Wed, Jun 12, 12:47pm by Staff Writer
The Star Entertainment group will cut 400 jobs within days after announcing its VIP spend at its casinos – including its flagship Sydney casino – is plummeting.
In its annual results out on Tuesday, the Star Entertainment Group admitted VIP spending would fall by 31 per cent in the six months to June, forecasting an $18 million profit downgrade.
The ABC reports that following the group’s results, market commentators have questioned the viability of Crown’s massive new Barangaroo Sydney casino – and its VIP focus – which will come online in 2021.
Commenting on the results, the Star also blamed the impact of “disruption from capital works” at its Sydney site for its soft numbers.
The casino’s share price dived to a four-year low on Tuesday, closing down 15.7 per cent to $3.80, after the company revealed the 3 per cent cut to its forecast profit for the year.
Forecasting full-year normalized earnings before interest, tax, depreciation and amortization (EBITDA) of $555 million, the Star blamed the continued decline in revenue from its super-rich VIPs for driving slowdown, as well as weaker domestic growth.
The company operates casinos in Sydney, Brisbane and the Gold Coast and relies heavily on high-roller gambling revenue, particularly from Chinese gamblers.
The company said weak economic conditions in China and the US-China trade war had weighed down sentiment in that market.
Turnover from international VIP clientele is down 31 per cent o June 8, with the high-rollers having fewer turns (9.5 times compared to 11.3 times last year) and putting less money on the table (down 16.5 per cent) between January and May.
Star chief executive Matt Bekier said confidence among the super-rich VIPs was lower, with some “very large customers” spending one or two days at the casino, instead of a whole week as usual.
“The positive is the customers are still coming,” Mr Bekier said.
“They just don’t spend as much and take as many risks as they did in the past.”
Mr Bekier sold 200,000 shares in late April at a price of $4.568 per share.
— The Today Show (@TheTodayShow) June 11, 2019
Gamblers have also beat the house more than expected, with the actual win rate above the theoretical win rate of 1.35 per cent for this financial year.
The downgrade shows the outlook in the VIP market remains poor despite some predictions of a turnaround.
In April, analysts were “optimistic” about a rebound in the high-roller next financial year, but Mr Bekier doesn’t see a substantial profit on the horizon.
“It’s quite a lump business, it can be influenced by a small number of visitors,” he said.
The casino also pointed to softening domestic venue growth for its profit downgrade.
Growth was almost 6 per cent in the first half of this financial year, but since January had grown just 0.3 per cent.
Mr Bekier blamed a variety of factors, including the timing of Easter and the Lunar New Year, as well as the federal and New South Wales elections.
While last week’s interest rate cuts were designed to stimulate the economy, Mr Bekier said that sends the signal that “the economic outlook for Australia is relatively bleak.”
“It will only slowly make its way into consumers’ wallets. Our customers are not typically all that rational. They come and visit us when they feel good about their wealth and future prosperity,” he said.
Macquarie Research gaming analyst David Fabris said the overall result was “disappointing”, with the domestic business, comprising 85 per cent of Star’s earnings, softening due to challenging macro-economic business conditions.
Domestic revenue growth was well below Macquarie Research’s forecast of 4.5 per cent growth for the second half.
The weak VIP trends reflect softening volumes out of Macau, which Fabris attributed to US-China trade tensions.
“Without a resolution, it is challenging to see improved sentiment,” within the VIP segment, Mr Fabris said.
He described the cost-cutting measures as a “silver lining” but said “we will need to get more disclosure around the program.”
Staff of Melbourne’s Crown Casino are not happy over their pay. With its union, United Voice, they are fighting for better pay…
A Wallan pub looking to add an extra 20 poker machines to its venue is facing stiff resistance from residents. Last Thursday…
Claims of a limousine driver will be used by Independent MP Andrew Wilkie in his calls for a royal commission into Melbourne’s…