Wet weather, COVID delay The Star’s multi-billion dollar Queen’s Wharf project

Wet weather, COVID delay The Star’s multi-billion dollar Queen’s Wharf project

Via Queen's Wharf Brisbane on Facebook.

Inclement weather in Brisbane and COVID-19 disruptions have led to a delay in the completion of The Star’s (ASX: SGR) increasingly expensive Queen’s Wharf development on the Brisbane River.

Announced today alongside a trading update detailing revenue recovery in the June quarter, The Star says it expects to open the 71-storey project in the second half of calendar year 2023, representing a delay from prior guidance of mid-2023.

The company cites higher than average rainfall in FY22 to date and the impact of COVID-19 as the reasons behind the delay, noting costs will increase as a result.

“Total project costs are expected to be up approximately 10 per cent on prior guidance of $2.6 billion due to escalating construction material costs, labour shortages, supply chain challenges and the program delay as well as the inclusion of capital equipment required to open the Integrated Resort Development (IRD),” The Star says.

“Pre-opening and other operational readiness costs would be in addition to this estimate.

“The Star, together with its joint venture partners, proposes to fund the majority of the increase in expected costs through additional equity contributions in accordance with the existing joint venture interests. The remainder is expected to be funded from future operating cashflows.”

News of the delay comes alongside The Star reporting its June quarter trading update, as well as the release of indicative results for FY22 ahead of the release of full year results on 22 August.

Subject to completion of an external audit, The Star expects to report normalised revenue of $1.53 billion in the 12 months to 30 June 2022, almost on par with FY21’s $1.54 billion revenue figure.

SGR says domestic revenue recovered strongly the June quarter with all properties open on an unrestricted basis. Domestic revenue was up 11 per cent on pre-COVID levels (2019) to $512 million, with slots revenue up 28 per cent and non-gaming revenue up 26 per cent.

Domestic table revenue has not fully recovered but SGR says it was within 5 per cent of pre-COVID levels.

The Star Gold Coast was the company’s peak performer on a growth basis, with revenue rising by 48 per cent on pre-COVID levels - the result of a recovery in domestic tourism and the opening of The Dorsett Gold Coast Hotel and The Star Residences during the year.

Brisbane revenue was up 13 per cent on pre-COVID levels while The Star Sydney domestic revenue returned to pre-COVID levels.

“The full year result will be impacted by the first half net loss associated with the property closures, operating restrictions and border closures as well as costs associated with the regulatory reviews and increased investment in regulatory and compliance functions,” The Star said.

The company says momentum has continued into early FY23, with trading in July sitting above pre-COVID levels.

The Star says it expects net debt to be $1.15 billion as at 30 June 2022, and notes it has $513 million of liquidity on hand with undrawn facilities of $433 million and $80 million in cash.

The update follows a tumultuous quarter for The Star, which spent most of the period under scrutiny from the New South Wales Independent Liquor and Gaming Authority (ILGA) which is assessing the casino and resorts company’s suitability to hold a gaming licence in the state.

That review, helmed by Adam Bell SC, led to legal counsel assisting ILGA to submit that the casino is not suitable to hold a casino licence in Sydney and that it misled shareholders back in October last year.

Shares in SGR are up 0.49 per cent to $3.08 per share at 10.48am AEST.

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