High-roller spending slump delivers big hit to The Star profits
Casino giant Star Entertainment Group's profits have been dented by a sharp pullback in spending by wealthy Asian high-roller visitors coming to Australia to gamble.
Turnover from so-called "international VIP" gamblers across The Star's casinos plunged 33 per cent in the six months to December 31 to $20.7 billion, with VIP turnover at its biggest casino, in Sydney, down 49 per cent.
The company on Thursday revealed record earnings for the half-year period, but "normalised" after-tax profits – removing the volatility of high-roller win rates – fell 2.4 per cent to $124 million, The Star said, missing analyst forecasts. Macquarie Research had expected $135 million, while JPMorgan had expected $129 million.
The $4 billion Star Entertainment Group, listed on the ASX, is Australia’s second-biggest casino company behind James Packer's Crown Resorts and operates casinos in Sydney, Brisbane and the Gold Coast.
Rival Crown Resorts this week also told investors it had suffered a steep drop in spending by high-rollers coming from China. Crown's executive chairman, John Alexander, attributed to the trend to China's softening economy, which has ground to its slowest growth in nearly three decades, and the Chinese government's crackdown on conspicuous consumption.
Around the world, gambling operators have been gripped by growing uncertainty about the fortunes of their lucrative international high-roller programs, where mainly Chinese punters, who often play baccarat, can turn over hundreds of thousands of dollars a hand and millions of dollars an hour.
Foreign high-roller volumes across Australian casinos have been volatile after crashing in the wake of the dramatic arrests and jailing of 19 Crown staff for illegal marketing activities on the Chinese mainland. Foreign VIP turnover partly recovered in recent times, but has remained volatile and has failed to return to pre-2016 levels.
Crown's "VIP program" for the six months to December 31 had shrunk 12.2 per cent to $19.9 billion, driving down its profits, the company said.
Star Entertainment on Thursday said its half-year accounts revealed record earnings and "strong domestic performance", and the company was making "pleasing progress" in the execution of its plans.
"We are delivering continued growth in key segments of our business as well as exhibiting
effective management of capital expenditure," chairman John O'Neill said.
"Our existing and new customers are responding positively to the newly unveiled attractions which provides optimism for the future."
Star declared an interim dividend if 10.5¢, fully franked, up 40 per cent from the previous year.