GEG announces Q2 & INTERIM RESULTS 2020
Tokyo, 13 August 2020 – Galaxy Entertainment Group (“GEG”, “Company” or the “Group”) (HKEx stock code: 27) today reported results for the three month and six month periods ended 30 June 2020. (All amounts are expressed in Hong Kong dollars unless otherwise stated)
LETTER FROM THE CHAIRMAN OF GALAXY ENTERTAINMENT GROUP
I would like to take this opportunity to update you on the status of GEG during the period of COVID-19. Q2 2020 continued to be a difficult period for the community and businesses globally including Macau and GEG.
First and foremost, the Macau government continues to perform admirably throughout the pandemic with proactive and decisive leadership and generating community support. They are clearly focused on public health and safety as well as economic and social stability. As a responsible corporation GEG continues to work closely with and support the Macau Government, local SMEs and local employment. COVID-19 had an adverse impact on our financial results in Q2 and in the first half of 2020, as Mainland China, Hong Kong and Macau faced travel restrictions and social distancing. These restrictions resulted in a significant reduction in visitor arrivals and subsequent decline in revenue. With minimal revenue and ongoing staff costs, the Group’s Adjusted EBITDA was negative $1.4 billion for the second quarter.
We are pleased that Macau and Guangdong have taken the critical step in creating a travel bubble followed most notably, by the reinstatement of the Individual Visit Scheme (IVS) and group travel for Zhuhai Hukou residents and Zhuhai Resident Permit holders to visit Macau effective yesterday. The government subsequently announced that they will expand the IVS and group travel beyond Zhuhai to Guangdong Province by the end of August 2020 and Nationwide by the end of September 2020 provided the pandemic situation continues to improve. Despite these important positive early steps, it is premature to comment on how quickly the market may recover. Going forward we expect to experience further head winds from the pandemic, which will have an adverse impact on our financial performance. However in the medium to longer term, we continue to remain optimistic in the outlook for Macau in general and GEG specifically.
We continue to make good progress with our development projects, including Cotai Phases 3 & 4 as well as existing enhancement projects at our resorts. These projects will help support the Macau Government’s vision to develop Macau into a World Center of Tourism and Leisure. We also continue to make progress with our international expansion plans and we do acknowledge that timelines for Japan may be impacted by the worldwide pandemic of COVID-19, however we can adjust accordingly and we remain committed to our Japan expansion plans.
Our balance sheet remains strong with $49.8 billion in cash and liquid investments and $43.6 billion of net cash as well as virtually unlevered. On 24 April 2020, GEG paid a special dividend of $0.45 per share. Given the ongoing impact of COVID-19, today the Board has decided not to declare a dividend.
During this period of very low revenue our focus has shifted from revenue generation to effective cost control. However, it is important to not cut costs excessively and therefore adversely impact our ability to deliver upon customer service standards when business returns. We remain committed to support the Macau Government, local employment and SMEs.
I wish to assure you that the management and staff have been working diligently in regards to health, safety and hygiene so that our resorts are operationally ready as travel restrictions ease. These included the introduction of a number of policies and procedures to elevate the cleaning and hygiene standards across our resorts. The wellbeing of our staff and guests is our highest priority. It is pleasing to note that there have been no new locally transmitted COVID-19 cases in Macau since 9 April 2020. The Macau Government, health authorities and the community should be commended for this outstanding achievement.
At GEG we take our corporate social responsibility most seriously. Some of our efforts during the first half of 2020 have included making a cash contribution of $100 million, to assist in the fight against COVID-19. In addition, the Galaxy Entertainment Group Foundation subscribed $100 million to a special purpose Macau COVID-19 Recovery Bond. We also donated 1 million face masks, financially contributed to the deep cleaning of 35 local schools, provided numerous food & hygiene hampers to the needy and provided support to the broader community to name a few.
We would like to thank everyone from the Macau Government, the community and the GEG team who supported the Company in these difficult times. We are proud to report that virtually all team members made voluntary contributions including the Board which also waived their Director’s fee, management who participated in our non-paid leave program and the many group members who joined our Flexi Family Care Program. At GEG we have tried to spread the impact of COVID-19 fairly across all team members as we prefer not to engage in redundancies.
