Sky City Limited

1998 Annual Report

1998 in Summary

1998 Financial Performance

Earnings

• After-tax profit of $32.1 million before non-recurring items, $2.5 million after non-recurring items.

• Earnings per share (before non-recurring items) of 32.2 cents.

Revenues

• Total sales revenue (net of GST and complimentaries) increased 5% to $239 million.

• Gaming revenue flat with 1997 at $192 million.

• Within the non-gaming sector, carpark revenues increased, food and beverage revenues remained flat with 1997 and hotel decreased as a result of the Asian economic downturn.

• Sky Tower contributed new revenue of $13.5 million in 1998.

• Gaming contributed 80% of total revenue, with an upward trend in slot play offset by lower table win.

• 12,000 visitors per day to the casino produced average daily revenue of $595,000 (incl GST).

• Slot win per day increased 13% to $314 per machine.

• Table win per day decreased 19% to $2,190 per table.

• Sky City Hotel occupancy was 71% at $144 average daily room rate.

Gross Margin and Productivity

• Gross margin increased 11% from $139 million to $155 million, with gross margin percentage increasing from 58% to 63%.

Operating Expenses

• Total operating expenses held at 1997 levels.

EBITDA

• Overall, EBITDA increased 15% from $88 million to $101 million.

• EBITDA without Sky Tower (new in 1998) increased 10% from $88 million to $97 million.

• EBITDA margin to sales improved from 39% to 42%.

1997/1998 Achievements

• Result in line with that foreshadowed at the half-year.

• Strong cost management/margin performance.

• Introduction of a successful programme of events and promotions aimed at driving visitation and enhancing the overall appeal of Sky City as an entertainment choice for Aucklanders.

• Establishment of the Sky City brand and a hierarchy of product brands.

• Product initiatives as foreshadowed at the 1997 result announcement successfully implemented during 1998. These included the repositioning of Alto Casino & Bar, introduction of the Sky High jackpot and other gaming machine initiatives, and restructuring of Sky City Theatre as a venue for hire (curtailment of show losses).

• Over 700,000 people visited Sky Tower in the 12 months since opening in August 1997.

• Orbit restaurant at Sky Tower becomes one of New Zealand's most sought-after dining experiences.

• Casino operator's licence awarded.

• Experienced gaming executives recruited from Australia to replace Harrah's personnel.

• Smooth transition from Harrah's to a fully New Zealand-managed operation.

• Sky City remained open for business throughout the Auckland CBD power crisis.

• Share buyback of up to 7.5 million (7.5%) shares commenced May 1998.

• Debt funding successfully re-negotiated with the existing syndicate of lenders.

• Strong community involvement across a diverse range of initiatives.
   

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