Star Entertainment Reports Profits Down In Annual Financials
The Star Entertainment Group posted its annual financials this month with mixed results.
Profits and most revenue markers were down, but core earnings were up. Asian gamblers, representing much of the VIP revenue, took fewer chances in Star establishments, but Aussie customers gambled more than usual.
Full Year 2019 Basics
The fiscal year for the Star Entertainment Group ended on June 30, 2019.
When looking at the results presentation from Star itself, one is presented with some highlights and a few blips on the radar.
- Domestic EBITDA up 5.4%
- Tables up 4%
- VIP normalized EBITDA down 35.6% but unique VIP customers up 10% “to record levels”
Analysts and financial websites give a different view:
- Adjusted revenue down 1%
- Adjust EBITDA down 2%
- Adjusted net profit after tax down 8.4%
- Statutory net profits up 33.7%
- Earnings per share up 23.4%
Overall, the adjusted revenue of $2.161 million was down 1% from the previous year. This was in line with its projections.
Of $2.16 billion in total net revenue, nearly 90% was comprised of gross domestic revenue, which totaled $1.93 billion.
Reuters Unbiased Report
Leave it to Reuters to get to the bottom line. Their headline about Star’s annual report was that the casino operator reported an 8.4% drop in annual underlying profit.
Further, Star reported a 30.7% drop in normalized revenue for its VIP business. That came with a 35.6% drop in core earnings.
The bottom line was that spending by overseas visitors was down. There were fewer visitors and the spend per visitor was down by more than 30%. That went hand-in-hand with a reduction in overall VIP business, upon which Star relies for a substantial amount of its revenue.
Aussies Up, Asians Down
It appears that Star properties in Sydney, Brisbane, and Gold Coast saw increased spending from Australians. In fact, domestic customers gambled in record amounts over the past year.
The notable decrease in foreign wagers, primarily from China, was the negative in the mix and send profits down overall.
There were numerous reasons for Chinese gambling to dip, one being the shaky economy that has been on edge for much of 2019 due to roller coaster relations between the US and China. The trade war has had the wealthy in China wary of spending, especially in the area of gambling with leisure funds.
As Star Entertainment CEO Matt Bekier told Reuters last month when preparing the year-end financials, “The very large VIPs continue to travel, but they don’t take as many risks as they have in the past. The potential trade wars have just created a level of uncertainty, and they’re not as aggressive in their outlook as they might have been in the past.”
In addition, an increased focus on junkets and the traditional ways that Australian casinos have lured Asian gamblers has prompted caution, both on the part of the casinos and gamblers themselves.
Jobs Still to be Cut
Bieker put fear into casino employees across Star Entertainment properties in June with the revelation that hundreds of jobs would be cut. It is a part of a “planned restructuring.”
None of the job cuts have been reported as yet, but Bekier anticipated as much as 20% of backroom staff would be laid off in the coming months. Workers in IT, hospitality, human resources, and finance departments are considered for cuts as well to “take out duplication.”
At that time, Bekier had said the cuts were “days, not weeks or months” in the future, but reports have yet to surface. And the jobs were not mentioned in the year-end financial report.
CFO Barton Resigns
Other news that emerged from the release of Star’s financials is the resignation of Chief Financial Officer Chad Barton. He will stay with the company until November 1.
Barton decided to resign after the decision to make executive organizational changes. The finance department will be consolidated with strategy, investor relations, and IT under the CFO’s oversight.
In addition, the company is creating a Group Executive Operations role to take responsibility for the operations at all three casino locations. And the Chief Legal & Risk Officer role will oversee legal, risk, regulatory, and compliance functions.
The purpose of the changes is to “enhance customer service and deliver ongoing cost benefits.”
The reorganization also establishes a new group structure with three centres – Gaming, Marketing, and Hospitality and Tourism.
Regarding Barton’s replacement, there have been no indications that the search for a new CFO has started yet.
