The Star dims on loss as high rollers disappear

The Star dims on loss as high rollers disappear

Without international gamblers to fill The Star Entertainment Group's (ASX: SGR) high-value tables, the company's VIP revenues could plummet by half a billion dollars if recent trends continue.

The revelation comes as the casino and resort operator posted a full-year statutory loss of $94.6 million today.

The Star saw its gambling facilities closed down for periods in both New South Wales and Queensland due to COVID-19 restrictions in FY20, leading to a 77.8 per cent drop in statutory earnings.

Were it not for the global pandemic and associated government imposed restrictions, The Star was on track to deliver domestic EBITDA growth of 8.3 per cent.

"The Star delivered record normalised and domestic earnings for July 2019 to February 2020 on a pcp basis before the full impact of COVID-19," says chairman John O'Neill.

"This reflected growth from investments, operational improvements and cost management benefits."

Though its casinos in Sydney, the Gold Coast and Brisbane are operational again, The Star will have to make up for a major loss of wealthy VIP gamblers.

During July, VIP turnover volumes were 5 per cent of what they were last year. For context, in a pre-COVID environment $586 million in revenue was generated from VIP clients in FY19, making up around one quarter of the group's total revenue.

In FY20 before the pandemic, a boom in VIP activity in Queensland meant the company had already recorded $472 million in high roller revenue by the end of February.

As a result, if the July rate continues and international borders remain closed the company is potentially missing out on at least $500 million in revenue.

The Star has seen domestic gaming revenues pick up a bit in July, but revenue levels are only 80 per cent of what they were at the beginning of FY20.

"Initial response by our highest value domestic customers to the new Sovereign in Sydney since its July 2020 opening has been pleasing," says managing director and CEO Matt Bekier.

"The Star's business is fundamentally strong, evidenced by the step up in earnings growth from 1H FY2020 into early 2H FY2020.

"The long-term value uplift from investments in our network of integrated resorts and continuing operational improvements to drive visitation and earnings remain substantial."

Shares in Star Entertainment Group are up 3.18 per cent to $2.92 per share at 11:16am AEST.

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