SKYCITY 2015 Annual Meeting 13 November 2015 Chief Executive Address Nigel Morrison
Key Highlights Of 30 June 2015 Result
FY15 Result Overview (1 of 3) Record Normalised Revenue up 8.7% (over $1.0bn for the first time) and solid earnings growth with Normalised NPAT up 8.8% to $134.1m Cash flows from operations increased to $368.0m, up $49.0m (15.3%) from $319.0m Strong 2H15 result with Normalised EBITDA up 9.2% to $150.5m and Normalised NPAT up 18.8% to $67.5m Continued strong growth in Auckland, with momentum Auckland continued to be the standout performer across the group, delivering record results, with Normalised Revenue up 13.0% (including Auckland IB revenues up 38.7% to $81.3m) and Normalised EBITDA up 13.7% to $247.8m from $217.9m A strong focus on cost management ensured solid EBITDA margins maintained, despite mix changes from strong growth in IB, local tables and F&B Auckland reaping the benefits from the capex program over the last 5 years (Horizon, Eight, Federal Street and our 6 new signature restaurants), and from the positive external influences which are supporting sustained growth (record tourism inflows, Auckland's events strategy, buoyant economy) 3
FY15 Result Overview (2 of 3) Continued strong growth in group-wide IB SKYCITY s International Business ( IB ) grew to another record high, with group turnover and Normalised Revenue up 42.6% to $9.3bn and $125.6m, respectively Five years ago (FY11), before Horizon was launched in Auckland, IB turnover was only $2.8bn and Normalised Revenue $37.3m. The CAGR over the 5 years has been ~27% Normalised IB EBITDA was $26.4m up 35.1%, with margins over 20%. Actual win rate of 1.36% for the period, was in line with the theoretical (1.35%). Over the last 5 years, the weighted average win rate has averaged 1.349%, in line with the theoretical Disappointing result for Adelaide Adelaide was significantly impacted for the first 7 months of FY15 by the very disruptive total refurbishment of the property that wasn t completed until the end of January 2015 Over the year, modest revenue growth was achieved with Normalised Revenue up 4.8% to A$174.1m. However, the challenges of the disruption, a lack of immediate revenue growth and unsatisfactory cost management, resulted in margin contraction delivering a poor EBITDA result for the full year, down 19.2% to A$27.3m 4
FY15 Result Overview (3 of 3) FY15 FY14 Movement $m $m $m % Normalised Revenue (incl Gaming GST) 1,007.7 927.3 80.4 8.7% Normalised EBITDA 304.9 287.6 17.3 6.0% Normalised NPAT 134.1 123.2 10.9 8.8% Normalised EPS 22.9 cps 21.3 cps 1.6 cps 7.5% FY15 FY14 Movement $m $m $m % Reported Revenue (incl Gaming GST) 1,009.1 902.5 106.6 11.8% Reported EBITDA 304.1 256.5 47.6 18.6% Reported NPAT 128.7 98.5 30.2 30.7% Reported EPS 22.0 cps 17.0 cps 5.0 cps 29.4% Final Dividend NZ$ cps 10.0 cps 10.0 cps - - Average NZD/AUD cross-rate during FY15 0.9301 and FY14 0.9049 Weighted average number of shares FY15 = 586,071,258 and FY14 = 579,706,028 5
TSR 1 year October 2014 to November 2015 AGM to AGM 30.0% 1 Year TSR (October 2014 to November 2015) 25.0% 20.0% 15.0% 10.0% 5.0% 25.6% 24.6% 17.8% 0.0% -5.0% 16-Oct-14: A$3.19 10-Nov-15: A$3.83 Dividends: paid A$0.16 16-Oct-14: $3.47 10-Nov-15: $4.13 Dividends: paid $0.20-0.1% SKC (A$) SKC (NZ$) NZX50 ASX200 6
FY15 Recognition and Awards SKYCITY Auckland: Australasia s Leading Casino Resort SKYCITY Grand Hotel: New Zealand s Leading Hotel Suite SKY Tower: NZ number 1 Tourist Attraction & Landmark SKYCITY Grand Hotel and SKYCITY Hotel: Trip Advisor Travellers' Choice Award & Certificates of Excellence SKYCITY Hamilton: Trip Advisor Certificate of Excellence Federal St Restaurants: Trip Advisor Certificate of Excellence East Day Spa: Oceania's Best Hotel SPA Depot: Metro Restaurant of the Year Awards Supreme Winner Gusto, The Grill, Fed Deli, The Sugar Club, Masu: Metro Restaurant of the Year Awards Top 50 SKYCITY Darwin: Best Entertainment Venue NT SKYCITY Darwin: Ministers Award for Responsible Service of Gaming SKYCITY Adelaide, Sean s Kitchen: Finalist for Australia s Best Restaurant and Bar Design Awards SKYCITY Adelaide, Sean s Kitchen: The City Awards, Adelaide s Best New Restaurant the Year 7
Trading Update Four Months 31 October 2015
