Star Entertainment share price slides on $32 million loss

The casino group released its earnings report today.

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Key points

  • Star Entertainment released its earnings report today, and the market has responded negatively
  • The company's earnings were significantly affected by COVID-19, but recovery was noted
  • Star Entertainment will continue to focus on improving its fundamentals post-COVID in FY23

The Star Entertainment Group Ltd (ASX: SGR) share price is in the red today, down 0.86% after the casino group announced its financial results for FY22.

Shares in Star Entertainment are swapping hands for $2.89 apiece at the time of writing after a mixed morning of trading.

Let's cover off what the company announced.

What did Star Entertainment report?

  • Normalised gross revenue down 2% year-over-year (YoY) to $1.53 billion
  • Earnings before significant items and interest, taxes, depreciation, and amortisation (EBITDA) down 45% YoY to $237 million.
  • Normalised net loss of $32 million
  • Domestic revenues in June this year up 11% on pre-COVID levels

Star Entertainment said the company was working to recover lost ground after its earnings were "materially affected by COVID-19".

Key gambling locations were closed for extended periods due to lockdowns and other operating restrictions, including The Star Sydney, which was closed the longest at 102 days.

Despite facing strong headwinds from COVID-19 restrictions, Star Entertainment claims to be bouncing back strongly.

The company advised that all properties were operating at above pre-COVID levels, with group domestic revenue up 9% from 1 July to 18 August this year.

The company did not declare a final dividend for FY22.

What else happened in FY22?

Star Entertainment made several executive changes, including the appointment of three new board members. Robbie Cooke joined the company as managing director and CEO, and Scott Wharton was named as the new CEO for The Star Sydney and Group head of transformation.

The company also made progress on several acquisitions in the pipeline, including for Union Street Pyrmont and the Sheraton Grand Mirage Gold Coast.

In addition, Star Entertainment reported there was potential to "unlock the underlying value of the Group's property assets".

What did management say?

Star Entertainment acting CEO Geoff Hogg said:

The past year has demonstrated how resilient our business is and how quickly customers return when the properties are allowed to open and operate without restrictions. This gives us great confidence moving forward.

The fundamental earnings prospects for The Star's domestic business remain attractive. They are underpinned by valuable long-term licences in compelling locations while the transformation of our properties into globally competitive integrated resorts continues.

What's next?

Star Entertainment expects to make continued progress on its renewal program for the transparent reporting to regulators in Australia. The renewal program encompasses several aspects of the company including for "governance, culture, training and technology initiatives".

Related to this is that the company will focus on retaining its licence for New South Wales and Queensland states.

No earnings or revenue guidance was provided for FY23 but an estimate for capital expenditures (CAPEX) was. The company expects CAPEX to be in the area of $150 million, down from prior guidance of $175 million.

Finally, Star Entertainment will continue its focus on improving fundamentals, including hastening its COVID-19 recovery, keeping a lid on costs, and responding to challenges and threats in its competitive environment for Crown Sydney.

Star Entertainment share price snapshot

The Star Entertainment share price is down almost 24% year to date. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 7% over the same period.

The company's market capitalisation is $2.75 billion at the time of writing. 

Motley Fool contributor Matthew Farley 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 Scott Phillips.

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