THE STAR SYDNEY OFFSETS WEAKNESS IN QUEENSLAND
Written on the 26 August 2016 by Nick Nichols
STRONGER earnings from its flagship Sydney casino have offset a weaker performance in Queensland to help The Star Entertainment Group (ASX: SGR) boost net profit by 14.9 per cent to $194.4 million.
The Star Sydney (pictured) proved a magnet for both high rollers and domestic players in FY16, with gross revenue rising 7.5 per cent to $1.65 billion.
However, the drag from Queensland saw growth in group revenue pegged back to just 4.4 per cent to $2.35 billion.
"The continued improvement in The Star Sydney's results validates the group's strategy of investing in its properties, with continuing focus on our brand, loyalty program, guest satisfaction and staff engagement delivering a differentiated value proposition to our 11 million customers," says Star Group CEO Matt Bekier.
"Queensland experienced a small decline in normalised and actual gross revenue in FY16, as revenue growth in domestic tables and slots was offset by disruption at non-gaming facilities at the Gold Coast property, inclusion of three months of Jupiters Townsville revenues in the previous corresponding period, and lower International VIP rebate business volumes in the second half of FY16."
Bekier says FY16 has been a year of transition for the Queensland business due to the capital works program at Jupiters Casino on the Gold Coast with a new six-star hotel tower under construction at the Broadbeach property.
"Initial customer response to the new VIP salons, refurbished hotel rooms and new restaurants has been pleasing," he says.
"There has been no material change at Treasury Brisbane over the year. Operating expenses remain well managed across both properties."
The company says among its priorities in FY17 is to progress detailed planning of the $3 billion Queen's Wharf development in Brisbane along with the next stages of development at its properties in Sydney and Gold Coast.
Star says business volumes from the international VIP rebate business and the win rate are in line with expectations. The VIP win rate rose to 1.5 per cent in the second half of FY16, from 0.88 per cent in first half.
The company warns that disruption to the business due to capital works will have some impact on earnings in the current year, although this will wane towards the second half as projects are completed.
Star is paying a final dividend of 7.5c per share, taking the full-year payout to 13c per share.
The Star Entertainment Group featured at number nine on Brisbane Top Companies 2016.
Author: Nick Nichols