Trading Update (1 of 4) (FY16 Revenue to 31 October) FY16 FY15 YTD YTD Movement $m $m $m % New Zealand Casinos Auckland 209.3 197.1 12.2 6.2% Hamilton 18.1 16.3 1.8 11.3% Queenstown / Other 10.7 4.6 6.1 132.6% Total New Zealand 238.1 218.0 20.1 9.2% Australian Casinos Adelaide (A$) 70.3 56.5 13.8 24.4% Darwin (A$) 52.0 50.3 1.6 3.3% Total Australia (A$) 122.3 106.8 15.4 14.4% Total Australia (NZ$) 135.1 118.0 17.0 14.4% Normalised Revenue 373.2 336.0 37.2 11.1% Reported Revenue 363.6 329.5 34.1 10.3% International Business turnover 4,520.3 2,999.2 1,521.1 50.7% International Business win rate (%) 1.14% 1.13% 0.0% 0.9% Revenue (including Gaming GST) is shown above to facilitate Australasian comparisons Normalised Revenue is adjusted for IB at theoretical win rate of 1.35%, Some numbers may not add because of rounding 9
Trading Update (2 of 4) (FY16 EBITDA to 31 October) FY16 FY15 YTD YTD Movement $m $m $m % New Zealand Casinos Auckland 89.6 78.9 10.7 13.6% Hamilton 7.8 6.1 1.7 27.9% Queenstown / Other 1.9 0.2 1.7 850.0% Total New Zealand 99.3 85.2 14.1 16.5% Australian Casinos Adelaide (A$) 14.7 8.3 6.4 77.2% Darwin (A$) 16.6 15.4 1.2 7.8% Total Australia (A$) 31.3 23.7 7.6 32.1% Total Australia (NZ$) 34.5 26.2 8.3 32.1% Corporate Costs (12.0) (10.3) (1.7) (16.5%) Normalised EBITDA 121.8 101.1 20.7 20.5% Reported EBITDA 107.2 94.1 13.1 13.9% Normalised EBITDA is adjusted for IB at theoretical win rate of 1.35% Some numbers may not add because of rounding 10
Trading Update (3 of 4) The strong momentum in 2H15 has continued through the first 4 months of the FY16 year (to 31 October 2015) Normalised Revenue up 11.1% to $373.2m and Normalised EBITDA up 20.5% to $121.8m Pleasingly, Normalised EBITDA margins of all businesses (including and excluding IB), have improved compared to the pcp, with good cost management and leverage from revenue growth SKYCITY s flagship property Auckland, continues to perform strongly, with Normalised Revenue up 6.2% to $209.3m, and Normalised EBITDA up 13.6% to $89.6m, maintaining the momentum of FY15, with growth across all business segments IB continues to deliver strong growth with group-wide turnover up 50.7% to $4.5bn, with a win-rate of 1.14% (comparable to the pcp of 1.13%, but below the theoretical). Adelaide IB turnover was up over 200% for the period, with Darwin up 51.8% and New Zealand up 15.0%, with most of the growth in Queenstown. Auckland turnover was flat with $2.0bn for the first 4 months Hamilton and Queenstown continue to deliver significantly improved revenue and earnings, with Queenstown particularly buoyed by significant IB revenue growth 11
Trading Update (4 of 4) Significant progress has been made on addressing the cost structure of the Adelaide operations. While local gaming continues to be soft (down ~4%), in a challenging local economy, the success of our two new signature restaurants, Sean's Kitchen and Madame Hanoi's, has more than doubled F&B revenue The Adelaide Casino delivered Normalised Revenue up 24.4% to A$70.3m and Normalised EBITDA up 77.2% to A$14.7m, with an overall margin of ~21%, for the first 4 months. This pleasing result was significantly boosted by the increase in IB business to Adelaide The refurbished property, with its improved offerings and recent changes to IB regulations (licensing processes now consistent with rest of Australia) has delivered significant IB growth. With certainty over IB tax rates, for the next 20 years and with commissions deductible, our effective tax rate on IB revenue is very competitive During the first 4 months Adelaide's IB turnover increased to A$1.3bn (compared to A$1.5bn for the full year in FY15). We continue to believe there is significant opportunity to grow the IB business in Adelaide, with the right product and offering (hotel/villas, Cantonese/Japanese restaurants and more Horizon gaming salons) Darwin continues to experience challenging trading conditions, underpinned by soft hotel occupancy and F&B revenue. IB Normalised Revenue growth of 51.8% again contributed to the overall property EBITDA performance. As a result overall property revenue increased to A$52.0m up 3.3% and EBITDA to A$16.6m up 7.8% 12
Update on Other Development Highlights: NZICC
