SKYCITY ENTERTAINMENT GROUP LIMITED SHAREHOLDER REVIEW 25 SEPTEMBER 2009

Transcription

1 SKYCITY ENTERTAINMENT GROUP LIMITED SHAREHOLDER REVIEW 25 SEPTEMBER 2009

2 FINANCIAL HIGHLIGHTS CONTENTS Financial Highlights IFC Chairman s Review 04 CEO s Review 06 Financial Summary 14 Board of Directors 18 Executive Team 20 Our People 30 SKYCITY in the Community 31 Directory IBC $ 914.3m Gross Revenue including gaming GST (for Australian comparison purposes) + $ 846.7m Revenues* up 6% on prior year + $ 300.5m Group EBITDA* up 3.8% on prior year and up 9.6% in second half on the previous corresponding period + $ m Group NPAT* up 13% on prior year + $ 228m Amount raised in equity raising + $ 306m Debt retired cps Distribution to shareholders cps Earnings per share* up 7% cps Net Tangible Asset backing up from 11.3 cps the previous year *NORMALISED FOR NON-RECURRING ITEMS AND INTERNATIONAL BUSINESS AT THEORETICAL WIN RATE

3 GROUP SUMMARY AT A GLANCE THE GROUP EMPLOYEES 7,360 HOTEL ROOMS 780 GAMING TABLES 298 RESTAURANTS/BARS/CAFES 50 GAMING MACHINES 4,312 CINEMA SCREENS 123 AUCKLAND RESTAURANTS/ BARS/CAFES 19 HOTEL ROOMS 660 GAMING MACHINES 1,647 GAMING TABLES 110 EMPLOYEES 3,070 HAMILTON RESTAURANTS/ BARS/CAFES 6 GAMING MACHINES 339 GAMING TABLES 23 EMPLOYEES 340 QUEENSTOWN RESTAURANTS/ BARS/CAFES 2 GAMING MACHINES 86 GAMING TABLES 12 EMPLOYEES 85 CHRISTCHURCH RESTAURANTS/ BARS/CAFES 5 GAMING MACHINES 500 GAMING TABLES 35 EMPLOYEES 560 DARWIN RESTAURANTS/ BARS/CAFES 10 HOTEL ROOMS 120 GAMING MACHINES 750 GAMING TABLES 28 EMPLOYEES 1,470* CINEMAS SEATS 22,188 COMPLEXES 17 EMPLOYEES 755 ADELAIDE RESTAURANTS/ BARS/CAFES 8 GAMING MACHINES 990 GAMING TABLES 90 EMPLOYEES 1,080 *INCLUDING ALL STAFF DURING DRY SEASON

4 LET US ENTERTAIN YOU. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 1

5 SKYCITY ENTERTAINING AS A GROUP. PAGE 2

6 SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 3

7 CHAIRMAN S REVIEW WORKING HARD FOR SOLID GROWTH. The financial year just ended presented extraordinary times for companies worldwide. Great uncertainty surrounding the strength of the economy fuelled speculation of diminishing corporate profits, causing anxiety amongst shareholders and staff and presenting boards and senior executives with significant challenges. I am therefore delighted on behalf of my Board colleagues, executives and staff to report a very sound result for SKYCITY. It is my pleasure to report that underlying net profit after tax for the year to the end of June 2009 was $115.3 million, up 13 percent on last year s underlying net profit after tax of $102.0 million. Total Group revenue for this year was up 6 percent on last year at $846.7 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $300.5 million were up 4 percent on last year and up 10 percent in the second half of the year compared with the same period the year before. Particularly pleasing were: the results from Adelaide, where a record result saw EBITDA up by more than 40 percent for the year and up 75 percent for the second half compared with the same period last year; and the revival of the Cinema business, with EBITDA up 46 percent during the year and up by 61 percent in the second half compared with the year before. It was good to see Darwin s second half EBITDA up 6 percent over the same period the year before after a disruptive first half as we completed our A$40 million expansion project. Auckland too improved in the second half given a soft first half that had seen EBITDA contract compared with the year before. The other good news for shareholders was that earnings per share were up 7 percent this year to 23.4 cents per share. REDUCING DEBT, PRESERVING EARNINGS Three key matters dominated the Board s deliberations over the year. The first was our desire to prudently reduce our debt levels and restructure the balance sheet. The second was our wish to adjust the distribution/dividend payout to more sustainable levels and replace PAGE 4

8 the profit distribution plan with a fully imputed cash dividend in order to preserve earnings per share. The third was our aim to improve the performance of our core businesses. AN OPPORTUNITY FOR ALL Historically, SKYCITY has funded its expansion and acquisitions through cash generated by the business and debt. Towards the end of the financial year, SKYCITY went to the market with an equity raising programme designed to restructure the balance sheet and enable the company to adjust and right size its credit metrics. The raising was structured to closely resemble a standard rights issue but enabled us to raise money from the markets in a more timeefficient manner. It consisted of an overnight institutional placement, a similar offer to retail investors (the Share Placement Plan) and a top up plan for middle tier shareholders. The offers were structured to optimise the opportunity for all shareholders, and we were careful to ensure that priority was given to existing shareholders. Each offer was well supported, demonstrating the confidence that investors at all levels have in the business and its progress. There is no doubt this strategy has placed the company on a very solid foundation. The level of positive feedback we have received from shareholders reinforces that. PROACTIVELY ADDRESSING OUR DEBT PROFILE Having successfully raised NZ$228 million from the new share issue, the Board, in conjunction with management, set out to lower debt and restructure the balance sheet. $177 million of the money raised was used to retire 40 percent (US$115.5 million) of the US Private Placement debt due in March US$53m of the 2012 maturity debt was bought back in July. A further US$62.5m of the same maturity debt was bought back in August. The bank facility of $129 million at 30 June 2008 had been repaid during the course of the FY09 financial year. This means we have retired $306 million in debt since 30 June 2008, and SKYCITY s gross debt due within three years has been reduced by a sizeable 31 percent. This in turn will lower interest costs for the business going forward. The net effect has been that we have improved the Group s capital structure. SKYCITY s gearing ratio (Net Debt: EBITDA) has dropped from 3.3 times at 30 June 2008 to 2.3 times at 30 June This is important for a number of reasons. It enhances our financial flexibility and improves our credit metrics, giving us greater flexibility over our banking and other credit market choices, and so providing greater latitude to take advantage of growth opportunities as they arise. The Board s view is that this more conservative gearing ratio coupled with the strengthened balance sheet has significantly improved our debt profile and is an appropriate position in the context of the economic environment, emerging opportunities and the need to provide investors with peace of mind. PROTECTING EARNINGS PER SHARE The final dividend for the 2009 year was 6.5 cents per share, taking the total dividend/ distribution for 2009 to 15.5 cents per share. This was paid in cash on 11 September to those shareholders on the register as at 4 September The final dividend was fully imputed at the company s tax rate of 30 percent. The amount is lower than last year s dividend/distribution because of a number of changes in payout policy that investors have been advised of over the past year. In February this year, we announced that we would reduce the distribution payout ratio for dividends from 90 percent of net profit after tax to between percent of net profit after tax. Subsequently, the Board decided to discontinue the profit distribution plan (PDP) that saw non-taxable bonus shares issued to shareholders because this Plan was continuing to dilute shareholder value. Going forward the company intends to pay fully imputed cash dividends. As part of our objective to maximise earnings per share growth, a dividend reinvestment plan will not be offered at this time. NEW PEOPLE, NEW IDEAS Throughout the Group, the injection of new management into individual businesses has bolstered performance, bringing in new ideas and fresh ways of addressing problems. My thanks to Nigel Morrison and his Executive Management team for the energy and sheer determination they have invested in lifting performance in the second half. Systems and processes are essential for an organisation as diverse as SKYCITY to work effectively, but without the commitment and spirit of people, there wouldn t be answers when they were needed and there wouldn t be the interaction and communication that make entertainment possible. One of our commitments as a Group is to be proactively involved in the jurisdictions in which we operate. SKYCITY is a proactive proponent of the development of Auckland for example, and I m proud of the fact that our senior executives and Board members, despite their significant workloads, continue to find the time to be involved in committees and meetings that seek to make the most of Auckland s extraordinary potential. Our Chief Executive s invitations to the New Zealand Government, Auckland City Council and both the South Australian and Northern Territory Governments to work with SKYCITY to progress different developments are examples of the relationships we are continuing to build and the contributions we are making as responsible corporate citizens. Every day, thousands of people pour into SKYCITY facilities looking for experiences, and what keeps them coming back is the attention and the service they get, directly or indirectly, from people right across the business. On behalf of the Board, thank you to all the staff at SKYCITY who have worked so hard and so diligently through times that have not been easy. This is a result that, as Nigel Morrison has said in his report, really points to what this organisation is capable of. READY FOR THE FUTURE We are at some low point in the economic cycle - I m not sure any of us can pinpoint exactly where that point is - but the Board feels the business has clearly found its feet and is now well placed for the future. The improved operating performance in the second half and strong balance sheet mean we will be looking for continuing gains across all our businesses, accompanied by ongoing operational improvements. The Board shares the Chief Executive s ambition to achieve double digit growth again this year. I look forward to sharing my thoughts on our progress at our forthcoming Annual Meeting. ROD McGEOCH - CHAIRMAN On behalf of the SKYCITY Board SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 5

