$107 Million End-Of-Year Profit For Skycity Ent.

$107 Million End-Of-Year Profit For Skycity Entertainment Group

SKYCITY Entertainment Group Limited today posted another impressive operating result, with an after tax surplus of NZ$107.2 million for the year ended 30 June 2003. The result is a 26% increase over the previous financial year (FY02: $85.1m before non-recurring item).

A final dividend of 26 cents per share (cps) has been declared, bringing total shareholder dividends for the year to 67cps (including a special dividend of 20cps paid in November 2002). The final dividend payment date is 3 October, with the entitlement date being 19 September. One of the NZX’s best performing stocks, SKYCITY has paid out a total of NZ$460 million in dividends to shareholders since it commenced operations in February 1996.

“This is an extremely solid result and particularly pleasing as it provides further indication of SKYCITY’s strong position in the entertainment market and an assurance of the business’s resilience in times of external uncertainty,” said Managing Director Evan Davies, referring in part to the SARS and Iraq war concerns that impacted many New Zealand and Australian tourism and leisure businesses during FY03. “Leading this strong performance were a 9% increase in group revenues to NZ$556m and a 14% increase in operating earnings (EBITDA*) over the previous financial year.”

“Key drivers of SKYCITY’s strong FY03 performance were revenue increases from our SKYCITY Auckland, SKYCITY Adelaide and SKYCITY Queenstown operations. The opening of our Hamilton business in September 2002 added a new revenue stream and saw a solid first “year” (9.3 months) contribution from that property to the Group’s overall result,” said Mr Davies.

SKYCITY Entertainment Group is the majority shareholder in New Zealand-listed cinema business SKYCITY Leisure Limited and cinema revenues from that operation were up 5%, with the company recently reporting its first full year surplus since 1999.

Mr Davies pointed to SKYCITY’s track record of increasing profits, consistent growth, a strong balance sheet, and enhanced shareholder value as indicators of the company’s sound financial and operational position.

“We have achieved consistent growth in earnings since opening. The company’s balance sheet is strong and we are committed to ongoing profitability and creating shareholder value. We’ve proven this through six consecutive years of profit increase and an investment and reinvestment programme that continues to deliver,” he said.

Mr Davies added that SKYCITY’s recent branding changes contributed to the company’s strength.

Flagship property, SKYCITY Auckland, recorded another strong performance with consistent revenue growth across all business sectors. Total revenues were up 8% (+$27.2m). Gaming revenues grew 8%, with table games recording 7% growth and gaming machines up 8%. 1800 jackpots of more than $10,000 were won (13 over $100,000), 124 cars were won and the Sky High Jackpot (minimum payout $250,000) was won four times – the largest payout being $1.25m.

Food and beverage revenue was up 10% at $30m. On-site at SKYCITY Auckland are seven restaurants and five bars, with a new bar being added as part of the level 3 gaming expansion. Off-site, SKYCITY’s out-catering operations (SKYCITY Cuisine and Events and SKYCITY Catering) supported high-profile events including the Kawau Island Millennium Cup dinner, corporate catering for the Alinghi and Oracle America’s Cup syndicates, Tourism Auckland’s TRENZ welcome cocktail function and the TRENZ farewell gala dinner.

Sky Tower revenue was up 7% at $7.6m. A refurbished entry/exit/retail experience opened August 2003 and Vertigo, Sky Jump and the new Eye-in-the-Sky observation technology combined to enhance the appeal of this popular tourist attraction, which has been named a finalist in the ‘Visitor Attractions’ category of this year’s New Zealand Tourism Awards. SKYCITY Theatre recorded 123,000 theatre visits during FY03, with the Auckland Film Festival and Rocky Horror Picture Show contributing more than 50,000 visitors. New Zealand film premieres hosted at the theatre included Men in Black 2, Lilo and Stitch, Goldmember and the world premiere of Whale Rider.

SKYCITY Auckland’s hotel and conference revenue increased 7% (to $20m) despite the closure of its conference facilities in April to facilitate the main gaming floor expansion. SKYCITY’s new convention and exhibition centre is currently under construction and is scheduled to open in April 2004. Stage two of the refurbishment of the existing hotel was completed during the year to favourable response from the corporate sector. The final stage will be completed during FY04 and, with the opening in April 2005 of a new 320 room Qualmark-rated 5 star hotel (above the new convention centre) - the ‘SKYCITY Grand’ – SKYCITY’s Auckland hotel room total will nearly double, to 664 rooms.