NZICC Update SKYCITY announced on 27 October 2015 that Fletcher Construction had been awarded the contract for the NZICC and Hobson St Hotel construction at $477m. The agreed commercial terms, including the proportion of fixed or capped construction cost, at ~90%, provides significant risk protection for SKYCITY SKYCITY will have invested ~$700m in this precinct on completion, including land, the NZICC development, the Hobson St Hotel development, the connecting air bridges, the retail/restaurant laneway development between Nelson and Hobson Streets and the additional car parks under the NZICC, increasing the total car park to 1,327 spaces, which, in addition to SKYCITY s existing car park of 2,000 spaces, will increase SKYCITYs car park spaces to 3,327. This significant investment in vitally needed NZ tourism infrastructure will deliver 1,000 construction jobs and 1,140 hospitality jobs once completed The construction contracts for the NZICC and Hobson St Hotel, were signed on Wednesday 11 November 2015, which has, accordingly, activated the gaming concessions negotiated under the NZICC Agreement SKYCITY expects to commence construction of the NZICC by the end of 2015 and is targeting completion of the NZICC and Hobson St Hotel in Q1 2019 with an official opening by Q2 2019 As shareholders would be aware the concessions include an extension of the casino licence to 2048, fixing gaming tax rates at current levels for the next 7 years, an expansion of gaming product (tables, MTGMs, and gaming machines) to meet current and future gaming demand, TITO throughout the property and flexibility to offer casino gaming in other facilities along Federal Street including planned new Grand Horizon Salons on Level 7 of the Grand Hotel 14
NZICC Project Master Plan, Looking East 15
NZICC Hobson St View (including laneway) 16
NZICC Laneway View From Nelson St 17
Hobson St Hotel Hobson St View 18
Update on Other Development Highlights: Auckland Atrium Development
Auckland Atrium Development In August, SKYCITY announced plans to further enhance our Auckland property with a major upgrade of its main atrium We have engaged internationally renowned architects YWS to design and deliver a world-class entry experience SKYCITY plans to spend ~$24m on the improvements, with the programme split into two stages to be completed by mid 2016 Stage 1: to be completed by December 2015 New main escalator providing more direct access to the main gaming floor. A second new escalator will link levels two and three New wall claddings and light features New entry experience to the main gaming floor Stage 2: to be completed by mid-2016 Extension of the main gaming floor through a partial infill of the atrium space Completion of entrance, foyer, flooring and wall treatments Subsequently, development of a new exciting world-class Cantonese restaurant New bathrooms on the ground floor Andy s gourmet burger bar, adding to the choice of quality F&B offerings for customers 20
Auckland Atrium Development Main Foyer 21
Auckland Atrium Development Level 2 Infill 22
Auckland Atrium Development New Entrance to Main Gaming Floor 23
Update on Other Development Highlights: Adelaide Expansion
Adelaide Expansion (1 of 2) SKYCITY is well advanced in finalising the design of the expansion of the Adelaide Casino. The exterior of the development is well advanced and final submissions have been made to the Development Assessment Commissioner (DAC). The interior layout, design and presentation will continued to be finessed over the next 6 months SKYCITY s latest design has changed little from what was originally envisaged and includes: An ~80 room all suite boutique, world-class hotel of 9 stories, with a roof-top bar Horizon villas and suites for SKYCITY s growing International Business An additional two signature restaurants Cantonese and Japanese An expanded gaming podium, allowing for the staged rollout of the additional gaming product SKYCITY currently expects the future construction and fit out costs of the expansion to be in the vicinity of A$250m-$270m. Additional costs will include: Finalisation of the lease terms of the site (to accommodate the extension) with the SA Government. SKYCITY estimates this to cost ~A$10-12m Cost of additional gaming equipment, EGM licences, and IT and systems estimated at A$30-$35m 25
Adelaide Expansion (2 of 2) The final timing to commence works, is dependent on the finalisation of the site lease with the SA Government and coordination with the Government s plans for the broader development of the Riverbank precinct, including the 1,500-1,900 space car park, of which SKYCITY will lease 750 It is hoped that ground works will begin in the first-half of next calendar year Under the agreement with the SA Government, SKYCITY is required to complete its expansion by 30 June 2019, unless an extension is otherwise agreed between the parties 26
Adelaide Expansion At Night 27
Adelaide Expansion Views Across Festival Plaza 28
Adelaide Expansion F&B / Plaza Activation 29
