COVID-19 STAFF UPDATE AND CHANGE OF SENIOR MANAGER

3 April 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)
COVID-19 STAFF UPDATE AND CHANGE OF SENIOR MANAGER

Please find attached an update from SkyCity Entertainment Group Chief Executive Officer,
Graeme Stephens, provided to all SkyCity staff today outlining the impact of COVID-19 and
the changes being implemented to minimise the impact. These changes include
significantly reducing capital expenditure and minimising operating costs, including the
immediate restructure of the SkyCity management team and salaried employee base.

As part of the management restructure and for the purposes of NZX Listing Rule 3.20.1,
Peter Alexander will step down from the role of Chief Property Officer and leave the
company effective from 2 July 2020.

Please note that the update is not intended to provide a forecast or guidance on revenue
or earnings for the 2020 financial year. The company is continuing to assess the operational
and financial impacts of COVID-19 and the closure of SkyCity’s properties in New Zealand
and Adelaide, South Australia. The SkyCity Board of Directors is closely involved with the
SkyCity management team in monitoring the evolving situation and, in addition to weekly
update meetings, is scheduled to formally meet on 21 April 2020. SkyCity will update the
market as new material information becomes available.


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

Authorised by:

Jo Wong,
Company Secretary
Phone: +64 9 363 6143
Email: jo.wong@skycity.co.nz

---

MARKET RELEASE
SkyCity Entertainment Group Limited
(SKC.NZX/SKC.AX)

3 April 2020
Staff Update from Graeme Stephens (Chief Executive)
Overview
The COVID-19 crisis has caused an unprecedented impact on people, businesses and the
global economy. In the short term, we are all dealing with the immediate impact of
shutdowns and the uncertainty of containing the disease to save lives. SkyCity is fully
supportive of the initiatives being taken by the New Zealand and Australian Governments
and will play whatever role it can to assist in dealing with the current crisis. We all believe
that the virus will ultimately pass and that we can then start to return to “normality”. None
of us, however, know what “normal” will look like, or when it will happen - but it is
reasonable to assume that it will take some time.
At present, all casinos, hotels, restaurants, bars and attractions are closed across the five
SkyCity properties in New Zealand and Adelaide, South Australia. We have over 5,000
people on our payroll and we are a tight knit team – even more so after dealing with the
fire at the New Zealand International Convention Centre (NZICC) late last year. During the
closure, we face almost $90 million in lost revenue per month whilst still incurring
significant costs such as utilities, lease payments and labour, with labour costs alone
around $20 million per month.
This is a storm we could, and would, weather if we were to reopen within a few months in
a pre COVID-19 world. Unfortunately, the impact of COVID-19 is not limited to the short-
term consequences of closure. Even when we fully open, we reasonably expect that weaker
economies, lower personal disposable income and changed entertainment habits, as well
as longer term travel restrictions, will result in us recommencing as a smaller, domestically
focused business. Our International Business activities might recover reasonably quickly
once travel restrictions are lifted, but the parts of our business driven by corporate travel
and by tourism, such as our hotels and the Sky Tower, will take longer to recover.
Given that our business has fundamentally changed for the foreseeable future, we need to
take action now to address this. We have conducted an intensive evaluation of our
strategic options and will be implementing a wide range of changes across all our
businesses to reduce our operating costs and preserve funding liquidity. Our objective is
to right-size and refocus the business now so that it is sustainable through the crisis. When

we reopen, our business will already be tailored to the market we are operating in, and we
expect it to grow again as our economy recovers.
Cost Saving Initiatives
The changes being implemented include significantly reducing capital expenditure and
minimising operating costs, including restructuring the management team and salaried
employee base immediately. It is also highly likely that we will have to reduce our rostered
(waged) workforce in the coming months.
The relatively easy decisions have revolved around reducing costs that are not directly
related to people, and these include:
Reducing Capital Expenditure
• A $15 million reduction in stay-in-business capital expenditure for the remainder of
the financial year ending 30 June 2020 (FY20), with the remaining stay-in-business
capital expenditure in FY20 relating solely to essential ICT projects that can be
continued remotely and to Adelaide master plan projects
• Except for the NZICC and Horizon Hotel project, all capital development projects in
New Zealand have been put “on hold” at least until our properties reopen. Some of
these circa 50 different small capital projects could assist our return to profitable
operations and may be able to continue in an Alert Level 2 or Level 3 environment
• No work is currently possible on the NZICC and Horizon Hotel project. This means
that payments for this project will be delayed,