9 CHIEF EXECUTIVE S REVIEW MAKING MORE OF EVERYTHING WE HAVE. NIGEL MORRISON PAGE 6

10 This is my second report for SKYCITY, and I m pleased to share with you my confidence in the progress we have made this year. The 2009 result shows what this organisation can accomplish in a significant downturn and satisfies me that we have sound structures and systems in place, a committed management team who are encouraging positive results from teams across the business, an evolving suite of products and services that is gaining us market share and traction, and a re-emerging confidence in just what we are capable of. The underlying strength of all that showed itself most clearly in the second half of the year, when there was a noticeable gathering of momentum. Our core objective for 2009 was to continue to maximise the potential of our assets while tightly controlling capital expenditure. We made good progress. Net profit after tax was up significantly on last year to $115.3 million - the result of a healthy 13 percent lift in normalised net profit after tax (earnings excluding non-recurring items and with international win rate adjusted to theoretical), and the fact that we had no write-downs in any of our business units. Adelaide staged an impressive turnaround. Darwin stayed even whilst undertaking an extensive assets development programme. Cinemas defied the softness in the New Zealand economy. Auckland did well in table games, grew market share in gaming machines and held hospitality steady in a very challenging market. As I said, there was strong second half performance generally, with all business units delivering increased earnings over the same period the year before. Underlying revenues were up 6.2 percent for the year, and more particularly 9.7 percent for the second half, showing just how much the whole business rallied after a 3 percent increase at half year. Earnings before interest, tax, depreciation and amortisation (EBITDA) for the second half lifted by nearly 10 percent to around $151 million. Eighteen months into my role as Chief Executive, the Group is galvinising and our concentrated and coordinated strategy to achieve the most from the assets we have and those we are developing is bearing fruit. The Executive Management team was particularly pleased with results at our Adelaide Casino, where EBITDA increased by 42 percent over the year to A$29.4 million, and at our New Zealand SKYCITY Cinemas operations, where EBITDA increased by 46 percent to $7.0 million. While parts of the business are making greater progress at greater pace than others, overall there s a real sense of us moving forward as a team. Underlying revenues for the Group for the year were $846.7 million, up from $797.2 million last year, while underlying EBITDA increased by nearly 4 percent to $300.5 million. Our operational performance, together with our significantly strengthened balance sheet, following our successful capital raising in April this year and our repayment of over $300 million of debt, means SKYCITY is in a very sound financial position. STRONG SIGNS OF IMPROVEMENT IN SOFT TIMES SKYCITY s New Zealand casinos fared well in the second half of this financial year. EBITDA at our Hamilton site was up 7 percent in that period, after contracting by 12 percent in the first half of the year compared to the same period the year before, following a significant costs review. SKYCITY Auckland s earnings increased modestly in the second half of 2009 compared to the previous corresponding period after contracting by around 5 percent in the first half compared to the first half of This meant the year end result was virtually flat. The temptation in such an environment is to focus totally on stripping out costs. We have certainly contained costs wherever possible as part of our ongoing quest to achieve efficiency, but reducing expenses alone is not enough. In these more difficult times, it is vital that our Auckland business continues to give our local visitors and tourists alike great reasons to visit us. That means not just concentrating on our service standards but also using the maintenance capex we have set aside to enhance our bars and restaurants so that they are entertainment destinations of choice. It s also about continuing to physically develop our gaming environments, so that they are inviting and stimulating places to play and to bring friends for good times. Enhancing the service and presentation of our main gaming floors, our VIP gaming offerings and our Platinum and Pacific Rooms in Auckland has kept people coming back to our casino in times when other forms of entertainment have not done so well. I was heartened to see our Auckland teams perform well and get us back on course. Table games improved in the second half of the year, with poker showing encouraging growth, although we actually had enthusiastic take up across all our table products. In October, we also relaid out the gaming floor, creating what could be described as a business class environment in the middle of the floor, where higher value players can play for higher limits and receive a parallel level of service. This refurbishment means we now have three levels of table gaming product available: VIP; our business class zone (the Rouge area); and mainstream. The improvement in Auckland was led by table games revenue growth combined with an ongoing focus on managing our costs. Gaming machine revenue did not do so well. While we increased our market share in this key business unit, it is an area that has proven more sensitive to changes in the economic climate and remains subject to some of the tightest regulatory constraints of any casino operation in the world. Our team worked hard to get revenues back to flat in the second half after they contracted by 3 percent in first half. Given that the overall New Zealand gaming machines market contracted by 5.2 percent for the year, we held up well. That said, gaming machines are a very important part of our revenue strategy and re-delivering growth in this part of the business will always be a core focus for our Auckland management team. I am pleased to say that I am proud of the many improvements we have made to the Auckland experience over the last 18 months including the Lobby Bar at the Grand, the main gaming floor experience, Aces and Rouge Bars, our newest bar twentyone, our refurbished SKYCITY Hotel rooms and suites and Bellota and invite you all to experience these improved offerings. Before Christmas we will open a new exclusive bar XO and a more contemporary remodelled Rebo. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 7