Adelaide Expansion King Suite 30
Update on Other Highlights: Darwin Tax Rate Review
Darwin Tax Rate Review The Northern Territory Government completed its gaming tax review for SKYCITY Darwin (as required under the Casino Operator s Agreement) in July 2015 The gaming tax review followed the introduction of a new Community Benefit Levy ( CBL ) for casinos in the Northern Territory of 10% of the gross profits of gaming machines. The CBL applies from 1 July 2015 The results of the review effectively eliminated any significant additional cost to the business as a result of the CBL. SKYCITY estimates that the net impact of the CBL after the offset of the lower gaming tax rates negotiated, is an increase in operating costs for SKYCITY Darwin of no more than $1.0m per annum The new agreed lower tax rates will apply for the next ten years, providing SKYCITY with certainty as to gaming tax rates through until 30 June 2025 The Northern Territory Government also confirmed that, during the ten year period through to 2025, any changes in the CBL rate, will result in an equal offsetting adjustment to the gaming tax rate for gaming machines, and that SKYCITY will be entitled to offset any licence or regulatory fee introduced against gaming tax otherwise payable, further extending tax rate certainty 32
Funding Update
Funding Update SKYCITY is well placed to fund the outstanding capital expenditure of the NZICC and Hobson St Hotel developments, forecast at ~$580m, from future operating cash flows and existing debt facilities Following the recent $125m NZ bond issue, SKYCITY now has over $300m of committed undrawn bank facilities which together with cash flows over the next 3 years, provides ample headroom to fund the outstanding capital expenditure on the NZICC and Hobson St Hotel precinct developments As previously announced, as part of its longer-term funding plan, SKYCITY continues to explore propertyrelated funding options, including the potential sale of the Federal St car park and securing external investors to fund and ultimately own the Hobson St Hotel development JLL have been appointed to secure external investors for the Hobson St Hotel Information Memorandum due to be released in November Once the Adelaide expansion project (currently estimated at ~A$300m) is finalised SKYCITY will provide an update on its longer-term funding plans 34
Conclusions and Outlook
Conclusions and Outlook (1 of 2) The strong momentum from 2H15 continued through the first 4 months of FY16, with good revenue and EBITDA growth and further margin improvement Management s focus for the remainder of FY16 is to: Continue to optimise the operating performance of all businesses Continue to drive improved turnaround performance of the Adelaide Casino Commence construction on the NZICC development by Christmas Successfully activate the NZICC gaming concessions in Auckland in November Continue to deliver growth in IB with the opening of the Grand Horizon Salons on Level 7 of the Grand Hotel in Q4 FY16 Finalise plans and capex timing for the Adelaide expansion Conclude external investment to fund the Hobson St Hotel Finalise the group funding plan through to FY20 providing for completion of the major projects 36
Conclusions and Outlook (2 of 2) Based on current trading performance to 31 October 2015, management expects SKYCITY to deliver a pleasing first-half result for FY16 In summary, SKYCITY is in great shape: We are generating record revenue, experiencing strong growth and improving EBITDA margins We have $300m of undrawn committed bank facilities The licences of our Auckland and Adelaide properties have been extended to 2048 and 2035 respectively Our gaming tax rates have been locked in, in Auckland, Adelaide and Darwin for 7, 20 and 10 years respectively The concessions and additional gaming product negotiated with the NZ and SA Government s position SKYCITY for growth in these major markets for years to come The certainty these provide, allow us to invest with confidence, give back to our communities, and enable us to continue as an employer of choice We look forward to updating shareholders further at our FY16 interim result on 11 February 2016 37
Disclaimer All information included in this presentation is provided as at 13 November 2015 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 For more information in connection with this presentation, please contact Ben Kay, Investor Relations & Corporate Development Manager Phone: + 64 9 363 6067 Email: ben.kay@skycity.co.nz 38