to $7.2bn and $96.6m, respectively



Normalised EBITDA was up 57.3% to $22.8m with margins expanding due to operating leverage



Actual win rate for the period was 1.41%, slightly above the theoretical win rate of 1.35%

6

 1H16 Results Overview – Key Points

(page 4 of 6)

January 2016 Trading Update


January trading has broadly seen a continuation of the trends exhibited during 1H16



Strong performances from the NZ businesses were offset by weaker performances from Darwin and IB, resulting in
normalised group revenue for the month of $88.4m which was flat on the pcp



Auckland continued to deliver growth across all business segments, with local revenue (excluding IB) up 7.6% on the
pcp. As previously identified, early indicators suggest the NZICC gaming concessions are having a positive impact



IB had a quieter month with turnover of $700m against a strong comparative period (~$1bn), but has a very busy
outlook for Chinese New Year in February



EBITDA margins for all businesses were broadly in-line with those in both January 2015 and 1H16

NZICC and Hobson St Hotel Projects


Fletcher Construction was appointed in November 2015 as the main contractor for the NZICC and Hobson St hotel
projects following a competitive tender process, with demolition and preparation works commencing on-site in
December 2015, and the overall programme progressing on-time and on-budget



Total project costs, including the NZICC development, the expanded 1,327 space car park, the laneway and the
Hobson St hotel remain consistent with previous market guidance of ~$700m (including appropriate contingencies)

7

 1H16 Results Overview – Key Points

(page 5 of 6)

Adelaide Redevelopment


SKYCITY is well advanced in finalising the design for the expansion of its Adelaide property, with development
approval received from the Development Assessment Commission (“DAC”) on 22 January 2016



SKYCITY is committed to a total development cost of no greater than A$300m, including the capital cost of the
ground lease (~A$12m) and the commissioning of gaming product (~A$30m)



While early ground works are expected to commence by the middle of the year, commencement of core
construction of the expansion is unlikely to be before December 2016



SKYCITY’s commencement remains contingent upon the satisfactory finalisation of the ground lease, the car park
lease with Walker Corporation and the development approvals of adjacent works, all of which are important to the
overall success of SKYCITY’s expansion

Funding


Following the recent $125m NZ bond issue, SKYCITY now has ~$322m of committed undrawn bank facilities –
sufficient headroom to fund the committed NZICC and Hobson St hotel projects



The proposed sale of the Hobson St hotel is progressing well, with strong interest from a broad range of domestic
and international investors

8

 1H16 Results Overview – Key Points

(page 6 of 6)



Based on indicative feedback received from S&P, SKYCITY expects that a successful sale of the Hobson St hotel
should enable it to retain its BBB- credit rating



SKYCITY intends to provide a further update on its long-term funding plan following the completion of the Hobson
St hotel sale process and once the plans and timing for the Adelaide expansion are further progressed

9

 1H16 Revenue Summary by Business (incl Gaming GST)
Movement

1H16

1H15

$m

$m

$m

%

324.9

302.5

22.4

7.4%

27.7
13.7

25.2
7.0

2.5
6.7

9.9%
95.7%

366.3

334.7

31.6

9.4%

New Zealand Casinos
 Auckland
 Hamilton
 Queenstown, Other

Total New Zealand
Australian Casinos
 Adelaide
 Darwin

(A$)
(A$)

103.6
75.0

87.3
73.1

16.3
1.9

18.7%
2.6%

Total Australia

(A$)

178.6

160.4

18.2

11.3%

Total Australia

(NZ$)

195.7

175.3

20.4

11.6%

562.0

510.0

52.0

10.2%

4.1

(14.5)

18.6

128.3%

566.1

495.5

70.6

14.2%

Normalised Revenue
Adjust International Business to actual win rate

Reported Revenue

• Revenue (including Gaming GST) is shown above to facilitate Australasian comparisons
• Normalised Revenue is adjusted for IB at theoretical win rate of 1.35%, versus actual 1.41% in 1H16 (1H15: 1.04%)
• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147
• Certain totals, sub-totals and percentages may not agree due to rounding

10

 1H16 EBITDA Summary by Business
Movement

1H16

1H15

$m

$m

135.4
11.6
2.7
149.7

124.3
9.8
0.5
134.6

11.1
1.8
2.2
15.1

8.9%
18.4%
440.0%
11.2%

21.4
23.1
44.5
48.8

13.5
21.6
35.1
38.3

7.9
1.5
9.4
10.5

58.5%
6.9%
26.8%
27.4%

(17.5)
181.0
(0.7)
(1.6)
(0.5)

(16.4)
156.5
(2.1)
-

(1.1)
24.5
1.4
(1.6)
(0.5)

(6.7%)
15.6%

Normalised EBITDA

178.2

154.4

23.8

15.4%

International Business adjustments
Other adjustments(4)
Reported EBITDA

(6.6)
171.6

(11.1)
(2.5)
140.8

4.5
2.5
30.8

21.9%

New Zealand Casinos
 Auckland
 Hamilton
 Queenstown, Other
Total New Zealand
Australian Casinos
 Adelaide
 Darwin
Total Australia
Total Australia
Corporate costs
Branding project costs(1)
Adelaide restructure costs(2)
NZICC operating costs(3)

(A$)
(A$)
(A$)
(NZ$)

$m

%

• Normalised EBITDA is adjusted for IB at theoretical win rate of 1.35% and certain other items (see page 55 for more details)
• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147
(1) Relates to the Adelaide and Auckland brand campaigns. (2) Redundancy and related costs in Adelaide. (3) NZICC operating costs not able to be capitalised. (4) Other adjustments in 1H15
were Adelaide restructure costs $1.5m, NZICC operating costs $0.3m and other items $0.7m

11

     
   
 
   


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1H16 Property Update – SKYCITY Auckland

(page 1 of 2)



SKYCITY Auckland delivered a strong result for the period, reflecting the continued benefits of significant
investment in the property over recent years



Revenue and EBITDA growth was achieved across all business segments, with total normalised revenue increasing
7.4% to $324.9m and normalised EBITDA increasing 8.9% to $135.4m



Excluding IB, Auckland’s revenue increased 6.4% to $273.9m and EBITDA 10.7% to $124.3m



Auckland’s performance was primarily driven by:
•

Strong local tables growth (especially in the expanded Baccarat room) with revenue up 13.5% on the pcp

•

Further growth from gaming machines on both the main gaming floor and in premium rooms, with revenues up
2.3% on the pcp

•

IB turnover of $3.8bn being up 13.2% on the pcp (and representing ~53% of total group IB turnover)

•

Further growth in average room rates and RevPar across both Auckland hotels

•

The ongoing strength of our Federal Street dining precinct, with our signature restaurants achieving ~5% revenue
growth and improved margins on the pcp

•

Continued focus on cost management across the Auckland business which contributed to a further improvement
in normalised EBITDA margin to 41.7% (1H15: 41.1%)

13

 1H16 Property Update – SKYCITY Auckland


(page 2 of 2)

Early indicators suggest that Auckland is benefiting from the NZICC gaming concessions activated in mid-November
2015
•

241 EGMs, 25 tables and 10 ATGs of the additional product have been accommodated on the existing casino
floor, in-line with previous guidance

•

Rollout of the remaining gaming product requires development of new gaming spaces, including IB salons on
Level 7 of the Grand Hotel and infilling part of the atrium to expand the main floor

•

TITO and cashless gaming have been successfully introduced on all gaming machines, with a strong customer
adoption rate and a majority of both cash-in and cash-out already using this technology

•

EGM revenue was up 10% over December and January vs. the pcp and Auckland expects to continue to achieve
higher revenue during peak trading periods



SKYCITY continues to invest in the Auckland property to enhance the customer experience, including the
refurbishment of the main site atrium and establishment of a new high-end Cantonese restaurant, both of which
are expected to be completed by September 2016



Auckland continues to benefit from positive external influences which are supportive of further growth over the
medium-term

14

 SKYCITY Auckland 1H16 – Normalised
1H16
$m

1H15
$m

$m

Movement
%

Revenues
Machines

116.7

114.1

2.6

2.3%

Tables – Local

76.6

67.5

9.1

13.5%

Tables – IB (Normalised)

51.0

45.0

6.0

13.3%

244.3

226.6

17.7

7.8%

Food and Beverage

32.5

31.7

0.8

2.5%

Hotels and Conventions

35.0

31.8

3.2

10.1%

13.1

12.4

0.7

5.6%

80.6

75.9

4.7

6.2%

Total Normalised Revenue (incl gaming GST)

324.9

302.5

22.4

7.4%

Gaming GST

(31.5)

(29.2)

(2.3)

(7.9%)

Total Normalised Revenue (excl gaming GST)

293.4

273.3

20.1

7.4%

(124.8)

(121.8)

(3.0)

(2.5%)

(33.2)

(27.2)

(6.0)

(22.1%)

Normalised EBITDA

135.4

124.3

11.1

8.9%

Normalised EBITDA Margin

41.7%

41.1%

Normalised EBITDA excluding IB

124.3

112.3

12.0

10.7%

Normalised Gaming Revenue (incl GST)

Sky Tower, Parking and Other
Non-Gaming Revenue

Expenses (excluding IB)
Expenses – IB (Normalised)

•
•
•
•

Gaming revenue shown on this page is gaming win (GST inclusive) - to facilitate Australasian comparisons
Non-gaming revenue is net of GST
Total revenue shown is gaming win plus non-gaming revenue
EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming revenue - to facilitate Australasian comparisons

15

 1H16 Property Update – Hamilton


Hamilton delivered a strong performance for the period with the positive momentum exhibited during FY15
continuing



Normalised revenue was up 9.9% to $27.7m and normalised EBITDA up 18.4% to $11.6m



Hamilton’s strong performance was largely driven by:
•

Solid local gaming growth, delivered from both the main floor and premium gaming rooms

•

Ongoing focus on customer experience and loyalty programmes

•

Opening of new F&B outlets during the period

•

Successful cost management initiatives across the property

•

Robust local macroeconomic conditions



Hamilton’s five new F&B outlets opened to much acclaim and have added significant appeal and amenity to the
property



The medium-term outlook for Hamilton remains positive, underpinned by strategic initiatives to drive incremental
visitation to the property

16

 SKYCITY Hamilton 1H16 – Normalised
1H16
$m

1H15
$m

$m

Movement
%

Revenues
Machines

17.8

17.0

0.8

4.7%

Tables – Local

5.8

4.4

1.4

31.8%

Tables – IB (Normalised)

0.0

0.0

0.0

NM

23.6

21.4

2.2

10.3%

Food and Beverage

2.7

2.4

0.3

12.5%

Conventions, Parking, Bowlevard and Other

1.4

1.4

0.0

0.0%

Non-Gaming Revenue

4.1

3.8

0.3

7.9%

Total Normalised Revenue (incl gaming GST)

27.7

25.2

2.5

9.9%

Gaming GST

(3.1)

(2.8)

(0.3)

(10.7%)

Total Normalised Revenue (excl gaming GST)

24.6

22.4

2.2

9.8%

(13.0)

(12.6)

(0.4)

(3.2%)

Expenses – IB (Normalised)

0.0

0.0

0.0

NM

Normalised EBITDA

11.6

9.8

1.8

18.4%

41.9%

38.9%

Normalised Gaming Revenue (incl GST)

Expenses (excluding IB)

Normalised EBITDA margin
•
•
•
•

Gaming revenue figures shown on this page is gaming win (GST inclusive) – to facilitate Australasian comparisons
Non-gaming revenue is net of GST
Total revenue shown is gaming win plus non-gaming revenue
EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming revenue - to facilitate Australasian comparisons

17

 SKYCITY Hamilton – ‘City Co-Op’

(page 1 of 2)

The Local Taphouse and Eat Burger - view from
the atrium
18

 (page 2 of 2)

La Parrilla Marble Room

 

1H16 Property Update – Queenstown/Wharf Casino


The combined Queenstown operations have delivered record growth for the period, underpinned by significant
growth in IB and local gaming activity and a focus on cost control



Normalised revenue was up 107.6% to $13.7m and normalised EBITDA up 420% to $2.6m



Excluding IB, revenue increased 20.3% to $6.6m and EBITDA 300% to $1.6m



Queenstown remains an iconic location with strong tourism growth expected over the medium-term



Potential medium-term opportunity exists to enhance VIP offering and/or consolidate licences, but any significant
actions would require regulatory change