11 CHIEF EXECUTIVE S REVIEW - CONTINUED Difficult economic conditions meant that growing earnings from our hotels and tourism-related businesses was difficult. Flat EBITDA in such circumstances was not a bad result. I was pleased with our increased occupancy rates in our 660 hotel rooms, and very pleased with our Grand Hotel, which lifted occupancy from 55 percent in 2008 to a much healthier 73 percent this year. From my office, I can look across the front entrance to our Auckland business. It s an area that is always busy. People gather around our casino to meet, talk, enjoy the sunshine and of course entertain themselves and their friends. Such an environment can only be good for Auckland, for the city s tourism initiatives and as a destination bringing life back to the heart of the CBD. That is why we re very interested in working with the Council to transform Federal Street into a pedestrian area. We would like to see even more foot traffic through the area and we d also like to encourage the development of more bars, restaurants and retail shops in this precinct. The New Zealand Government, together with the Auckland City Council and other interested parties are evaluating the demand and potential for having a larger convention centre in Auckland. This is something we are close to and would be very interested in being involved with, either by expanding our existing convention facility over Federal Street or by developing, with others, our 101 Hobson Street site into a purpose-built international convention centre. We will continue to stay close to this going forward. NOW SHOWING: PLEASING GROWTH A year ago, we undertook a major write-down on our Cinemas business. This year, under the leadership of Jane Hastings and her new management team, the business has recovered strongly to record impressive growth, both in absolute terms and in terms of market share. This was a business in need of bold and decisive transformation. The new management team has drawn on its extensive retail background to achieve that, completely re-engineering the business by tightly controlling costs, reframing the labour structures, updating performance monitoring and reporting, and refocusing everyone involved on the customer experience. Now, instead of the one size fits all approach that invariably characterises the industry, we have turned our cinemas into the entertainment hub of their communities. Recognising that Auckland has a significant Asian population, for example, that has had no access to Asian movies, we introduced films from India and China, and invited local communities to come back to our cinemas to enjoy experiences that have not previously been available to them in New Zealand. Food and beverage offerings at our cinemas have also been revamped to give individual audiences more of the choices they re really looking for, at price points that encourage participation because they offer real value. These and other initiatives have seen SKYCITY cinema revenues grow 16 percent to $77 million over the year, and I m confident we will see ongoing momentum in the year ahead. ADELAIDE DEALS SOME WINNING HANDS Our Adelaide casino has also performed impressively this year, with EBITDA up 42 percent to A$29.4 million for this financial year from A$20.7 million in a record result since we acquired the property in 2000 and a significant turnaround given that it is just over a year since smoking bans were imposed. Revenues were up by 10.5 percent for the full year to A$130.6 million and up nearly 19 percent in the second half to A$66 million. This was combined with sound cost control that saw EBITDA take off, up by nearly 75 percent on the previous year to A$15 million in the second half of Congratulations to our new Adelaide General Manager, David Christian and his new management team. This result lifts the proportion of earnings we now generate in Australia to around 40 percent of what we generate from Auckland, compared with 34 percent last year, and shows that we are continuing to successfully diversify shareholder risk across the Group. By focusing on core casino business and appealing to a much more focused clientele, SKYCITY Adelaide has successfully re-positioned itself in the market as a first class casino entertainment facility with good value propositions in its restaurants and bars, great entertainment, plenty of gaming choices and a great sense of ambience thanks to its careful and well thought through re-fitouts. The introduction of the new baccarat room has generated growth for that game of over 30 percent, making baccarat Adelaide s fastest growing game and now the second most popular table game after roulette. Poker has also increased in popularity by more than 30 percent over the course of the year. New technology too has given customers the chance to play games they love in new ways. For example, we ve introduced shuffle machines to improve game efficiency and the player experience and added new automated games such as Rapid Roulette. All of these changes give people reasons to keep coming back to our facilities. We are currently finalising plans for the introduction of table gaming into Marble Hall, after receiving approval to do this - a development that could enable us, as early as next year, to introduce an exclusive chandelier bar, ultimately offer one continuous casino floor across the whole site, and theme the space in ways that add even more character to this prestigious heritage site. Such a year of growth gives us great confidence in the potential for our business in Adelaide. We are certainly interested in working with the South Australian Government to invest further in South Australia and to help create a more significant entertainment destination for Adelaide that will stimulate new jobs, tourism, and greater revenues for the South Australian Government. INVESTING IN THE NORTHERN TERRITORY In the course of this year, SKYCITY Darwin has developed into a true five-star destination for Darwin and the Northern Territory, with the new Platinum VIP gaming room, the new Sandbar destination bar and a new Italian restaurant, il Piatto. SKYCITY Darwin s gaming floor has also been expanded and includes 750 gaming machines in addition to the new bars and restaurant. New smoking balconies have also been introduced in readiness for a smoking ban which comes into effect in the Northern Territory on 2 January After declining by 5 percent in the first half of the year, due to the disruption of the A$40 million resort expansion, SKYCITY Darwin s earnings increased by 6 percent in the second half of this year compared with the same period last year. With these new facilities now complete, our Darwin management team is looking forward to the investment made in the complex realising its potential going forward. We do anticipate, however, that the smoking bans will have a negative impact on gaming machine revenues because the propensity to PAGE 8

12 smoke is higher in the Northern Territory than in other jurisdictions in Australia. The effect of smoking ban introductions on casino revenues in other states of Australia has seen gaming machine revenues soften by 10 to 15 percent. We believe that the impact on revenues in Darwin could be at the higher end of that range. We believe we have done everything we can by way of improving our gaming offering to mitigate this. INTERNATIONAL BUSINESS A GROWTH OPPORTUNITY After softening by 16 percent to $640 million in the first half of the year, SKYCITY s international business turnover recovered in the second half of the year with turnover up 27 percent on the previous corresponding period. This led to overall turnover for the 2009 year being $1.5 billion compared to $1.4 billion the year before. The increase in turnover in the second half year would have been greater but for travelling concerns relating to swine flu which curtailed visitation and turnover. The overall win rate for the financial year was 1.29 percent - just below the theoretical of 1.33 percent, and in contrast to the very high win rate of 2.63 percent in Having restructured the international business management in response to first half results, we now look forward to building on the foundations achieved in the second half and growing international business turnover in the year ahead. BALANCING OUR PRIORITIES During the year, we also undertook a number of capital management initiatives to pay down debt and readjust our balance sheet and improve our gearing metrics. As a result, we have, in the course of the year, reduced our net financing costs by a very pleasing 11 percent to $67.4 million. In April, SKYCITY went to the market with a successful equity raising initiative that raised $228 million, through an institutional placement of $185 million and share purchase and top up plans that raised an additional $43 million. The offers were made available to current shareholders as a priority and were well supported. The purpose of this was to improve our capital structure, strengthen the company s credit metrics by addressing specific debt, and provide capital for potential opportunities as and when they unfold. We used a good percentage of the money we raised - over $177 million - to buy back a significant proportion of the US private placement debt due to mature in March 2012, in July and August this year. These buy backs and the payback of our $129 million bank facility mean that the Group has retired over $300 million in debt since June last year. SKYCITY s debt profile and credit metrics have significantly improved as a result and that s put us in a sound position for debt cover. Our gearing ratio (Net Debt to EBITDA), for example, has reduced from 3.3 times to 2.3 times, while our interest cover ratio has increased from 3.8 times to 4.4 times. If you look at our net tangible asset backing, it s up from 11 cents per share to 58 cents per share. On top of this, we have cash reserves of $60 million and a totally undrawn, secured bank facility of $500 million. We have also maintained tight control over capex. As I explained earlier, it is very important that we continue to invest maintenance expenditure into our core business assets to preserve, renew and restore the facilities that generate cashflow. In addition, we need to spend specific project capex on adding to the assets we have available to us. This year our major project capex has been the A$40 million expansion/ enhancement at SKYCITY Darwin In August 2008, we provided capex guidance for the year of $65 million maintenance capex and project capex of $35-40 million, a total of $ million. I m pleased to report that our actual capex for the year was $63 million maintenance capex and $41 million project capex, a total of $104 million. We would expect a similar capex profile over the year ahead, with maintenance capex of $65 million and project capex of $40 million. The latter will include our initial expenditure to begin developing the Little Mindil site in Darwin, the activation of Marble Hall in Adelaide and a number of new bars and restaurants in Auckland. By proactively repaying debt and systematically pursuing a tight but effective capex programme, we have strengthened our credit position and bolstered our assets such that we are now well positioned for growth. PLAYING FAIR While SKYCITY is an avid believer in responsible corporate citizenship, and we take great pride in offering our customers safe and highly enjoyable environments in which to play and be entertained, there is no doubt in my mind that, in Auckland at least, we are constrained from delivering the potential growth in our core business because of regulation. On 1 July 2009, player information displays (PIDs) became mandatory on gaming machines in New Zealand. SKYCITY invested over $20 million to comply with this regulation. While no discernable machine revenue reduction has been noted to date that can be directly attributed to these new displays, their introduction is certainly not helpful in our endeavour to grow our gaming machine business and compete with our peers. According to Gambling Compliance, a UK gaming monitoring company, regulations governing casinos in New Zealand are some of the most stringent in the world more so than in Australia, the US, Canada and South Africa. That makes it difficult for us to compete on a level playing field with our SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 9

