Star Entertainment Suffers From Revenue Drop Caused By COVID-19 Pressures

Article by : Helen Oct 29, 2020

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Star Entertainment, an Australian ASX 100 listed casino operator, has recently reported a 25% drop in annual revenue for the first 15 weeks of the financial year of 2021 with a fear that the COVID-19 consequences will be tangible throughout the entire year or even longer. Starting from the beginning of the financial year to 15 October, the company’s gambling revenue was around 75% of the same period in the previous year. The casino operator claims that such a drop happened because of the coronavirus-related restrictions that were applied to gambling in the country and the whole world. As of now, all the gambling venues that belong to Star Entertainment Group are operating at reduced capacity.

Anyway, some of the company’s properties were going according to the initial plan. The Queensland properties, for example, showed great trading results in the 15-week period. Even despite having to comply with different COVID-related measures, such as keeping social distancing and reducing the working hours, the properties had a certain growth in the domestic gambling revenue.

The Sydney properties turned out not to be as successful during the same period of time. This is mainly because they had to contend with some stricter restrictions, including but not limited to reducing the limit of customers visiting the area. The loyalty gambling revenue also remained at a high level thanks to a new Sovereign private gambling room located in Sydney.

Matt Bekier, chief executive of Star Entertainment, says that the company has already created a list of measures to soften the impact of revenue dropping. These include smarter management of operational expenses in line with limited 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.

The trading report was established in August at the company’s annual general meeting, where chairman John O’Neill together with Matt Bekier and some other executives were reviewing the company’s performance in the financial year 2020. According to the official results, the operator lost over AU$85 million in the 12-month period since net revenue dropped 31% compared to the previous financial year. What is also interesting, the company claims that it was trading well ahead of the plan before the Queensland and Sydney properties had closed.

Mat Beiker says that if all the coronavirus restrictions stay in place or even become stricter, then this will definitely have a worse impact on the business during the financial year 2021.

Restrictions may change over the remainder of the year which could materially impact revenues.

In order to counter this, he named a list of first priority measures that include but are not limited to refocusing on the domestic market and managing operational expenses. Beiker also claims that it is mandatory to keep completing all the existing investment projects in time and focus on providing a centralized operating model. This will help the operator to provide their customers with the best resort experience and secure their loyalty status.

Despite all the fuss about the negative coronavirus impact and the dropped operator’s revenues, Star Entertainment has recently decided to award its executives with prizes that are worth AU$1.4 million in total. At the same time, the company takes part in the government’s JobKeeper program aimed at helping employees who are negatively impacted by the coronavirus pandemic. According to the official data, the company has already received payments that are worth almost AU$65 million from the government. John O’Neill claims that the bonuses issued to the executives are in no way connected to the received subsidies.