20

 SKYCITY Queenstown/Wharf 1H16 – Normalised
1H16
$m

1H15
$m

Movement
$m

%

Revenues
Machines

3.1

2.8

0.3

10.7%

Tables – Local

2.8

1.8

1.0

55.6%

Tables – IB (Normalised)

7.1

1.2

5.9

491.7%

13.0

5.8

7.2

124.1%

Food and Beverage

0.7

0.8

(0.1)

(12.5%)

Non-Gaming Revenue

0.7

0.8

(0.1)

(12.5%)

Total Normalised Revenue (incl gaming GST)

13.7

6.6

7.1

107.6%

Gaming GST

(1.7)

(0.7)

(1.0)

(142.9%)

Total Normalised Revenue (excl gaming GST)

12.0

5.9

6.1

103.4%

Expenses (excluding IB)

(4.2)

(4.4)

0.2

4.5%

Expenses – IB (Normalised)

(5.2)

(1.0)

(4.2)

(420.0%)

2.6

0.5

2.1

420.0%

19.0%

7.6%

1.6

0.4

1.2

300.0%

Normalised Gaming Revenue (incl GST)

Normalised EBITDA
Normalised EBITDA margin
Normalised EBITDA excluding IB
•
•
•
•

Gaming revenue figures shown on this page is gaming win (GST inclusive) – to facilitate Australasian comparisons
Non-gaming revenue is net of GST
Total revenue shown is gaming win plus non-gaming revenues
EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming revenue - to facilitate Australasian comparisons

21

 1H16 Property Update – Adelaide Casino


Adelaide Casino delivered strong growth for the period, despite a small decline in local gaming revenue (down 4%)
which was consistent with trends observed in the broader Adelaide gaming market



Normalised revenue was up 18.7% on the pcp to A$103.6m with normalised EBITDA up 58.5% to A$21.4m



Excluding IB, Adelaide’s revenue increased 1.9% to A$78.4m and EBITDA was up 34.6% to $14.0m



Adelaide’s improved performance was underpinned by:



•

Significant growth in IB with normalised revenue up 145.8% to $25.2m, reflecting the benefit of successfully
attracting VIP customers visiting the eastern seaboard of Australia to Adelaide as an additional destination

•

Significant growth in F&B activity with revenue up 64.8% to A$11.7m, along with improved margins, following the
successful opening of two new signature restaurants, Sean’s Kitchen and Madame Hanoi

•

Cost saving initiatives implemented across the property delivering significantly improved margins

SKYCITY remains firmly focused on delivering sustained revenue and earnings growth at the Adelaide property and
has implemented a range of strategic initiatives to grow visitation to ensure the casino captures a greater share of
local, interstate and international markets

22

 Adelaide Casino 1H16 – Normalised
1H16
A$m

1H15
A$m

A$m

Movement
%

Revenues
Machines
Tables – Local
Tables – IB (Normalised)
Normalised Gaming Revenue (incl GST)

27.2
39.0
25.2
91.4

28.9
40.2
10.3
79.4

(1.7)
(1.2)
14.9
12.0

(5.9%)
(3.0%)
145.8%
15.1%

Food and Beverage

11.7

7.1

4.6

64.8%

Parking and Other

0.5

0.8

(0.3)

(37.5%)

Non–Gaming Revenue
Total Normalised Revenue (incl gaming GST)
Gaming GST

12.2
103.6
(8.3)

7.9
87.3
(7.2)

4.3
16.3
(1.1)

54.4%
18.7%
(15.3%)

Total Normalised Revenue (excl gaming GST)

95.3

80.1

15.2

19.0%

Expenses (excluding IB)(1) (2)

(58.4)

(59.2)

0.8

1.4%

Expenses – IB (Normalised)

(15.5)

(7.4)

(8.1)

(109.5%)

21.4
20.7%
14.0

13.5
15.5%
10.4

7.9

58.5%

3.6

34.6%

(1) (2)

Normalised EBITDA
EBITDA margin
Normalised EBITDA excluding IB
(1) Excludes $1.1m of branding project costs during 1H15 – nil adjustment in 1H16
(2) Excludes $1.4m of restructure costs in 1H16
•
•
•
•

Gaming revenue figures shown on this page is gaming win (GST inclusive) – to facilitate Australasian comparisons
Non-gaming revenue is net of GST
Total revenue shown is gaming win plus non-gaming revenue
EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming revenue - to facilitate Australasian comparisons

23

 1H16 Property Update – Darwin


SKYCITY Darwin achieved a satisfactory result despite a challenging local market with normalised revenue
increasing 2.6% to A$75.0m and normalised EBITDA increasing 6.9% to A$23.1m



Excluding IB, Darwin's revenue decreased 3.3% to A$65.0m and EBITDA decreased 3.2% to A$20.8m



Darwin’s performance was largely driven by:
•

Positive growth in gaming machines, despite stronger competition from local pubs and clubs, which benefitted
from the introduction of note acceptors and an increase in product entitlements

•

Significant growth in IB turnover, reflecting the attraction of Darwin as a destination for IB customers

•

Challenging local market conditions in both the hotel and F&B sectors

•

Strong management focus on operating costs and efficiencies



The NT Government completed its gaming tax review for SKYCITY Darwin in July 2015, the net impact of which was
an increase in operating costs for Darwin of approximately A$1m per annum (vs. FY15)



Medium to longer-term growth prospects for the Darwin property will depend on further promotion of IB play,
potential activation of the Little Mindil site (adjacent to the property) and any further investment in existing
facilities
24

 SKYCITY Darwin 1H16 – Normalised
1H16
A$m

1H15
A$m

Movement
A$m

%

Revenues
Machines
Tables – Local
Keno
Tables – IB (Normalised)
Normalised Gaming Revenue (incl GST)
Food and Beverage
Hotel
Conventions and Other
Non-Gaming Revenue

32.1
9.7
8.3
10.0
60.1
6.7
4.6
3.6
14.9

31.2
10.1
8.8
5.9
56.0
8.1
5.3
3.7
17.1

0.9
(0.4)
(0.5)
4.1
4.1
(1.4)
(0.7)
(0.1)
(2.2)

2.9%
(4.0%)
(5.7%)
69.5%
7.3%
(17.3%)
(13.2%)
(2.7%)
(12.9%)

75.0

73.1

1.9

2.6%

Gaming GST

(5.4)

(5.0)

(0.4)

(8.0%)

Total Normalised Revenue (excl gaming GST)

69.6

68.1

1.5

2.2%

(39.7)
(6.8)

(41.1)
(5.4)

1.4
(1.4)

3.4%
(25.9%)

23.1

21.6

1.5

6.9%

30.8%

29.5%

20.8

21.5

(0.7)

(3.2%)

Total Normalised Revenue (incl gaming GST)

Expenses (excluding IB)
Expenses – IB (Normalised)

Normalised EBITDA
EBITDA Margin
Normalised EBITDA excluding IB
•
•
•
•

Gaming revenue figures shown on this page is gaming win (GST inclusive ) – to facilitate Australasian comparisons
Non-gaming revenue are net of GST
Total revenue shown is gaming win plus non-gaming revenue
EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming revenue - to facilitate Australasian comparisons

25

 1H16 Update – International Business

(page 1 of 3)



IB delivered record activity during the period, with turnover increasing by 51.4% to $7.2bn and normalised EBITDA
increasing 57.3% to $22.8m



Strong and sustained growth in IB has been underpinned by:
•

Increased recognition of our ‘Horizon’ brand and offering amongst Asian VIP customers

•

Strong focus on direct relationships with our VIP customers

•

Increased play at higher table differential levels (maximum increased to $300k since December 2015)

•

Significant growth in revenue share programmes



Strong growth in turnover was achieved in Adelaide, Darwin and Queenstown, highlighting the potential of these
destinations for VIP customers



Normalised EBITDA margins increased to 23.6% from 22.7% due to operating leverage being achieved



Actual win rate of 1.41% was slightly above the theoretical win rate of 1.35%



Provision for doubtful debts during the period was $0.3m on a normalised basis ($1.3m on a reported basis)

26

 1H16 Update – International Business

(page 2 of 3)



Sustained turnover growth across IB, with a 42% CAGR since December 2010 and 1H16 up 51.4% on the pcp



Average actual win rate of 1.29% since December 2010, broadly in-line with the theoretical win rate of 1.35%
4,500

2.50%

4,000
3,500

2.00%

Win rate (%)

2,500
2,000
1,500
1,000

1.50%

1.00%

0.50%

500
1Q16

2Q16

4Q15

2Q15

3Q15

1Q15

3Q14

4Q14

1Q14

2Q14

4Q13

3Q13

1Q13

2Q13

3Q12

4Q12

1Q12

2Q12

3Q11

1Q16

2Q16

4Q15

3Q15

1Q15

2Q15

4Q14

2Q14

3Q14

1Q14

3Q13

4Q13

1Q13

2Q13

4Q12

2Q12

3Q12

1Q12

3Q11

4Q11

0.00%

-

4Q11

Turnover ($m)

3,000

Average actual win rate (1.29%)

27

 1H16 Update – International Business

(page 3 of 3)

Turnover
Auckland (NZ$)
Other (NZ$)
Adelaide (AU$)
Darwin (AU$)
Total Turnover (NZ$)

1H16
$b
3.8
0.5
1.9
0.7
7.2

1H15
$b
3.3
0.1
0.8
0.4
4.7

Movement
$b
0.4
0.4
1.1
0.3
2.4

%
13.2%
477.0%
145.8%
69.4%
51.4%

Normalised Revenue (incl Gaming GST)
Auckland (NZ$)
Other (NZ$)
Adelaide (AU$)
Darwin (AU$)
Total Normalised Revenue (NZ$)

$m
51.0
7.1
25.2
10.0
96.6

$m
45.0
1.2
10.3
5.9
63.6

$m
6.0
5.9
14.9
4.1
33.0

%
13.2%
477.0%
145.8%
69.4%
51.4%

1H16

1H15

Normalised EBITDA
Auckland
Other
Adelaide (AU$)
Darwin (AU$)
Total Normalised EBITDA

$m
11.1
1.0
7.4
2.2
22.8

$m
12.0
0.1
2.0
0.1
14.5

$m
(0.9)
0.9
5.4
2.1
8.3

Movement
%
(7.5%)
900.0%
270.0%
2,144.7%
57.3%

Total Reported EBITDA

16.2

3.4

12.8

376.5%

• Adelaide and Darwin are shown in A$. The totals in each section have Australian numbers converted at the relevant exchange rate each month
• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147

1H16
1H15
Actual Win %
1.58%
0.54%
1.33%
1.30%
0.85%
1.04%
1.08%
3.29%
1.41%
1.04%

1H16

1H15

Normalised EBITDA %
21.8%
26.7%
14.1%
8.3%
29.4%
19.4%
22.0%
1.7%
23.6%
22.7%

28

 1H16 Update – Corporate and Other Costs
Normalised
Corporate costs
Branding project costs
Adelaide restructure costs
NZICC operating costs




1H16
$m
17.5
0.7
1.6
0.5

1H15
$m
16.4
2.1

Movement
$m
1.1
(1.4)
1.6
0.5

%
6.7%
(66.7%)
NM
NM

Corporate costs were in-line with expectations for 1H16
•

Increase mainly driven by higher licence fees for Bally IT system, development of our CSR framework and
investment in digital innovation

•

Corporate costs expected to be slightly higher in 2H16 due to the annualised impact of these changes

Branding project costs, Adelaide restructure costs and NZICC operating costs have been shown separately to
facilitate comparisons with 1H15
•

Branding project costs are not expected to continue beyond FY16

•

Adelaide restructure costs and NZICC operating costs were previously treated in 1H15 as normalisation
adjustments

29

 1H16 Update – Normalised Interest and Tax
Normalised



1H16
$m

1H15
$m

Movement

$m

%

Interest

17.3

22.0

(4.7)

(21.4%)

Tax

29.6

22.6

7.0

31.0%

Normalised net interest expense was down 21.4% on the pcp, reflecting the favourable interest rate environment,
lower average debt across the period and increased capitalised interest on projects
•

Average cost of debt for 1H16 was down 0.86% vs. the pcp to 6.00%

•

Capitalised interest of $3.9m related to the funding of the NZICC, Hobson St Hotel and Adelaide expansion
projects



Expect net interest expense in 2H16 to be broadly similar to that in 1H16, with capitalised interest expected to be
around ~$5m



Normalised tax expense was up 31.0% on the pcp, reflecting higher pre-tax earnings and an effective tax rate of
25.7%