13 CHIEF EXECUTIVE S REVIEW - CONTINUED SKYCITY EXECUTIVE TEAM FROM LEFT TO RIGHT Matthew Hardman, Gráinne Troute, Nigel Morrison, Simon Jamieson, Jane Hastings, Alistair Ryan, Mike Clarke, Kevin Clayton, Peter Treacy, Ejaaz Dean. PAGE 10

14 Trans-Tasman competitors and peers in Sydney and Melbourne. It also makes it harder for us to attract international players and tourists to New Zealand. The 2003 Gambling Act has, as its primary focus, harm minimisation. While there may be some argument that this is appropriate for some convenience forms of gaming, we don t believe it is appropriate for casinos. The New Zealand Ministry of Health s own statistics clearly demonstrate this. Casinos are not the problem, yet we are more tightly regulated than gaming machines in pubs and clubs, Lotto and online gaming operations a unique situation. In other jurisdictions, the governing legislation has a duality of purpose. In addition to harm minimisation, there is recognition of the significant positive contributions casinos make. These include: - creating jobs, - investment in community infrastructure, - development of tourism, generating export earnings, and - payment of significant taxes The New Zealand Government earns more in taxes, charges and levies from our New Zealand casinos than do our SKYCITY shareholders. It is totally consistent for casinos to deliver on these positive aspects, while maintaining at all times a safe and secure gaming environment. What seems to have been forgotten is that our business is built on enjoyment and fun, not personal and financial stress. It actually makes no sense for us, commercially or morally, to pursue anything other than a highly responsible approach. THANK YOU I d like to take this opportunity to thank the Board, Chairman Rod McGeoch and my fellow Directors, for the guidance and advice I have received from them throughout the year. My thanks also to the Senior Management team, and to the managers they appointed, for continuing to see and pursue opportunities for every part of the business throughout the year. Finally, my thanks to all those who have understood the energy and commitment required to make things happen in a dynamic and exacting sector like ours. Being an entertainer - because that s the mindset that each of us has to have - is demanding. Everybody s hard work and dedication shows in our results, particularly in the second half. It also points to our potential, and that is perhaps the most exciting aspect of all. READY TO GROW Because of what we have achieved on both sides of the Tasman and across our businesses over the last year, there is now a sound foundation for growth going forward. Our core objective will continue to be to maximise the potential of our existing assets, businesses and licenses. To do that, we will focus on generating even more reasons for our customers and tourists alike to visit us, we will invest appropriately and astutely to ensure we are the entertainment destination of choice in the cities in which we operate and work closely with governments to try to achieve a greater balance in the regulation governing our operations, particularly in New Zealand and Adelaide. I m satisfied that our businesses remain relatively resilient. As with last year, we are budgeting for growth across all our businesses in both revenues, EBITDA and net profit - which has been helped by the fact that our capital raising and debt buy backs will reduce our net funding costs. The year ahead will see us continuing to focus on investing in our businesses to generate growth as well as continuing to enhance our casino licenses and related businesses in the jurisdictions in which we operate. Our healthy financial position also means that should opportunities arise to expand our operations in the regions in which we operate, we are well placed to do so and would look at these seriously. Challenges remain. While the economic outlook appears to have stabilised and may even be starting to improve, should unemployment increase to any significant extent, this may curtail our opportunities for organic growth, particularly in our gaming machines business. And as noted earlier, I continue to have concerns too about the potential impact of smoking bans in Darwin. We achieved double digit growth in our underlying net profit in If things goes to plan, and the economic and regulatory environment does not shift to disadvantage us further, it is certainly our objective to deliver similar growth for shareholders again in NIGEL MORRISON CHIEF EXECUTIVE SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 11

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16 SKYCITY READY TO PLAY? SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 13

17 FINANCIAL SUMMARY WORTH OUR WHILE. Underlying Earnings (NPAT) Net Debt / EBITDA Interest Cover (EBITDA / Net Interest) 2.3X $95.4m $102.0m $115.3m 3.4X 3.3X 3.3X 3.8X 4.4X PAGE 14

18 FINANCIAL HIGHLIGHTS: UNDERLYING REVENUE AND EARNINGS - NPAT up 13% to $115.3 million - Group revenues up 6% to $847 million - Group EBITDA of $300.5 million up 3.8% and up 9.6% in second half - More than $300 million in debt paid back this year RESULT HIGHLIGHTS AUCKLAND - Overall revenues and EBITDA flat year on year, although good second half recovery for both - Sound second half in table games - up 6% - Market share growth in gaming machines - Non-gaming held its own - revenues up 2.2% year on year - SKYCITY Grand Hotel occupancy up from 55% to 73% SKYCITY Hotel steady at 83% ADELAIDE - Record result for Adelaide with EBITDA up over 40% for the year and up 75% in the second half compared with last year - Result means shareholder risk diversified, with Australian casino earnings now representing over 40% of the Auckland casino, compared with 34% in 2008 DARWIN - Revenues up 8% for the year despite the disruptions of the expansion programme - EBITDA growth of 6% in the second half compared with the previous year - Hotel occupancy steady at 82% CINEMAS - Revenues up 16% to $77 million - EBITDA growth up 46% OUTLOOK - Budgeting for growth in revenues and EBITDA in all businesses across the Group - Concerns about potential impact of smoking bans in Darwin - Objective is to deliver double digit growth again in 2010 SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 15

19 FINANCIAL SUMMARY - CONTINUED FINANCIAL PERFORMANCE NET PROFIT SUMMARY Year ended Year ended 30 June June 2008 ($ million) ($ million) Gaming revenues Non-gaming revenues Total Revenues Expenses EBITDA Depreciation and Amortisation EBIT Funding Net Profit before Tax Tax and Minority Interests Net Profit after Tax before Cinemas write down Cinemas write down Reported Net Profit after Tax OPERATING EARNINGS: EDITDA Auckland Adelaide A$ Darwin A$ International VIP Hamilton Cinemas Other New Zealand casino operations Group overhead expenses (26.7) (30.1) Group EBITDA Adjustment for non-recurring items (0.5) 7.8 International VIP adjusted to theoretical 0.5 (13.7) Normalised Group EBITDA NET PROFIT AFTER TAX Reported (after Cinemas write down and non-recurring items) Adjusted for non-recurring items Normalised (adjusted for non-recurring items and international VIP at theoretical) Normalised NPAT cents per share UNDERLYING CASH FLOW Receipts from Customers Payments to Suppliers Net Cash received from trading operations Taxes paid Net Interest Expense Underlying Cash Flow DISTRIBUTIONS TO SHAREHOLDERS 15.5cps 21.5cps PAGE 16

