Star Entertainment Group Limited · ASX:SGR
Star Entertainment — H1 FY2020 Earnings Presentation
41 slides from Star Entertainment's earnings presentation, Feb 20, 2020
Slide 1: ASX Announcement: 2020 Half Year Results Presentation
ASX Announcement 20 February 2020 2020 HALF YEAR RESULTS PRESENTATION Attached is the presentation regarding the financial results of The Star Entertainment Group Limited (The Star Entertainment Group) for the half year ended 31 December 2019, to be presented by Matt Bekier, Managing Director and Ch
Slide 2: 1H FY2020 Results Presentation
THE STAR ENTERTAINMENT GROUP 1H FY2020 RESULTS PRESENTATION THURSDAY 20 FEBRUARY 2020
Slide 3: Basis of Preparation and Non-IFRS Information
THE STAR ENTERTAINMENT GROUP THE STAR ENTERTAINMENT GROUP LIMITED (ASX: SGR) 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 The Star Entertainment Group
Slide 4: Agenda
THE STAR ENTERTAINMENT GROUP AGENDA 1. OVERVIEW MATT BEKIER – CEO 2. FINANCIALS 3. PRIORITIES 4. Q&A 3
Slide 5: Highlights
HIGHLIGHTS EARNINGS UP IN ♦ Normalised EBITDA of $307m, upper range of October 2019 guidance. Normalised EBIT CHALLENGING CONDITIONS up 8.5% ♦ Domestic EBITDA up 6.0%, margin expansion, 92% of group EBITDA ♦ Credible VIP performance given market conditions – turnover up 2.0% COST OUT DELIVERED AND ♦
Slide 6: Highlights
HIGHLIGHTS STRONG DOMESTIC RESULT STATUTORY VS PCP NORMALISED VS PCP – EBITDA UP 6.0% Gross Revenue $1,176m (11.9%) $1,307m 2.4% Net Revenue $1,054m (8.4%) $1,131m 1.9% EBITDA $243m (26.5%) $307m 3.5% EBIT $142m (36.6%) $206m 8.5% NPAT $77m (48.5%) $126m 2.1% ♦ Growth in group normalised EBITDA ♦ St
Slide 7: Coronavirus
CORONAVIRUS ♦ Coronavirus has affected international and domestic visitation, particularly in Sydney IMPACT ♦ Onset coincided with the busy Lunar New Year period ♦ Initial substantial impact on domestic visitation and revenue. Recent signs of return to normal domestic visitation patterns ♦ Inbound v
Slide 8: Sydney
SYDNEY STATUTORY VS PCP NORMALISED VS PCP DOMESTIC EBITDA UP 3.0% Gross Revenue $768m (4.3%) $791m (2.6%) EBITDA $187m 9.3% $191m 0.4% EBIT $128m 21.8% $132m 6.2% ♦ Earnings growth despite revenue decline ♦ Domestic earnings growth continued – revenue up 0.7%, EBITDA up 3.0% ♦ Normalised VIP revenue
Slide 9: Queensland
QUEENSLAND BROAD-BASED NORMALISED STATUTORY VS PCP NORMALISED VS PCP GROWTH Gross Revenue $408m (23.3%) $516m 10.9% EBITDA $57m (64.7%) $116m 9.0% EBIT $14m (88.0%) $74m 12.8% ♦ Strong growth in normalised revenue and EBITDA. Unusually low VIP actual win rate impacts statutory results ♦ Broad-based
Slide 10: Gold Coast
GOLD COAST HIGH QUALITY 1H FY2020 RESULT INVESTMENTS DELIVERING GROWTH ♦ Broad-based growth materially above system ♦ Earnings step up since The Darling Gold Coast and MGF expansion/ upgrade completed 2H FY2018 ♦ Total normalised revenue up 16.8%, EBITDA up 18.2%, EBIT up 28.8% ♦ Returns on growth c
Slide 11: EGM Market Share
