Star Entertainment Group Limited · ASX:SGR
Star Entertainment — Echo Entertainment Group — FY2012 Earnings Presentation
39 slides from Star Entertainment's earnings presentation, Aug 15, 2012
Slide 1: Full Year Results Presentation
15 August 2012 FULL YEAR RESULTS PRESENTATION Attached is a presentation regarding Echo Entertainment Group Limited’s (Echo) full year results for the financial year ended 30 June 2012 to be presented by Larry Mullin, Managing Director and Chief Executive Officer and Matt Bekier, Chief Financial Off
Slide 2: Echo Entertainment Group Full Year 2012 Results Presentation
Echo Entertainment Group Limited Full Year 2012 Results Presentation 15 August 2012 1
Slide 3: Basis of preparation and non-IFRS information
Basis of preparation and non-IFRS information □ Information in this presentation is provided as at the date of the presentation unless specified otherwise. It should be read in conjunction with Echo Entertainment Group Limited’s financial report for the full year ended 30 June 2012 and other disclos
Slide 4: Agenda
Agenda 1. Overview Larry Mullin, CEO 2. Financials Matt Bekier, CFO 3. Q&As Larry Mullin, CEO 3
Slide 5: FY12 results overview
FY12 results overview □ NPAT of $42.2m, not comparable to pcp given demerger. Results negatively impacted by a number of significant items, a negative IRB win rate in 4Q12 and a disappointing 3Q12 at The Star □ Normalised* EBITDA of $386.0m down 4.5% on the pcp, impacted by a soft consumer environme
Slide 6: Key drivers of FY12 result
Key drivers of FY12 result EBITDA ($m) 0 1 2 3 4 5 6 7 8 9 10 17.0 (116.8) 158.8 (61.8) 404.1 (15.3) 386.0 (53.4) (66.7) 265.9 FY11 The Star Qld Gross Gaming The Star QLD Opex FY12 VIP Win Rate Significant FY12 Actual Normalised Gross Revenue taxes, levies, Opex Growth Normalised Items* EBITDA EBITD
Slide 7: The Star – Successive openings in 2012
Non-gaming The Star – Successive openings in 2012 Gaming □ Significant new product opened over the course of FY12 □ The Events Centre is planned to open in January 2013 FY12 July August September October November December 2H12 FY13 Vestibule Gaming Area 5A Pirrama Rd Entry Sokyo Retail Phase 3 Pyrmo
Slide 8: The Star - Opened January 2012 – VIP salons
The Star - Opened January 2012 – VIP salons 7
Slide 9: The Star - Opened March 2012 – Marquee nightclub
The Star - Opened March 2012 – Marquee nightclub 8
Slide 10: The Star - Opened May 2012 – Oasis PGR
The Star - Opened May 2012 – Oasis PGR 9
Slide 11: The Star - Opened July 2012 – The Century
The Star - Opened July 2012 – The Century 10
Slide 12: The Star - to open in January 2013 – Events Centre
The Star - to open in January 2013 – Events Centre 11
Slide 13: The Star – Positive response to openings
The Star – Positive response to openings Australian, Australia Australian Financial Review, Australia 28 Jul 2012, 02 May 2012 Conde Nast Traveller 2012, May 2012 EGlobal Travel Media, Australia / New Zealand / India / Asia / Japan / America, Conde Nast Traveller 2012 May 1, 2012 May 2012 Australian
Slide 14: The Star revenue momentum building
The Star revenue momentum building □ Revenue growth retreated in 3Q12 due to events and poor publicity associated with the departure of the Managing Director in December □ From mid April, revenue across the business has built momentum □ Activation of new areas is now gaining traction as scale and mo
Slide 15: The Star – Gaming revenue growth by month
The Star – Gaming revenue growth by month The Star The Star Table Games (ex VIP) Slot and MTGM PCP Revenue Growth PCP Revenue Growth 25% 40% 20% 35% 15% 30% 10% 25% 5% 20% 0% 15% (5%) (10%) 10% (15%) 5% (20%) 0% FY12 J A S O N D J F M A M J FY13 FY12 J A S O N D J F M A M J FY13 YTD* YTD* Gross reve
Slide 16: The Star Food & Beverage growth on track