20 FINANCIAL POSITION CURRENT ASSETS As at As at 30 June June 2008 (NZ $ million) (NZ $ million) Cash and bank Receivables and prepayments Inventories Tax receivables Other current assets NON-CURRENT ASSETS Property, plant and equipment 1, Investment property Intangible assets Investments in associates Tax receivables Derivative financial instruments Other non-current assets , ,537.6 Total Assets 1, ,672.0 CURRENT LIABILITIES Payables Tax liabilities Derivative financial instruments Subordinated debt NON-CURRENT LIABILITIES Term borrowings Subordinated debt Deferred tax liabilities Derivative financial instruments Other non-current liabilities ,081.3 Total Liabilities 1, ,199.6 Net Assets EQUITY Share capital Retained profits (1.3) (24.3) Reserves Minority interests Equity This summary financial information has been derived from and should be read in conjunction with the SKYCITY Entertainment Group Limited audited financial statements for the year ended 30 June The audited financial statements are available at Investor Centre, Financial Reports and Presentations. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 17

21 BOARD OF DIRECTORS LEADING US FORWARD. ROD McGEOCH - DIRECTOR Chairman SKYCITY Board, Chairman of the Governance and Nominations Committee, Member of the Audit and Risk Committee, Member of the Human Resources Committee, appointed Chairman of the Board April Rod McGeoch was appointed a director in September 2002 and Chairman of the company on 1 April Based in Sydney, Australia, Rod is a director of Telecom Corporation of New Zealand Limited and Ramsay Health Care Limited. He is also Chairman of Vantage Private Equity Growth Limited and an Australian Prime Ministerial appointment to the Australia and New Zealand Leadership Forum. In August 2009 he became Honourary Chairman of the Trans- Tasman Business Circle. NIGEL MORRISON - MANAGING DIRECTOR Appointed as Managing Director December Nigel Morrison also holds the role of Chief Executive, SKYCITY Entertainment Group. His profile is included with the SKYCITY senior management team. PAGE 18

22 PETER CULLINANE - DIRECTOR Member of the Human Resources Committee, Member of the Governance and Nominations Committee, appointed Director March JANE FREEMAN - DIRECTOR Chairperson of the Human Resources Committee, Member of the Governance and Nominations Committee, appointed Director March BRENT HARMAN - DIRECTOR Member of the Audit and Risk Committee, Member of the Governance and Nominations Committee, appointed Director December Peter Cullinane has led the development of some of New Zealand s most iconic brands, applying strategic and creative thinking both locally and internationally, which led to his appointment as chief operating officer, Saatchi & Saatchi Worldwide. Since returning to New Zealand and establishing Assignment Group, Peter has specialised in strategic advice to a wide range of New Zealand and international clients. Jane Freeman is prominent in the field of customer-driven technology, a discipline that has formed the foundation for success of some of New Zealand s most forward-thinking and successful companies. In addition to her role as director with SKYCITY, Jane sits on the boards of several prominent New Zealand companies, including Air New Zealand, Delegats Wines, and Pumpkin Patch. Brent Harman is a highly experienced broadcaster and company director with a background in managing publicly listed companies in Australia and the United Kingdom. He is presently a director and Chairman of HT Media Ltd, the parent of broadcast and online media company, MediaWorks NZ Limited. Prior to that, he held senior positions in the broadcast and new media industries in New Zealand, the UK and Australia. CHRIS MOLLER - DIRECTOR Chairman of the Audit and Risk Committee, Member of the Governance and Nominations Committee, appointed Director December SIR DRYDEN SPRING - DIRECTOR Member of the Audit and Risk Committee, Member of the Governance and Nominations Committee, appointed Director October ELMAR TOIME - DIRECTOR Member of the Human Resources Committee, Member of the Governance and Nominations Committee, appointed Director February Chris Moller is currently a director of Meridian Energy Limited, NZX Limited, Rugby New Zealand 2011 Limited and New Zealand Cricket. In his previous role of CEO of the NZRU, Chris jointly led New Zealand s successful bid to host the 2011 Rugby World Cup. He was also a member of the Council of the International Rugby Board and CEO of SANZAR. Chris s distinguished career has included senior posts with the New Zealand Dairy Board, including global CFO and Managing Director of New Zealand Milk Products, and later Deputy Chief Executive of Fonterra. His early career was in the finance and banking sectors. In addition to being a director of SKYCITY, Sir Dryden Spring is Chairman of ANZ National Bank Limited and certain of its subsidiaries. He is also a director of Fletcher Building Limited and Port of Tauranga, and a trustee of the New Zealand Business and Parliamentary Trust. Sir Dryden brings to the board proven skills in governance and compliance as well as significant financial acumen. He is a Distinguished Fellow of The New Zealand Institute of Directors. Former Chief Executive of New Zealand Post and credited with leading New Zealand Post through its transformation into one of the top rated postal services internationally, Elmar Toime has been based in London since Elmar has extensive international experience in running large companies. He is a management consultant with his own company and is a member of the supervisory board of Deutsche Post DHL, the world s leading logistics group. He is Chairman and a shareholder in Postea Inc, a technology and services company. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 19

23 EXECUTIVE TEAM THE POWER OF TEAMWORK. NIGEL MORRISON MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER Appointed March 2008 Nigel Morrison has over 18 years experience in the gaming industry throughout Australasia and Asia. Prior to being appointed CEO of SKYCITY, Nigel was the Group Chief Financial Officer of Galaxy Entertainment Group, a leading publiclylisted Hong Kong-based group operating and developing casinos in Macau. Before that he was Chief Executive of the Federal Group, Australia s largest private gaming group and prior to this Chief Operating Officer of Crown Limited. Prior to embarking on a career in casinos in 1993, he was a Corporate Finance Partner with Ernst and Young, specialising in the gaming industry. PAGE 20

