The Star Entertainment Group has declared revenue declines in its half year 2024 report but has also stated that this aligns with AGM commentary, with net debt now cleared as well.
The H1 FY24 results have been released as the operator faces another inquiry by the New South Wales Independent Casino Commission into the suitability of management and operations for its Sydney property.
The Star clears its net debt
Publishing its financials, The Star reported a 14.6 per cent revenue decline year-over-year in H1 to AUS $865.7m (H1 FY23: $1.01bn).
Normalised EBITDA for the period was $113.6m, which the operator says is “broadly consistent” with Q4 2023, while statutory net profit – after $16m loss (H1 FY23: $1.3bn loss) in significant items after tax – was $9m (H1 FY23: $1.26bn loss).
As of December 31, 2023, the operator had a net cash of $171m, an increase in comparison to the net debt of $596m as of June 30, 2023.
The Star noted that the significant items figure primarily reflects “regulatory, legal costs and equity raising and debt refinancing costs offset by the profit on the sale of assets”.
Revenue and earnings across all properties during the period, the operator noted, take into account the “implementation of necessary uplift in the control environment (resulting in an increased number of guest exclusions and reflecting the introduction of time play management of guests), higher levels of risk and compliance resourcing, higher remediation costs and increased competition together with a weaker discretionary spending environment”.
In addition, The Star revealed that performances across all main gaming floors and products “held up well”, but premium gaming areas were “significantly impacted” following a revenue mix shift from premium to main gaming areas. Non-gaming performance was “solid with strong hotel occupancy levels”.
Property performances
Per property, The Star Sydney’s revenue declined by 16.9 per cent YoY to $450m (H1 FY23: $541.2m), with an EBITDA of $37.4m, down 57.2 per cent in comparison to the previous year (H1 FY23: $87.4m).
Table games were down 20.9 per cent YoY, EGMs fell by 15.9 per cent, while non-gaming revenue dropped by 4.9 per cent. Premium gaming areas were significantly impacted.
The operator noted that its Sydney operations were affected by necessary uplift in the control environment, operating restrictions impacting guest experiences, weaker consumer discretionary spending, reduced relative competitive position vs NSW pubs and clubs, increased competition from a new Sydney casino, as well as an increase in risk and compliance resourcing and remediation costs.
As previously stated, The Star’s Sydney casino is subject to another inquiry by the NICC into its suitability of management and operations, an inquiry that the operator has welcomed.
At The Star Gold Coast, revenue fell by 13.6 per cent YoY in H1 to $238.1m (H1 FY23: $275.6m), while EBITDA dropped by 32.6 per cent to $44.6m (H1 FY23: $66.2m).
EGMs revenue was down 15.1 per cent, table games fell by 22.5 per cent while non-gaming dropped by 6.7 per cent.
The Star noted that the “normalisation of consumer spend” impacted Gold Coast operations, with Australians resuming international travel. Despite this, the operator reported that hospitality revenue was “solid”.
Gaming revenue was “impacted by necessary uplift in the controls environment resulting in an increased number of guest exclusions together with effects of time play management of guests and increased competition from pubs and clubs”.
Revenue and EBITDA also fell at The Star’s Treasury Brisbane property. Revenue dropped by 9.6 per cent YoY to $177.6m (H1 FY23: $196.4m), while EBITDA declined by 31.5 per cent to $31.6m (H1 FY23: $46.1m).
EGMs revenue fell by 10.4 per cent, table games declined by 9.8 per cent, while non-gaming revenue decreased by 2.8 per cent. Hospitality revenue was solid, hotel revenue was flat, while food and beverage revenue was slightly down.
Similar to The Star’s other properties, performance during the reporting period was impacted by the implementation of necessary uplifted control environments.
However, unlike the other two destinations, visitation was still subdued following COVID. Additional competition by pubs and clubs impacted the Treasury, affecting market share.
Outlook
Looking ahead, The Star noted that H2 FY24 revenue and EBITDA are “broadly consistent” with H1 and “only slightly softer” than the same period the previous year. The operator will largely focus on remediation measures and lifting operational performance.
However, in January, EBITDA across all areas – Group, Sydney, Gold Coast and Brisbane operations – was down in comparison to the previous year.
Remediation costs in FY24 are expected to be around $45m, with costs higher in the second half due to a ramp-up in resourcing in line with remediation plan milestones. The total impact of casino duty rates in FY24 is expected to be approximately $10m.
