| SKYCITY Entertainment Group 2008 Annual Result Monday 25 August 2008. |
| 2008 Full Year Result Presentation |
| Media Release |
| NZX Announcement |
| Financial Statements |
| Result Briefing Webcast |
FLYR: SKC: Summary full year to 30/06/08 $49.9m ($98.4m) -49.3% 10.5 cps
SUMMARY OF PRELIMINARY FULL YEAR ANNOUNCEMENT
Name of Listed Issuer: SKYCITY Entertainment Group Limited
For full-year ended: 30 June 2008
CONSOLIDATED OPERATING STATEMENT
Current Full Year NZ$'000; Up/Down %; Previous Corresponding Full Year
NZ$'000
Total Revenue:
$818,847; up 0.3%; $816,097
OPERATING SURPLUS BEFORE UNUSUAL ITEMS AND TAX:
$145,782; up 10.8%; $131,555
Unusual items for separate disclosure:
$60,000 Cinemas write-down; $0
OPERATING SURPLUS BEFORE TAX:
$85,782; down 34.8%; $131,555
Less tax on operating profit:
$36,534; up 10.3%; $33,125
OPERATING SURPLUS AFTER TAX ATTRIBUTABLE TO MEMBERS OF LISTED ISSUER:
$49,856; down 49.3%; $98,402
Extraordinary items after tax attributable to Members of the Listed Issuer:
$0; nil%; $0
OPERATING SURPLUS AND EXTRAORDINARY ITEMS AFTER TAX ATTRIBUTABLE TO MEMBERS
OF THE LISTED ISSUER:
$49,856; down 49.3%; $98,402
Earnings per share:
10.8 cps; 22.3 cps
Final distribution:
10.5 cps
Record Date: 12 September 2008. Date Payable: 10 October 2008
Attachments: Appendix 1, 7 and related documents
SKYCITY ENTERTAINMENT GROUP LIMITED
Chief Executive Officer's Review
Year Ended 30 June 2008
The full version of the Chief Executive Officer's presentation of the SKYCITY
result for
2008 is available on the company's website under the Investor Centre at
www.skycityentertainment.co.nz. The full presentation includes comprehensive
information some of which is presented in graphical format which is not able
to be
reproduced for this extract. SKYCITY recommends that the full presentation
be referred
to as it contains useful explanatory information.
FY08 Group Result
- Reported Net Profit after Tax at $49.9m (after non recurring items
including the Cinemas write down of $58.4m). FY07 NPAT $98.4m.
- NPAT adjusted for non-recurring items (including Cinemas write down) at
$111.9m, up 19% over FY07 ($93.8m)
- Earnings per share adjusted for non-recurring items at 24.2cps, up 14% over
FY07 (21.2cps)
- NPAT adjusted for non-recurring items and international VIP commission
business at theoretical at $102.0m, up 7% over FY07 ($95.4m)
- Normalised earnings per share at 21.9cps, up 1.4% over FY07 (21.6cps)
- Group revenue at $818.8m, up 1.7% over FY07 revenues (adjusted for
non-recurring items) of $805.1m
- EBITDA (before Cinemas and adjusted for non-recurring items) at $306.4m, up
7.7% over FY07 at $284.5m
- EBIT adjusted for non-recurring items up 8.0% at $238.5m (FY07: $221.0m)
- Underlying cash flow of $199.1m, up 15% on FY07 ($173.0m)
- Key financial metrics improved: operating cash flow increased from $268m to
$286m, net debt to EBITDA reduced from 3.4x to 3.3x and interest cover
increased from 3.3x to 3.8x
- Results in line with February guidance of $108m-$110m
- Retirement of $92m of debt ($93.1m in FY07) strengthened the company's
balance sheet, further reinforced by Investment Grade BBB- rating from
Standard and Poor's
- Total FY08 distribution 21.5cps (FY07 21.0cps). Final distribution of
10.5cps to be paid 10 October
Management and Operational Highlights
- Permanent CEO appointed in March 2008
- New management appointments have significantly enhanced operational
expertise
- Reorganisation of company to drive divisional profit focus and reduce
corporate overhead
- Auckland casino refurbishment completed March 2008
- Strong result from International VIP Commission Business in FY09
Outlook
- Business plans budget for growth in FY09
- Satisfactory trading in FY09 year to date (25 August 2008)
- Strong control to be maintained over capital expenditure
- Further debt retirement anticipated in FY09
Distribution to Shareholders
- Distribution payout ratio of 90% reaffirmed
- Total distribution 21.5cps for FY08 (21.0cps FY07)
- Final distribution of 10.5 cents per share (12.0cps FY07)
- Entitlement/record date 12 September. Bonus share Issue/payment date 10
October
- Distribution by way of non-taxable bonus shares with fully-imputed cash
