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SkyCity working hard to support employees

SkyCity chief executive Graeme Stephens has clarified the company's position after a statement by Unite Union claimed recent redundancies were “illegal”.

Graeme says the COVID-19 crisis has led to 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.”

Graeme says SkyCity employs more than 5000 people and they are a tight-knit team, strengthened by the fire at the New Zealand International Convention Centre last year.

He says SkyCity has more than just wages to pay during the shutdown and these additional expenses add up quickly. He says it’s also crucial to remember that re-opening will look different as many things have changed domestically and globally as a result of COVID-19.

“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,” he says.

“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.”

Graeme says a number of cost-saving initiatives have been implemented in an effort to reduce capital expenditure and minimising operating costs, which also means restructuring the management team and salaried employee base.

“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.”

These initiatives include:

•A $15 million reduction in stay-in-business capital expenditure for the remainder of the financial year ending June 30, 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,” Graeme says.

“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.”

Other operating costs being minimised include:

•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 per cent to 40 per cent 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 per cent for the remainder of FY20.

•The SkyCity board of directors has also volunteered to cut its fees for the remainder of FY20 by 50 per cent.

“The incredibly hard decisions have revolved around our people,” says Graeme.

“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.”

Graeme says unfortunately it is not realistic for SkyCity to retain all staff, though they are determined to try and maintain their culture and values through this difficult time.

“How we treat our people, those that are having to leave and those that remain, has been front of mind,” he says.

“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 per cent 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,” says Graeme.

“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,” he says.

Graeme points to the situation in Australia, saying that around 90 per cent of the workforce has been stood down and decisions are yet to be made surrounding 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,” he says.

Graeme points out that redundancies are hitting SkyCity employees at every level, including at the top. But that also means that those in leadership are being able to make decisions that could help those affected by hardship.

“We have restructured the senior leadership team and the role of chief property officer, held by Peter Alexander, has been made redundant,” he says.

“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.”

Graeme says other SkyCity staff members will be able to contribute to the fund if they would like to and that SkyCity is extending help to departing staff beyond financial aid.

“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,” he says.

“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 per cent, 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 June 30, 2020 and/or travel restrictions remain in place for an extended period.”

Graeme acknowledges that this is an incredibly stressful tome for everyone and that SkyCity is endeavouring to provide their staff with certainty as quickly as they are able.

“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,” he says.

“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.”

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