EGM MARKET SHARE ♦ Sydney market share consolidated around SYDNEY SYDNEY longer term trends 9.5% 9.4% ♦ Market share declined impacted by strong 9.0% 9.1% 8.8% growth in pcp (slots revenue up 9.9% in 1H FY2019 on pcp, driven by PGRs) ♦ Strong growth in MGF driven by higher volumes (jackpots, game mi
Slide 12: Domestic Performance
DOMESTIC PERFORMANCE ♦ 1H FY2020 continued longer term trends GROWTH TRENDS ♦ Growth trends reflect investments (gaming and non-gaming), service levels, loyalty GROUP SYDNEY QUEENSLAND Domestic Revenue Domestic Revenue Domestic Revenue 1,015 619 624 391 991 Total 4.3% CAGR 588 Total 4.7% CAGR Total
Slide 13: International VIP Rebate
INTERNATIONAL VIP REBATE ♦ International Premium Mass growth continued – turnover up 16.9% TURNOVER UP 2.0% ♦ VIP customers down 4% (pcp up 10%) ♦ $2.0bn front money down 8.5% on pcp, $21.2bn turnover up 2.0% ♦ 0.73% actual win rate lowest for a half since 1H FY2008 ♦ Sydney underperformed (turnover
Slide 14: Agenda
THE STAR ENTERTAINMENT GROUP AGENDA 1. OVERVIEW 2. FINANCIALS HARRY THEODORE – CFO 3. PRIORITIES 4. Q&A 13
Slide 15: Overview
OVERVIEW ♦ Cost base reset. $20m restructure cost out 1H FY2020, ~$45m annualised run rate COST OUT EMBEDDED ♦ Operating costs flat on pcp. Higher domestic volumes, wage inflation, bonuses, and VIP debt provision offset by cost out benefits ♦ $146m 1H FY2020 capex ($95m growth, $51m maintenance), do
Slide 16: EBITDA Bridge
EBITDA BRIDGE $m Normalised EBITDA Composition International VIP Domestic EBITDA up Rebate EBITDA down 6.0% vs pcp 1H FY19 266 31 18.2% vs pcp 1H FY20 282 25 Domestic International 1H FY2019 International 1H FY2019 Sydney Queensland Sydney Queensland 1H FY2020 International 1H FY2020 Statutory VIP R
Slide 17: Cost Out Program
COST OUT PROGRAM ♦ Restructure improves capability, processes and decision-making RESTRUCTURE RECAP ♦ Benefits from lower costs (reduce duplication, economies of scale) and improved efficiency (process improvements, automation, faster decisions) ♦ Customer service levels maintained – no enterprise a
Slide 18: Capital Expenditure
CAPITAL EXPENDITURE QWB AND FIRST JV TOWER EQUITY CONTRIBUTIONS GROUP CAPEX REDUCING COMPLETE 2H CY2020 ♦ FY2020 expected capex of ~$250m includes Sovereign ♦ QWB equity contributions to complete 2H CY2020. (opening May 2020) Remainder capex funded by project level debt ♦ FY2021 expected capex of ~$
Slide 19: Profit and Loss
PROFIT AND LOSS $M 1H FY2020 fav/(unfav) 1H FY2020 2 fav/(unfav) ♦ Unusually 2 low 0.73% 2 actual win rate STATUTORY NORMALISED 2 2 drives difference between statutory and Domestic Gaming revenue 862.3 1.7% 862.3 1.7% normalised results International VIP Rebate 154.1 (54.2%) 285.7 2.0% Non-gaming an
Slide 20: Balance Sheet
BALANCE SHEET $M DEC 2019 JUN 2019 DEC 2018 ♦ Capital programs progressed ASSETS Current Assets • Increased assets (property, plant Cash and cash equivalents 98.0 114.3 109.2 Trade and other receivables 210.8 235.5 173.0 and equipment), mainly Sydney Inventories 18.7 17.5 17.7 Sovereign Income tax r
Slide 21: Agenda
