Australian casino operator The Star Entertainment Group saw its profit plunge in the second half of 2017 as VIP gamblers treated the company like dogs treat fire hydrants.
Figures released Friday show The Star’s statutory revenue rising a modest 3.3% to A$1.27b (US$1b) in the six months ending December 31, 2017. But earnings fell more than one-third to A$200m and net profit after tax plunged 76.8% to just A$32.9m.
The ‘normalized’ results, which smooth out the traditionally wild variance in VIP gambling activity, read far more positively. Normalized revenue was up 16% to A$1.36m, earnings improved nearly 12% to A$280m and net profits were up 12.4% to A$120.4m. (Now if you’ll excuse me, I’m going to binge on cheeseburgers and then hop on this ‘normalized’ weight scale, which will tell me that everything is just fine.)
Whatever way you slice it, the fiscal H1 was done in by an “abnormally low” international VIP (read: Asian gambling whales) win rate of just 1.06%, well below the benchmark 1.35% rate and miles away from the 1.62% rate The Star enjoyed in the same period one year earlier.
The low win rate spoiled the ongoing narrative of Chinese VIPs returning to The Star after a significant absence. International VIP turnover shot up 49% and front money was up 25%, due in part to the company’s diversification strategy of lessening its reliance on “North Asian visitation” by expanding into “other international markets.”
The company’s eponymous flagship property in Sydney managed to eke out statutory revenue of A$866m, a gain of 3% year-on-year despite a VIP win rate (1.01%) even lower than the group result. Domestic revenue was up 4%.
In Queensland, the Gold Coast and Brisbane properties generated combined revenue of just under A$405m (+3.8%), thanks in part to 8.4% growth in domestic revenue.
Company CEO Matt Bekier said trading in the new year to date has been a mixed bag, with “softer than expected” results in Sydney but “pleasing performance” at its Queensland properties and “continued strength” in its VIP action.
The Star plans to allocate A$100m in the current fiscal year to cover its share of the in-development Queen’s Wharf Brisbane casino joint venture with partners Chow Tai Fook Enterprises Ltd and Far East Consortium (Australia) Pty Ltd.