Star returns to net profit – despite 14.6% fall in revenue

Star Entertainment was able to return to a net profit during the first half of its 2024 financial year despite also reporting a decline in group revenue.

Revenue fell 14.6% to AU$865.7m (£445.4m/€520.7m/US$564.3m) in H1 at Star. However, the operator moved into the black with a small net profit of $9.1m, compared to a $1.26bn loss in the previous year.

The large loss in H1 of 2023 was caused by the writedown in the value of casinos in Sydney, Gold Coast and Brisbane. This came in the wake of a series of anti-money laundering and social responsibility failings and the venues.

While Star seemingly began to recover somewhat in H1 of 2024, recent news casts some doubt over its future. This month, the New South Wales Independent Casino Commission (NICC) confirmed a second inquiry into Star.

Running for 15 weeks, with a final report due 31 May. Adam Bell SC, who oversaw the first Bell report, will lead the inquiry, looking at how Star has implemented recommendations from the first inquiry. Star was declared unsuitable to hold a casino licence in New South Wales in September 2022 after the first inquiry.

Delayed H1 results make for mixed reading

Incidentally, this announcement led Star to delay its H1 results announcement, with this being pushed back to today (29 February). While the results make for mixed reading, and the operator faces a nervous few weeks while the inquiry takes place, CEO Robin Cooke says Star achieved several key regulatory milestones in H1.

“While the group continues to operate in a challenging regulatory environment, Star has achieved a number of significant milestones in the period,” Cooke said. “Our 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.

“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.”

Star working to regain player trust

These efforts, Cooke says, form part of an effort to regain player trust after the first inquiry exposed failures. Work is ongoing, with Cooke saying Star has made progress on this front.

He adds that Star welcomes the latest inquiry and will work with authorities on the report.

“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,” Cooke said.

“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 NSW to assist the NICC in forming a view as to what, if any, action it should take in respect of Star. This inquiry will provide an objective forum in which 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.”

Revenue falls across all Star properties

Breaking down Star’s performance in H1, domestic gaming activity remained its main source of revenue at $683.3m. However, this was 16.7% less than the $820.2m posted in the first half of 2023.

There was also a decline in non-gaming revenue, which fell 5.6% to $176.4m. In addition, other revenue slipped 3.2% to $6.0m.

As for its three casino properties, revenue was lower at each venue. Star Sydney was again the core site for Star with $450.0m, though this was 16.9% lower than the previous year. The operator put this down to new regulatory and responsible gambling measures at the casino, as well as weaker consumer spending.

Meanwhile, revenue at Star Gold Coast dropped 13.6% to $238.1m. Star said this was due to the normalisation of consumer spend, following the benefit of a post-Covid spending surge in 2023. It also again noted the impact of a necessary uplift in the Treasury Brisbane environment in line with its company-wide changes.

Finally, revenue at the Treasury Brisbane was down 9.6% to $177.6m. Again, Star highlighted the impact of new controls, but also noted that visitation in the region is still subdued after the pandemic. In addition, it said increased competition from larger pubs and clubs that underwent renovation projects, introduced loyalty programs and had more promotional activity saw market share shift.

Back in the black after spending reduced

Turning to spending, costs were lower across the board. Operating expenses were cut by 5.0% to $541.6m and gaming tax and levies spend fell 13.6% to $210.5m. Depreciation and amortisation was also 38.3% down at $62.2m.

This left $51.4m in earnings before interest and tax, an increase of 48.0%. Star also noted several other financials, including $18.6m in net funding, down 44.6%, and $3.7m in net profit from an associate.

Star paid $11.5m in tax, leaving a net profit of $25.0m before significant items, down 42.7% from $43.6m in 2023. However, after accounting for $15.9m in significant items, compared to the $1.31bn in the previous year caused by the write-downs, bottom line looked very different.

Statutory net profit after tax hit $9.1m, compared to the $1.26bn posted in 2023. However, EBITDA before significant items fell 43.1% to $113.6m.

How has H2 started for Star?

Looking to H2, Star said early revenue and EBITDA is mainly consistent with H1 and only slightly softer than the previous year.

Group EBITDA run rate of $20.0m per month as maintained in January. During the month, group EBITDA was down 6.5%, while EBITDA was also lower across all three of its casino properties.

“The start of this calendar year has seen revenue and earnings continue to track our first half run rate,” Cooke added.

Original Article