Expect the effective tax rate in 2H16 to be broadly similar to that in 1H16

30

 1H16 Update – Depreciation & Amortisation






Normalised D&A was up $2.7m (+6.3%) on the pcp due to the
amortisation of the increased Adelaide Casino licence value
and the impact of recent capex in connection with:

1H16
$m

1H15
$m

Movement
%

Auckland

23.3

23.3

-

-

•

New F&B outlets in Hamilton

Hamilton

2.3

2.2

0.1

4.5%

•

Redevelopment of existing Adelaide Casino

Queenstown

0.5

0.5

-

-

•

Vue restaurant and Aces sports bar in Darwin

Adelaide (A$)

8.5

7.1

1.4

19.7%

Darwin (A$)

6.6

6.2

0.4

6.5%

•

Bally IT system and PeopleSoft payroll upgrade
Group

3.2

2.8

0.4

14.3%

45.9

43.2

2.7

6.3%

7.6

-

7.6

NM

2.7

-

2.7

NM

56.3

43.2

13.1

30.3%

Expect normalised D&A in 2H16 to be higher than 1H16 due to
the annualised impact of above changes plus recent capex in
Auckland
Reported D&A in 1H16 included the $10.4m write-off of
property assets on the NZICC site and capitalised costs
associated with the Hamilton hotel project incurred in 2011-14

Normalised D&A
(NZ$)
Write-off of 101
Hobson St and
Nelson St car park
Write-off of Hamilton
hotel project costs
Reported D&A
(NZ$)

• Certain totals, sub-totals and percentages may not agree due to rounding

31

 1H16 Update – Capital Expenditure
1H16 Capex

Capital Expenditure

1H16
$m

1H15
$m



Maintenance capex of $26.8m was in-line with expectations



Project capex of $46.3m primarily related to the NZICC project,
activation of the NZICC gaming concessions and the refurbishment
of the atrium in Auckland

NZICC

11.0

5.4

Activation of NZICC Concessions

14.1

-

Other projects included Hamilton’s F&B outlets and Darwin’s Vue
restaurant

Auckland Atrium Refurbishment

9.3

-

Adelaide Expansion (A$)

3.2

19.2

Other Projects

8.3

10.6

Total Project Capex (NZ$)

46.3

36.1



Future Capex


Still expect maintenance capex of $60-65m for FY16



Key project capex for 2H16 will relate to:



•

NZICC and Hobson St hotel (~$47m)

Maintenance Capex

26.8

24.9

•

Adelaide expansion (~A$4m)

Total Capex (NZ$)

73.2

61.0

•

Further activation of NZICC gaming concessions (~$28m)

•

Auckland atrium refurbishment, expanded gaming podium and
Cantonese restaurant in Auckland (~$16m)

• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147
• Certain totals, sub-totals and percentages may not agree due to rounding

No change to previous long-term capex guidance for NZICC and
Hobson St hotel projects

32

  

January 2016 Trading Update


January trading has broadly seen a continuation of the trends exhibited during 1H16



Strong performances from the NZ businesses were offset by weaker performances from Darwin and IB, resulting in
normalised group revenue for the month of $88.4m which was flat on the pcp



Auckland continued to deliver growth across all business segments, with local revenue (excluding IB) up 7.6% on
the pcp
•

Early indicators suggest the NZICC gaming concessions are having a positive impact

•

New direct escalator access to the casino has been well received by customers



Hamilton continued its strong momentum with local revenue (excluding IB) up 11.1% on the pcp



Adelaide achieved modest growth with local revenue (excluding IB) up 1.6% on the pcp, underpinned by improved
performances of tables and F&B



Darwin continued to face a challenging local market with local revenue (excluding IB) down 6.5% on the pcp



IB had a quieter month with turnover of $700m against a strong comparative period (~$1bn) but has a very busy
outlook for Chinese New Year in February



EBITDA margins for all businesses were broadly in-line with those in both January 2015 and 1H16

34

  

Interim dividend of 10.5 cents per share
1H16

1H15

Movement

Dividend – NZ$

10.5 cps

10.0 cps

0.5cps

5.0%

Dividend – A$(1)

9.9cps

9.5 cps

0.4cps

4.2%



Interim dividend of 10.5 cps is 5% higher than 1H15 and reflects significant growth in earnings per share on the pcp



Represents a payout ratio of 73% of Normalised 1H16 NPAT – slightly below our policy target of 80% over each full
financial year



Based on a share price of NZ$4.44, represents an annualised cash dividend yield of 4.7%



Dividend Reinvestment Plan will be available for the 1H16 interim dividend with a 2% discount



Payment date is 18 March 2016 with a record date of 4 March 2016



SKYCITY remains committed to its stated dividend policy for the foreseeable future

(1) For illustrative purposes, only to show the dividend in A$, 1H16 converted at 10 February 2016 rate of 0.9395 and 1H15 at 9 February 2015 rate of 0.9471

36

  

 

 

 

 

 

 

NZICC / Hobson St Hotel

(page 1 of 2)



Fletcher Construction was appointed in November 2015 as main contractor for the NZICC and Hobson St hotel
projects following a competitive tender process



Construction contracts for NZICC and Hobson St hotel were signed on 11 November 2015, triggering the activation of
the gaming concessions under the NZICC Agreement



Agreed commercial terms provide significant risk protection for SKYCITY



Total project costs, including the NZICC development, the expanded 1,327 space car park, the laneway and the
Hobson St hotel remain consistent with previous market guidance of ~$700m (including appropriate contingencies)



Demolition and preparation works commenced on-site in December 2015 and excavation is schedule to commence
during March 2016



Overall programme is progressing on-time and on-budget with completion of both the NZICC and Hobson St hotel
expected in Q1 2019

38

 NZICC / Hobson St Hotel

Demolition of NZICC and Hobson St hotel site, December 2015

(page 2 of 2)

39

 Auckland Atrium Refurbishment

(page 1 of 2)



SKYCITY is enhancing its Auckland property with a major upgrade of its main atrium for a total cost of $24m



Stage 1 was completed on-time and on-budget, in-line with previous market guidance with the delivery of:



•

New main escalator providing direct access to main gaming floor on level 2

•

Second escalator linking levels 2 and 3

•

New bathrooms on the ground floor

•

Andy’s Burgers & Bar, which has enhanced the quality and variety of SKYCITY’s existing F&B offering

Stage 2 is expected to be completed by September 2016
•

Extension of main gaming floor through partial infill of the new atrium space

•

Completion of entrance, foyer, flooring and wall treatments, and new light features

•

Development of a new Cantonese restaurant to complement the existing Federal Street dining precinct

40

 Auckland Atrium Refurbishment

(page 2 of 2)

New atrium escalator and expansion of casino entry in Auckland, opened December 2015

41

 Adelaide Expansion


SKYCITY is well advanced in finalising the design for the expansion of the Adelaide Casino, having received
development approval from the DAC on 22 January 2016



SKYCITY’s design envisages:
•

~80 room all-suite boutique hotel

•

Horizon VIP villas and suites for SKYCITY’s growing International Business

•

Two new signature restaurants

•

Expanded gaming podium, allowing for the staged rollout of the additional gaming product



SKYCITY is committed to a total development cost of no greater than A$300m, including the capital cost of the
ground lease (~A$12m) and the commissioning of gaming product (~A$30m)



While early ground works are expected to commence by the middle of the year, commencement of core
construction of the expansion is unlikely to be before December 2016



SKYCITY’s commencement remains contingent upon the satisfactory finalisation of the ground lease, the car park
lease with Walker Corporation and the development approvals of adjacent works, all of which are important to the
overall success of SKYCITY’s expansion

42

 *0













it

 

Funding – Current Debt Facilities


Total hedged debt as at 31 December 2015 of $654m (reported total debt of $705m)



Gearing ratio (net hedged debt/normalised EBITDA) of 1.9x as at 31 December 2015 (down from 2.3x vs. the pcp)



Current debt funding headroom is expected to be sufficient to meet expected funding requirements until at least the
start of FY18
Debt Facilities (as at 31
December 2015)

Utilised
$m

Total Available
$m

Headroom
$m

Hedged(1)

Reported(2)

Hedged(1)

Reported(2)

Bank Facilities

264

264

586

586

322

NZ Bond

125

125

125

125

-

USPP Notes

265

316

265

316

-

Total Debt

654

705

976

1,027

322

Less: Cash at Bank

(17)

(17)

Net Debt

638

689

(1) After adjusting for the exchange rate hedging effect of CCIRS
(2) Based on exchange rates at 31 December 2015 of NZD/AUD 0.9396, NZD/USD 0.6848

44

 Funding – Debt Maturity Profile


Weighted average maturity of existing debt facilities is 4.3 years



Next maturity is US$27m (NZ$39m) of USPP notes in March 2017
Hedged Debt Maturity Profile at 31 December 2015 ($m)
USPP

NZ Bond

Bank - Drawn

Bank - Undrawn

$2

$120

$264
$200

$146

$125

$110
$0
FY16

$39
FY17

$0

$21
FY18

FY19

FY20

FY21

FY22

FY23

45

 Funding – Outlook


Following its recent $125m NZ bond issue, SKYCITY has over $300m of committed undrawn bank facilities – sufficient
headroom to fund the NZICC and Hobson St hotel projects



SKYCITY continues to explore various options for funding all major projects, including the Adelaide expansion



Proposed sale of the Hobson St hotel is progressing well
•

Strong interest from a broad range of domestic and international investors

•

Seeking to complete the process in April 2016



Based on indicative feedback received from S&P, SKYCITY expects that a successful sale of the Hobson St hotel should
enable it to retain its BBB- credit rating



SKYCITY intends to provide a further update on its long-term funding plan following the completion of the Hobson St
hotel sale process and once plans and timing for the Adelaide expansion are further progressed

46

  

Conclusion


Strong 1H16 result with record normalised revenue and earnings for the group, at the upper-end of previous market
guidance



Strong performance by all NZ businesses, continued growth in IB and a much improved performance in Adelaide



Momentum from 1H16 has broadly continued into January 2016, with strong performance by the NZ businesses
being offset by weaker results in Darwin and IB



Significant milestones achieved on the NZICC project during 1H16 with gaming concessions activated and
construction commencing on-site



Early indicators suggest the NZICC gaming concessions are having a positive impact in Auckland



Good progress on finalising plans for the Adelaide expansion, with design approval received from the DAC



Management focus for FY16:
•

Continue to optimise the operating performance of all business segments, especially the gaming concessions in
Auckland

•

Continue to drive improved performance at the Adelaide Casino

•

Finalise plans for the Adelaide expansion

•

Complete sale process for the Hobson St hotel

•

Complete the Auckland atrium refurbishment

•

Finalise the funding plan through to completion of the major projects

48

  
  
 

Appendices

 I1

31 Decem er 015 

Accounting Treatment of NZICC Regulatory Concessions
(page 1 of 2)




Following the activation of the NZICC regulatory concessions in November 2015, SKYCITY is required to recognise
the fair value of these concessions as an intangible asset (being the Auckland licence enhancement)
•

Based on external valuation advice, SKYCITY has assessed the fair value of the Auckland licence enhancement at
$405m

•

Prior to completion of the NZICC, SKYCITY will also recognise a “deferred licence value” liability of an equivalent
amount ($405m)

•

Following completion of the NZICC, the deferred licence value will be reversed and offset against the value of
tangible NZICC assets

This accounting treatment for the NZICC regulatory concessions is consistent with the approach adopted for the
new Adelaide Casino regulatory reforms in FY14
•

Value of the Adelaide licence (an intangible asset) as at 31 December 2015 was A$306.6m

•

The Adelaide licence value is required to be amortised over the relevant period of the regulatory benefits (being
2035 or 2085 depending upon whether the benefit is associated with the exclusivity period or full licence period)

•

The Auckland licence enhancement is not required to be amortised but will be reviewed annually for impairment

50

 Accounting Treatment of NZICC Regulatory Concessions
(page 2 of 2)


The $405m value of the Auckland licence enhancement includes the present value of the expected gross gaming
cash-flows associated with the regulatory concessions and the capital costs required to activate the regulatory
concessions, but excludes:
•

Expected cash-flows associated with the development and operation of the NZICC, Hobson St hotel, laneway and
additional car parks

•

Expected on-spend from NZICC convention delegates and Hobson St hotel guests across the broader SKYCITY
Auckland precinct (excluding the gaming business)

