Star Entertainment Group Ltd (ASX: SGR) shares have managed to stay out of the red today, despite the company reporting a 33.1% fall in profits. At the time of writing, the Star Entertainment share price is up 0.27% to $3.69.
Results impacted by COVID
Star Entertainment owns and operates a number of resorts and venues including The Star Sydney, The Star Gold Coast, and Treasury Brisbane. Considering the very physical nature of these businesses, social distancing restrictions and border closures have materially impacted patron volumes.
As a result, group revenue came to $749.9 million for the half-year, down 36.2%. Sydney venue earnings were significantly dampened by the patron cap per-area, no co-mingling, and caps on table utilisation. VIP revenues across Syndey, Gold Coast, and Brisbane were dismantled – all falling 94% or more.
Slot machine revenues appeared to be a saving grace for the company. Both Brisbane and Gold Coast revenues from the slots increased by 7% and 8% respectively.
Brisbane operations fared the best during the half as a result of fewer COVID-19 restrictions. Non-gaming revenues for the sunny city were down by only 15%, compared to 45% and 64% for Gold Coast and Sydney respectively.
Managing through the storm
The Star Entertainment share price is treading water today after management advised its prudent action during the half led to a 40% reduction in operating expenses. Both variable and fixed costs were reduced to weather impacted revenues.
The company plans to deleverage the business throughout FY21. Steps being taken include asset sales, capex reductions, and continuing the suspension of dividends.
Furthermore, $50 million in fixed costs are targeted to be saved as part of the plan. In the first half alone, 248 salaried roles have been removed.
Star Entertainment share price spotlight
As has been the case for many physical-based businesses, the Star Entertainment share price has taken a beating over the past year. While the S&P/ASX 200 Index (ASX: XJO) has fallen 3.5% during the last 12 months, Star Entertainment shares have fallen by more than 10%.
The Star share price lost its sparkle from February 2020, once the implications of lockdowns became apparent. The share price went for a bungee jump, plummeting from $4.33, down to $1.53 in March only to spring back to $3.35 by June.
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Motley Fool contributor Mitchell Lawler 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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