The Star Entertainment Group Ltd (ASX: SGR) share price will be on watch when the ASX opens this morning after the group released its half-year earnings result.
Challenging market conditions
For the six months ended 31 December 2019, Star Entertainment reported that normalised earnings were up in challenging market conditions.
Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $307 million which was in the upper range of October 2019 guidance. However, its statutory counterpart came in lower at $243 million, representing a 26.5% decline on the prior corresponding period (pcp) of 1H19.
Statutory net profit after tax (NPAT) was also lower, falling 48.5% on the pcp to $77 million.
Normalised earnings before interest and tax (EBIT) was up 8.5% to $206 million. Meanwhile, strong growth in Queensland drove domestic EBITDA 6% higher, while VIP performance turnover was up 2.0%.
The company further reported that Gold Coast normalised EBITDA was up 18.2%, while normalised EBIT for Gold Coast was up 28.8%. Broad-based growth was noted for the Gold Coast with Slots revenue up 4.1%, tables revenue up 15.9%, non-gaming revenue up 7.3%, and VIP normalised revenue up 36.5%.
Impact of coronavirus
Star Entertainment noted that the Coronavirus has affected international and domestic visitation, particularly in Sydney.
There has been an initial substantial impact on domestic visitation and revenue, although there were recent signs of a return to normal domestic visitation patterns. However, inbound visitation (VIP, tourism) continues to be impacted by border closures.
The consequences of the coronavirus are being assessed and managed proactively by the company.
Early trading and reporting for the second half
Star Entertainment commented that trading in early 2H FY2020 reflects the current challenging conditions, impacted by continuing cautious consumer environment, bushfires and coronavirus.
From 1 January to 16 February 2020, domestic revenue has been flat on a strong prior corresponding period.
There was reported to be an initial substantial impact from the coronavirus on domestic visitation and revenue during the current quarter so far.
VIP volumes so far this quarter are up on the pcp, although the company did comment that comparisons are difficult to make given the short time period and the impact of the coronavirus.
Going forward, the impact of the coronavirus will depend on a number of factors including the length of border closures and speed of market recovery.
