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Star Entertainment meets guidance, warns economy is soft

This morning Star Entertainment Group Ltd (ASX: SGR) released its results for the financial year ending June 30, 2019. Below is a summary of the results with comparisons to the prior year. 

  • Adjusted revenue of $2,161m, down 1%
  • Adjusted EBITDA $556.5m, down 2% (in line with guidance of $550m – $560m)
  • Operating expenditure $1,061.3m, flat
  • Adjusted net profit after tax $223.7m, down 8.4%
  • Statutory net profit $198m, up 33.7%
  • Earnings per share 21.6c, up 23.4%
  • Final dividend 10cps, compared to 10.5cps
  • Total dividends 20.5cps, flat
  • Net debt at 1.9x statutory 12 month trailing EBITDA
  • Domestic revenue in early H1 FY2020 marginally up on soft H2 FY 2019

This looks a pretty flat result from the Sydney, Brisbane, and Gold Coast casino operator with management flagging the soft domestic economy as a key headwind for a business leveraged to consumer spending.

” The Group remains focused on executing our long-standing strategy of investing to drive visitation and earnings to our network of properties located in sought-after destinations. The expansion and upgrades of our properties are being executed to plan, through a partnership approach that enables capital-efficient and de-risked growth,” Chief Executive Officer, Matt Bekier said.

Investing in upgrading properties to retain a market-leading status is crucial for an Australia casino operator like Star in order to attract ‘high rollers’ and the general public.
Star is also set to face competition in Sydney once Crown Resorts Limited’s (ASX: CWN) casino and hotel complex at Barangaroo is operating in 2021. In response Star is still seeking permission to develop its own Ritz Carlton joint venture hotel and entertainment mega-property across Sydney harbour, while investing heavily in its existing Star Casino, Sydney.
At $3.58 it trades on 16.6x FY19’s earnings with a 5.7% dividend yield. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.