THE STAR ENTERTAINMENT GROUP AGENDA 1. OVERVIEW 2. FINANCIALS 3. PRIORITIES MATT BEKIER – CEO 4. Q&A 20
Slide 22: Recap: Delivering on Our Strategy
RECAP: DELIVERING ON OUR STRATEGY OUR STRATEGY OUR DELIVERY 1 Solid domestic earnings growth ♦ Signature gaming ♦ Premium hotel rooms ♦ Slots market share gains, consolidation ♦ F&B ♦ Gold Coast growth ♦ Retail (on site and ♦ Restructure cost benefits embedded proximate) Investments 2 Effective capi
Slide 23: Sydney
SYDNEY WORKS ON TIME, BUDGET ♦ Upgraded and expanded Sovereign to open May 2020 ♦ New Oasis (currently interim Sovereign) to open June 2020 ♦ Strategies to mitigate impact of new entrant progressing to plan • Property – PGRs, MGF, Non-gaming • Customer – loyalty, service, CRM • People – retention pl
Slide 24: Gold Coast
GOLD COAST JV TOWERS PROGRESSED ♦ Dorsett Hotel and Residences (first JV tower) on time and budget for FY2022 completion. $260m project debt funding in place, first draw down mid CY2020 ♦ Second JV tower presales underway. Construction subject to presales and all other approvals CAPITAL EFFICIENT MA
Slide 25: Queen's Wharf Brisbane
QUEEN’S WHARF BRISBANE WORKS ON TIME, BUDGET ♦ Shell, core and façade underway in line with project timetable and budget ♦ ~60% of project costs under lump sum contract terms ♦ Further ~15% of project costs under contract expected by mid CY2020 ♦ Project level debt funding targeting financial close
Slide 26: Queen's Wharf Brisbane
QUEEN’S WHARF BRISBANE CONCEPT IMAGE CONCEPT IMAGE QWB IRD FROM SOUTHBANK VIEW OF SKYDECK AND SOUTHBANK FROM IRD CONCEPT IMAGE CONCEPT IMAGE BRISBANE STEPS GEORGE & MARGARET STREET VIEW 25
Slide 27: Priorities
PRIORITIES IMPROVE AND DE-RISK ♦ Leverage improved capabilities RETURNS 1 Deliver on operating model ♦ Retain efficiencies from reset cost base ♦ Focus on Sydney PGR, Group MGF ♦ Sydney ♦ Gold Coast masterplan 2 Deliver on investment strategy ♦ Queen’s Wharf Brisbane ♦ Chow Tai Fook/ Far East Consor
Slide 28: Priorities – Address Crown Sydney
PRIORITIES – ADDRESS CROWN SYDNEY THE STAR SYDNEY The Star SydneyREVENUE BREAKDOWN Revenue Breakdown (CY2019) (CY2019) PRIORITY COMMENTS 1 PGRs ♦ Sovereign opening May 2020 1,700 ♦ Oasis opening June 2020 2 Property ♦ Significant upgrades completed ♦ Incremental MGF and F&B upgrades, The • Network w
Slide 29: Agenda
THE STAR ENTERTAINMENT GROUP AGENDA 1. OVERVIEW 2. FINANCIALS 3. PRIORITIES 4. Q&A 28
Slide 30: Appendix
THE STAR ENTERTAINMENT GROUP APPENDIX STATUTORY RESULTS 30 NORMALISED RESULTS 31 AASB 16 LEASES 32 OPERATIONAL METRICS 33 INTERNATIONAL VIP REBATE NORMALISATION 34 INTERNATIONAL VIP REBATE RECEIVABLES 35 CASH CONVERSION AND FUNDING 36 KEY FINANCIAL METRICS 37 KEY SUSTAINABILITY METRICS 38 GLOSSARY 3
Slide 31: Statutory Results
APPENDIX STATUTORY RESULTS SYDNEY QUEENSLAND TOTAL $M 1H FY20 1H FY19 fav/(unfav) fav/(unfav) 1H FY20 1H FY19 fav/(unfav) fav/(unfav) 1H FY20 1H FY19 fav/(unfav) fav/(unfav) Slots 180.1 180.5 ( 0.4) (0.2%) 176.1 169.7 6.4 3.8% 356.2 350.2 6.0 1.7% Domestic Tables 358.8 359.7 ( 0.9) (0.3%) 147.3 137.