Finally, I would like to acknowledge the efforts of the health and emergency personnel who have worked so hard to ensure the safety of Macau and I would also like to thank our staff for being so supportive of our Company during this period of time. Thank you.
Dr. Lui Che Woo
GBM, MBE, JP, LLD, DSSc, DBA
Q2 & INTERIM 2020 RESULTS HIGHLIGHTS
GEG: Well Capitalized to Weather the Storm
- 1H Group Net Revenue of $6,223 million, down 76% year-on-year
- 1H Group Adjusted EBITDA of $(1,087) million Vs $8,315 million in 1H 2019
- 1H Net Loss Attributable to Shareholders of $2,856 million Vs profit of $6,680 million in 1H 2019
- Q2 Group Net Revenue of $1,153 million, down 91% year-on-year and down 77% quarter-on-quarter
- Q2 Group Adjusted EBITDA of $(1,370) million, Vs $4,332 million in Q2 2019 and $283 million in Q1 2020
- Played lucky in Q2 which increased Adjusted EBITDA by approximately $3 million, normalized Q2 Adjusted EBITDA of $(1,373) million, Vs $3,983 million in Q2 2019 and $199 million in Q1 2020
- LTM Adjusted EBITDA of $7,077 million, down 57% year-on-year and down 45% quarter-on-quarter
Galaxy Macau: Adjusting Operations to the Current Business Environment
- 1H Net Revenue of $3,835 million, down 80% year-on-year
- 1H Adjusted EBITDA of $(848) million Vs $6,258 million in 1H 2019
- Q2 Net Revenue of $311 million, down 97% year-on-year and down 91% quarter-on-quarter
- Q2 Adjusted EBITDA of $(1,177) million, Vs $3,235 million in Q2 2019 and $329 million in Q1 2020
- Played lucky in Q2 which increased Adjusted EBITDA by approximately $12 million, normalized Q2 Adjusted EBITDA of $(1,189) million, Vs $2,982 million in Q2 2019 and $256 million in Q1 2020
- Hotel occupancy for Q2 across the five hotels was 4%
StarWorld Macau: Adjusting Operations to the Current Business Environment
- 1H Net Revenue of $1,083 million, down 81% year-on-year
- 1H Adjusted EBITDA of $(202) million Vs $1,892 million in 1H 2019
- Q2 Net Revenue of $81 million, down 97% year-on-year and down 92% quarter-on-quarter
- Q2 Adjusted EBITDA of $(306) million, Vs $943 million in Q2 2019 and $104 million in Q1 2020
- Played unlucky in Q2 which decreased Adjusted EBITDA by approximately $9 million, normalized Q2 Adjusted EBITDA of $(297) million, Vs $851 million in Q2 2019 and $92 million in Q1 2020
- Hotel occupancy for Q2 was 4%
Broadway Macau: A Unique Family Friendly Resort, Strongly Supported By Macau SMEs
- 1H Net Revenue of $65 million Vs $298 million in 1H 2019
- 1H Adjusted EBITDA of $(97) million Vs $21 million in 1H 2019
- Q2 Net Revenue of $12 million Vs $147 million in Q2 2019 and $53 million in Q1 2020
- Q2 Adjusted EBITDA of $(52) million Vs $6 million in Q2 2019 and $(45) million in Q1 2020
- There was no luck impact on Q2 Adjusted EBITDA
- Hotel occupancy for Q2 was 9%
Balance Sheet: Maintain a Healthy and Liquid Balance Sheet
- Cash and liquid investments were $49.8 billion and net cash was $43.6 billion as at 30 June 2020
- Debt of $6.2 billion as at 30 June 2020 primarily associated with treasury yield management program
- Paid the previously announced special dividend of $0.45 per share on 24 April 2020
- Given the ongoing impact of COVID-19, today the Board has decided not to declare a dividend
Development Update: Continue to Pursue Development Opportunities
- We continue to make ongoing progressive enhancements to our resorts to ensure that they remain competitive and appealing to our guests
- Cotai Phases 3 & 4 – Continue with development works for Phases 3 & 4, with a strong focus on non-gaming, primarily targeting MICE, entertainment, family facilities and also including gaming, given COVID-19, timelines may be impacted
- Hengqin – Refining plans for a lifestyle resort to complement our high-energy entertainment resorts in Macau
- International – Continuously exploring opportunities in overseas markets, including Japan