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Star warns of ongoing Covid-19 impact amid revenue declines

| By Robert Fletcher
Australian casino operator Star Entertainment has reported a 25% year-on-year drop in revenue for the first 15 weeks of its 2021 financial year, warning that the impact of novel coronavirus (Covid-19) could continue throughout the year.
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In a trading update, the operator said during the 15 weeks to 15 October, group domestic gaming revenue was approximately 75% of the prior comparable year, while group domestic revenue came to 70% of prior year levels.

The operator said this was primarily due to ongoing Covid-19 restrictions on its casino operations, with all of its properties currently operating at reduced capacity.

The operator said its Queensland properties traded strongly in the period, with domestic gaming revenue broadly in line with FY20, despite having to contend with restrictions such as reduced trading hours and social distancing requirements.

Stricter Covid-19 measures in Sydney meant its properties in the area were not as successful during the 15-week period. Additional restrictions here include a cap on the number of customers in an area and no co-mingling between areas.

In terms of loyalty gaming revenue, Star Entertainment said that this remained strong, helped by a new Sovereign private gaming room in Sydney

However, the operator noted that its VIP Rebate business continued to feel the effects of the closure of the international and domestic borders due to Covid-19, and only saw “negligible” turnover in the period.

Star’s managing director and chief executive Matt Bekier said the operator has in place a number of initiatives to soften the blow of lower revenue, including managing its operating expenses in line with its restricted operations.

“Domestic EBITDA margins were above the prior period despite lower revenues, which has driven strong cashflow generation in the period and enabled significant debt reduction,” Bekier said.

The trading update was issued at the operator’s annual general meeting, where Bekier and chairman John O’Neill also looked back at Star Entertainment’s performance in FY20, which was also impacted by Covid-19.

Published in August, the results revealed a comprehensive loss of Aus$85.4m (£46,3m/€51.2m/US$60.6m) in the 12 months to 30 June 2020, as statutory net revenue fell 31.1% from $2.16bn in its previous financial year.

Star Entertainment said that prior to the shutdown of its Sydney and Queensland casinos from 23 March, it had been trading ahead of the prior year.

Bekier warned that if Covid-19 measure were to remain in place, or be upgraded to stricter rules, then this could further harm the business during the course of its 2021 financial year.

“Restrictions may change over the remainder of the year which could materially impact revenues,” Bekier said.

To help combat this, Bekier set out a number of core priorities for the business in FY21, including driving a Covid-19 earnings recovery. This will include a rapid refocus on local markets and domestic tourism, as well as addressing new competition in Sydney, and managing operating expenses and liquidity.

Bekier also said that he was keen for a greater focus on delivering a centralised operating model, as well as completing investment projects on time and on budget, and executing in a capital efficient way

“These projects will provide us the platform to offer our customers the ultimate integrated resort experiences and secure their loyalty for repeat visitation,” he said.

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