buyback alternative
- Strike price for the bonus share issue for the FY08 final distribution will
be the weighted average SKC price on the NZSX during the 5 day period 15-19
September
- The number of bonus shares to be issued in respect of the FY08 final
distribution will be confirmed to shareholders on 24 September. Shareholder
elections (for the cash/buyback option) due to share registry (Computershare)
by 8 October
Funding Structure
- Very strong liquidity position
- Cash and undrawn facilities of ~$400m
- Debt repayment of $92m in FY08 (FY07 $93m)
- Debt maturity profile: FY10 $124m, FY11 $318m, FY12 $405m, FY15 $90m, FY17
$35m, FY20 $22m
- No maturity events until May 2010. Capital Notes mature in May 2010, but
the securities offer good rollover flexibility with limited refinancing risk
- Significant headroom within existing covenants
- Reflected in Standard and Poor's Investment Grade Rating (BBB-) with Stable
Outlook
FY09 Capex
Maintenance Capex
- FY09 maintenance capex of approximately ~$65m will include significant
reinvestment in core business operations
- Primary use of maintenance capex will be on gaming machine product,
technology and systems
- FY09 depreciation estimated at ~$80m
Project Capex
- Completion of Darwin Stage 1 expansion (FY09 spend A$18m)
- Completion of Manukau Cinema complex in Auckland (FY09 spend $8m)
- No significant capex on Little Mindil resort (Darwin) during FY09
- No plans to proceed with Adelaide carpark
Strategic Priorities for FY09
- The core objective for 2009 is to maximise the potential of the company's
existing assets
- SKYCITY's new management team focused on delivering revenue growth, driving
operational efficiencies and maximising EBITDA, while tightly controlling
capex
- To deliver an improved customer experience across all properties, focusing
on customer service, effective marketing and enhanced entertainment
experiences
- To significantly enhance IT and systems capabilities and reinvest in new
gaming technology and core operating systems, positioning the business for
growth
- To grow and diversify International VIP commission-based play business
- To improve employee engagement and employee advocacy across all business
operations
FY09 Outlook
- Results and progress achieved in FY08 provide a solid platform for FY09
- Business plans budget for growth in FY09
- SKYCITY's most recent revenue indicators suggest it is trading
satisfactorily in the current economic environment
- The new management team is focused on delivering revenue growth, increasing
operating efficiency and maximising EBITDA, whilst retaining tight control
over capex
- Further debt reduction anticipated in FY09
BUSINESS UNIT RESULTS
Auckland
- Sound result in challenging economic environment
- Revenue up 1.0% at $402.3m (+$3.8m)
- EBITDA down 0.1% at $208.3m (-$0.3m)
- EBIT down 0.3% at $174.4m (-$0.5m)
- New Auckland management team has strong focus on core business with
strategic concentration on product, mix, pricing, presentation, customer
service, marketing and loyalty
- Main gaming floor renovation completed March 2008
- renovation disruption impacted FY08 result
- improvements in casino revenues are evident
- positive feedback from customers and staff
- refurbishment completion provides platform for FY09
- New gaming product and relayout of main floor tables and machines will
further enhance customer experience during FY09
- Recent highlights indicate management strategies are gaining traction:
- 08/08/08 was biggest gaming day in Auckland in over four years
- $1m SKYCITY Auckland Festival of Poker tournament announced for
October
- SKYCITY Grand Hotel topped Auckland's occupancy levels in August
- record Auckland convention revenues in August
Adelaide
- Solid result given impact from smoking ban (from 1 November 2007)
- revenue impact less significant than anticipated
- minimal impact on table gaming revenues given partial smoking bans already
applied to tables
- Positive cost reductions achieved, holding EBITDA steady with FY07
- Revenue down 4.4% at A$118.2m (-A$5.5m)
- EBITDA down 1.0% at A$20.7m (-A$0.2m)
- EBIT down 3.6% at A$10.6m (-A$0.4m)