The Star Food & Beverage growth on track The Star F&B FY12 PCP Gross Revenue Growth 140% 120% □ Restaurant and bar revenue 100% 80% built momentum over the year 60% 40% with revenue up 99% on PCP 20% 0% on 4Q12 (20%) (40%) FY12 J A S O N D J F M A M J FY13 YTD* $ '000s Restaurant Total ‐ Gross Reven
Slide 17: VIP continues to grow strongly
VIP continues to grow strongly □ VIP business continues strong momentum with normalised gross revenue up 56.6% to $359.0m □ Actual win rate of 1.39% (FY11: 1.97%) below trend of 1.60% over the last 5 years, with actual turns lower at 12.4 times (FY11: 15.0) compared to 14.0 times average over the la
Slide 18: Project Star – Update on progress
Project Star – Update on progress Status Comments Capex □ Project Star capex 91% spent, tracking on time and budget □ Revenue CAGR of 10.2% since FY09 Slots □ Loyalty program significant driver of growth □ Expect continued growth with commissioning of traffic drivers □ Significant increase in produc
Slide 19: Key milestones to realise potential of Echo
Key milestones to realise potential of Echo Milestone Status Make NSW licence competitive 2008 Partially completed Attract experienced casino talent Strong team in place Demerge from Tabcorp Completed June 2011 Completed – growth sustained during The Star Manage disruption during expansion construct
Slide 20: Outlook and summary
Outlook and summary □ Project Star to be completed at the start of 2HFY13 with launch of the Events Centre - true value of The Star to be realised over time as all traffic drivers are implemented □ Balance sheet strengthened and geared to deliver growth post equity raising □ Outlook for FY13 positiv
Slide 21: Agenda
Agenda 1. Overview and Strategy Larry Mullin, CEO 2. Financials Matt Bekier, CFO 3. Q&As Larry Mullin, CEO 20
Slide 22: Echo group financials
Echo group financials $ millions FY 12 FY 11 Growth FY 12 FY 11 Growth b b Actual Actual % Norm Norm % Gross Revenuea 1,689.3 1,648.4 2.5% 1,773.3 1,597.6 11.0% Variable contribution 1,160.1 1,205.7 (3.8%) 1,213.5 1,154.5 5.1% Operating expenditure 754.5 682.0 10.6% 754.5 682.0 10.6% Corporate costs
Slide 23: FY12 revenue analysis
FY12 revenue analysis Percent revenue growth on pcp Observations: The Star 1H12 3Q12 4Q12 FY12 □ VIP volumes up strongly over FY12 EGM 9.7% 2.3% (7.4%) 3.5% □ EGM growth moderated over 2H12 – MGF (incl MTGM) 6.6% 9.9% 9.4% 8.1% PGR 4.0% (4.0%) (3.2%) 0.3% 4Q impacted by a very weak April and VIP (No
Slide 24: Electronic gaming at The Star continues to improve
Electronic gaming at The Star continues to improve □ Electronic gaming market growth has been subdued with the Sydney market flat on the pcp in 3Q12 YTD and Queensland (Brisbane, Gold Coast and Townsville) down 0.3% in 2012 □ The Star continued sustained market share improvements with share of Sydne
Slide 25: Discussion of results – KPIs
Discussion of results – KPIs Key Performance Indicators Actual Normalised Observations: FY12 FY11 FY12 FY11 Revenue % gaming 86% 86% 87% 85% □ Fall in MTGM NMR result of significant product additions over the period at EGM NMR $316 $317 $316 $317 MTGM NMR $335 $373 $335 $373 The Star TG Average Tabl
Slide 26: Cost optimisation program
Cost optimisation program □ Increase in operating expenses (including corporate costs) during FY12, up 10.2% to $827.5 m due to: □ New opening initiatives at The Star – headcount increased by 465 at The Star from June 2011 to December 2011 as new areas were commissioned □ Transition from demerger fr
Slide 27: Significant Items in FY12
Significant Items in FY12 □ Total significant items in FY12 of $74.1m □ Significant pre opening expenses (POE) in 2012 associated with the launch of The Star □ Majority of expenses related to: □ Employee and other costs of new areas prior to opening □ Advertising and promotions around launch events