•

Cost of the land acquired for the development of the NZICC and Hobson St hotel

•

Benefit of extending the SKYCITY Auckland casino licence to 2048

•

Benefit of the seven-year gaming tax rate certainty period for SKYCITY Auckland

51

 1H16 Results Overview – Normalised Results
1H16
$m

1H15
$m
510.0

Gaming GST

562.0
(51.4)

Normalised Revenue

Normalised
Normalised Revenue (including Gaming GST)

Expenses
Normalised EBITDA
Depreciation and Amortisation
Normalised EBIT
Interest
Normalised NPBT
Tax
Normalised NPAT
Normalised EPS

Movement
$m

(46.1)

52.0
(5.3)

10.2%
(11.5%)

510.6

463.9

46.7

10.1%

(332.4)
178.2
(45.9)
132.3
(17.3)
115.0

(309.5)
154.4
(43.2)
111.2
(22.0)
89.2

(22.9)
23.8
(2.7)
21.1
4.7
25.8

(7.4%)
15.4%
(6.3%)
19.0%
21.4%
28.9%

(29.6)

(22.6)

(7.0)

(31.0%)

85.4

66.6

18.8

28.2%

14.5 cps

11.4 cps

3.1 cps

27.2%

• Revenue (including Gaming GST) is shown above to facilitate Australasian comparisons
• Normalised NPAT adjusts for certain items and International Business (IB) at theoretical win rate of 1.35% versus actual 1.41% in 1H16 (1H15: 1.04%)
• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147

• Certain totals, sub-totals and percentages may not agree due to rounding

%

52

 1H16 Results Overview – Reported Results
1H16
$m

1H15
$m

566.1
(52.4)
513.7
(342.1)
171.6
(56.3)
115.3
(17.3)
98.0
(26.9)
71.0

495.5
(44.0)
451.5
(310.7)
140.8
(43.2)
97.6
(24.9)
72.7
(18.1)
54.6

70.6
(8.4)
62.2
(31.4)
30.8
(13.1)
17.7
7.6
25.3
(8.8)
16.4

14.2%
(19.1%)
13.8%
(10.1%)
21.9%
(30.3%)
18.1%
30.5%
34.8%
(48.6%)
30.0%

Reported EPS

12.0 cps

9.3 cps

2.7 cps

29.0%

Final Dividend

10.5 cps

10.0 cps

0.5 cps

5.0%

Reported
Reported Revenue (including Gaming GST)
Gaming GST
Reported Revenue
Expenses
Reported EBITDA
Depreciation and Amortisation
Reported EBIT
Interest
Reported NPBT
Tax
Reported NPAT

Movement
$m

%

• Revenue (including Gaming GST) is shown above to facilitate Australasian comparisons
• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147

• Certain totals, sub-totals and percentages may not agree due to rounding

53

 1H16 EBIT Summary by Business
New Zealand Casinos
 Auckland
 Hamilton
 Queenstown, Other

Movement

1H16

1H15

$m

$m

$m

112.0
9.4
2.1

101.0
7.6
0.0

11.0
1.8
2.1

10.9%
23.7%
100.0%

123.5

108.6

14.9

13.7%

%

Total New Zealand
Australian Casinos
 Adelaide
 Darwin
Total Australia

(A$)
(A$)
(A$)

12.9
16.5
29.4

6.4
15.4
21.8

6.5
1.1
7.6

101.6%
7.1%
34.9%

Total Australia

(NZ$)

32.2

24.0

8.2

34.2%

(20.6)
135.1
(0.7)
(1.6)
(0.5)

(19.3)
113.3
(2.1)
-

(1.3)
21.8
1.4
(1.6)
(0.5)

(6.7%)
19.2%
NM

132.3

111.2

21.1

19.0%

(6.6)
(10.4)

(11.1)
(2.5)

4.5
(7.9)

115.3

97.6

17.7

Corporate Costs
Branding project costs(1)
Adelaide restructure costs(2)
NZICC operating costs(3)
Normalised EBIT
International Business adjustments
Other adjustments(4)
Reported EBIT

18.1%

• Normalised EBIT is adjusted for IB at the theoretical win rate of 1.35% and certain other items (see page 55 for more details)
• Average NZD/AUD cross-rate during 1H16 0.9130 and 1H15 0.9147
(1) Relates to the Adelaide and Auckland brand campaigns. (2) Redundancy and related costs in Adelaide. (3) NZICC operating costs not able to be capitalised. (4) Other adjustments in
1H16 were the write-off of various fixed assers. Other adjustments in 1H15 were Adelaide restructure costs $1.5m, NZICC operating costs $0.3m and other items $0.7m

54

 1H16 Reported and Normalised Earnings
1H16
Revenue EBITDA
EBIT
$m
$m
$m
Normalised

NPAT
$m

1H15
Revenue EBITDA
EBIT
$m
$m
$m

NPAT
$m

562.0

178.2

132.3

85.4

510.0

154.4

111.2

66.6

International Business at Theoretical

4.1

(6.6)

(6.6)

(4.6)

(14.5)

(11.1)

(11.1)

(8.2)

International Business Adjustments

4.1

(6.6)

(6.6)

(4.6)

(14.5)

(11.1)

(11.1)

(8.2)

Adelaide redevelopment costs

-

-

-

-

-

(1.5)

(1.5)

(1.0)

NZICC interest and other costs

-

-

-

-

-

(0.3)

(0.3)

(2.3)

Asset write-offs

-

-

(10.4)

(9.8)

-

-

-

-

Restructuring costs

-

-

-

-

-

(0.5)

(0.5)

(0.4)

Auckland project costs

-

-

-

-

-

(0.2)

(0.2)

(0.1)

0.0

0.0

(10.4)

(9.8)

(2.5)

(2.5)

(3.8)

566.1

171.6

115.3

71.0

140.8

97.6

54.6

Total Other Adjustments
Reported

• Revenue includes GST inclusive gaming revenue and GST exclusive non-gaming revenue
• Normalised (underlying) earnings adjusts for IB at the theoretical win rate of 1.35% and certain other items
• Certain totals, sub-totals and percentages may not agree due to rounding

495.5

55

 Reported and Normalised Earnings

(page 1 of 2)



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



Gaming revenue figures reflect gaming win (inclusive of gaming GST). Non-gaming revenue is net of GST. Total
revenue is gaming win plus non-gaming revenue



EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming revenue



This approach facilitates Australasian and period-on-period comparisons and is consistent with the treatment
adopted by major Australian casinos

56

 Reported and Normalised Earnings


(page 2 of 2)

Key other adjustments are:
•

•

1H16 Adjustments
o

Write-off of the Hamilton Hotel project costs as this project is no longer proceeding ($2.7m of capitalised costs
incurred over 2011 to 2014)

o

Write-off of 101 Hobson Street and the Nelson Street car park to make way for the NZICC ($7.6m book value)

1H15 Adjustments
o

Adelaide redevelopment costs – Structural redundancies and launch costs for new facilities (Sean’s Kitchen and
Madame Hanoi)

o

NZICC – Interest on purchase of New Zealand International Convention Centre (NZICC) land bank (calculated
using the group’s average cost of debt of 6.8% on an average balance of $85m) and other costs specific to this
project

o

Restructuring costs – Costs associated with changing the staffing structures under an approved restructuring
plan

o

Auckland project costs – Federal Street launch and Federal Street fire costs



Actual IB win rate was 1.41% for 1H16 (1H15: 1.04%)



During FY16 the application of the Group’s non-GAAP financial information policy was tightened to further restrict the
number of adjustments between Reported and Normalised results
57

 Disclaimer


All information included in this presentation is provided as at 11 February 2016



The presentation includes a number of forward-looking statements. Forward looking statements, by their nature,
involve inherent risks and uncertainties. Many of those risks and uncertainties are matters which are beyond
SKYCITY’s control and could cause actual results to differ from those predicted. Variations could either be materially
positive or materially negative



This presentation has not taken into account any particular investors investment objectives or other circumstances.
Investors are encouraged to make an independent assessment of SKYCITY

58

 APPENDIX 7 – NZSX Listing Rules

EMAIL: announce@nzx.com
Number of pages including this one
(Please provide any other relevant
details on additional pages)

Notice of event affecting securities
NZSX Listing Rule 7.12.2. For rights, NZSX Listing Rules 7.10.9 and 7.10.10.
For change to allotment, NZSX Listing Rule 7.12.1, a separate advice is required.
Full name
of Issuer

SKYCITY Entertainment Group Limited

Name of officer authorised to
make this notice
Contact phone
number

Contact fax
number

(09) 363 6000
Bonus
Issue

Nature of event
Tick as appropriate

Authority for event,
e.g. Directors' resolution

Peter Treacy

If ticked,
state whether:

Rights Issue
non-renouncable

Capital
change

Call

(09)363 6140
/ Non Taxable

Taxable
Dividend

x

11

Date

Conversion

If ticked, state
Interim
whether:

x

Directors' resolution
2
Rights Issue
Renouncable

Interest

Full
Year

2016

Special

DRP Applies

x

If more than one security is affected by the event, use a separate form.

EXISTING securities affected by this
Description of the
class of securities

ISIN

Ordinary Shares

NZSKCE0001S2
If unknown, contact NZX

Details of securities issued pursuant to this event

If more than one class of security is to be issued, use a separate form for each class.

Description of the
class of securities

ISIN
If unknown, contact NZX

Number of Securities to
be issued following event

Minimum
Entitlement

Conversion, Maturity, Call
Payable or Exercise Date

Treatment of Fractions
Enter N/A if not
applicable

Tick if
pari passu

OR

Strike price per security for any issue in lieu or date
Strike Price available.

Monies Associated with Event

Ratio, e.g
1 for 2

for

provide an
explanation
of the
ranking

Dividend payable, Call payable, Exercise price, Conversion price, Redemption price, Application money.
In dollars and cents

Amount per security
(does not include any excluded income)

Source of
Payment

$0.1050

Profit

Excluded income per security
(only applicable to listed PIEs)
Supplementary
dividend
details NZSX Listing Rule 7.12.7

NZ Dollars

Currency

$62,268,210

Total monies

Taxation

$0.000000

Date Payable

18 March, 2016

Amount per Security in Dollars and cents to six decimal places

In the case of a taxable bonus
issue state strike price

Resident
Withholding Tax

$

Foreign
Withholding Tax

Timing

Amount per security
in dollars and cents

$0.034650

Imputation Credits
(Give details)

$0.000000

FWP Credits
(Give details)

$

(Refer Appendix 8 in the NZSX Listing Rules)

Record Date 5pm
For calculation of entitlements -

4 March, 2016

Notice Date
Entitlement letters, call notices,
conversion notices mailed

OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:
Cease Quoting Old Security 5pm:

Application Date
Also, Call Payable, Dividend /
Interest Payable, Exercise Date,
Conversion Date. In the case
of applications this must be the
last business day of the week.
Allotment Date
For the issue of new securities.
Must be within 5 business days
of application closing date.

Security Code:
Security Code:

18 March, 2016

 SKYCITY Entertainment Group Limited
Interim financial report

for the six month period ended 31
December 2015

For and on behalf of the Board:

 

ChriEJMoller Bruce qarter
Chairman Chairman of the Audit and Financial Risk Committee

 

10 February 2016





Independent Review Report
to the shareholders of SKYCITY Entertainment Group Limited

Report on the Interim Financial Statements

We have reviewed the accompanying ?nancial statements of SKYCITY Entertainment Group Limited
(?the Group?) on pages 1 to 18 which comprise the consolidated balance sheet as at 31 December 2015,
and the consolidated income statement, the statement of comprehensive income, the statement of cash
?ows and the consolidated statement of changes in equity for the period ended on that date, and a
summary of significant accounting policies and selected explanatory notes.

Directors?Responsibility for the Financial Statements

The Directors? of the Group are responsible for the preparation and fair presentation of these ?nancial
statements in accordance with New Zealand Equivalent to International Accounting Standard 34
Interim Financial Reporting (NZ IAS 34) and for such internal controls as the Directors? determine are
necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.

Our Responsibility

Our responsibility is to express a conclusion on the accompanying ?nancial statements based on our
review. We conducted our review in accordance with the New Zealand Standard on Review
Engagements 2410 Review of Financial Statements Performed by the IndependentAuditor of the
Entity (NZ SRE 2410). NZ SRE 2410 requires us to conclude whether anything has come to our
attention that causes us to believe that the financial statements, taken as a whole, are not prepared in
all material respects, in accordance with NZ IAS 34. As the auditors of the Group, NZ SRE 2410
requires that we comply with the ethical requirements relevant to the audit of the annual ?nancial
statements.