24 ALISTAIR RYAN GRÁINNE TROUTE MIKE CLARKE CHIEF FINANCIAL OFFICER GENERAL MANAGER GROUP SERVICES AND HUMAN RESOURCES CHIEF INFORMATION OFFICER Alistair Ryan is responsible for all financial matters including financial reporting, group treasury, investor relations and internal audit. Alistair is also a director of Christchurch Casinos Limited and Queenstown Casinos Limited. Prior to being CFO for the Group, Alistair was SKYCITY s General Manager Corporate, and Company Secretary. Prior to joining SKYCITY, Alistair was a financial services partner with international accounting firm Ernst and Young. Gráinne Troute is responsible for SKYCITY s Human Resources function across the Group including recruitment, learning & development, employee relations and employment brand. She has an extensive career in Human Resources & General Management, being previously Managing Director of HR consultancy Right Management, and prior to that, Managing Director of McDonald s Restaurants (New Zealand) Ltd. Gráinne also has operational oversight of the management of the SKYCITY Community Trusts. Mike Clarke is responsible for the planning, implementation and management of SKYCITY information technology systems and is focused on delivering systems to improve business effectiveness and customer experience. Mike has wide experience in IT Management having previously held roles such as Regional Director with Lotus IBM Asia Pacific based in Singapore, and Managing Director for 3Com in Australia and New Zealand. PETER TREACY DAVID CHRISTIAN ANDREW WILSON GENERAL COUNSEL AND COMPANY SECRETARY GENERAL MANAGER, SKYCITY ADELAIDE GENERAL MANAGER, SKYCITY DARWIN Peter Treacy is responsible for SKYCITY s government relations, legal, regulatory, compliance and company secretarial functions. Peter is also a director of several of SKYCITY s subsidiary companies. He has extensive experience in major international financing and corporate transactions, with many years international experience, including eight years as partner with international law firm Linklaters in London, Hong Kong and Bangkok. David Christian is responsible for the operation of the SKYCITY Adelaide casino. David has held several significant positions within the SKYCITY business including time as General Manager of both the SKYCITY Auckland and the SKYCITY Hamilton businesses. David has more than 20 years experience in hospitality, hotel and casino management including working in several Australian states and in Singapore. David was previously General Manager of the Wrest Point Hotel Casino and General Manager Operations of the Country Club Casino, both in Tasmania. Andrew Wilson is directly responsible for the operations and performance of SKYCITY Darwin as well as the development plans for the property. He has an extensive background in hospitality and casino management including 15 years with Burswood International Resort Casino in Perth where he was Chief Operating Officer. Andrew is a board member of the Northern Territory Chamber of Commerce and Industry and the Australian Technical College. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 21

25 EXECUTIVE TEAM - CONTINUED JANE HASTINGS KEVIN CLAYTON EJAAZ DEAN GENERAL MANAGER, SKYCITY CINEMAS GROUP GENERAL MANAGER, MARKETING EXECUTIVE MANAGER - TABLE GAMES, SKYCITY AUCKLAND, PRESIDENT INTERNATIONAL BUSINESS Jane Hastings brings a breadth of international experience and a broad marketing and operations background to managing the company s cinema business. During her time in Asia, she led one of the most recognised integrated marketing companies and throughout her career has consulted to and worked for leading listed and fortune 500 global brands, including AIG, American Express, Shell and Singapore Airlines. Kevin Clayton is responsible for marketing strategy and branding. Kevin has more than seven years experience in gaming, wagering and casino industries, having previously held senior executive positions at Galaxy Entertainment in Macau and Tabcorp in Melbourne. He also has more than 15 years experience managing consumer brands and businesses. Ejaaz Dean is responsible for managing SKYCITY s table games business in Auckland. Ejaaz also manages SKYCITY s International Business and is responsible for marketing SKYCITY s properties to the international market. He has more than 23 years experience in the casino industry, having previously held key management positions at Burswood Casino in Perth, Star City in Sydney and Crown Casino in Melbourne. His most recent role was as Chief Operating Officer - Gaming at Burswood Casino. MATTHEW HARDMAN SIMON JAMIESON ARTHUR PITCHER EXECUTIVE MANAGER - GAMING MACHINES, SKYCITY AUCKLAND GENERAL MANAGER, SKYCITY HOTELS GROUP AUCKLAND GENERAL MANAGER, SKYCITY HAMILTON Matthew Hardman is responsible for managing the gaming machines business of the SKYCITY Auckland casino. Matthew has had 20 years experience in the casino industry, with a history in start-up gaming operations and industryleading businesses including Crown Casino and Star City. Most recently, Matthew was General Manager of Gaming Machine Operations at Crown in Melbourne. Simon Jamieson is responsible for SKYCITY s two luxury Hotels in Auckland, The Grand and the SKYCITY Hotel, the SKYCITY Convention Centre, the Sky Tower and SKYCITY s awardwinning restaurants. With more than 25 years experience in large-scale hospitality businesses, Simon brings a wealth of commercial and global tourism experience to the SKYCITY business in New Zealand and is presently a director of the New Zealand Tourism Association. Arthur Pitcher is an experienced casino operator with over 35 years experience in the industry. Arthur was General Manager of Christchurch Casino for its first 10 years and prior to that spent 25 years with UK based Hamblin Leisure Group as a casino executive. After leaving Christchurch Casino in late 2004, Arthur was a consultant for the Packer/Aspinall Group, assisting with the setting up of a chain of entertainment casino venues in the UK before returning to New Zealand to take up this role. PAGE 22

26 EXCITEMENT EVERYWHERE YOU LOOK. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 23

27 THE NZ HOME OF POKER. In October 2008, SKYCITY hosted the largest poker tournament New Zealand has ever seen. With the sport now the fastest growing table game in the world, such a tournament was a great opportunity to welcome a new kind of patron to our casino. According to Ejaaz Dean, Executive Manager - Table Games, SKYCITY Auckland, The Festival of Poker ran for a full week and attracted over 300 players for the main event, more than half of them from overseas. In the course of those seven days, we gave away over $1 million in prize money and gathered strong international coverage on TV and radio, in papers and on numerous websites. The international visitors especially also generated hotel sales and spent up large in our city. Everyone benefitted. Yet The Festival of Poker was only one of four major tournaments held over the year: SKYCITY Auckland was also involved with the Auckland Anniversary Tournament, the North Island Championship and the New Zealand Poker Open (each with prize money of over $100,000). In late July 2009, SKYCITY ran another event at our Queenstown casino, which attracted well over 130 players to Queenstown, the vast majority of them from overseas. But this was a poker tournament with a twist. Players didn t just compete at poker, they also took part in at least one tourism activity - be it Milford Sound, bungy jumping, skiing or snowboarding. Once again - coverage was huge. PAGE 24

28 The key to successfully navigating tougher times is to read the signs and respond decisively according to Simon Jamieson, General Manager, SKYCITY Hotels Group Auckland. The downturn in visitor numbers and consumer spending has hit the hotels and conventions sectors hard. SKYCITY has strongly resisted the downward trend by adapting its offerings. Recognising that the hotel industry would be impacted, SKYCITY shifted its emphasis at the beginning of the year, targeting the Australian and domestic New Zealand market to get new visitors into the hotels who did not have so far to travel. As a result, the four and a half star SKYCITY Hotel enjoyed a small growth in occupancy in a market that declined overall by up to 8 percent. Meanwhile, the five-star Grand Hotel enjoyed significant growth, with a sizeable increase in occupancy. The convention and events business also changed tack, aggressively marketing for more smaller events than it had in the past, adapting margins and lifting the numbers of functions to catch up with the marketdriven shortfall. Visitor numbers to the Sky Tower were also down but profits were up overall, thanks to a new pricing initiative that achieved higher average spend per visit. To achieve this, the business introduced a new category of ticket Whole of Tower that added to the experience for just a few dollars more. The new offer was well supported by the market. SKYCITY HOTELS ADAPT TO CHALLENGING MARKET. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 25