Slide 32: Normalised Results
APPENDIX NORMALISED RESULTS SYDNEY QUEENSLAND TOTAL $M 1H FY20 1H FY19 fav/(unfav) fav/(unfav) 1H FY20 1H FY19 fav/(unfav)fav/(unfav) 1H FY20 1H FY19 fav/(unfav) fav/(unfav) Slots 180.1 180.5 ( 0.4) (0.2%) 176.1 169.7 6.4 3.8% 356.2 350.2 6.0 1.7% Domestic Tables 358.8 359.7 ( 0.9) (0.3%) 147.3 137.
Slide 33: AASB 16 Leases
APPENDIX AASB 16 LEASES ♦ The Group adopted the new AASB 16 (Leases) accounting standard from 1 July 2019, summarised below. Note E of the Financial Report contains further details. ♦ The effect of adopting AASB 16 on the balance sheet is as follows: $M 30 JUNE 2019 ADOPTION ADJUSTMENT 1 JULY 2019 P
Slide 34: Operational Metrics
APPENDIX OPERATIONAL METRICS SYDNEY QUEENSLAND OPERATIONAL METRICS 1H FY2020 1H FY2019 1H FY2020 1H FY2019 Slots Revenue ($m) 180 180 176 170 NMR/machine/day 654 659 314 303 MTGMs Revenue ($m) 51 52 21 21 NMR/machine/day 456 494 305 309 Domestic Tables (excl. MTGMs) Revenue ($m) 308 307 126 117 Hold
Slide 35: International VIP Rebate Normalisation
APPENDIX INTERNATIONAL VIP REBATE NORMALISATION HISTORICAL ACTUAL WIN RATE (%) ACTUAL WIN RATE VS THEORETICAL 2.00% ♦ 1H FY2020 win rate is unusually low 1.75% 1.62% 1.62% 1.55% ♦ 1H FY2020 actual win rate of 0.73% includes International Premium Mass 1.50% 1.33% 1.50% 1.27% (0.69% excluding Internat
Slide 36: International VIP Rebate Receivables
APPENDIX INTERNATIONAL VIP REBATE RECEIVABLES INTERNATIONAL VIP ♦ 31 December 2019 past due not REBATE BUSINESS 30 DAYS - impaired receivables down on 31 0 - 30 DAYS 1 - 3 YEARS TOTAL RECEIVABLES (BEFORE 1 YEAR PROVISIONS) December 2018 • 30 days to 1 year down December 2019 ($m) • 1 to 3 years up o
Slide 37: Cash Conversion and Funding
APPENDIX CASH CONVERSION AND FUNDING CATEGORY CASH CONVERSION DEC-19 DEC-18 $M Cash flows from operating activities before interest and income tax Net cash receipts from customers (inclusive of GST) 1,063.9 1,153.0 Payments to suppliers and employees (inclusive of GST) (598.6) (600.0) Payment of gov
Slide 38: Key Financial Metrics
APPENDIX KEY FINANCIAL METRICS REVENUE GEARING Normalised Gross Revenue ($m) Domestic Revenue ($m) Interest Cover (EBIT/ Net Gearing (Net Debt/ Statutory EBITDA) (times) Interest Expense ) (times) 3,000 2,500 3.0 12.0 2,500 2,000 2.5 10.0 2,000 1,335 1,224 1,500 1,164 926 8.0 2.0 897 921 1,500 1,000
Slide 39: Key Sustainability Metrics
APPENDIX KEY SUSTAINABILITY METRICS GLOBAL LEADER Casino and Gaming Category, 2016, 2017, 2018, 2019 25% of energy from renewable 7.5m pa plastic straws diverted ENVIRONMENTAL sources from landfill 12,600 kL pa water saved from #1 in environmental and energy waterless woks practice, Sydney, AHA 2018
Slide 40: Glossary
APPENDIX GLOSSARY TERM DEFINITION CAGR Compound Annual Growth Rate Capital expenditure Unless otherwise stated, capital expenditure is presented on an accruals basis and excludes investments in (capex) associates and equity acquisitions D&A Depreciation and Amortisation Domestic Tables Domestic Tabl
Slide 41: The Star Entertainment Group
THE STAR ENTERTAINMENT GROUP
Star Entertainment Group — H1 FY2020 Earnings Presentation on 6ix