- Maintenance capex will be maintained to underpin revenue growth
- No plans to proceed with Adelaide carpark (costs relating to the project
have been written off)
Darwin
- Solid growth achieved in Darwin
- Regional economic momentum continues
- Revenue up 7.7% at A$100.8m (+A$7.2m)
- EBITDA up 13.9% at A$40.1m (+A$4.9m)
- EBIT up 14.7% at A$32.7m (+A$4.2m)
Stage 1 expansion (A$30m) commenced October 2007. Scheduled for opening by
March 2009. Includes increased gaming floor area (~20%) and new/upgraded
gaming, bars, restaurants and service facilities Darwin's proximity to the
Asian market is key to the International VIP Commission Business development
strategy
The Little Mindil site and associated resort development will support the
International VIP Commission Business growth strategy but no significant
capex will be incurred on this project in FY09
International VIP Commission Business
- Strong result from International VIP Commission Business (turnover $1.4bn)
- Revenue up 4.6% at $34.0m (+$1.5m)
- EBITDA up 267% at $17.2m (+$10.6m)
- Revenue assisted by favourable actual to theoretical win rate. FY08 win
rate of 2.63% vs theoretical win rate of 1.33% (FY07 actual win rate 1.24%)
- Core management focus for International Business is to increase
international VIP gaming turnover, to build sustainable revenue, and reduce
volatility
Hamilton
- Steady performance in FY08
- Revenue down marginally at $39.0m (-$0.7m)
- EBITDA down 5.1% at $18.5m (-$1.0m)
- EBIT down 4.8% at $14.0m (-$0.7m)
- New management team with significant additional casino and gaming
experience
- Current focus on increased utilisation/performance of the existing assets
and on the core gaming customers
- New machine introductions during FY09 expected to refresh customer interest
- New and upgraded facilities in place (including new bars and restaurants)
Christchurch
- Solid performance from Christchurch Casino in FY08. Earnings up marginally
at $5.7m, from $5.6m in FY07
- New management appointed
- Phased refurbishment initiated to renew/refresh the overall property,
self-funded from cash flows
- Crowne Plaza Hotel interest sold and Intercontinental Hotel Group's shares
in the casino acquired. As a result SKYCITY and Skyline have each increased
their ownership interest in Christchurch Casino by 5.2%, from 40.5% to 45.7%
Queenstown
- Increased revenues for FY08 lifted operating earnings
- Revenue up 9.4% at $7.0m (+$0.6m)
- EBITDA at $0.5m (+$0.2m)
- New management appointed
- Good progress at Queenstown during FY08, although result not material to
the overall Group result
- New machine introductions during FY09 expected to refresh customer interest
Cinemas
- Cinema's result for FY08 very disappointing
- New management team appointed and focused on growing core revenues
- Revenue (adjusted for non-recurring items) down 2.1% at $66.2m (-$1.4m)
- EBITDA (adjusted for non-recurring items) down significantly from $8.7m in
FY07 to $4.8m in FY08
- Cinemas' performance suffered as a consequence of unusually good weather
during FY08 summer and management distraction from the sale process
- Management team focus on greater customer value, increased facility
utilisation, and greater diversity of product aligned to demographics
- 55% market share in Auckland and 38% across all of New Zealand
- New cinema complexes improve SKYCITY's penetration in the important
Auckland market: Albany (10 screens) opened April 2008, and Manukau (10
screens) opens September 2008
Summary Profit and Loss for FY08 and Balance Sheet (and Notes) as at 30 June
2008
- A summary of revenue and earnings performance by site (FY08 and FY07) is
attached to this presentation
- Balance sheet positions as at 30 June 2007 and 2008, and explanatory notes,
are also attached.
Presentation Format
As referred earlier, the full CEO FY08 result presentation is available from
the company's website. Information presented in graphical format is
reproduced in this narrative format (as required by NZX) but a full and
detailed explanation of the result is set out in the website presentation
version.
Nigel Morrison
Chief Executive Officer
25 August 2008
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