29 It s easy to love the cinema business, according to Jane Hastings, General Manager, SKYCITY Cinemas. But the secret to turning round a cinema operation like SKYCITY Cinemas lies in focusing not only on the movies themselves but on the people who love going to the cinema. To do that, SKYCITY Cinemas has completely re-engineered the business with a new management team to create more value for customers. Today it s all about being local and being the best. SKYCITY Cinemas has focused on the fact that Manukau cinema-goers are different from those in Albany, and what is offered must reflect what local customers want. In addition, SKYCITY Cinemas has introduced a wider range of movies; Cinema Asia brings the best in Asian cinema to New Zealand screens for the first time. By bringing back the classics, and offering concerts and live performances, SKYCITY Cinemas gives more people more reasons to continue to choose us. Doing that properly requires a commitment to being the entertainment hub for each community. Another important aspect has been rethinking the food and beverage offering. The SKYCITY Cinema team has re-examined the whole offer, delivering more options such as wine and cheese or coffee and cake and affordable $5 kids combos, so that our cinemas continue to deliver a total entertainment experience for a full range of customers. IT S EASY TO GO TO SKYCITY CINEMAS. PAGE 26

30 The key to Adelaide s success this year, according to David Christian, General Manager, SKYCITY Adelaide has been a decentralised operating model that has allowed the team to focus on running the casino as an Adelaide-centric business. It means, he says, that day to day decisions can be made by the business with a very clear understanding of the environment and context. The casino has not just revamped its management team this year, it has also upgraded its culture, focusing on striving to be the best with its new 1 percent improvement attitude. The idea that everyone is responsible for making small changes has had a huge impact, engaging staff and giving them a very real sense of ownership. There has been a tendency in the past to think of the premises as a pub, and therefore to watch what other pubs are doing. A new mindset has seen the business thinking of itself, and behaving as, a casino, as good as any other casino in Australia. We have strengthened the gaming product with additions like the new baccarat room and the introduction of Rapid Roulette, and extended the restaurant hours so that they now run as 7 day a week operations. These changes, alongside innovative game specific promotions, are about raising the reasons and the occasions for customers to keep visiting. ADELAIDE STRIVES FOR SUCCESS. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 27

31 DARWIN S FIVE STAR DESTINATION. The Darwin premises is now an iconic five star destination after major refurbishments last year. Today the casino has four fine dining restaurants, five major bars, a coffee shop, two function rooms (the International and Grand Ballroom) and a massive outdoor catering area that recently hosted 3,729 people for the black tie Turf Club Gala Ball. Andrew Wilson, General Manager, SKYCITY Darwin says the new Italian restaurant il Piatto, which opened in December, set a new benchmark in the city with its show kitchen and indoor/outdoor dining that seats nearly 200 people. Sandbar, the new destination bar, opened in February and has been very popular, particularly over the weekend with live music. Together with the new VIP Platinum Room, extended machine gaming in the Southern Cross Room and the refurbished table games area on the main gaming floor, the property is an entertainment showcase. More exciting changes are coming, with plans to develop the Little Mindel Resort well progressed. PAGE 28

32 WE CAN ALL MAKE A DIFFERENCE. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 29

33 OUR PEOPLE LIFTING THE BAR. The most powerful and effective way to unite thousands of people is through ideas; simply articulated principles and concepts that bring them together and inspire them to lift the bar. It s critical in a multi-faceted business such as ours, with its 24 hour workplace, many roles, numerous locations, and mixes of waged and salaried, full and part-time workers. As human beings, we are drawn towards concepts that each person relates to individually and that still bring us together as groups by spelling out clearly what needs to be achieved. The key to doing that successfully in a corporate environment is building what is known as a values-based organisation - a business that bases not just how it works, but how it judges how it is working, by an agreed set of aspirations and conceptual standards. In September 2008, a key group of senior executives met to work through a draft vision, mission and values set for SKYCITY. Through a series of subsequent presentations and focus groups with a wide cross-section of staff, we resolved three ideas that underpinned the final result. The first was that people said they wanted all parts of the business to be world class. The second was that everyone felt we needed to be much more upfront about the businesses we are in. The third was that, feeling like a winner was a universal emotion that people across the business related to. WHAT EMERGED WAS A VERY CLEAR PICTURE OF THIS ORGANISATION S AMBITIONS: Our vision is to be the centre of world-class entertainment with casinos at our heart. It is extremely important that we openly acknowledge such a critically important aspect of what we do. Our business focuses on managing casinos and what drives us is our intention to be world-class in all aspects of our business. And - Our mission is to thrill, excite and make everyone feel like a winner. Again, these are ideas that are as important internally in terms of how teams work together as they are when they are carried through to customer service. We articulated the values that we would apply to realise our vision and mission, as follows: PLAY FAIR We are all equally important (the key ideas here are accountability, integrity, recognition and respect) PLAY HARD We can all make a difference (this is about being empowered, acting with courage and integrity, being committed to success) PLAY A PART Together we ll go far (we need to work together if we are to be truly successful) PLAY TIME Let s have fun (it s important to remember that we all enjoy the journey) We established a programme called Let s All Play, designed to bring our vision, mission and the four values to life internally. We then launched it over a 12 day period with competitions, games and fun, to let everyone know that play is an integral part of our identity. The reaction has been fantastic. The ideas have been warmly and enthusiastically received, and people across the business have told us they now have clear benchmarks for what s expected of them and what they can expect of each other. In such a high energy and demanding business as ours, keeping people engaged is much more than just a nice-to-have. We simply cannot run an entertainment business successfully without intense commitment. To measure just how involved our staff felt in the business, we changed how we monitor engagement this year, adding more questions that probed deeper into staff s true feelings. The responses showed that we are continuing to gain ground in all areas, with significant improvement in each weighting compared to the previous survey 18 months prior. Against the competitive external benchmarks set by the research company, every site was above average, with our salaried staff hitting the high performing benchmark. That commitment is also reflected in our staff turnover monitoring, which shows our average turnover has dropped from a high of 37 percent in January 2008 to 20 percent by July That s a truly remarkable turnaround, given that even at our highest point we were still below the hospitality industry s turnover benchmark of 41 percent. It indicates just how much progress we have made, and how quickly, in our bid to become an employer of choice. Not everyone will stay of course. So to help us communicate with people who want to work with us, we set up an interactive site that shows the jobs we have available and invites people to apply. Interest has been widespread, and in just five months we have now gone from having no formal talent pool to an online talent pool of 11,700 people. Succession planning is also critical if we are to have a stable and resilient upper management structure. This year, we set in place a key role succession planning programme for those roles that report directly to the CEO. Overall, it s been a year when we cemented critical structures and systems. We have significantly reduced turnover and our recruitment processes are now state of the art. Over the year ahead, we ll implement programmes to further develop talent within the organisation, creating career paths that encourage longevity and lift our leadership development. The experience and skills that people bring to this business are their own. But translating those individual talents into high performing teams is even more important, because ultimately it s collective performances that the business depends on, and that our customers judge us by. This year, we put words around that idea in ways that people across SKYCITY can proudly and sincerely own. GRÁINNE TROUTE GENERAL MANAGER GROUP SERVICES AND HUMAN RESOURCES PAGE 30

