Star Entertainment (ASX: SGR) share price up 5% despite revenue slump

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The Star Entertainment Group Ltd (ASX: SGR) share price is surging in early trade after the company reported its latest full-year results to the market.

Star Entertainment share price rises as profit slides

The Aussie wagering group this morning provided its full-year results for the year ended 30 June 2021 (FY21). Some of the key takeaways include:

  • Normalised gross revenue down 21% to $1,561 million
  • Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) flat at $430 million
  • Net profit after tax (NPAT) down 5% to $116 million
  • Capital expenditure down 63% to $89 million and below guidance
  • No final dividend declared

After the announcement, the Star Entertainment share price is surging more than 5% at market open.

What happened in FY21 for Star Entertainment?

The COVID-19 pandemic caused significant disruption for Star Entertainment during the year. Reduced operational capacity, particularly across Sydney and Brisbane, weighed heavily on earnings.

Star reported that revenue trends were broadly consistent with 1H FY21 results when venues were open in Queensland, with the shutdowns meaning continued staff payments as well as lost revenue.

The Star Entertainment share price has been up and down in 2021 amid rolling lockdowns and takeover talks with Crown Resorts Ltd (ASX: CWN).

Star has since walked away from the proposed $12 billion merger with Crown as it baulked at ongoing enquiries into its fellow casino operator.

What did management say?

Chairman John O'Neill noted the significant challenges posed by COVID-19 in contextualising the latest results:

The Group continued executing its strategy well in the context of the extraordinary COVID-19 related challenges. The fundamental eanings prospects for The Star's domestic business remain attractive.

They are underpinned by valuable long-term licenses in compelling locations and the transformation of our properties into globally competitive entertainment destinations is nearing 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 a final dividend for FY2021 given the continuing impacts of COVID-19 on the business and, consistent with the June 2020 covenant waiver, cash dividends cannot be paid until gearing is below 2.5 times.

The Star Entertainment share price has leapt higher despite the softer earnings numbers.

What's next for Star Entertainment?

COVID-19 is the looming question mark for FY2022 now Star has walked away from the proposed Crown merger. The casino operator has turned its focus to prudent balance sheet management in the year ahead.

Star said 1H 2022 trading has been negatively impacted by COVID-19. For example, The Star Sydney closed on 25 June and remains out of action amid the ongoing lockdown.

Persistent and uncertain restrictions "could materially impact revenues and earnings", according to today's release.

The Star Entertainment share price is down 4.8% in 2021 and underperforming the S&P/ASX 200 Index (ASX: XJO).

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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