Profit down but Star’s stock rises
SHAREHOLDERS have responded well to The Star’s handling of a market downturn, sending shares in the group soaring by 9.21 per cent after it revealed an 8.4 per cent profit slump for the last financial year.
Shares in The Star, which also announced a 10c franked dividend, climbed as high as $3.91 before settling to finish trade 5.87 per cent higher at $3.79.
The group’s results for the 12 months to June 30 revealed cautious VIP gamblers had substantially curbed their spending, despite arriving in higher numbers.
Domestic customers made up 88 per cent of the group’s earnings for the year, climbing to a record number, however normalised earnings, which strip out the casinos’ VIP rebates, were down two per cent to $557 million.
Star revealed it had paid out $18.4 million in redundancy and restructuring costs following its June announcement it would cut up to 20 per cent of its salaried staff. The company has cut 343 executives, saving $37 million in salaries.
It revealed the cuts had saved about $40 million a year, with $45 million a year in savings expected by the end of the financial year.
The company, which posted record earnings for the first half of the year, declared a 10c franked dividend, to be paid September 26, for total yearly dividends of 20.5c.
The company said growing domestic revenue, and success at the Gold Coast and Brisbane casinos, had failed to compensate for the slide in spending by international VIPs at its Sydney property.
“The performance of the International VIP Rebate business was impacted by weaker market conditions – increased visitation was more than offset by declines in spend per visit,” the company said.
“Operating costs were flat (on prior corresponding period), reflecting domestic volume growth, higher wages and higher interim service levels for recently commissioned Gold Coast assets and the transition to Sovereign 1.5 in Sydney, offset by lower International VIP Rebate business volumes and continuing cost management.”
For the second year, the group’s Gold Coast operations were the shining light for the group, increasing its domestic and International VIP Rebate business visitation, electronic gaming share gains, reporting solid domestic tables volume growth, and International VIP Rebate business volumes growth of 20.1 per cent on the previous year.
Operating expenses increased 4.9 per cent, reflecting increased domestic and international volumes, higher wages and newly commissioned assets on the Coast.
Across the Brisbane and Gold Coast properties, normalised net revenue, which allows for the International VIP Rebate win rate, increased 5.2 per cent with normalised net earnings up 5.9 per cent.
The company said domestic revenue and earnings growth came from domestic gamers and was driven by private gaming rooms.
Electronic gaming market share increased at Gold Coast and Brisbane, with tables revenue growth of 3.9 per cent on the previous year.
Despite a record 10 per cent growth in the number of international VIPs, it was well offset by reduced spending by those customers, with International VIP Rebate business revenue declining 30.7 per cent.
The Star said trading for the current financial year to date reflected “a cautious consumer environment” but had improved since the second half of FY2019.
Managing director and chief executive officer, Matt Bekier said managers remained focused on returns.
“Cost benefits from the organisational restructure are being delivered to plan, with approximately $40m annualised cost benefits achieved to date,” he said in a statement.
“Around 60 per cent of total project costs for Queen’s Wharf Brisbane are now under lump sum contracts, with a further approximately 28 per cent to be contracted on lump sum terms expected by end FY2020.”