Slide 28: Bad debts in FY12 driven by SilkStar
Bad debts in FY12 driven by SilkStar □ Total bad and doubtful debt expense of $30.7m predominately driven by SilkStar liquidation and associated provisioning □ Total of $22.9m provision taken on players introduced by SilkStar □ SilkStar “marketing agent” relationship unique with all other players be
Slide 29: Capital expenditure
Capital expenditure □ FY12 capex $346m, including $212m for Project Star and $28m for Project Icon (Queensland expansion) □ Project Star capex of $870m around 91% complete with total project scope unchanged □ Concept development and approvals for Project Icon progressing. Echo continues to work with
Slide 30: Echo funding
Echo funding □ Gross debt of A$1,318m at 30 June 2012 □ Undrawn bank facilities of $80m at 30 June 2012 (before the repayment of $443m post year end) □ Cash balance of $342.6m at 30 June 2012, including $255.6m proceeds from institutional component of Entitlement Offer □ Average debt maturity of 4.6
Slide 31: Balance sheet
Balance sheet 2012 $m 2011 $m □ Net debt of $793.3m after adjusting for the ASSETS Current assets cash and receivable relating to the Cash and cash equivalents Trade and other receivables 342.6 322.3 108.2 87.6 Entitlement Offer completed on 19 July 2012 Inventories 7.4 6.3 Income tax receivable 38.
Slide 32: Agenda
Agenda 1. Overview and Strategy Larry Mullin, CEO 2. Financials Matt Bekier, CFO 3. Q&As Larry Mullin, CEO 31
Slide 33: Appendix
Appendix The Star and Queensland results – Actual Page 33 The Star and Queensland results – Normalised Page 34 Normalisation rates Page 35 Normalisation reconciliation Page 36 32
Slide 34: The Star and Queensland results - Actual
The Star and Queensland results - Actual Actual The Star QLD Total fav/ (unfav) fav/ (unfav) fav/ (unfav) FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 $m on pcp on pcp on pcp EGM 239.4 231.2 3.5% 283.2 279.5 1.3% 522.6 510.7 2.3% Main Gaming Floor 328.7 304.0 8.1% 140.9 135.6 3.9% 469.6 439.6 6.8% PGR 123.3
Slide 35: The Star and Queensland results - Normalised
The Star and Queensland results - Normalised Normaliseda The Star QLD Total fav/ (unfav) fav/ (unfav) fav/ (unfav) FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 $m on pcp on pcp on pcp EGM 239.4 231.2 3.5% 283.2 279.5 1.3% 522.6 510.7 2.3% Main Gaming Floor 328.7 304.0 8.1% 140.9 135.6 3.9% 469.6 439.6 6.8% P
Slide 36: Normalisation rate update
Normalisation rate update □ Echo normalises earnings for its VIP business only given the inherent volatility in that business □ The objective of normalisation is to provide the best reflection of underlying VIP earnings □ Normalisation based on win rate alone is helpful but is not entirely accurate
Slide 37: Normalised results reconciliation – FY11 & FY12
Normalised results reconciliation – FY11 & FY12 Normalised The Star QLD Total fav/ (unfav) fav/ (unfav) fav/ (unfav) FY 12 FY 11 FY 12 FY 11 FY 12 FY 11 $m on pcp on pcp on pcp EGM 239.4 231.2 3.5% 283.2 279.5 1.3% 522.6 510.7 2.3% Main Gaming Floor 328.7 304.0 8.1% 140.9 135.6 3.9% 469.6 439.6 6.8%
Slide 38: Glossary
Glossary CAGR Compound Annual Growth Rate Capital expenditure Unless otherwise stated, capital expenditure is presented on an accruals basis and excludes intangible (capex) assets, investments in associates and equity acquisitions. It is shown gross of any fixed asset disposals proceeds Customer fro
Slide 39: Disclaimer
Disclaimer □ This presentation is prepared for information purposes only and does not take into consideration any individual investor’s circumstances. Echo Entertainment Group recommends investors make their own assessments and seek independent professional advice before making investment decisions.
Echo Entertainment Group — FY2012 Earnings Presentation on 6ix