Australian casino operator The Star Entertainment Group (SGR) saw its fiscal H1 profits cut in half after reporting its lowest VIP gambling win rate in over a decade.
On Thursday, SGR reported gross revenue of AU$1.17b (US$786m) in the last six months of 2019, nearly 12% lower than the same period in 2018. Earnings fared far worse, sliding 26.5% to AU$243m while net profit after tax plunged 48.5% to just AU$77m.
The above results are on a statutory basis, rather than the ‘normalized’ versions preferred by Aussie gambling companies, which assume a constant 1.35% VIP win rate, regardless of the reality. Under those conditions, revenue rose 2.4% to AU$1.3b, earnings improved 3.5% to AU$307m and profits gained 2.1% to AU$126m.
The stark difference in the two sets of figures came as a result of a pitiful 0.73% VIP win rate, nearly a full point below the comparative period and the lowest rate for a half-year period since 2008. The extended run of bad luck spoiled a 2% rise in VIP turnover, an impressive feat given the double-digit declines posted by most other Asia-Pacific casino operators over the same period.
On a statutory basis, the company’s eponymous Sydney casino saw its revenue slip 4.3% to AU$768m while earnings nudged up 9.3% to AU$187m. VIP revenue was down nearly 14% and domestic slots and tables were basically flat, so the overall situation would have been much worse had non-gaming revenue not risen 7.1%.
SGR’s VIP frustrations were on even starker display at its two Queensland casinos, as turnover was up more than one-third while win rate slumped to a truly abysmal 0.16%. Making matters worse, the previous comparative period featured an outsized 2.32% win.
As a result, the Brisbane and Gold Coast casinos combined for revenue of AU$408m, down 23.3% year-on-year, while earnings were off by nearly two-thirds to AU$57m.
Looking forward, SGR says its Sydney casino’s expanded Sovereign international VIP room will open in May while the new Oasis premium space for domestic bigwigs will follow in June. The gussied up offerings are intended to give the venue a fighting chance against rival Crown Resorts’ Crown Sydney project, which will start its phased opening this December.
Construction of the Queen’s Wharf Brisbane project remains on track with a targeted opening of late-2022. In the meantime, SGR chairman John O’Neill said negotiations continue with the Queensland government for “regulatory certainty” regarding the company’s long-sought Gold Coast exclusivity.
SGR said its trading in the year through February 16 had been “challenging,” due to “a continuing cautious consumer environment, bushfires and coronavirus.” VIP turnover is up, but the company acknowledged that it’s anyone’s guess what the future might bring in terms of travel restrictions or how quickly the market rebounds.