A review of financial statements in accordance with NZ SRE 2410 is a limited assurance engagement.
The auditor performs procedures, primarily consisting of making enquiries, primarily of persons
responsible for ?nancial and accounting matters, and applying analytical and other review procedures.
The procedures performed in a review are substantially less than those performed in an audit
conducted in accordance with International Standards on Auditing (New Zealand) and International
Standards on Auditing. Accordingly we do not express an audit opinion on these ?nancial statements.

Our ?rm carries out other services for the Group in the areas of accounting assistance, tax, and other
advisory services. Appropriate safeguards were applied to reduce the threats to independence from
the provision of other services to an acceptable level. The provision of these other services has not
impaired our independence as auditors of the Group.

- 


..
3

.

PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz





Independent Review Report
SKYCITY Entertainment Group Limited

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that these ?nancial
statements of the Group are not prepared, in all material respects, in accordance with NZ IAS 34.

Restriction on Use of Our Report

This report is made solely to the Group?s shareholders, as a body. Our review work has been
undertaken so that we might state to the Group?s shareholders those matters which we are required to
state to them in our review 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 Group?s shareholders, as a body, for
our review procedures, for this report, or for the conclusion we have formed.

 r. an? 

Chartered Accountants Auckland
10 February 2016

PM: 2

SKYCITY Entertainment Group Limited
Consolidated income statement
For the six month period ended 31 December 2015

Notes

Unaudited
6 months
31 December
2015
$'000

Unaudited
6 months
31 December
2014
$'000

Audited
12 months
30 June
2015
$'000

Total receipts including GST
Less non-gaming GST
Gaming win plus non-gaming revenue
Less gaming GST
Revenue

4
4
4
4
4

581,092
(15,794)
565,298
(52,382)
512,916

509,552
(14,832)
494,720
(44,047)
450,673

1,036.966
(29,259)
1,007,707
(91,620)
916,087

Revenue
Other income

4
5

512,916
814

450,673
794

916,087
1,356

Employee benefits expense
Other expenses
Directors fees
Restructuring costs
Gaming taxes and levies
Direct consumables
Marketing and communications

6
6

(155,190)
(100,762)
(586)
(30,821)
(39,539)
(15,247)

(152,337)
(71,021)
(578)
(2,517)
(27,711)
(37,880)
(18,574)

(302,748)
(137,772)
(1,179)
(4,316)
(56,676)
(75,327)
(35,348)

171,585

140,849

304,077

(56,297)

(43,299)

(89,292)

115,288

97,550

214,785

(17,335)
97,953
(26,934)
71,019

(24,899)
72,651
(18,092)
54,559

(43,927)
170,858
(42,114)
128,744

CENTS

CENTS

CENTS

12.0
12.0

9.3
9.3

22.0
22.0

6

Earnings before interest, taxes, depreciation and amortisation
expenses (EBITDA)
Depreciation, amortisation and asset write-offs

6

Earnings before interest and taxes (EBIT)
Net finance costs
Profit before income tax
Income tax expense
Profit for the period

7

Earnings per share for profit attributable
To the shareholders of the company:
Basic earnings per share (cents)
Diluted earnings per share (cents)

The above consolidated income statement should be read in conjunction with the accompanying notes.

-1-

 SKYCITY Entertainment Group Limited
Statement of comprehensive income
For the six month period ended 31 December 2015

Notes
Profit for the period

Unaudited
6 months
31 December
2015
$'000

Unaudited
6 months
31 December
2014
$'000

Audited
12 months
30 June
2015
$'000

71,019

54,559

128,744

(15,793)
(843)
192

(4,994)
(2,263)
638

11,719
(2,805)
768

(16,444)
54,575

(6,619)
47,940

9,682
138,426

Other comprehensive income
Items that may be reclassified subsequently to Profit and
Loss
Exchange differences on translation of overseas subsidiaries
Movement in cash flow hedges
Income tax relating to components of other comprehensive
income
Other comprehensive income for the period, net of tax
Total comprehensive income and expense for the period

-2-

13
13
13

 SKYCITY Entertainment Group Limited
Consolidated balance sheet
As at 31 December 2015

Notes
ASSETS
Current assets
Cash and bank balances
Receivables and prepayments
Inventories
Tax prepayment
Derivative financial instruments
Total current assets

8

Non-current assets
Tax prepayment
Property, plant and equipment
Intangible assets
Derivative financial instruments
Total non-current assets

9
8

Total assets

LIABILITIES
Current liabilities
Payables
Derivative financial instruments
Senior interest bearing liabilities
Subordinated debt - capital notes
Total current liabilities

8
10

Non-current liabilities
Senior interest bearing liabilities
Provisions
Deferred tax liabilities
Derivative financial instruments
Deferred licence value
Total non-current liabilities

11

8
9

Total liabilities
Net assets
EQUITY
Share capital
Reserves
Retained profits
Parent entity interest

12
13(a)
13(b)

Total equity

Unaudited
31 December
2015
$'000

Unaudited
31 December
2014
$'000

68,285
38,058
8,532
23,147
996
139,018

60,428
23,188
8,249
39,729
6,542
138,136

53,232
16,654
8,362
45,227
32
123,507

1,185,539
932,113
73,893
2,191,545

12,841
1,144,544
522,321
44,060
1,723,766

779
1,174,248
556,029
70,998
1,802,054

2,330,563

1,861,902

1,925,561

123,884
404
124,288

110,137
293
88,202
76,447
275,079

130,085
675
130,760

701,403
2,752
77,566
32,600
557,004
1,371,325

538,753
81,248
31,144
151,689
802,834

699,092
3,739
80,613
33,513
160,922
977,879

1,495,613

1,077,913

1,108,639

834,950

783,989

816,922

780,469
(55,338)
109,819
834,950

757,752
(55,195)
81,432
783,989

758,800
(38,894)
97,016
816,922

834,950

783,989

816,922

The above consolidated balance sheets should be read in conjunction with the accompanying notes.

-3-

Audited
30 June
2015
$'000

 SKYCITY Entertainment Group Limited
Consolidated statement of changes in equity
For the six month period ended 31 December 2015
Foreign
Currency
Hedging Translation Retained
Reserves Reserve
profits
$'000
$'000
$'000

Share
capital
$'000

Notes
Balance as at 1 July 2015
Total comprehensive income/(expense)

Total
equity
$'000

758,800

(10,803)

(28,091)

97,016

816,922

-

(651)

(15,793)

71,019

54,575

Dividends

14

-

-

-

(58,216)

(58,216)

Shares issued under dividend reinvestment plan
Shares issued for employee services
Net movement in treasury shares
Balance as at 31 December 2015

12
12
12

21,036
643
(10)
780,469

(11,454)

(43,884)

109,819

21,036
643
(10)
834,950

737,546

(8,766)

(39,810)

84,915

773,885

-

(1,625)

(4,994)

54,559

47,940

Balance as at 1 July 2014
Total comprehensive income/(expense)
Dividends

14

-

-

-

(58,042)

(58,042)

Shares issued under dividend reinvestment plan
Shares issued for employee services
Net movement in treasury shares
Balance as at 31 December 2014

12
12
12

19,254
552
400
757,752

(10,391)

(44,804)

81,432

19,254
552
400
783,989

737,546

(8,766)

(39,810)

84,915

773,885

-

(2,037)

11,719

128,744

138,426

Balance as at 1 July 2014
Total comprehensive income/(expense)
Dividends

14

-

-

-

(116,643)

(116,643)

Shares issued under dividend reinvestment plan
Share rights issued for employee services
Net purchase of treasury shares
Balance as at 30 June 2015

12
12
12

19,254
1,245
755
758,800

(10,803)

(28,091)

97,016

19,254
1,245
755
816,922

The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.

-4-

 SKYCITY Entertainment Group Limited
Statement of cash flows
For the six month period ended 31 December 2015

Notes
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Gaming taxes paid
Income taxes paid
Net cash inflow from operating activities

18

Cash flows from investing activities
Purchase of/proceeds from property, plant and equipment
Payments for intangible assets
Net cash inflow / (outflow) from investing activities
Cash flows from financing activities
Cash flows associated with derivatives
Repayment of borrowings
New borrowings
Net issue/(purchase) of treasury shares
Dividends paid to company shareholders
Interest paid
Net cash (outflows) from financing activities
Net movement in cash and bank balances
Cash and bank balances at the beginning of the period
Cash and cash equivalents at end of the half-year

Unaudited
6 months
31 December
2015
$'000

Unaudited
6 months
31 December
2014
$'000

492,052
(331,115)
160,937

447,124
(294,555)
152,569

918,243
(550,189)
368,054

10
(22,274)
(7,367)
131,306

8
(23,514)
(9,757)
119,306

8
(48,328)
(29,059)
290,675

(69,024)
(4,168)
(73,192)

(58,785)
(2,216)
(61,001)

(106,310)
(5,724)
(112,034)

2,992
(109,809)
125,000
(10)
(37,180)
(24,054)
(43,061)

(2,543)
14,700
400
(38,788)
(25,698)
(51,929)

4,839
(40,677)
755
(97,389)
(46,989)
(179,461)

15,053
53,232
68,285

6,376
54,052
60,428

(820)
54,052
53,232

The above cash flow statements should be read in conjunction with the accompanying notes.

-5-

Audited
12 months
30 June
2015
$'000

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015

1

General information

SKYCITY Entertainment Group Limited (SKYCITY or the company and its subsidiaries or the Group) operates in the
gaming/entertainment, hotel and convention, hospitality, recreation, and tourism sectors. The Group has operations in New
Zealand and Australia.
SKYCITY is a limited liability company incorporated and domiciled in New Zealand. The address of its registered office is
Federal House, 86 Federal Street, Auckland. The company is dual listed on the New Zealand and Australian stock
exchanges.
The interim financial statements of the Group have been prepared in accordance with the requirements of the Financial
Reporting Act 2013, the Companies Act 1993 and the New Zealand Stock Exchange (NZX). SKYCITY Entertainment
Group Limited is a company registered under the Companies Act 1993 and is an FMC Reporting Entity under part 7 of the
Financial Markets Conduct Act 2013.
These consolidated financial statements have been approved for issue by the board of directors on 10 February 2016.

2 Summary of significant accounting policies
These general purpose financial statements for the interim half year reporting period ended 31 December 2015 have been
prepared in accordance with generally accepted accounting practice in New Zealand, International Accounting Standard 34
and NZ IAS 34 Interim Financial Reporting.
The preparation of interim financial statements in accordance with NZ IAS 34 Interim Financial Reporting requires
management to make judgements, estimates and assumptions that affect the application of policies and reported amounts
of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
These financial statements have been prepared under the historical cost convention except for the revaluation of certain
financial instruments (including derivative instruments). The Group is designated as a profit-oriented entity for financial
reporting purposes.
The accounting policies that materially affect the measurement of the Income Statement, Balance Sheet and the Statement
of Cash Flows have been applied on a basis consistent with those used in the audited financial statements for the year
ended 30 June 2015 and the unaudited financial statements for the six months ended 31 December 2014.
These interim financial statements do not include all the notes of the type normally included in an annual financial report.
Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2015.
(a) Changes in accounting policies
There have been no significant changes in accounting policies during the current period.

3 Segment information
Management has determined the operating segments based on the reports reviewed by the Chief Executive
Officer/Managing Director that are used to make strategic decisions.
The Group is organised into the following main operating segments:
SKYCITY Auckland
SKYCITY Auckland includes casino operations, hotels and convention centres, food and beverage, carparking, Sky Tower,
and a number of other related activities.
Rest of New Zealand
Rest of New Zealand includes the Group's interest in SKYCITY Hamilton, SKYCITY Queenstown Casino and SKYCITY
Wharf Casino.
SKYCITY Adelaide
SKYCITY Adelaide includes casino operations and food and beverage.
SKYCITY Darwin
SKYCITY Darwin includes casino operations, food and beverage and hotel.

