IMPACTS OF COVID-19 AND UPDATED FY20 FORECASTS

18 March 2020


Client Market Services
NZX Limited
Level 1, NZX Centre
11 Cable Street
WELLINGTON

Copy to:

ASX Market Announcements
Australian Stock Exchange
Exchange Centre
Level 6
20 Bridge Street
Sydney NSW 2000
AUSTRALIA


RE: SKYCITY ENTERTAINMENT GROUP LIMITED (SKC)
IMPACTS OF COVID-19 AND UPDATED FY20 FORECASTS


Please find attached a market release concerning the impacts of COVID-19 on, and
updated FY20 forecasts for, SkyCity Entertainment Group Limited.


Authorised by:



Jo Wong
Company Secretary

Phone: +64 9 363 6143
Email: jo.wong@skycity.co.nz

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MARKET RELEASE
18 March 2020
Impacts of COVID-19 and Updated FY20 Forecasts
SkyCity Entertainment Group Limited (SKC.NZX/SKC.AX) (“SkyCity”) advises that, in
common with all members of the tourism and leisure industry, it has been negatively
impacted by the global response to COVID-19, particularly since 28 February 2020 when the
first case was confirmed in New Zealand. These impacts are expected to be exacerbated
by the new border controls, social distancing requirements and restrictions on mass
gatherings recently imposed in New Zealand and Australia.
SkyCity CEO Graeme Stephens said that the current market conditions being experienced
as a result of COVID-19 were unprecedented for all businesses in New Zealand and Australia.
Mr Stephens said “We fully understand and support the priority to slow the spread of
COVID-19 in order to save lives. SkyCity always seeks to be a responsible leader in our
communities, and we will play our part in working with governments to help and protect
our customers, staff and other stakeholders.”
The main impacts experienced by SkyCity during the March month to date have been
(with all comparisons relative to internal budgets and expectations):
Auckland
• Visitation to the precinct down around 15%
• Electronic gaming machine revenue down 14%
• Domestic table and automated table game revenue down 43%
• Hotel revenue down 19% with average occupancy of 79%
• Food, beverage and conventions revenue down 32%
• Sky Tower revenue down 35%
Hamilton
• No impact on gaming revenue
• Non-gaming revenue down 12%
Queenstown
• Combined revenue down 37%
Adelaide
• Gaming revenue down 7%
• Non-gaming revenue down 14%
International Business
• Substantial decline in activity with Asian customers not able to travel to New Zealand
and Australia

The recently announced enhanced border controls, social distancing requirements and
restrictions on mass gatherings now imposed in New Zealand and Australia will have
further negative impacts – in particular on the tourism-related aspects of the business,
including the SkyCity Grand Hotel, SkyCity Hotel and Sky Tower. Whilst there have been
no instances of transmission within communities in New Zealand to date, it is reasonable
to assume that this will occur which will have an impact on visitation to our precincts.
Mr Stephens said “We anticipate further restrictions on mass gatherings in Australia and
New Zealand. We will need to understand these restrictions in more detail as they evolve
to ascertain whether they will apply to our properties. Casinos are similar to shopping
centres in that they have multiple smaller areas within a larger precinct, and these areas
can be used in flexible ways to comply with enhanced mass gathering restrictions. It’s also
helpful that our customers are already segregated into different tiers and spaces through
our loyalty programs”. Additionally, it is possible that a full lock down is implemented in
New Zealand and/or Australia, which would lead to the temporary closure of the SkyCity
properties.
Based on the experience of the past few weeks and an estimate of the further impact of
the recently introduced restrictions, SkyCity currently estimates an EBITDA impact of
around $55m in relation to previous guidance for the full year. As a result of these impacts,
SkyCity now expects normalised EBITDA for FY20 to be in the range $230-250 million and
normalised NPAT for FY20 to be in the range $85-100 million. These ranges are based on
the best information currently available and reflect the continued uncertainty regarding
the impacts of COVID-19 through to the end of FY20. The updated guidance also assumes
that all SkyCity properties remain open for business.
In response to the impacts of COVID-19, SkyCity has undertaken the following actions to
mitigate the consequences for its businesses:
• A range of social distancing measures have been implemented across all properties
• Additional and frequent cleaning of all facilities and provision of hand sanitiser
throughout all properties
• Rescheduling labour rosters at all properties in response to reduced customer
visitation
• Encouraging all employees to take voluntary leave over the next few months
• Suspending all international travel by staff and limiting domestic business travel
• Suspending marketing activity that would drive spikes in visitation
• Reviewing all non-essential capital expenditure and corporate overheads for the next
12 months
SkyCity has over 5,000 employees currently and will be seeking to employ significantly
more people in Adelaide and Auckland following the completion of its two major projects
(Adelaide expansion opening expected in October 2020). “SkyCity is looking beyond the
current challenges presented by COVID-19 and will seek to preserve existing jobs in New
Zealand and Australia,” said Mr Stephens.
On a positive note, SkyCity has also this week reopened “Eight”, its premium domestic
tables salon in Auckland, following a major refurbishment and expansion. The new facilities
were completed on-time and on-budget and have been well received by customers. At

least part of the recent weaker performance in tables can be attributed to the disruption
caused by the refurbishment over the past few months.
Mr Stephens noted that while SkyCity has experienced a decline in visitation at its
properties, it has also observed a continued increase in sign-ups to, and activity on, SkyCity’s
offshore online casino which is available for New Zealand customers. “Perhaps this reflects
that our New Zealand customers are choosing to gamble online in response to the social
distancing requirements and restrictions on mass gatherings,” said Mr Stephens.
SkyCity has a strong balance sheet and is conservatively geared, in particular after receiving
the proceeds from the strategic disposal of non-core assets during 2019. It is therefore well
placed to withstand the adverse impacts of COVID-19. SkyCity owns property assets with
an estimated market valuation of around $2.0 billion and, following the payment of its
interim dividend last week and the repayment of $21 million of US private placement notes
earlier this week, SkyCity currently has undrawn bank facilities of $337 million.
SkyCity also expects to receive a further insurance payment of $85 million over the next
month to fund initial repair works arising from the fire at the New Zealand International
Convention Centre (NZICC). As previously advised, SkyCity will always be “in funds” during
the repair works on the NZICC and Horizon Hotel, with payments to Fletcher Construction
for these works only being made if SkyCity has received the funds from the insurers.
The Adelaide expansion remains on-track to open later in 2020 and is fully funded and
on-budget.
Based on the updated earnings guidance, SkyCity expects that its debt level will peak
during FY22 at around $850 million (excluding lease-related liabilities) following the
completion of the Adelaide expansion and as the NZICC and Horizon Hotel project nears
completion. SkyCity remains committed to retaining its BBB- credit rating and expects
that its gearing (debt/EBITDA ratio) will remain within debt covenants during FY21 and
FY22.
SkyCity will provide further updates to the market as new material information becomes
available. “The focus for now is on reacting rapidly to the situation, which is evolving daily,
and on ensuring that we can continue to trade in a way that is responsible and protects the
thousands of people that work at SkyCity and our customers, largely domestic, who
continue to choose to visit us,” said Mr Stephens.
ENDS
For more information, please contact:
Media Investors and analysts
Liza McNally
Chief Marketing Officer
DDI: + 64 9 363 7137
Mobile +64 2194 4989
E-mail: liza.mcnally@skycity.co.nz

Ben Kay
General Manager, Corporate
Development & Investor Relations
DDI: +64 9 363 6067
E-mail: ben.kay@skycity.co.nz