Star and Crown Release Half Year Financial Results
Star Entertainment and Crown Resorts released their half-year financial results on February 17. It is the first time investors have had the chance to see the financial impact of the COVID-19 pandemic.
Star’s financial results for the half-year ending December 21, 2020, show a significant drop in revenue. Revenue fell to $741.4 million, a reduction of 29.6%. EBITDA dropped 4.2% to $233.2 million, while net profit after tax weighed in at $51.2 million, 33.1% less than the same period last year.
Things look slightly better when using the “normalised” figures Australian casinos are fond of, but only slightly. Normalised results take into account the volatility that comes with high-stakes VIP gamblers. They are adjusted using an average win rate of 1.35% of actual turnover, taxes, and revenue share commissions. Net profit after tax weighed in at $63.2 million based on normalised financial results.
The company looks to have weathered the COVID-19 storm relatively well. Pokies revenue at its Gold Coast and Brisbane venues increase 8% and 7% respectively. Star reduced operating expenses by 40% to $324 million. This reduction helped Star’s slice $151 million from its debt. That debt, however, is a staggering $1.232 billion.
Star Chairman Talks About Company’s Financial Results
John O’Neill, Star Entertainment’s Chairman, gave his thoughts in a statement to the Australian Securities Exchange. He outlined ongoing construction plans and the decision not to pay a dividend.
“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.”
“Last week we broke ground on the construction of a further tower at The Star Gold Coast. A $400 million investment with our JV partners, this 63-story 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 the 1H FY2021 as a cash dividend cannot be paid until gearing is below 2.5 times, which was a condition for the June 2020 covenant waiver.”
Star enjoyed the advantage of not having a casino in New South Wales. Melbourne has endured several full lockdowns due to COVID-19, forcing the closure of non-essential businesses. Casinos fall under this label, which is why Crown and its Melbourne venue suffered badly.
Crown’s Financials Show $121 Million Loss
Star made a profit in its financial results but the same cannot be said for Crown Resorts. Crown endured more full lockdowns than Star and it shows in the figures released to the ASX. Revenue slumped 62.1% to $581 million with net profit collapsing 155.4% to a $120.9 million loss. It is not paying a dividend to investors either.
It is yet another bitter pill to swallow for Crowns long-suffering investors. Several key board members resigned from their positions following the damning Bergin inquiry. The financial results filed the inquiry results under “regulatory matters,”
“The New South Wales Independent Liquor and Gaming Authority (ILGA) has since written to Crown stating that having regard to the contents of the Inquiry Report, it presently considers that Crown Sydney Gaming is no longer a suitable person to give effect to the Restricted Gaming Licence in New South Wales and Crown Sydney Gaming has breached clause 14(a) of the VIP Gaming Management Agreement and has given Crown a notice to this effect.”
The report mentions additional regulatory investigations by AUSTRAC and the VCGLR.