Australia’s Star Entertainment Group saw its profit tumble 76.8% to AU$33 million and EBITDA fall 33.6% to AU$200 million in the six months to 31 December 2018 due to bad luck in its international VIP business.
But the results didn’t accurately reflect strong business volumes, with international VIP turnover actually up 49.0% year-on-year to AU$30.9 billion driven primarily by 56.6% turnover growth at flagship property The Star Sydney.
Group-wide gross revenue grew 3.3% in real terms to AU$1.27 billion and by 15.9% on a normalized basis to AU$1.36 billion, while normalized profit was up 12.4% to AU$120 million and normalized EBITDA up 11.8% to AU$280 million.
Despite the low win rate of just 1.06% hitting the company’s bottom line, Chairman John O’Neill said VIP numbers were returning to normal following the impact of the Crown Resorts arrests in mainland China in October 2016.
“In 1H FY18 we have seen further progress by the group in executing our investment strategy,” O’Neill said. “We have witnessed the beneficial impact of major capital works already completed at the Gold Coast and Sydney.
“Also, our international business has returned to activity levels comparable to those before disruption of the North Asian market in October 2016 and been further enhanced by the steps we have taken over the last few years to diversify growth in that line of business.”
The Star Sydney drove the company’s results, with a win rate of just 1.01% in international VIP resulting in a 3% revenue increase to AU$866 million, while EBITDA fell 42.8% to AU$108 million. On a normalized basis revenue grew 19.3% to AU$959 million and EBITDA 22.4% to AU$191 million. Domestic revenue grew 4%, driven by “increased gaming visitation.”
In Queensland, where the company is in the midst of major renovation works on the Gold Coast and constructing the AU$3 billion Queen’s Wharf project in Brisbane, revenue grew 3.8% to AU$405, but EBITDA fell 18% to AU$92 million. The company’s new Darling Hotel on the Gold Coast soft-opened in January while some of the property’s new VIP gaming facilities were opened in time for Chinese New Year, Star Entertainment Group said.
It added that it had now received development approval for an AU$220 million expansion of its high-end Sovereign Resort facilities at Star Sydney and will submit a development application for a new 400-room Ritz-Carlton hotel tower nearby in the coming months.
“Sydney continued to grow as the property prepares for its next round of expansion,” said Managing Director and CEO Matt Bekier. “Guests responded to the upgrades and improvements completed to date, with strong visitation over the Christmas-New Year period underscoring the importance of the investments we’ve made.
“There were almost 250,000 visitors to The Star Sydney over 26 to 31 December, up 12.8% on the previous year. This included record visitation for New Year’s Eve of more than 62,000 guests, up 16.7%. The investment in gaming and non-gaming offerings will continue during CY2018 and align with our long-term strategy to deliver a unique customer value proposition.”