Australian casino operator The Star Entertainment Group reported H1 profit down sharply thanks to the hot hands of Asian VIP gamblers.
For the six months ending Dec. 31, The Star (formerly Echo Entertainment) reported net profit after tax down 38% to A$60m (US $42.9m). Revenue was down a more moderate 2.6% to $1.1b but earnings fell 19.6% to $192.6m, driven down by increased operating expenses in domestic gaming and a truly crappy win rate at The Star’s VIP tables.
Win rate for what the company calls its international VIP Rebate business was a mere 0.88%, well below the the 1.33% average in H115 and the historic average of 1.43%. The plunge was so dramatic the company plans to reduce the historic normalization rate to 1.35% when it comes time to compute the FY16 results.
Overall VIP win was down 33% to $207m despite total VIP turnover rising 1.5% to $23.6b, of which 78% was derived from The Star’s relationships with junket operators (down from 84% the previous year). Overdue (but not yet written off) VIP debts were $16m for the period, on par with figures reported last June.
In contrast to the bruising VIP results, The Star said it enjoyed strong growth in its domestic gaming business thanks to improved marketing, loyalty program and sales activity, a better product and a general upswing in the local economies in which The Star operates.
The Star Sydney, the company’s flagship property, saw revenue fall 7.2% to $738m despite a 14.1% rise in domestic gaming (tables up 14.9%, slots up 12.4%). VIP turnover was down 0.4% and VIP win was even suckier than the average, with a win rate of just 0.77%. The property’s non-gaming revenue was up nearly 8% as visitation rose 4.1% and visitor spending increased by 8.6%.
The Star’s two Queensland properties – Jupiters Gold Coast and Treasury Brisbane – reported revenue up 8.2% to $370m, with domestic gaming rising 4.2%. The VIP business proved far more favorable than in Sydney, with turnover up 59.6% and win rate rising to 2.88% from 1.68% one year earlier.
Looking ahead to H2, the company says trading to date is “unchanged” from previous months. Moreover, the VIP business is reportedly performing in line with management’s expectations, despite difficult year-on-year comparisons given the variable timing of the Lunar New Year holiday period.
The Star CEO Matt Bekier said the company’s H2 priorities include working with its strategic partners Chow Tai Fook Enterprises and Far East Consortium to secure additional development opportunities at the Sydney and Gold Coast properties. The Star also plans to further develop its loyalty program via further enhancements later this calendar year.