Galaxy Entertainment Group Announces Q4 & Annual Results 2018

Full Year Adjusted EBITDA of $16.9 Billion, Up 19% YoY

Q4 Adjusted EBITDA of $4.3 Billion, Up 4% YoY & Up 12% QoQ

Announced Another Special Dividend of $0.45 Per Share

HONG KONG, Feb. 28, 2019 /PRNewswire/ -- Galaxy Entertainment Group ("GEG", "Company" or the "Group") (HKEx stock code: 27) today reported results for the three months and twelve months periods ended 31 December 2018. (All amounts are expressed in HKD unless otherwise stated)

Q4 & FULL YEAR 2018 RESULTS HIGHLIGHTS

GEG : Delivered Solid Performance, Proceeding On A $1.5 Billion Property Enhancement Program For Galaxy Macau™ And StarWorld Macau

• Full Year Group Net Revenue* of $55.2 billion, up 14% year-on-year
• Full Year Group Adjusted EBITDA of $16.9 billion, up 19% year-on-year
• Full Year net profit attributable to shareholders ("NPAS") of $13.5 billion, an increase of 29% year-on-year including $0.6 billion of non-recurring charges
• Full year Adjusted NPAS of $14.1 billion, up 28% year-on-year after adjusting for non-recurring charges
• Q4 Group Net Revenue* of $14.2 billion, up 2% year-on-year and up 9% quarter-on-quarter
• Q4 Group Adjusted EBITDA of $4.3 billion, up 4% year-on-year, up 12% quarter-on-quarter
• Played lucky in Q4 which increased Adjusted EBITDA by approximately $77 million, normalized Q4 Adjusted EBITDA of $4.3 billion, up 4% year-on-year and up 1% quarter-on-quarter

Galaxy Macau™: Continued Solid Performance Driven By Mass And Non-gaming

• Full Year Net Revenue* of $39.5 billion, up 14% year-on-year
• Full Year Adjusted EBITDA of $12.9 billion, up 16% year-on-year
• Q4 Net Revenue* of $10.4 billion, up 2% year-on-year and up 11% quarter-on-quarter
• Q4 Adjusted EBITDA of $3.4 billion, up 2% year-on-year and up 16% quarter-on-quarter
• Played lucky in Q4 which increased Adjusted EBITDA by approximately $191 million, normalized Q4 Adjusted EBITDA of $3.2 billion, up 1% year-on-year and down 1% quarter-on-quarter
• Hotel occupancy for Q4 across the five hotels was virtually 100%

StarWorld Macau: Continued Solid Performance Driven By Mass

• Full Year Net Revenue* of $12.2 billion, up 18% year-on-year
• Full Year Adjusted EBITDA of $3.8 billion, up 28% year-on-year
• Q4 Net Revenue* of $3.0 billion, up 12% year-on-year and up 2% quarter-on-quarter
• Q4 Adjusted EBITDA of $893 million, up 19% year-on-year and down 4% quarter-on-quarter
• Played unlucky in Q4 which decreased Adjusted EBITDA by approximately $115 million, normalized Q4 Adjusted EBITDA of $1.0 billion, up 18% year-on-year and up 8% quarter-on-quarter
• Hotel occupancy for Q4 was virtually 100%

Broadway Macau™: A Unique Family Friendly Resort, Strongly Supported By Macau SMEs

• Full Year Net Revenue* of $562 million, up 9% year-on-year
• Full Year Adjusted EBITDA of $32 million versus $10 million in FY 2017
• Q4 Net Revenue* of $144 million, down 1% year-on-year and down 1% quarter-on-quarter
• Q4 Adjusted EBITDA of $8 million versus $7 million in Q4 2017 and $9 million in Q3 2018
• Played lucky in Q4 which increased Adjusted EBITDA by approximately $1 million, normalized Q4 Adjusted EBITDA of $7 million versus $3 million in Q4 2017 and $13 million in Q3 2018
• Hotel occupancy for Q4 was 98%

Balance Sheet: Healthy Balance Sheet

• Cash and liquid investments was $45.8 billion and net cash was $37.0 billion as at 31 Dec 2018
• Debt of $8.8 billion as of 31 Dec 2018 primary reflects ongoing yield management initiative
• Paid two special dividends: $0.41 per share on 27 April 2018 and $0.50 per share on 26 October 2018
• Announced another special dividend of $0.45 per share payable on or about 26 April 2019