which is helpful to our debt position
It is worth noting that, for now, the Adelaide expansion and master plan projects are
continuing as construction is deemed an essential service in Australia. However, should
this status change and the construction site shut down, then the budgeted capital
expenditure will cease as well as several related work streams that are required to complete
those projects.
Minimising Other Operating Costs
• Other operating costs (excluding labour costs) across all properties and corporate
functions have been reviewed and all non-essential costs eliminated for the
remainder of FY20
• Executive salary cuts ranging from 20%-40% have been volunteered by the leadership
team at Group and property level for the remainder of FY20. The Chief Executive,
Chief Financial Officer and Chief Operating Officer’s salaries will be cut by 40% for the
remainder of FY20 (see further detail below)
• The SkyCity Board of Directors has also volunteered to cut its fees for the remainder
of FY20 by 50%
The incredibly hard decisions have revolved around our people. The entertainment
business typically attracts passionate people and we have thousands of them from very
diverse backgrounds. SkyCity people work hard, they always go the extra mile, and many
have been with us for years. But, unfortunately, we are not going to be able to retain all of
them. We are determined to try and maintain our culture and values through this period

and how we treat our people, those that are having to leave and those that remain, has
been front of mind.
Our workforce is made up of salaried and waged employees. The New Zealand
Government’s Wage Subsidy Scheme is providing significant assistance in being able to
retain our lower level waged staff in New Zealand for as long as the subsidy is in place. We
have asked waged staff to cut to 80% of normal wages and, on this basis, we can carry their
cost. Those not wishing to reduce wages have been offered the option of voluntary
redundancy. This provides us with some time to assess how the impact of COVID-19
evolves. Based on our current assessment of the likely operating environment, were it not
for the subsidy we would be forced to make some 700 waged people redundant now in
order to right-size our labour workforce for the future.
For our salaried employees in New Zealand, the subsidy is less meaningful and,
consequently, we will need to reduce our headcount to a level more commensurate with
our anticipated levels of trade once we reopen. This will lead to redundancies for
approximately 200 of our people and we will be starting this process with immediate effect.
In Australia, around 90% of our workforce has been stood down and no decisions have yet
been made about potential redundancies. We welcome the Australian Government’s new
JobKeeper payment scheme and expect to access this scheme for all our Australian staff.
We still expect to complete the new Adelaide expansion in the reasonably near term and
reopen (still on track for later this year) as a significant employer.
We have restructured the senior leadership team and the role of Chief Property Officer,
held by Peter Alexander, has been made redundant. It will be some years before we can
invest into the vision that Peter has helped to develop for our property portfolio, but it
remains as significant latent value for the company to unlock at the relevant time.
In regard to the other members of the leadership team, the Board has endorsed my view
that they individually and collectively contribute the critical skills that will steer the
company through this phase. Myself and our leadership team have volunteered to take
significant reductions in salary for the remainder of FY20 which will be used to establish an
Employee Hardship Fund of around $1 million to initially assist those of our departing New
Zealand employees who find themselves in financial difficulties that can’t fully be
addressed by their redundancy payments. Other SkyCity staff members will also be able
to voluntarily contribute to the Fund.
Beyond financial assistance, we are al so committed to supporting our departing staff as
they transition out of the business. We have collaborated with essential service providers
in the healthcare and grocery sectors, where employment demand has increased, to set up
the Keep New Zealand Working job portal, and will offer free independent services, such as
out-placement assistance, counselling support and budgeting advice.
If our view of the future state of the business remains unchanged over the next three
months, then we will also be forced to take action to reduce our waged staff as identified
above. The fully implemented cost reduction plan for salaried and waged staff will impact
around 900 people and generate labour savings of close to $50 million per annum – a
reduction of some 20%, which aligns with the currently anticipated reduced business

activity over the next 12-18 months. The estimated cost of the redundancies is $11 million.
We will review our outlook as the crisis evolves and may need to make further changes,
especially if our properties remain closed beyond 30 June 2020 and/or travel restrictions
remain in place for an extended period.
In Conclusion
This is an incredibly stressful time for everyone and we are trying to provide our staff with
certainty as quickly as we can. We are doing what it takes to ensure that our business
survives for the long term and continues to provide a great place to work and a place to
which thousands of our customers can return in the future.
I would like to thank our Chairman and Board for their support and counsel as we make
decisions in unprecedented circumstances. The wider leadership team has worked
extremely hard to redefine our strategic direction and to prepare our business for the new
normal. I am proud of their efforts. My thoughts are with the majority of the SkyCity team
that are desperately wanting to help but cannot. I very much look forward to the day when
we can unite in a positive and constructive environment and rebuild our business.
We will continue to provide further updates as new material information becomes
available.

ENDS