Australia’s Star Entertainment Group has cut its EBITDA forecast for fiscal 2019 and says it will slash hundreds of jobs to counter the impact of a sharp slowdown in its VIP business.
The company said it was accelerating a plan to reduce expenses by $40 million to $50 million and as part of the cost-cutting measures about 300 to 400 non customer-facing jobs will be lost.
The company said there had been no improvement in the softening sentiment in the international VIP sector since the first half, with turnover in H2 up until June 8 dropping just over 31 percent compared with the prior calendar year.
The group also saw a slowdown in its domestic business which saw a gain of just 0.3 percent in the second-half period, making for a 3.1 percent gain in revenue for the year as a whole.
The group said it now expects full-year normalised EBITDA to be in a range of $550 million to $560 million, down from $568 million in the prior year. That’s some 3 percent below its original forecasts.
“The slowing of domestic growth in 2H FY2019 reflects a combination of more challenging macroeconomic conditions across our markets, lower hold rates on tables games in private gaming rooms and the impact of disruption from capital works at The Star Sydney,” the company said in a statement.
In a later conference call, Star CEO Matt Bekier was cited by local media as saying the VIPs are still coming, but not spending at much or staying as long.
“The positive is the customers are still coming,” Bekier was cited as saying in the Sydney Morning Herald said. “They just don’t spend as much and take as many risks as they did in the past.”
He added that some high rollers were only spending a couple of days at the casino, rather than the week they may have spent beforehand. He also said he didn’t see any significant pick up on the horizon.
Shares in the company, which operates properties in Sydney, Brisbane and the Gold Coast, plummeted 15.7 percent on the news.
A weakening in China’s economy, coupled with the escalating trade war between Washington and Beijing is taking its toll on sentiment among China’s wealthy.