Galaxy Entertainment Group’s revenue for the half year was HK$5,392 million, (US$693 million) down from HK$6,332 million (US$813.8 million) in 2007, which reflects the increased competition in the Macau gaming market, particularly within the City Clubs sector. The Group’s earnings before interest expense, taxation, depreciation and amortization (EBITDA) for the half year was HK$356 million (US$45.7 million), down from HK$737 million (US$94.7 million) in 2007, primarily due to higher commissions within the VIP segment.

The company expects to see an improved EBITDA in future periods as a result of the Macau Government policy initiatives to cap commission payments to junket operators. Net loss of HK$7,432 million (US$955.2 million) was largely due to the one-time, non-cash write-down of approximately HK$7 billion (US$899.6 million) in net amount, which relates to Galaxy’s Macau gaming licence and should have a material and positive impact on future results by significantly reducing the annual amortization of the gaming licence.

Dr. Che-woo Lui, Chairman of Galaxy, said, “The first half of 2008 experienced a slowing global economy and continued financial market instability. At a local level, visa restrictions into Macau were introduced as part of broader measures to control the growth of the gaming industry. We are focused on continuing to grow our gaming and entertainment business as demonstrated through the enhancement initiatives being undertaken at StarWorld and our development at Cotai.”

Throughout the past six months Galaxy has been actively working to reposition and upgrade StarWorld’s product offering and customer appeal. These enhancements include: increased marketing into the Chinese mass market, upgrading a major VIP promoter, relocating the Jinmen premium play room to level 10, introducing a new poker room, establishing a sky casino on level 39 and fitting level three for the Jumbo VIP facility. The increased marketing into mainland China, specifically targeting the mass market, has resulted in an increased mass market drop every month this year-to-date. July produced the highest ever mass market drop on level one of StarWorld. The re-fitting of level 3 for the Jumbo VIP facility is nearly completed and is expected to open later this month.

Reporting on the Galaxy Macau mega resort in Cotai, the company believes that the themed ‘Mystical Oasis’ will redefine gaming experience in Macau and set a new standard for hospitality in Asia. At the heart of the development will be a unique casino in terms of architecture and surprising Asian features. This will include a retail boulevard presenting world renowned fashion and cosmetic brands, lush podium gardens, a wave pool, white sand beach, floating private villas and exclusive poolside cabanas. The white and gold façade towering over Cotai is distinctively designed to immediately capture visitor’s attention.

Galaxy says it is focused on the construction of area 1 of the Mega Resort project, which is scheduled for completion in 2009. This will have approximately 5 million sq. ft. of development across two towers, including three luxury hotels and a casino. The hotel in tower one, a 5-star 1,500 room property, will be operated by Galaxy. Two additional hotels in the second tower will be managed by the Japanese luxury hotel group Okura and the world’s leading resort brand, Banyan Tree, respectively. Both are due to open in late 2009.

Four City Club casinos for high rollers are operated by Galaxy in Macau in an increasingly competitive gaming market. The company is actively adjusting the business to current market conditions by driving operational efficiencies. Permira Advisers, Europe's biggest buyout firm, bought 20% of Galaxy in October, its first Asian investment and the sale has helped Galaxy to cut its debt and raise cash to complete the Cotai Mega Resort. (E-09.19.08)

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