-6-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

3 Segment information (continued)
International Business
International Business includes revenue share, commission and complimentary play. The international business segment
is made up of customers sourced mainly from Asia, and the rest of the world. The revenue is generated at all of
SKYCITY's locations.
Corporate / Group
Head office functions include legal and regulatory, group finance, human resources and information technology, the Chief
Executive's office and directors.
Half year ended
31 December 2015

Revenue from external customers and other income
Expenses
Depreciation and amortisation
Segment profit/(loss) (Earnings before Interest and Tax)
Finance costs - net
Profit before income tax
Half year ended
31 December 2014

Revenue from external customers and other income
Expenses
Depreciation and amortisation
Segment profit/(loss) (Earnings before Interest and Tax)
Finance costs - net
Profit before income tax
Year end ended
30 June 2015

Revenue from external customers and other income
Expenses
Depreciation and amortisation
Segment profit/(loss) (Earnings before Interest and Tax)
Finance costs
Profit before income tax

SKYCITY Rest of New SKYCITY
Auckland
Zealand
Adelaide
$'000
$'000
$'000

SKYCITY International Corporate /
Darwin
Business
Group
$'000
$'000
$'000

Total
$'000

249,020

30,379

79,361

66,325

88,646

-

513,731

(124,754)
(31,000)
93,266

(17,648)
(5,524)
7,208

(64,059)
(9,329)
5,973

(43,477)
(7,213)
15,635

(72,467)
16,179

(19,741)
(3,231)
(22,973)

(342,146)
(56,297)
115,288
(17,335)
97,953

SKYCITY Rest of New SKYCITY
Auckland
Zealand
Adelaide
$'000
$'000
$'000

SKYCITY International Corporate /
Darwin
Business
Group
$'000
$'000
$'000

Total
$'000

234,105

27,626

77,299

68,621

43,842

-

451,493

(121,837)
(23,332)
88,936

(17,106)
(2,701)
7,819

(65,895)
(7,664)
3,740

(45,124)
(6,773)
16,724

(40,440)
3,402

(20,242)
(2,829)
(23,071)

(310,644)
(43,299)
97,550
(24,899)
72,651

SKYCITY Rest of New SKYCITY
Auckland
Zealand
Adelaide
$'000
$'000
$'000

SKYCITY International Corporate /
Darwin
Business
Group
$'000
$'000
$'000

Total
$'000

473,725

56,157

152,291

123,170

112,100

-

917,443

(245,540)
(47,759)
180,426

(34,288)
(5,489)
16,380

(129,069)
(16,319)
6,903

(82,738)
(13,782)
26,650

(82,217)
29,883

(39,514)
(5,943)
(45,457)

(613,366)
(89,292)
214,785
(43,927)
170,858

-7-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

4 Revenue
6 months
31 December
2015
$'000

6 months
31 December
2014
$'000

12 months
30 June
2015
$'000

Total receipts including GST
Less non-gaming GST
Gaming win plus non-gaming revenue
Less gaming GST
Total revenue

581,092
(15,794)
565,298
(52,382)
512,916

509,552
(14,832)
494,720
(44,047)
450,673

1,036,966
(29,259)
1,007,707
(91,620)
916,087

Gaming
Non-gaming
Total revenue

398,393
114,523
512,916

342,793
107,880
450,673

704,066
212,021
916,087

Gaming win represents the gross cash inflows associated with gaming activities. “Total receipts including GST” and
“Gaming win plus non gaming revenue” do not represent revenue as defined by NZ IAS 18 “Revenue”. The Group has
decided to disclose these amounts as they give shareholders and interested parties a better appreciation for the scope of
the Group’s gaming activities and is consistent with industry practice adopted by casino operations in Australia.

5 Other income
6 months
31 December
2015
$'000
804
10
814

Net gain on disposal of property, plant and equipment
Dividend income

6 months
31 December
2014
$'000
786
8
794

12 months
30 June
2015
$'000
1,348
8
1,356

6 Expenses
6 months
31 December
2015
$'000

6 months
31 December
2014
$'000

12 months
30 June
2015
$'000

Profit before income tax includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Furniture and fittings
Motor vehicles
Asset write-offs
Total depreciation
Amortisation
Casino licence (Adelaide)
Software
Total amortisation
Total depreciation and amortisation

-8-

14,035
19,373
6,033
250
10,406
50,097

13,641
19,450
4,894
232
38,217

27,359
40,226
10,832
492
78,909

2,859
3,341
6,200

2,230
2,852
5,082

4,402
5,981
10,383

56,297

43,299

89,292

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

6

Expenses (continued)
6 months
31 December
2015
$'000

Restructuring costs:
Restructuring costs
Adelaide Redevelopment costs
Auckland project costs
NZICC costs
Darwin preopening costs

Other expenses includes:
Utilities, insurance and rates
Community trust donations
Property expenses
Other items (including International Business commissions)
Lease payments relating to operating leases
Provision for bad and doubtful debts

6 months
31 December
2015
$'000

6 months
31 December
2015
$'000

-

754
1,218
179
366
2,517

1,576
1,689
318
629
104
4,316

11,742
1,994
7,435
75,974
2,378
1,239
100,762

11,423
1,494
7,138
47,938
2,357
671
71,021

23,014
3,762
14,023
92,197
4,675
101
137,772

7 Finance costs - net
6 months
31 December
2015
$'000
Finance costs
Interest and finance charges
Exchange (gains)/losses
Interest Income
Capitalised interest
Total finance costs

21,986
(119)
(680)
(3,852)
17,335

-9-

6 months
31 December
2014
$'000

26,512
(140)
(1,185)
(288)
24,899

12 months
30 June
2015
$'000

49,421
(1,077)
(2,324)
(2,093)
43,927

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

8 Derivatives
The Group carries derivatives at fair value and all other financial instruments are carried at amortised cost.
All derivatives are fair valued using inputs other than quoted prices that are observable (level 2).
The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is
determined by using valuation techniques. These valuation techniques maximise the use of observable market data where
it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2.
Specific valuation techniques used to value financial instruments include:
- The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on
observable yield and credit default swap curves.
- 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
- Other techniques, such as discounted cash flow analyses, are used to determine fair value for the remaining financial
instruments.

9 Non-current assets - Intangible assets
Goodwill
$'000

Casino
licences
$'000

Computer
software
$'000

Total
$'000

At 1 July 2015
Cost
Accumulated amortisation and impairment
Net book amount

142,236
142,236

429,994
(41,876)
388,118

79,054
(53,379)
25,675

651,284
(95,255)
556,029

Half-year ended 31 December 2015
Opening net book amount
Exchange differences
Additions
Amortisation charge
Closing net book amount

142,236
(5,778)
136,458

388,118
(20,747)
405,000
(2,859)
769,512

25,675
(359)
4,168
(3,341)
26,143

556,029
(26,884)
409,168
(6,200)
932,113

At 31 December 2015
Cost
Accumulated amortisation and impairment
Net book amount

136,458
136,458

811,893
(42,381)
769,512

82,637
(56,494)
26,143

1,030,988
(98,875)
932,113

-10-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

9 Non-current assets - Intangible assets (continued)

$'000

Casino
licences
$'000

Computer
software
$'000

$'000

At 1 July 2014
Cost
Accumulated amortisation and impairment
Net book amount

137,290
137,290

410,219
(35,541)
374,678

74,635
(48,955)
25,680

622,144
(84,496)
537,648

Half-year ended 31 December 2014
Opening net book amount
Exchange differences
Additions
Amortisation charge
Closing net book amount

137,290
(2,652)
134,638

374,678
(9,579)
(2,230)
362,869

25,680
(135)
2,121
(2,852)
24,814

537,648
(12,366)
2,121
(5,082)
522,321

134,638
134,638

399,616
(36,747)
362,869

75,273
(50,459)
24,814

609,527
(87,206)
522,321

$'000

Casino
licences
$'000

Computer
software
$'000

$'000

At 1 July 2014
Cost
Accumulated amortisation and impairment
Net book amount

137,290
137,290

410,219
(35,541)
374,678

74,635
(48,955)
25,680

622,144
(84,496)
537,648

Year ended 30 June 2015
Opening net book amount
Exchange differences
Additions
Amortisation charge
Closing net book amount

137,290
4,946
142,236

374,678
17,842
(4,402)
388,118

25,680
252
5,724
(5,981)
25,675

537,648
23,040
5,724
(10,383)
556,029

142,236
142,236

429,994
(41,876)
388,118

79,054
(53,379)
25,675

651,284
(95,255)
556,029

Goodwill

Total

At 31 December 2014
Cost
Accumulated amortisation and impairment
Net book amount

Goodwill

Total

At 30 June 2015
Cost
Accumulated amortisation and impairment
Net book amount
Casino Licence
SKYCITY Darwin
Casino

Contract Term
The casino and associated operations are carried out by SKYCITY Darwin Pty Limited under a casino
licence/operator agreement (the Casino Operator's Agreement) with the Northern Territory
Government. The current licence term was extended in 2011 and now expires on 30 June 2031. The
Casino Operator's Agreement is subject to extension for a further 5 years once its period to maturity
reaches 15 years. These licence extensions apply on a continuing 5 year basis so that, subject to
certain criteria being met, the licence period is never less than 15 years. The carrying value of the
casino licence is A$31.7m (1H15: A$31.7m, FY15 A$31.7m).

-11-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

Adelaide Casino

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.
Effective 14 February 2014, the ALA and associated agreements were amended to (a) extend
Adelaide Casino’s exclusivity period for casino gaming in South Australia for a further 20 years until 30
June 2035 (during which period no other casino gaming is permitted, except for interactive gambling);
(b) permit the implementation of account based cashless gaming and ticket-in-ticket-out gaming
systems; (c) permit an increase in the number of both gaming machines and gaming tables; (d) reflect
new taxation rates; and (e) implement various other operational improvements. As part of the
agreement with the South Australian Government, SKYCITY Adelaide made a A$20 million payment to
the South Australian Government and agreed to undertake a casino expansion and hotel development
project.
These reforms are exclusive to the Group and have therefore been recorded at fair value based on the
estimated incremental benefit of the reforms over the life of the reforms. The asset is amortised over
20 years or 71 years depending on whether the incremental benefit is associated with the exclusivity
period or the full licence period.
The carrying value of the casino licence is A$306.6m (1H15: A$311.3, FY15: A$309.2m).

SKYCITY Auckland
Casino

SKYCITY Auckland Limited holds a Casino Premises Licence for the Auckland premises. The Casino
Premises Licence was for an initial 25 year term from 2 February 1996.
The initial licence was granted in 1996 for nil consideration, and hence there is no associated 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 (“Agreement”), the initial term of the licence was extended to 30 June 2048 on 11 November
2015. This was the date the Company executed a building works contract with The Fletcher
Construction Company Limited to construct the New Zealand International Convention Centre.
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 gaming
machines; and (c) implement various other operational improvements. Under the Agreement, the
Company has agreed to construct the New Zealand International Convention Centre for a total cost
$430 million.
The reforms (a to c above) are exclusive to the Group and have therefore been recorded at fair value
based on the estimated incremental benefit over the life of the reforms. The fair value has been
determined using a discounted cashflow model falling within level 3 of the fair value hierarchy over the
life of the reforms.
Key assumptions used in determining the fair value are as follows:








A discount rate of 9.5%
An additional 230 single terminal gaming machines
An additional 40 gaming tables
An additional 12 gaming tables that can each be substituted for 20 additional automated table
game terminals
The introduction of TITO and cashless gaming
Up to 359 gaming machines being permitted to accept bank notes with a denomination up to
$100
Operating margins (net of labour costs, direct costs, comps/commissions and marketing) are
calculated based on an internal view of the structural changes to the cost base required to
support the incremental revenue

-12-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

The assumptions underpinning the model are inherently uncertain and require the exercise of
significant judgement about the future expected benefits of the reforms to the Group.
The asset will not be amortised but will be reviewed for impairment annually.
Deferred Licence Value included within non-current liabilities will be transferred and offset against
property, plant and equipment when the New Zealand International Convention Centre has been
completed.
SKYCITY Hamilton
Casino

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

Queenstown Casinos Limited holds a Casino Premises Licence for these Queenstown premises. The
Casino Premises Licence is for an initial 25 year term from 7 December 2000. The licence can be
renewed for further periods of 15 years pursuant to section 138 of the Gambling Act 2003 (NZ). As the
licence was initially granted for nil consideration, there is no associated carrying value.

SKYCITY Wharf
Casino (Queenstown)

Otago Casinos Limited holds a Casino Premises Licence for these Queenstown premises. The Casino
Premises Licence is for an initial 25 year term from 11 September 1999. The licence can be renewed
for further periods of 15 years pursuant to section 138 of the Gambling Act 2003 (NZ). The carrying
value of the casino licence which arose on SKYCITY's aquisition of Otago Casinos Limited is $4.4m
(1H15: $4.4m, FY15: $4.4m).
The asset is not amortised but will be reviewed for impairment annually.