34 SKYCITY IN THE COMMUNITY If you are involved in making a difference in the community, either as an individual or with an organisation, and you believe we could help you with support or funding, please contact us. We are always interested in opportunities where we can help change the lives of New Zealanders for the better. GREAT TIMES, GREAT CAUSES. Part of being a responsible corporate organisation is ensuring that we match a good return to shareholders with an appropriate return to the communities we operate in. To achieve that SKYCITY looks to actively participate in communities through sponsorships and through the activities of the SKYCITY Community Trusts. SKYCITY COMMUNITY TRUSTS Once again this year, rather than focus on a single cause, we have worked through the SKYCITY Community Trusts to deliver difference for as many people as possible. Since the first Trust was established in 1996, we have distributed over $23 million to more than 1,800 community groups and organisations, large and small, through our three Community Trusts in Auckland, Hamilton and Queenstown. This year, we distributed more than $2.6 million to 270 community organisations. Harder times prompted different community needs, which have culminated in a shift in emphasis this year, with more funding targeted to reach grass roots community organisations where trustees felt the needs were greatest. We were pleased to welcome two new trustees to our Auckland Community Trust, with the appointment of Paul Holmes and Frank Bunce. Both men bring to that Trust a strong social perspective. AN EVENING WITH SIR BOB In November last year, we hosted Sir Bob Geldof, an event designed to raise money for the Manukau Community Foundation. SKYCITY presents an evening with Bob Geldof was one of those money-can t-buy experiences that enabled our special guests to meet the man himself and to hear his views. We were delighted to be involved and very pleased too that the event raised $80,000 for the Foundation. ACTION PACKED YACHTING We were proud to be the official hotel for the inaugural Louis Vuitton Pacific Series, an exciting yachting regatta that took place in late January through to the middle of February. This by-invitation-only series saw some of the world s most famous sailing teams line up to compete on the Waitemata Harbour. The 10 team line-up was made up of BMW Oracle Racing (USA), Alinghi (Switzerland), Damiani Italia (Italy), Luna Rossa (Italy), Pataugas K-Challenge (France), TEAMORIGIN (Great Britain), China Team (China), Greek Challenge (Greece), Team Shosholoza (South Africa) and of course Emirates Team New Zealand. As the official hotel for the event, we hosted VIPs, media and the teams, and ran the SKYCITY Pacific Bar at the very heart of the Louis Vuitton Pacific Series Village, complete with fantastic live entertainment - including the legendary Hello Sailor. This wonderful series proved an absolute delight, with guests, staff, management, the public and Louis Vuitton themselves declaring the Series a success. The winners of course weren t just the teams, or even the public, but also the city and Auckland s tourism sector. OUR LAST STARLIGHT SYMPHONY In February, SKYCITY once again sponsored the SKYCITY Starlight Symphony, an opportunity for thousands of Aucklanders to come together and listen to guest performer Brooke Fraser. It was nice to end our association with this event on such a high note. DINING FOR A DIFFERENCE In April, the SKYCITY Convention Centre was the setting for SKYCITY Dining for a Difference, a black-tie fundraiser for the Leukaemia & Blood Foundation featuring iconic kiwi musician Dave Dobbyn and 12 world renowned chefs who had been encouraged to join New Zealand s own celebrity chef Peter Gordon to raise money for a cause that is close to Peter s heart. The 270 guests were treated to a stunning meal and the Foundation benefitted from all of the $160,000 raised. LOOKING AHEAD As a business, SKYCITY looks to align its sponsorship and community involvement with its objective to entertain people and to help everyone feel like a winner. This year once again, we were the venue and/or the supporter of some truly unforgettable events that not only quickened the pulse of those who attended but also raised funds for worthy organisations to carry on with great work. Looking ahead, we will of course look to host wonderful events that fit with what we re about and to offer people from all walks of life the chance to enjoy opportunities, such as player signings, that they would not normally have access to. Increasingly, we will look to do so at our own sites, giving more people in Auckland, Hamilton, Queenstown, Adelaide and Darwin more reasons than ever to come through our doors to be entertained. FROM THE STANDS TO THE STAGE Our active and varied sponsorship programme this year reinforced our energetic commitment to entertainment, ranging from our continued support for Auckland Rugby and the Vodafone Warriors through to becoming a Silver Sponsor for the New Zealand International Comedy Festival. SKYCITY ENTERTAINMENT GROUP LIMITED Shareholder Review 2009 / PAGE 31

35 COMMUNITY TRUSTS KIRSTY MANN (LEFT) AND DEBBIE TURNBULL FROM THE ORDER OF ST JOHN WAKATIPU WITH THE NEW EQUIPMENT - A SCOOP STRETCHER, A KENDRICK EXTRACTION DEVICE (KED), AN ENTONOX REGULATOR AND A SUCTION UNIT. ORDER OF ST JOHN WAKATIPU UPGRADES LOCAL AMBULANCE Days after being announced as recipients of a grant from the SKYCITY Queenstown Casino Community Trust, the Order of St John Wakatipu was putting the money to good use. The organisation was awarded the grant to help outfit an ambulance with new equipment for use in the Wakatipu region. Marty Black, Chairman of Order of St John Wakatipu, said he was thrilled to receive the grant which had already been invested in new equipment. It can cost up to $50,000 to fit out an ambulance so every bit helps. We really appreciate SKYCITY Queenstown Casino Community Trust s support and wish to thank them for giving our organisation a boost in funds, he said. The Order of St John is known throughout New Zealand for helping the sick, injured and suffering. The organisation has several branches, including the Wakatipu branch, with each area responsible for raising their own funds to buy new equipment and ambulances. The SKYCITY Queenstown Casino Community Trust was pleased to be able to support such an iconic organisation that provides an essential service to the Queenstown community and one which had such respect in the community for the work they do in the region. KIHIKIHI GETS ANNUAL BOOST FROM QUALIFIER EVENT For the past five years, the SKYCITY Hamilton Community Trust has supported both the Kihikihi Waikato Eventing club and the Kihikihi local community by getting behind the HSBC FEI World Cup Eventing qualifier tournament. This year, the Community Trust assisted by funding the marquee and equipment hire for the event totalling $5,000. This is an event that attracts visitors and competitors from all over the world and continues to grow bigger and bigger each year. Bruce Bason, President of Kihikihi Waikato Eventing said of the 2009 event, The day could not have gone any better, all reports that came back to us via FEI and event attendee s were nothing but positive. This would not have been possible without the support and assistance of our sponsors, one of which was SKYCITY Hamilton Community Trust. It was a fantastic way to start the World Cup Qualifiers and as we are a team of volunteers at Kihikihi Waikato Eventing we are very proud to have had such a fantastic result. The event itself is unique as it is not just New Zealand s only qualifier but the first of nine to be held around the world throughout year. Eighteen competitors from across Australia and New Zealand took part in the 3 day event. SECOND PLACE WINNER AND NEW ZEALAND COMPETITOR, HEELAN TOMLINS ON SUGOI AT THIS YEAR S HSBC FEI WORLD CUP EVENTING QUALIFIER TOURNAMENT HELD ANNUALLY IN KIHIKIHI. AUCKLAND STUDENTS PROUD OF THEIR ACHIEVEMENTS Nine tough and ready Henderson High students this year proved they could go the distance by completing a 10-day adventure taking in cycling, tramping and kayaking from Waitangi back to their Auckland school grounds. These challenging and rewarding journeys are arranged for students by the Adventure Specialties Trust, a group that runs a wide variety of outdoor education and youth development programmes throughout the Auckland region. Key factors in this holistic development are people taking responsibility for their actions, learning to be contributors both to their families and their community, feeling a sense of purpose in life and a healthy self-esteem. This has shown to assist students resist negative peer group influences. LONG TREK AS HENDERSON HIGH STUDENTS CELEBRATE THE COMPLETION OF THEIR VOYAGE FROM WAITANGI TO AUCKLAND. The SKYCITY Auckland Community Trust has in turn sponsored the Adventure Specialties Trust for over four years now so that students can continue to undertake these trips. This year s group of year 10 pupils tackled the challenges posed by the journey with enthusiasm and determination and other fellow students were on hand to welcome them back home. This particular trip has been organised annually for Henderson High students since A worthy tradition. PAGE 32