Development Update: Continuing to Pursue Development Opportunities

• Cotai Phases 3 & 4 -- Continue to move forward with Phases 3 & 4, with a strong focus on non-gaming, primarily targeting MICE, entertainment, family facilities and also including gaming
• Hengqin -- Plans moving forward to develop a low-density integrated resort to complement our high-energy entertainment resorts in Macau
• International -- Continuously exploring opportunities in overseas markets, including Japan

Dr. Lui Che Woo, Chairman of GEG said:

"I am pleased to provide an updated on our financial results for Q4 and full year 2018.  At GEG, we continue to drive every segment of the business with a particular focus on the mass business and continue to allocate resources to their most efficient use. Our efforts are reflected in full year Adjusted EBITDA of $16.9 billion. This was despite continuing competitive openings in both Macau and regionally and a number of geo-political and economic issues that impacted consumer sentiments. Our cash and liquid investments were $45.8 billion and net cash was $37.0 billion.

During the year, we purchased a minority equity stake of approximately 4.9% of Wynn Resorts.

We are pleased to announce another special dividend of $0.45 per share to be paid on or about 26 April 2019. Additionally, the Group paid two special dividends of $0.41 and $0.50 per share in 2018. The Group will continue to focus on both our Macau development plans and international expansion ambitions.

During 2018, Macau experienced another strong typhoon in September which resulted for the first time in the closure of casinos for a modest period of time. Due to the careful planning by the Macau government, damage to Macau and properties was minimal and there were only minor personal injuries but more importantly there were no fatalities.

Finally, I would like to extend my sincere appreciation to all of our committed team members whom without their commitment we would not have been able to achieve these solid financial results. Our team members continue to deliver exceptional customer experiences and 'World Class, Asian Heart' service each and every day."

Macau Market Overview

Investor sentiment throughout 2018 experienced periods of volatility. This was a result of a number of geo-political and economic issues such as global trade tensions, the slowing Chinese economy, rising interest rates, currency fluctuations and also the introduction of smoking restrictions, to name a few. Despite the above, GGR for full year 2018 was $294.0 billion, up 14% year-on-year. Quarterly GGR in Q4 2018 was $76.5 billion, up 9% year-on-year and up 7% quarter-on-quarter.       

In 2018, visitor arrivals to Macau were 35.8 million, up 10% year-on-year, in which visitors from Mainland China grew at a faster rate of 14% year-on-year. Overnight visitors accounted for 52% of total visitation. The average length of stay for overnight visitors increased 0.1 day year-on-year to 2.2 days. The visitation growth in 2018 was also assisted by the improvements in infrastructure, including the opening of the Hong Kong-Shenzhen-Guangzhou high speed train, the Hong Kong-Zhuhai-Macau Bridge and further relaxation of visas for Mainland Chinese to enter Macau.

Summary of Accounting Changes During 2018

In accordance with the Hong Kong Institute of Certified Public Accountants (HKICPA), GEG adopted a new accounting standard in reporting revenue from gaming operation beginning from 1 January 2018.  GEG's first mandatory full year reporting period is the twelve months period ended 31 December 2018. The main changes due to this reporting standard are that commission and incentives are to be deducted from the net wins from gaming operation to arrive at the net gaming revenue. In addition, GEG now also reports all complimentary provided to gaming customers at market rate. The comparative figures of revenue in 2017 have been restated to conform with the current period's presentation.

In summary the impact of these accounting changes will be lower reported gaming revenue, an increased Adjusted EBITDA margin, and an increase in non-gaming revenue such as hotels and F&B. There will be no change in the Adjusted EBITDA or NPAS.

Group Financial Results

Full Year 2018

The Group posted net revenue of $55.2 billion, up 14% year-on-year, and generating Adjusted EBITDA of $16.9 billion, up 19% year-on-year in 2018. Net profit attributable to shareholders was $13.5 billion, up 29% year-on-year. Galaxy Macau™'s Adjusted EBITDA was $12.9 billion, up 16% year-on-year. StarWorld Macau's Adjusted EBITDA was $3.8 billion, up 28% year-on-year. Broadway Macau™'s Adjusted EBITDA was $32 million versus $10 million in 2017.

GEG experienced bad luck in its gaming operation during 2018, which decreased its Adjusted EBITDA by approximately $484 million. Normalized 2018 Adjusted EBITDA grew 22% year-on-year to $17.3 billion.

https://photos.prnasia.com/prnh/20190228/2389078-1-a

The Group's total GGR on a management basis^[1] in 2018 was $67.2 billion, up 16% year-on-year. Total mass table GGR was $27.5 billion, up 14% year-on-year. Total VIP GGR was $37.3 billion, up 18% year-on-year. Total electronic GGR was $2.5 billion, up 15% year-on-year.

