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Australia – Star’s half year down 30 per cent but normality on the horizon

By - 22 February 2021

Fluctuating spatial distancing requirements and other COVID-19 related health orders constrained domestic visitation at Star Entertainment’s three Australian casinos, particularly in Sydney, while international border closures have substantially reduced the International VIP Rebate business with turnover down 96.9 per cent.

Net statutory revenue of $741.4m was down $312.3m or 29.6 per cent on the prior comparative period. Of this decline, $302.6m was attributable to Sydney, which was significantly impacted by health orders that restricted capacity to a maximum of 300 people per area for the majority of the reporting period. Gold Coast and Brisbane were down 4.9 per cent and 0.4 per cent respectively, with an increase in slots revenue offset by lower table game revenues, impacted by spatial distancing limitations, closed non-gaming venues and restricted international patrons.

Normality is on the horizon though. The Star in Sydney is now operating to the 1 person per 2m2 rule (from 1 person per 4m2) and it is no longer mandatory to wear masks in gaming rooms. Based on the scale of The Star’s various casino areas, The Star Sydney will be able to host up to around 10,000 customers at any one time across the total casino area.

Chairman John O’Neill AO said: “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. Major projects at Queen’s Wharf Brisbane and The Star Gold Coast are proceeding to plan, with the upgraded and expanded Sovereign at The Star Sydney delivered on time and budget.

“Last week we broke ground on the construction of a further tower at The Star Gold Coast. A $400m investment with our JV partners, this 63-storey mixed use tower will include a 210-room 5-star international hotel and 457 apartments. This will give us two new towers under construction, with the Dorsett hotel and apartments project well advanced and set for a 2022 completion.

“The Star remains committed to maintaining a balance sheet that positions the Group for the post COVID-19 recovery. The Board has not declared an interim dividend for 1H FY2021 as a cash dividend cannot be paid until gearing (net debt/trailing 12-month statutory EBITDA) is below 2.5 times, which was a condition for the June 2020 covenant waiver.”

In Sydney, revenue came in at $397.5m, down 48.2 per cent. Earnings were significantly impacted by the more onerous COVID-19 related operating restrictions imposed upon the property, especially the 300 patron cap per area, sending normalised EBITDA down 44 per cent.

On the Gold Coast, revenues came in at $171.7m, down 23.3 per cent. Normalised EBITDA was down 20 per cent to $51m, primarily driven by the absence of the international business. Earnings were impacted by border closures and the shutdown of non-gaming amenities, although slots revenue was up eight per cent in the period with a very strong performance in the December quarter.

Brisbane was less impacted by border closures and shutdown of non-gaming amenities and enjoyed record performance with normalised EBITDA up 29 per cent to $68m despite a three per cent decline in revenue to $180.7m. Slots revenue was up seven per cent in the period with a stronger performance in the December quarter and a strong PGR performance.

Managing Director and Chief Executive Officer, Matt Bekier said: “Execution of our long-standing growth strategy continued to plan over 1H FY2021. The initial response by our highest value domestic customers to the new Sovereign in Sydney since its July 2020 opening has been pleasing. Queen’s Wharf Brisbane was further de-risked with ~88 per cent of total project costs now under lump sum terms.

“Comprehensive actions to mitigate the impact of COVID-19 were implemented, safeguarding staff and customers, securing debt covenant waivers and amendments, and preserving cash. The properties reacted expediently to the many changes to operating conditions throughout the period. The Star’s business is fundamentally strong. The long-term value uplift from investments in our network of integrated resorts and continuing operational improvements to drive visitation and earnings remains significant.”

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