Star Entertainment remains in profit despite Covid-19 impact in H1

Statutory revenue for the six months through to 31 December 2020 amounted to $741.4m, down from $1.05bn in the corresponding period in the previous year.

This decline was primarily due to enforced casino property closures and on-site restrictions as a result of Covid-19. These measures included customer capacity limits, social distancing requirements and the closure of both state and national borders to limit the spread of the virus.

Star also published details of its normalised results for the period, with revenue amounting to $733.1m, down 35.2% on the previous year.

Normalised results reflect underlying performance, removing win rate volatility for international VIP customers. Star said the closure of international borders saw VIP turnover fall 97.0% to €654.0m in H1, meaning the difference between normalised and statutory results for the half was low.

Gross normalised revenue in Sydney was down 51% year-on-year to $390.0m, but remained Star’s core market. Star’s operations in Sydney were disrupted more than elsewhere, due to the region being subject to more restrictions than elsewhere in the country.

The Star Sydney closed on 23 March last year and did not reopen until 1 June to 500 members only. This was increased to 5,000 customers from 1 July, but cut to 1,800 a few weeks later due to a rise in local Covid-19 cases.

Capacity was increased to 10,000 on 7 December, but reduced to just 1,800 again on 21 December. The 10,000 limit came back in on 12 February this year, with customers no longer required to wars masks.

Elsewhere, in Queensland, gross revenue on the Gold Coast dropped 48% year-on-year to $172.0m, but gross revenue in Brisbane only fell by 3% to $180.0m.

Properties in Brisbane and on the Gold Coast did not face as many fluctuations in operating restrictions as Star Sydney, with the rules having similar throughout the year. The casinos closed on 23 March and reopened to 2,500 customers from 3 July, with this capacity limit increased to 5,000 on 17 November.

“Comprehensive actions to mitigate the impact of Covid-19 were implemented, safeguarding staff and customers, securing debt covenant waivers and amendments, and preserving cash,” Star managing director and chief executive Matt Baker said.

“The properties reacted expediently to the many changes to operating conditions throughout the period.”

In terms of costs for the first half, Covid-19 restrictions meant that spending was down across the board. Staff costs were cut by 34.9% to $217.6m, while cost of sales also fell 47.5% to $27.0m. Property costs were lowered to $27.4m, while advertising and promotion spend fell to $23.5m. 

Statutory earnings before interest, tax, depreciation and amortisation (EBITDA) was 4.2% lower at $741.4m – or down 26.6% to $225.7m on a normalised basis.

After accounting for $31.2m in net finance costs, statutory profit before tax was $75.8m, down 31.0% from last year. Star paid $24.6m in tax, leaving a statutory net profit of $51.2m, down 33.1% year-on-year, while normalised net profit was 50.0% lower at $63.2m.

However, Star also noted a negative impact of $10.8m in regards to change in fair value of cash flow hedges taken to equity. As such, statutory compressive net profit for the period amounted to $40.4m, a drop of 47.3% on H1 of the previous year.

“The Star’s business is fundamentally strong,” Baker said. “The long-term value uplift from investments in our network of integrated resorts and continuing operational improvements to drive visitation and earnings remains significant.”

Star chairman John O’Neill added: “The group continued executing its growth strategy despite the extraordinary challenges and significant impacts of Covid-19.

“The fundamental earnings prospects for the Star’s domestic business remain unchanged. They are underpinned by valuable long-term licences in compelling locations and the continued transformation of our properties into globally competitive entertainment destinations.”