The Star Entertainment Group (ASX:SGR), formerly Echo Entertainment Group Ltd, have released their results for the half year ending 31st December 2015. Normalised profit increased by 26% to $142 million
Statutory NPAT Down 37.9% but Normalised Results Strong
With statutory revenue down 3.2% to $1.1billion and likewise statutory NPAT down over 37% for to $60million, results appear weak at first sight, however normalised results are a more appropriate way of analysing the underlying business of a casino operator. The Normalised result focuses on the underlying business as it removes the inherent volatility. Normalised results are adjusted using an average win rate of 1.43% of actualy turnover. The 26% surge in normalised NPAT highlights the strog underlying business model. Normalised gross revenue of $1.24bn was 6.7% higher compared to pcp. The normalised win rate will be adjusted down to 1.35% for the 2016 full year results, in line with the Australia and New Zealand market practice.
Earnings before interest, tax, depreciation and amortisation at The Star Sydney increased by 21.7 per cent to $223 million with domestic gross gaming revenue surging by 14.1 per cent.
As a result of the price volatility, operating cash flow was down 48% for the period, to $129.1million.
On a statutory basis, gross revenue of the Star Sydney was one of the contributors to the declining results. Down 7.2% for the period, to $737.6million along with overall operating costs for the group, which were up 3.2%. However, normalised EBITDA was $223million, up 21.7% on the pcp.
However, the group’s Queensland operations, performed quite well, with gross revenue up 8.2% for the period, to $369.9million. Along with a 1% reduction, across all Queensland properties, to $173million.
Queen’s Wharf Brisbane Project
During the period, the group had partnered up with Hong Kong based organisations Chow Tai Fook Enterprises, along with the wholly owned Australian subsidiary of Far East Consortium International, in order to form the DBC (Destination Brisbane Consortium) JV for the development of the Queen’s Wharf Brisbane Project.
The group will contribute 50% of the capital to the development of the integrated resort, with Chow Tai Fook and Far East Consortium contributing 25% each. The cost of the group’s investment, for the period is $5.0million.
The Star Raises Dividend
The Group has declared an interim fully franked dividend of 5.5cents per share, being 10% up to the prior period. With the Ex-Dividend date and Payment Date on the 19th of February and 22nd of March respectively.
According to the group, ongoing disruption form capital investment works at The Star in Sydney, along with Jupiter’s on the Gold Coast, will have some impact on revenue throughout the 2HFY16. Capital Expenditure is expected to be within the range of $275-325million.
Share Performance: SGR Outperforms the Market
Despite some relatively mixed results, SGR is up 0.56% (AS at 12.54am AEDT), to $5.39. SGR has gained 25% in the past 12 months and is up year-to-date.
Author: Ben Khouri
Feb 16, 2016
Ben Khouri is a financial editor for Wise-Owl with a particular focus on the top ASX 300 companies. Having a vast background in economics and finance, Ben provides financial commentary & analysis as well as global market updates, which guide investors in devising investment strategies. Ben specialises in analysing economic data and global events from around the world and examines the impacts they have on the major equity markets.