The Star takes hit to half-year profit but Gold Coast casino shines

THE Star has reported its half-year result, which shows a slump in its profit due to a low win rate at the VIP business. But the Gold Coast is a different story.

Concept image of the rooftop at The Darling hotel at The Star Gold Coast.

THE Star’s Gold Coast operation has added some shine to an otherwise dim half-year result for the Sydney-based casino operator.

The Star’s reported profit for the six months to December 31 slumped 76.8 per to $32.9 million, mainly due to an abnormally low win rate in the group’s international VIP rebate business.

The actual win rate for the half fell to 1.06 per cent, compared to 1.62 per cent a year earlier and the average of 1.35 per cent.

The company’s bottom line also took a $32 million hit as the group restructured debt, replacing some expensive US private placement bonds with others that had lower interest payments.

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However, while domestic revenue rose a modest 4 per cent compared to the prior corresponding period, it soared 20.8 per cent on the Gold Coast.

Chief executive Matt Bekier said investment poured into the Gold Coast operation was gaining traction with customers.

“The property is starting to look really good. In the presentation, we are celebrating the transformation with before and after photos to really bring it to life,” he said.

“What excites us is we’re only at the beginning because there is so much more to come over the next six weeks.

The Darling — a 57-suite hotel — was due to open by the end of March, and included a new sports bar and expansion to the main gaming floor.

“Hotel rooms at The Darling are largely open and we are slowly ramping up capacity. We’re running at a restricted capacity because we want to train our staff, but every day we’re putting more rooms in.”

Artist impression of The Star Gold Coast's new Sports bar, which will be part of the new The Darling six-star hotel at the Broadbeach complex, opening early in 2018.

Mr Bekier said the restaurant, the lounge at level 19, and the integration with the existing casino are yet to open.

“The floorplate of the existing casino will flow into the building. There will also be a sports bar, which will be commissioned before the Commonwealth Games.”

Mr Bekier said construction of the first apartment and hotel tower with Chow Tai Fook and Far East Consortium was due to start in the third quarter of this year.

Excluding the abnormal win rate and one-off items, The Star’s “normalised” net profit rose 12.4 per cent to $120 million.

While the company had been unlucky this time against VIP gamblers, the money that high-rollers brought to play with had risen 25 per cent to $2.1 billion, and turnover had lifted 49 per cent to $30.9 billion, Mr Bekier said. Furthermore, the international high-roller business had returned to the activity levels seen before the disruption caused by China’s detention of rival Crown Resorts employees 16 months ago.

Mr Bekier said the group’s strategy over the past three years had been to entice VIP gamblers from around Asia and to become less reliant upon high-rollers from China and Macau.

VIP visitation from China and Macau was now back to normal while numbers from elsewhere in Asia were growing strongly.

Domestically, continued improvements to both gaming and non-gaming facilities aimed at boosting visitor numbers in its Sydney and Gold Coast casinos had helped generate broadbased growth.

But operating costs were up, driven by increased numbers of domestic and international gamblers, a big rise in non-gaming visitors and higher wage rates. The Star said efforts to stabilise earnings at its Brisbane casino continued while demolition work on the site of the Queen’s Wharf Brisbane casino-hotel project was progressing well.

And, while trading levels so far in the second-half had been mixed but, the company said, comparisons with a year ago were difficult due to the different timings of the Lunar New Year.