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| Sky City Limited |
| 1998 Annual Report |
Executive Summary
Company Listing
Sky City Limited is a New Zealand-registered public company listed on the New Zealand Stock Exchange (NZSE). Sky City's NZSE reference is SKC.
Shares on Issue
As at 30 June 1998, 98.1 million shares were on issue. Since that date the company has continued its share buyback programme (refer below). As at 31 October 1998, 96.3 million shares were on issue.
Share Buyback
The share buyback programme was announced on 4 May 1998. The programme targets the purchase of up to 7.5 million shares, during pre-determined buying periods, by or before 4 May 1999.
Financial Performance
Sky City's financial performance compares favourably with listed casino stocks in Australasia. Sky City's 1998 EBITDA ratio of 42% is significantly higher than the listed Australian casino companies which are in the 20%-30% range.
Over 80% of Sky City's revenue is produced by the gaming operations with the balance provided from the Sky City Hotel, Sky City's restaurants and bars, Sky Tower and the Sky City carpark.
Net tax-paid surplus (before non-recurring items) was $32.1 million for the year ended 30 June 1998. After non-recurring items (full write-off of both pre-opening expenses and the management contract termination fee paid to Harrah's) of $29.6 million (after tax impact) the 1998 Net Surplus was $2.5 million.
Dividends
The company currently has a policy of paying out 90% of tax-paid earnings (before non-recurring items) as dividends. Dividends paid in respect of the 1998 financial year, totalling 29 cents per share, were fully-imputed. Full imputation of dividends is anticipated to continue into the future.
Regulations
Casino licencing in New Zealand is governed by the Casino Control Act 1990, which is administered by the Casino Control Authority (CCA).
Under the Casino Control Act 1990, two licences are required to operate a casino in New Zealand. A site-specific casino premises licence is required. The licensed casino property must be managed by a licensed operator.
Sky City has a casino premises licence for its Auckland operation and holds an operator's licence which allows it to operate a casino anywhere in New Zealand. Sky City Auckland Limited (a fully-owned subsidiary of Sky City Limited) holds the initial North Island casino premises licence. This licence was issued in January 1994 and runs for an initial term of 25 years from the date of opening of the casino (February 1996). The holder of the casino premises licence may apply for a 15 year renewal. There is no limitation on the number of renewals.
Sky City's casino premises licence provides an exclusivity period of five years from date of opening within a 100 kilometre radius of the Auckland casino. This exclusivity period therefore runs to February 2001.
Sky City Casino Management Limited (a fully-owned subsidiary of Sky City Limited) holds a casino operator's licence. No licence term is nominated under the Casino Control Act.
Sky City Casino Management Limited took over the operations of the Sky City Auckland complex on 1 July 1998, following termination of the Harrah's management contract on 30 June 1998. From 1 July 1998 the Auckland casino is Sky City owned and operated.
Sky City is a joint venture partner with Skyline Enterprises of Queenstown (Sky City 60%; Skyline 40%) in a casino premises licence application for Queenstown. Otago Casinos Limited has also applied for a Queenstown casino licence. The Sky City/Skyline application has been heard by the CCA; the Otago Casinos application is currently being heard. A decision in Queenstown is anticipated before Christmas 1998.
If the Sky City/Skyline application is granted, Sky City Casino Management Limited will be the operator of the Queenstown casino.
Share Registry
Sky City's share register is managed by Corporate Registry Services of Auckland (for details refer Directory).
Non-Standard Constitution
Sky City Limited has a Non-Standard (NS) listing on the New Zealand Stock Exchange. There are certain restrictions and approvals imposed on the ownership of Sky City shares by the Casino Control Act and Sky City's Constitution refers to certain actions which the company might be required to take (suspension of voting rights and dividend entitlements, power to sell shares) where a purchase of shares does not comply with the requirements of the Act and that exposed the casino premises licence to risk of suspension or cancellation.
Financial History to 30th June 1998
| Periods ending 30 June | 1998 | 1997 | 1996 (Note 1) |
| Revenue | |||
| Total Revenue (excl complimentaries) | $239.6m | $227.8m | $82.7m |
| Increase over previous period | 5.2% | n/a | n/a |
| Operational Productivity (Note 2) | |||
| Gross Margin % | 63% | 58% | 58% |
| EBITDA % | 42% | 39% | 38% |
| Overhead Costs % | 23% | 23% | 30% |
| Net Surplus (Net Profit) | |||
| Net Surplus (after tax, before non-recurring items) | $32.1m | $36.1m | $15.5m |
| Non-Recurring Items (Note 3) | $29.6m | n/a | n/a |
| Net Surplus (after tax, after non-recurring items) | $2.5m | $36.1m | $15.5m |
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Earnings per Share (EPS) and Dividends |
|||
| EPS (before non-recurring items) | 32.2c | 36.1c | 15.5c |
| Dividend Payout as a % of NSAT (before non-recurrings) | 90% | 90% | 100% |
| Dividends Declared (cents per share) (Note 4) | 29.0c | 32.5c | 15.5c |
Notes
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