Operator News
Australia – Regulatory costs and lack of comping see Star Entertainment slump by 15 per cent
By Phil - 29 February 2024
A step-up in risk and compliance costs as well as a lack of being able to comp drinks on its gaming floors, took a huge bite out of Star Entertainment’s first half revenues, which dropped by 14.6 per cent year-on-year to US$562m with EBITDA falling 43.1 per cent to US$73.8m.
Star said: “Revenue and earnings at all properties now reflects 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.”
It added: “Main gaming floor performance across all properties and product segments held up well. Premium gaming areas were more significantly impacted reflecting the shift of revenue mix from
premium gaming areas to the main gaming areas. Non-gaming performance has been solid with strong hotel occupancy levels.”
At the operator’s flagship casino in Sydney, revenue was down 16.9 per cent on the pcp with table games down 20.9 per cent, EGMs down 15.9 per cent and non-gaming revenue down 4.9 per cent. Star said the premium gaming areas were significantly impacted with the mass gaming areas showing resilience.
It highlighted weaker consumer discretionary spending, increased competition from a new casino in Sydney and a reduced relative competitive position versus NSW pubs and clubs.
Star said: “Certain operating restrictions impacted guest experiences (such as a reduced level of complimentary services and benefits in private gaming areas) impacting the performance of both EGMs and table games for most of the reporting period. Complimentary services and benefits in private gaming areas resumed in November 2023 following a comprehensive risk assessment and implementation of an
enhanced control environment.”
At the Star Gold Coast, revenue was down 13.6 per cent with EGMs down 15.1 per cent, table games down 22.5 per cent and non-gaming revenue down 6.7 per cent. Results were impacted by the ‘normalisation of consumer spend on the Gold Coast with the benefit of the post-Covid spending surge experienced in FY23 abating as Australians resumed international travel, resulting in a drop-off in domestic leisure travel.’
Star stated: “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.”
Unlike Sydney and Gold Coast, visitation to the Treasury Brisbane is still subdued following Covid with overall Brisbane occupancy rates down by 70 per cent which translated to lower visitation to the casino.
Revenue at Treasury Brisbane was down 9.6 per cent with EGMs down 10.4 per cent, table games down 9.8 per cent and non-gaming revenue down 2.8 per cent. Although premium gaming areas were again the largest contributor to the decreased revenue, Treasury Brisbane delivered flat revenue growth for the mass gaming area.
Group CEO and Managing Director, Robbie Cooke stated: “While the Group continues to operate in a challenging regulatory environment, The Star has achieved a number of significant milestones in the period. The Group’s Remediation Plan was approved in Queensland. The resolution of the proposed increase to NSW casino duty rates has removed significant uncertainty for our Sydney property and has protected thousands of jobs for our team members in New South Wales.
“We have strengthened our Balance Sheet with the successful raising of $750m of additional equity and $450m in new debt facilities. Importantly also, our Queen’s Wharf Brisbane joint venture settled the outstanding litigation with Multiplex – removing considerable uncertainty and distraction enabling the project team to focus solely on the delivery of this transformational precinct that will showcase Brisbane to locals as well as interstate and international visitors.
“Notwithstanding these achievements, there is still much work to be done. Remediation remains our number one priority. We continue to uplift our risk management, safer gambling and AML capabilities and are starting to embed greater accountability and more robust governance. We have invested in enhancing our control environments and are operationalising and embedding these controls. We are improving our financial crime management and have commenced the introduction of significant harm minimisation measures. Our remediation program will track and hold us accountable to the multi-year program we are committed to delivering.
“In terms of trading performance, earnings have maintained the run rate experienced on exiting Q4 FY23 with EBITDA of $114m in the half. The start of this calendar year has seen revenue and earnings continue to track our first half run rate.
“Despite the challenges of the past 18 months, as a team we are progressing and continuing to work hard to do all that we possibly can to restore our suitability and earn back trust. As a team we are committed to our strategic ‘North Star’ looking to deliver sustainable outcomes for our guests, our team members, the communities in which we exist and our shareholders, by providing entertainment, gaming, and leisure experiences in a safe, responsible, and ethical way.”
“We welcome the inquiry called in New South Wales to assist the NICC in forming a view as to what (if any) action it should take in respect of The Star Pty Ltd (the holder of our NSW licence), prior to the end of the Manager’s appointment on 30 June 2024. This inquiry will provide an objective forum in which The Star will be able to demonstrate in NSW it is capable of returning to suitability with particular reference to the actions that have been put in place since the Bell report was published on 13 September 2022. The Star intends to participate in the inquiry in an open, transparent and facilitative manner”.