Balance Sheet and Special Dividends

As of 31 December 2018, cash and liquid investments were $45.8 billion and net cash was $37.0 billion. Total debt was $8.8 billion as at 31 December 2018, this was due solely to an ongoing treasury management exercise where interest income on cash holdings exceeds corresponding borrowing costs. Our balance sheet combined with cash flow from operations allows us to return capital to shareholders via dividends and to fund both our Macau development pipeline and international expansion ambitions.

In 2018, GEG returned capital to shareholders by paying two special dividends of $0.41 per share and $0.50 per share on 27 April 2018 and 26 October 2018, respectively. The Group announced another special dividend of $0.45 per share to be paid on or about 26 April 2019.

Q4 2018

During Q4 2018, the Group's net revenue increased 2% year-on-year and increased 9% quarter-on-quarter to $14.2 billion. Adjusted EBITDA increased 4% year-on-year and increased 12% quarter-on-quarter to $4.3 billion. Galaxy Macau™'s Adjusted EBITDA increased 2% year-on-year and increased 16% quarter-on-quarter to $3.4 billion. StarWorld Macau's Adjusted EBITDA increased 19% year-on-year and decreased 4% quarter-on-quarter to $893 million. Broadway Macau™'s Adjusted EBITDA was $8 million versus $9 million in Q3 2018 and $7 million in Q4 2017.

During Q4 2018, GEG played lucky in its gaming operations which increased  Adjusted EBITDA by approximately $77 million. Normalized Q4 2018 Adjusted EBITDA grew 4% year-on-year and increased 1% quarter-on-quarter to $4.3 billion.

https://photos.prnasia.com/prnh/20190228/2389078-1-b

The Group's total GGR on a management basis[6] in Q4 2018 was $17.0 billion, up 2% year-on-year and up 8% quarter-on-quarter. Total mass table GGR was $7.3 billion, up 10% year-on-year and up 11% quarter-on-quarter. Total VIP GGR was $9.0 billion, down 5% year-on-year and up 5% quarter-on-quarter. Total electronic GGR was $681 million, up 24% year-on-year and up 10% quarter-on-quarter.

Galaxy Macau™

Galaxy Macau™ is the primary contributor to Group revenue and earnings. Net revenue in the year was up 14% year-on-year to $39.5 billion. Adjusted EBITDA was up 16% year-on-year to $12.9 billion. Adjusted EBITDA margin under HKFRS was 33% (2017: 32%).

Galaxy Macau™ experienced bad luck in its gaming operations which decreased its Adjusted EBITDA by approximately $434 million in 2018. Normalized 2018 Adjusted EBITDA grew 19% year-on-year to $13.3 billion.

In Q4 2018, Galaxy Macau™'s net revenue was $10.4 billion, up 2% year-on-year and up 11% quarter-on-quarter. Adjusted EBITDA was $3.4 billion, up 2% year-on-year and up 16% quarter-on-quarter. Adjusted EBITDA margin under HKFRS was 33% (Q4 2017: 33%).

Galaxy Macau™ played lucky in its gaming operations which increased its Adjusted EBITDA by approximately $191 million in Q4 2018. Normalized Q4 Adjusted EBITDA was $3.2 billion, up 1% year-on-year and down 1% quarter-on-quarter.

The combined five hotels registered strong occupancy was virtually 100% for both the full year and Q4.

StarWorld Macau

StarWorld Macau's net revenue in the year was up 18% year-on-year to $12.2 billion. Adjusted EBITDA was up 28% year-on-year to $3.8 billion. Adjusted EBITDA margin under HKFRS increased to 31% (2017: 29%).

StarWorld Macau experienced bad luck in its gaming operations which decreased its Adjusted EBITDA by approximately $48 million in 2018. Normalized 2018 Adjusted EBITDA grew 30% year-on-year to $3.9 billion.

In Q4 2018, StarWorld Macau's net revenue was $3.0 billion, up 12% year-on-year and up 2% quarter-on-quarter. Adjusted EBITDA was $893 million, up 19% year-on-year and down 4% quarter-on-quarter. Adjusted EBITDA margin under HKFRS increased to 30% (Q4 2017: 28%).

StarWorld Macau played unlucky in its gaming operations which decreased its Adjusted EBITDA by approximately $115 million in Q4 2018. Normalized Q4 Adjusted EBITDA was $1.0 billion, up 18% year-on-year and up 8% quarter-on-quarter.

Hotel occupancy was virtually 100% for both the full year and Q4.