SKYCITY’s second-largest operation, SKYCITY Adelaide also recorded a positive FY03 result. Revenues were up 9% (to A$103m), with gaming revenue up 10% (to A$92m) due to a range of product initiatives and marketing promotions. Revenue growth from tables lifted 10% with gaming machine revenues up 9%. Food and beverage revenues at SKYCITY Adelaide were also up, by 5% (at A$13.2m).

SKYCITY Adelaide continues to build its reputation as South Australia’s premiere gaming and entertainment destination and hosted standout performances from Jimmy Barnes, Diesel and Marcia Hines during the year.

SKYCITY’s third New Zealand property was successfully opened in September 2002, on time and on budget. SKYCITY Hamilton has achieved a highly favourable response from customers and has quickly become an established gaming and entertainment venue for the Hamilton/Waikato region. The Hamilton business had a strong six-week period post opening with a more settled visitation pattern appearing from November/December. Revenues for the nine-month period (41 weeks) were $20.4m.

Highlights since its opening include the pay-out of 52 cars won, expansion of gaming facilities to offer 23 tables and 339 machines and the addition of a VIP gaming room (4 tables, 6 machines) in June 2003. In addition, customer demand saw trading hours recently extended (August 2003) and the announcement that conference facilities will be added, with an anticipated opening date of April 2004.

SKYCITY Queenstown Casino recorded a significant improvement in profitability during FY03, with revenues up 15% to $6.0m, EBITDA up to $1.2m (FY02: $0.3m) and EBIT close to breakeven at -$0.3m (FY02: -$1.3m). The property’s new name also takes effect from today.

SKYCITY Leisure Limited recorded a 27% improvement (at $3.3m) in net surplus after tax (FY02: $2.6m) and cinema revenues lifted 5% to $31.4m. Cinema gross margin was up 10% at $8.6m (+$810k) and EBITDA was up 17% at $12.2m. New food operations have been secured for the Planet Hollywood and Theatro spaces at the SKYCITY Metro complex in Auckland’s Queen Street.

Highlights during FY03 included the re-branding of SKYCITY Leisure’s cinema joint-venture - Village SKYCITY Cinemas – and the opening, by Prime Minister Helen Clark, of the new Village SKYCITY St Lukes 8-screen multiplex, in May 2003. A new Village SKYCITY 8-screen cinema complex is due to open in Tauranga mid 2004.

For on-line wagering company Canbet Limited, (SKYCITY’s shareholding 32.6%) turnover was up 33% at A$547m (FY02: A$410m) and profit lifted to A$499k (FY02: A$304k). The business was successfully relocated to the UK, from Canberra, commencing operations there in April 2003.

SKYCITY’s capital management programme continued throughout FY03. A key component was an on-market share buyback of $40-$60 million that commenced 3 March 2003. 1.56 million shares were purchased at a total cost of $13.0 million (average price $8.17 per share calculated on an ex-dividend basis). The second buyback period commences 27 August 2003 and runs until 30 November 2003.

Mr Davies acknowledged that tighter regulatory controls were a consideration for business planning in both New Zealand and South Australia, but confirmed the company is well placed to face any changes.

“Tighter restrictions in the areas of environmental tobacco smoke and harm minimisation initiatives have been expected for some time. SKYCITY has been actively involved in the relevant public processes and begun preparing for change,” he said. “We are confident of our business’s strong position. Our host responsibility initiatives are industry-leading and the introduction of clear guidelines, in New Zealand and South Australia, will provide the industry with long overdue certainty,” he said. “As far as smoke-free restrictions go, these have been increasingly inevitable for some time. Like any hospitality business, preparing customers for change and making any necessary physical changes to our environments will be a key focus between the time any legislation is passed and the time it becomes effective.”

Mr Davies said he is confident that the SKYCITY business has a positive path ahead.

“The gaming and entertainment markets in New Zealand are far from mature and significant opportunities exist for further development of the experiences we offer. While the South Australian market is more developed, many opportunities for growth remain. We are committed to continued community and economic participation at all levels. SKYCITY is a business which will continue to lead by example within the entertainment industry,” he said.

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