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China – Galaxy bemoans a year of two halves in 2014

By - 19 March 2015

Galaxy Entertainment reported a nine per cent rise in full-year revenue to US$9.3bn in 2014 although fourth quarter earnings dropped by nearly 25 per cent in what the Macau operator described as a year of two halves.

The operator said 2014 saw ‘two very contrasting half year performances,’ with total gaming revenue in H1 increasing 13 per cent year-on-year and registering an all-time monthly high in February of $36.9bn, up 40 per cent year-on-year. However, a confluence of factors such as the FIFA World Cup, China’s soft economic landing, rising costs and the Chinese austerity program etc., weighed on the market in the second half resulting in three per cent decline in full year total gaming revenue to $341.3bn.
Galaxy Macau celebrated its third year anniversary in May 2014 and continues to be the growth engine of the group. The property posted revenue of $46.9bn, up 18 per cent on the prior year, which translated to a 12 per cent increase in Adjusted EBITDA to $9.9bn.

The mass segment was a key contributing factor in the Group’s earnings. Galaxy Macau’s mass revenue increased from $10.5bn in 2013 to $12.1bn in 2014, up 16 per cent, with StarWorld Macau delivering growth of 12 per cent year-on-year to $4.3bn. In addition, Galaxy Macau also achieved very healthy volume and revenue growth in the VIP segment, with the latter gaining 20 per cent year-on-year to $31.7bn.

The Group’s total gaming revenue for 2014 on a management basis grew nine per cent year-on-year to $71bn driven by solid increases in VIP and Mass. Total Mass revenue increased 12 per cent year-on-year to $18.8bn while VIP revenue climbed eight per cent year-on-year to $50.4bn. Electronic gaming revenue also grew three per cent year-on-year to $1.8bn.

Total VIP rolling chip volume for the year was $941.7bn, up almost 22 per cent on last year. This generated revenue of $31.7bn an increase of 20 per cent year-on-year. The property finished the year with fourth quarter VIP net win of $7.4bn, down 10 per cent year-on-year but up two per cent sequentially.

StarWorld Macau generated revenue of $22.6bn and Adjusted EBITDA of $3.5bn in 2014, decreases of four per cent and six per cent year-on-year, respectively. Fourth quarter Adjusted EBITDA decreased 38 per cent year-on-year to $645m. Strong prior year comparatives and challenging market conditions in the second half of the year were all factors impacting results.

Dr. Lui Che Woo, Chairman of GEG said: “Marking our ten year anniversary in Macau, GEG achieved solid revenue and EBITDA growth of nine per cent and five per cent respectively, despite facing challenging headwinds in the second half of the year. Our ‘World Class, Asian Heart’ service philosophy is imbedded in all aspects of our business and governs every interaction with the customer, enabling us to deliver spectacular and unique holiday experiences.

“In the ten years since we made our debut in Macau, we have built and established world class, award winning hotels and resorts. Today our commitment to supporting Macau to become a World Centre of Tourism and Leisure is stronger than ever. Two ground breaking projects; Galaxy Macau Phase 2 and the rebranded Broadway at Galaxy Macau, are scheduled to open on 27 May 2015. Doubling our footprint to over 1m sq. m., they take our investment in Cotai to $43bn, well on the way to our target of investing $100bn once Phases 3 & 4 are completed. Furthermore, as a good corporate citizen, we always believe that ‘what is taken from the community is to be used for the good of the community’. We are confident that the recently announced$1.3bn GEG Foundation will reinforce GEG’s commitment to promoting a sustainable future for Macau and make a meaningful difference to the lives of young people in Macau and on the Mainland.

“In parallel, reflecting our commitment to returning capital to shareholders, we paid two special dividends totalling $4.9bn in 2014 and subsequently announced another special dividend of $0.28 per share.

“There can be no doubt that the second half of 2014 was one of the most challenging periods in the history of Macau. It is therefore more important than ever that all stakeholders in the industry and Macau pull together in one direction to ensure Macau fulfils its vast economic and social development potential.

“We remain optimistic about the future as the fundamental growth drivers for the market such as increasing domestic consumption in China, a rapidly growing affluent middle class and major planned infrastructure improvements, remain unaltered. Together with our clear roadmap for growth, strong balance sheet and powerful brand, we are confident that we can differentiate ourselves from our peers and attract a greater share of new visitors to Macau.”

This was indeed a highlight for the year with visitor numbers to the Macau region growing faster than the previous year, increasing by eight per cent year-on-year to 31.5m. Visitors from the Mainland increased at an even faster rate of 14 per cent and now represent 67 per cent of total visitors to Macau.

Galaxy expects the structural shift in the market to mass to continue in the coming years as visitors are drawn to a number of major new projects in Macau that will greatly enhance its MICEE, recreational, dining, retail and entertainment offer, and nearby Hengqin undergoes a transformation into a new regional business and leisure hub. Major planned future infrastructure improvements such as the Taipa Ferry Terminal, the Macau Light Rail Transit and the Hong Kong-Zhuhai-Macau Bridge, are expected to facilitate greater visitor numbers by improving access to Macau and connectivity within the territory.

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