-13-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

10

Current liabilities - Senior interest bearing liabilities
31 December
2015
$'000
Unsecured
United States Private Placement (USPP)
Total current interest bearing borrowings

31 December
2014
$'000

-

30 June
2015
$'000

88,202
88,202

-

Refer note 11 (Non-current liabilities) for details of the USPP.

11 Non-current liabilities - Senior interest bearing liabilities
31 December
2015
$'000
Unsecured
US Private Placement
Syndicated bank facility
NZ bond
Deferred funding expenses
Total unsecured non-current interest bearing borrowings

31 December
2014
$'000

316,104
264,285
125,000
(3,986)
701,403

279,142
261,387
(1,776)
538,753

30 June
2015
$'000

317,228
383,808
(1,944)
699,092

(a) United States Private Placement (USPP)
USPP non-current debt matures between March 2017 and March 2021.
The USPP fixed rate US dollar borrowings have been converted to New Zealand and Australian dollar floating rate
borrowings by use of cross-currency interest rate swaps to eliminate foreign exchange exposure to the US dollar within the
Income Statement.
The movement in the USPP amount from 30 June 2015 relates to foreign exchange movements.

-14-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

11 Non-current liabilities - Senior interest bearing liabilities (continued)
(b) Syndicated bank facility
The syndicated banking facility is comprised of ANZ (New Zealand and Australia), Commonwealth Bank of Australia, Bank
of New Zealand, National Australia Bank and Westpac (New Zealand and Australia).
As at 31 December 2015, SKYCITY had in place revolving credit facilities of:


A$250.0 million maturing 30 June 2019



NZ$200.0 million maturing 30 June 2020



NZ$120.0 million maturing 15 March 2021

(c) Fair value
Fair value of USPP debt is estimated at NZ$355 million compared to a carrying value of NZ$316 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.
(d) New Zealand Bond
$125 million of unsubordinated, unsecured, redeemable fixed rate bonds were issued on 28 September 2015 with a
maturity of seven years.
The bonds are quoted on the NZDX. As at 31 December 2015 the closing price was $1.0013 per $1 bond. The bonds
are carried at amortised cost. The total fair value is $125m and is a level 1 valuation as they are listed securities.

12 Share capital

Opening balance of ordinary shares
issued
Share rights issued for employee
services
Employee share entitlements issued
Treasury shares issued
Net movement in treasury shares
value
Shares issued under dividend
reinvestment plan
Closing balance of ordinary shares
issued

31
December
2015
Shares

31
December
2014
Shares

31
December
2015
$'000

587,472,741

582,088,094

582,088,094

758,800

737,546

737,546

-

67,799
(67,799)

76,617
(76,617)

643
-

552
-

1,245
-

-

-

-

(10)

400

755

5,557,833

5,384,647

5,384,647

21,036

19,254

19,254

593,030,574

587,472,741

587,472,741

780,469

757,752

758,800

30
June
2015
Shares

31
December
2014
$'000

Included within the number of shares are treasury shares of 6,699,707 (31 December 2014: 6,708,778 and 30 June 2015:
6,699,707) held by the company. Treasury shares may be used to issue shares under the company's employee incentive
plan or upon the exercise of share rights/options.

-15-

30
June
2015
$'000

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

13 Reserves and retained profits
6 months
31 December
2015
$'000

6 months
31 December
2014
$'000

12 months
30 June
2015
$'000

(a) Reserves
Hedging reserve - cash flow hedges
Foreign currency translation reserve

(11,454)
(43,884)
(55,338)

(10,391)
(44,804)
(55,195)

(10,803)
(28,091)
(38,894)

(10,803)
1,070
(1,913)
192
(11,454)

(8,766)
29,952
(32,215)
638
(10,391)

(8,766)
57,467
(60,272)
768
(10,803)

(28,091)
(15,793)
(43,884)

(39,810)
(4,994)
(44,804)

(39,810)
11,719
(28,091)

Hedgeing reserve - cash flow hedges
Balance at the beginning of the period
Revaluation (note 8)
Transfer to net profit
Deferred tax
Balance at the end of the period
Foreign currency translation reserve
Balance at the beginning of the period
Exchange differences on translation of overseas subsidiaries
Balance 31 December
(i) Hedging reserve - cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised
directly in equity. Amounts are recognised in profit and loss when the associated hedged transaction affects profit and
loss.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign operations are taken to the foreign currency translation reserve.
The reserve is recognised in profit and loss when the net investment is disposed of.
(b) Retained profit
Movements in retained profit were as follows:
31 December
2015
$'000
97,016
71,019
(58,216)
109,819

Balance at the beginning of the period
Profit attributable to shareholders of the company
Dividends
Balance at the end of the period

31 December
2014
$'000
84,915
54,559
(58,042)
81,432

30 June
2015
$'000
84,915
128,744
(116,643)
97,016

14 Dividends
31 December
2015
$'000
58,216
58,216

Prior year's final dividend
Interim dividend
Total dividends provided for or paid

-16-

31 December
2014
$'000
58,042
58,042

30 June
2015
$'000
58,042
58,601
116,643

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

14 Dividends (continued)
Subsequent to balance date the Board of Directors has resolved to pay an interim dividend of 10.5 cents per share.
31 December
31 December
30 June
2015
2014
2015
Cents per share Cents per share Cents per share
Cents per share
10.00¢

Prior year's final distribution/dividend
Interim distribution/dividend

10.00¢

10.00¢
10.00¢

15 Contingencies
There are no significant contingent liabilities or assets (31 December 2014 and 30 June 2015: none).

16 Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
31 December
2015
$'000
497,245

Property, plant and equipment

31 December
2014
$'000
16,345

30 June
2015
$'000
10,477

The significant increase in capital commitments relates to the New Zealand International Convention Centre and Hobson
Street Hotel. Construction contracts were signed with The Fletcher Construction Company Limited on 11 November 2015.
(b)

Operating lease commitments
31 December
2015
$'000

Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years

3,915
13,288
291,352
308,555

31 December
2014
$'000

6,861
16,873
293,396
317,130

30 June
2015
$'000

7,472
18,023
309,902
335,397

17 Events occurring after the balance date
(a) Dividend
On 10 February 2016, the directors resolved to provide for an interim dividend to be paid in respect of the six months
ended 31 December 2015. The unfranked, unimputed dividend of 10.5 cents per share will be paid on 18 March 2016 to all
shareholders on the company's register at the close of business on 4 March 2016.

-17-

 SKYCITY Entertainment Group Limited
Notes to the financial statements
31 December 2015
(continued)

18 Reconciliation of profit after income tax to net cash inflow from operating activities
6 months
31 December
2015
$'000

Profit for the period
Depreciation, amortisation and asset write offs
Net finance costs
Current period employee share entitlement
Gain on sale of property, plant and equipment
Change in operating assets and liabilities
(Increase)/decrease in receivables and prepayments
(Increase) in inventories
(Decrease)/increase in payables and accruals
(Decrease)/increase in deferred tax liability
Decrease in net tax receivable
(Decrease)/increase in provisions
Capital items included in working capital movements
Net cash inflow from operating activities

-18-

6 months
31 December
2014
$'000

12 months
30 June
2015
$'000

71,019
56,297
17,335
643
(804)

54,559
43,299
24,899
552
(786)

128,744
89,292
43,927
1,245
(1,348)

(21,404)
(170)
(6,201)
(3,047)
22,859
(987)
(4,234)
131,306

(4,378)
(378)
(9,363)
5,533
1,771
3,598
119,306

2,156
(491)
10,585
4,898
8,335
3,739
(407)
290,675

 MEDIA/MARKET RELEASE
11 February 2016
SKYCITY Entertainment Group Limited
Half-year results for six months to 31 December 2015
Result Highlights:


Record normalised revenue and earnings for the group for an interim period, at
the upper-end of the market guidance provided on 19 January 2016.



Normalised revenue up 10.2% on the previous corresponding period to $562.0
million, normalised EBITDA up 15.4% to $178.2 million and normalised NPAT up
28.2% to $85.4 million.



Reported NPAT for the half-year of $71.0 million, up 30.0%, reflecting a higher
win rate in International Business over the period.



Continued strong growth in Auckland, across all business segments, with
normalised revenue up 7.4% and normalised EBITDA up 8.9%.



Strong growth in group-wide International Business with turnover and normalised
revenue up 51.4% and normalised EBITDA up 57.3%.



Hamilton continues to deliver strong underlying growth.



Improved performance in Adelaide with normalised EBITDA up 58.5% to A$21.4
million underpinned by a significant increase in IB, the on-going success of the
new signature restaurants and cost saving initiatives.



EBITDA in Darwin up 6.9% to A$23.1 million, despite modest revenue growth in a
challenging macroeconomic environment.



Operating cash flows for the group up 7.4% for the period, maintaining current
debt levels, despite the significant capital investment across the group.



January trading has broadly seen a continuation of the trends exhibited during
1H16. Trading in December and January also suggests the NZICC gaming
concessions are delivering positive results.



Significant progress made on the NZICC and Hobson St hotel projects with
construction contracts signed with Fletcher Construction on 11 November 2015
activating the gaming concessions under the NZICC Agreement.



Design and planning approval for the Adelaide expansion received from the
Development Assessment Commission (“DAC”) during January 2016.



SKYCITY remains firmly committed to its BBB- credit rating. Based on indicative
feedback received from S&P, SKYCITY expects that a successful sale of the
Hobson St hotel should enable it to retain this credit rating.



Interim dividend increased by 5% to 10.5 cents per share, reflecting the
significant earnings per share growth over the period.

 SKYCITY Entertainment Group Limited (NZX:SKC) today announced its half-year
results for the 6 months ended 31 December 2015.
SKYCITY has delivered record normalised revenue and earnings for the group for an
interim period, at the upper-end of the market guidance provided on 19 January
2016.
Normalised revenue (including gaming GST) was up 10.2% to $562.0 million and
normalised EBITDA up 15.4% to $178.2 million. Normalised Net Profit After Tax
(NPAT) of $85.4 million was up 28.2% on the previous period.
Reported NPAT for the half-year was $71.0 million, up 30.0%, reflecting an improved
win rate in International Business over the period of 1.41% (vs. 1.04% in 1H15),
slightly above the theoretical.
SKYCITY Chief Executive Nigel Morrison says that, overall, the half-year results for
FY16 were very satisfying with strong and sustained momentum across the core
businesses.
“We have continued to achieve strong growth across our New Zealand properties and
International Business and have delivered record revenue and earnings for an interim
period. Pleasingly, the performance in Adelaide has significantly improved, and we
continue to achieve EBITDA growth in Darwin, despite the challenging local market in
the Northern Territory,” he says.
Mr Morrison says that Auckland delivered a strong result for the period despite a
healthy comparative period. The Auckland results reflects the benefits of significant
investment over the past few years, the robust Auckland economy and strength of
hospitality and tourism in the city, and our on-going focus on cost management and
efficiencies.
January trading has broadly seen a continuation of the trends exhibited during 1H16.
Strong performances from the NZ businesses were offset by weaker performances
from Darwin and International Business, resulting in flat normalised group revenue
for the month on the prior period.
Depreciation and Amortisation was up $2.7 million on a normalised basis due
primarily to higher depreciation on recent capital investment across the group, and
increased amortisation of the Adelaide Casino licence value. Corporate costs were
also higher in the half-year period, but in-line with management expectations.
Interest costs were down by $4.7 million for the period reflecting the lower interest
rate environment, lower average debt and increased capitalised interest on projects
now proceeding. Normalised tax expense was up 31% for the period, reflecting
improved financial performance.
Auckland
SKYCITY Auckland, SKYCITY’s flagship property, delivered a strong result for the
period, with normalised revenue rising 7.4% to $324.9 million and normalised
EBITDA up 8.9% to $135.4 million over the period. This significant growth continues
the positive momentum exhibited over the past two years, and means that Auckland
has now delivered eight consecutive quarters of EBITDA growth on previous
corresponding periods.
Revenue and EBITDA growth was achieved across all business activities. Notable
improvements were achieved in the gaming business, particularly within table
games, underpinned by improved customer segmentation and the success of our

2

 expanded Baccarat room. Gaming machines delivered a robust performance across
both the main gaming floor and in premium rooms.
The Federal Street dining precinct and both Auckland hotels continued to be very
popular and reflected the benefits of being able to offer world-class integrated casino
and entertainment facilities to local and international customers.
Non-gaming
revenue was up 6.2% to $80.6 million, with all business segments showing revenue
growth and stable or improving margins.
Early indicators suggest that Auckland is benefiting from the gaming concessions
which were triggered on 11 November 2015. 70% of the additional gaming product
has been accommodated on the existing casino floor with the balance to be activated
once capital works to create new contemporary gaming spaces are completed around
the middle of the year. Notably, the initial customer response to ticket-in-ticket-out
and cashless technology has been positive with a majority of both cash-in and cashout transactions now using this technology.
As previously announced, SKYCITY is enhancing the Auckland property with a major
upgrade of the main site atrium, for a total cost of ~$24 million. Stage 1 of the
Atrium project was completed on-time and on-budget which included a new main
escalator providing direct access to the main gaming floor on level 2, a second
escalator linking levels 2 and 3 and Andy’s Burgers & Bar, which has enhanced the
quality and variety of SKYCITY’s existing F&B offering. Stage 2 of the Atrium project
is due to be completed by September 2016 and includes an extension of the main
gaming floor through partial infill of the atrium space, completion of the entrance and
foyer and the development of a new Cantonese restaurant to complement the
existing Federal Street dining precinct.
Mr Morrison says that it is very pleasing to see SKYCITY Auckland continuing to
deliver sustained strong financial performance.
“The continued momentum in Auckland reflects the benefits of the significant
investment in the property over the past few years and positive external factors
which remain supportive of our underlying business with record low interest rates,
record high net migration and strong tourist inflows continuing to support
discretionary spending levels. Furthermore, we expect the property to benefit from
the continued activation of the NZICC gaming concessions and strategic investment
in the property over the medium-term reflecting the needs of our customers,” he
says.
Hamilton
SKYCITY Hamilton delivered a strong performance for the period with the positive
momentum exhibited during FY15 continuing. Normalised revenue was up 9.9% to
$27.7 million and normalised EBITDA was up 18.4% to $11.6 million.
The improved performance has been underpinned by solid gaming revenue across
both main floor and premium gaming spaces, an on-going focus on customer
experiences, the opening of new bars and restaurants during the period, and
delivering cost efficiencies across the property.
SKYCITY Hamilton’s five new F&B outlets opened by December 2015 to much acclaim
and have added significant appeal and amenity to the property.
The medium-term outlook for Hamilton remains positive, underpinned by strategic
initiatives to drive incremental visitation to the property.

3

 Queenstown
The combined Queenstown operations have delivered record results for the period,
underpinned by significant growth in International Business volumes and local
gaming activity and a focus on cost control. Normalised revenue was up 107.6% to
$13.7 million and normalised EBITDA up 420% to $2.6 million.
Queenstown remains an iconic location with strong tourism growth expected over the
medium-term. There is a significant potential medium-term opportunity for
Queenstown to enhance its VIP offering and/or consolidate the two existing gaming
licences but any significant action would require regulatory and licence change.
Adelaide
Adelaide Casino delivered strong growth for the period. Normalised revenue was up
18.7% on the prior period to A$103.6 million with normalised EBITDA up 58.5% to
A$21.4 million. This was despite a modest decline in local gaming revenue (down
4%) which was broadly consistent with trends observed in the Adelaide gaming
market.
Adelaide’s improved performance was primarily influenced by significant growth in
International Business (reflecting the benefit of successfully attracting VIP customers
visiting the eastern seaboard of Australia to Adelaide as an additional destination),
strong F&B activity, along with improved margins, following the successful opening of
two new signature restaurants (Sean’s Kitchen and Madame Hanoi), and cost saving
initiatives implemented across the property.
Mr Morrison says that SKYCITY remains firmly focused on delivering sustained
revenue and earnings growth at the Adelaide property.
“Whilst we are pleased with the improved performance in Adelaide, challenges
remain delivering growth in a soft local market. We remain confident that the
changes we have made in Adelaide will continue to deliver revenue growth over the
medium term,” he says.
Darwin
SKYCITY Darwin achieved a satisfactory result despite a challenging local market with
normalised revenue increasing 2.6% to A$75.0 million and normalised EBITDA
increasing 6.9% to A$23.1 million.
The performance was primarily driven by robust growth in gaming machines, despite
stronger competition from local pubs and clubs, significant growth in International
Business volumes, reflecting the attraction of Darwin as a destination for VIP
customers, challenging local market conditions in the hotel and F&B sectors, and a
continued strong focus on operating costs and efficiencies.
The Northern Territory Government completed the gaming tax review for SKYCITY
Darwin in July 2015. As previously announced, the net impact of the new gaming tax
rates (which will apply until June 2025) and community benefit levy is an increase in
operating costs for Darwin of approximately A$1 million per annum.
The medium to longer-term growth prospects for the Darwin property will depend on
further promotion of International Business play, potential activation of the Little
Mindil site (adjacent to the property) and any further investment in existing facilities.

4

 International Business
SKYCITY’s International Business delivered record activity during the half-year, with
turnover increasing 51.4% to $7.2 billion and normalised EBITDA up 57.3% to $22.8
million.
Growth in International Business turnover continues to be underpinned by the
success of the expanded sales and marketing team, increased recognition of the
‘Horizon’ brand and offering, a strong focus on direct relationships with VIP
customers, significant growth in revenue share programmes, and increased play at
higher table differential levels (the maximum was increased to $300,000 in
December 2015).
The average actual win rate for the half-year period was 1.41%, which is slightly
above the theoretical win rate of 1.35%.
January 2016 Trading Update
January trading has broadly seen a continuation of the trends exhibited during the
first-half of FY16. Strong performances from the NZ businesses were offset by
quieter performances from Darwin and in International Business, resulting in
normalised group revenue for the month of $88.4 million which was flat on the prior
period.
Auckland continued to deliver good growth across all business segments, with local
revenue (excluding International Business) up 7.6% on the prior period. The new
direct escalator access to the casino in the main atrium has been well received by
customers. Hamilton continued its strong momentum with local revenue up 11.1%
on the prior period, underpinned by strong local gaming growth. International
Business turnover was $700 million for the month against a strong comparative
period (~$1 billion).
Adelaide achieved modest growth on the prior period underpinned by improved
performance in tables and F&B. Darwin continued to face a challenging local market
with local revenue down 6.5%.
EBITDA margins for all businesses were broadly in-line with both January 2015 and
1H16.
New Zealand International Convention Centre and Hobson St Hotel
Significant progress has been achieved on the NZICC and Hobson St hotel projects
during the period.
Construction contracts for the NZICC and Hobson St hotel were signed on 11
November 2015 with Fletcher Construction, triggering the gaming concessions under
the NZICC Agreement. Demolition and preparation works commenced on-site in
December 2015 and excavation is scheduled to commence during March 2016. The
overall programme is progressing on-time and on-budget with completion of both the
NZICC and Hobson St hotel expected in early 2019.
Mr Morrison says this is a very exciting time for the NZICC and Hobson St hotel
projects, with construction having commenced after SKYCITY received the necessary
planning and approvals allowing it to proceed with the development.
“We’re pleased these much needed tourism infrastructure projects have now entered
the construction phase, bringing jobs, growth, and additional economic investment in
downtown Auckland. The NZICC, Hobson St Hotel and the planned retail laneway will

5

 be world-class facilities to be enjoyed by both visitors to the city and Aucklanders
alike,” he says.
Adelaide Redevelopment
SKYCITY is well advanced in finalising the design for the Adelaide expansion, having
received development approval from the DAC on 22 January 2016.
SKYCITY is committed to a total development cost of no greater than A$300 million
and while early ground works are expected to commence by the middle of the year,
commencement of core construction of the expansion is unlikely to be before
December this year. SKYCITY’s commencement remains contingent upon the
satisfactory finalisation of the ground lease, the car park lease with Walker
Corporation and the development approvals of adjacent works, all of which are
important to the overall success of SKYCITY’s expansion.
Funding
Following its recent $125 million NZ bond issue, SKYCITY has over $300 million of
committed undrawn bank facilities.
As previously announced, SKYCITY continues to explore property-related funding
options, including seeking external investors to fund and own the proposed Hobson
St hotel. The Hobson St hotel sale process is progressing well with strong interest
from both local and international investors. SKYCITY is seeking to complete the sale
process by April.
Based on indicative feedback received from S&P, SKYCITY expects that a successful
sale of the Hobson St hotel should enable it to retain its BBB- credit rating.
SKYCITY intends to provide a further update on its long-term funding plan following
the completion of the Hobson St hotel sale process and once plans and timing for the
Adelaide expansion are further progressed.
Dividend
SKYCITY has announced an interim dividend of 10.5 cents per share, 5% up on the
prior period, which is payable on 18 March 2016.
The Dividend Reinvestment Plan will be available for this dividend, with a 2%
discount applying.
Mr Morrison reiterated SKYCITY’s commitment to its existing dividend policy for the
foreseeable future.
“We are pleased to increase our interim dividend by 5%, thereby enabling our
shareholders to share in the improved financial performance of the group. We believe
our dividend policy continues to offer our shareholders an attractive yield and is
sustainable over the medium-term,” he says.
ENDS

6

 Notes to editors:


All numbers in this media release are unaudited. Further information on
adjustments between normalised and reported information is available in
SKYCITY’s investor presentation at: http://ir.skycityentertainmentgroup.com.

For more information please contact:
Media

Investors

Jade Lucas

Ben Kay

Senior Communications Advisor

Investor Relations & Corporate
Development Manager

DDI: +64 9 363 6084
Mobile: + 64 21 928 964
E-mail: jade.lucas@skycity.co.nz

DDI: +64 9 363 6067
E-mail: ben.kay@skycity.co.nz

7

 Appendix
Reconciliation between reported and normalised financial information
1H16
Revenue EBITDA
EBIT
$m
$m
$m

Normalised

NPAT
$m

1H15
Revenue EBITDA
EBIT
$m
$m
$m

NPAT
$m

562.0

178.2

132.3

85.4

510.0

154.4

111.2

66.6

International Business at Theoretical

4.1

(6.6)

(6.6)

(4.6)

(14.5)

(11.1)

(11.1)

(8.2)

International Business Adjustments

4.1

(6.6)

(6.6)

(4.6)

(14.5)

(11.1)

(11.1)

(8.2)

Adelaide redevelopment costs

-

-

-

-

-

(1.5)

(1.5)

(1.0)

NZICC interest and other costs

-

-

-

-

-

(0.3)

(0.3)

(2.3)

Asset write-offs

-

-

(10.4)

(9.8)

-

-

-

-

Restructuring costs

-

-

-

-

-

(0.5)

(0.5)

(0.4)

Auckland project costs

-

-

-

-

-

(0.2)

(0.2)

(0.1)

0.0

0.0

(10.4)

(9.8)

(2.5)

(2.5)

(3.8)

566.1

171.6

115.3

71.0

495.5

140.8

97.6

54.6

Total Other Adjustments
Reported

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.
Gaming revenue figures reflect gaming win (inclusive of gaming GST). This
facilitates Australasian comparisons and is consistent with the treatment adopted by
major Australian casinos. Non-gaming revenue is net of GST.
Total revenue is gaming win plus non-gaming revenue.
EBITDA margin is calculated as a % of gaming win (GST inclusive) plus non-gaming
revenue – to facilitate Australasian and period-on-period comparisons.
Key other adjustments are:


1H16 adjustments:
o Write-off of the Hamilton Hotel project costs given that this project is no
longer proceeding ($2.7 million of capitalised costs incurred over 2011 to
2014).
o Write-off of 101 Hobson Street and the Nelson Street car park to allow for the
NZICC development ($7.6 million book value).



1H15 adjustments:
o Adelaide redevelopment costs – Structural redundancies and launch costs for
new facilities (Sean’s Kitchen and Madame Hanoi).
o NZICC – Interest on purchase of New Zealand International Convention
Centre (NZICC) land bank (calculated using the group’s average cost of debt
of 6.8% on an average balance of $85 million) and other costs specific to this
project.
o Restructuring costs – Costs associated with changing the staffing structures
under an approved restructuring plan.
o Auckland project costs – Federal Street launch and Federal Street fire costs.

8

 Actual IB win rate was 1.41% for 1H16 (1H15: 1.04%).
During FY16 the application of the Group’s non-GAAP financial information policy was
tightened to further restrict the number of adjustments between Reported and
Normalised results.

9