In a trading update issued today, 24 June, Star Group has issued a sobering forecast, warning of anticipated revenue declines for both the full fiscal year 2024 (FY24) and the fourth quarter (Q4). The financial year is set to conclude later this week on 30 June.
Star’s projected revenue for the full year is estimated to range between AU$1.68 billion (£879.6 million/€1.04 billion/US$1.11 billion) and AU$1.69 billion. At the upper end of this spectrum, the figure would still represent a significant 11.1% decline compared to the AU$1.90 billion posted in FY23.
The company’s latest guidance references consistently “challenging” trading conditions since its last update in April. Factors contributing to the revenue shortfall include higher operating costs linked to ongoing remediation and transformation activities, and increased resourcing in risk and control functions. These heightened expenses come in the wake of a scathing inquiry by the New South Wales Independent Casino Commission, with a second probe currently underway.
As a result of these compounded challenges, Star is also forecasting a decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). For FY24, adjusted EBITDA is expected to fall within the range of AU$165 million to AU$180 million, with the higher end still reflecting a steep 43.2% year-on-year decrease.
With Q4 concluding this week, Star has issued forecasts for several specific metrics, anticipating a 3.3% year-on-year drop in revenue and a 4.3% quarter-on-quarter decline. The company has pointed to the challenging economic environment and cost of living pressures as key drivers for these declines.
Revenue from premium gaming rooms has continued to decrease, and is expected to be down by 16.5% for the quarter. Although the main gaming floor has shown some improvement, with Q4 revenue projected to rise by 5.2%, this is not sufficient to counteract the overall decline.
Breaking it down by property, Star Sydney is projected to see a 0.9% revenue drop, Star Gold Coast a 4.9% decline, and Treasury Brisbane a 6.9% decrease.
.
In terms of operational expenses, Star has flagged that Q4 costs are likely to be slightly higher than in Q3, reaching AU$92.5 million. The average operating costs for the first half of the year were AU$90.3 million. The increase in spending is attributed to ongoing remediation and transformation activities linked to the restructuring of the business following the first Bell inquiry. In response, Star will explore various initiatives aimed at reducing its overall operating cost base, although specifics were not disclosed.
Additionally, the group has provided an update on potential asset sales, including the Treasury casino, hotel, and car park, who are in ongoing talks. Star is also considering selling other, non-core assets, with further updates expected when it reports its FY24 results later in the year.
In other developments, Star has announced several changes in its leadership team. David Foster has exited his director role after stepping down as chair in April, with Anne Ward already confirmed as his replacement. Star also expects to make an imminent announcement regarding a new group CEO and managing director. Robbie Cooke, who vacated the position in March, has remained in a consultancy role while the search for a permanent replacement continues. In the interim, group chief financial officer Neale O’Connell has been appointed as acting CEO, while chair Anne Ward has assumed additional responsibilities temporarily.
These changes come amid Star’s recent appointment of Jeannie Mok, formerly of Crown Resorts, as group chief operating officer (COO). Another recent departure is Jessica Mellor, stepping down as CEO of Star Gold Coast.
The anticipated revenue decline and leadership changes are intrinsically linked to broader issues at Star. The most significant development is Star’s ongoing scrutiny under a second inquiry by the New South Wales Independent Casino Commission (NICC). Adam Bell SC, who led the first Bell report, is heading this new inquiry, focusing on how Star has implemented the recommendations from the initial investigation.
In September 2022, Star was declared unsuitable to hold a casino license in New South Wales following the initial inquiry, which uncovered numerous anti-money laundering and social responsibility lapses. Incidentally, some of the changes implemented in response have contributed to the higher costs highlighted in the Q4 and FY24 trading update. The second inquiry commenced in February, with a final report sent last month. Details of this report are yet to be disclosed.
Despite the challenges, there was some positive news for Star in May. Queensland announced a further delay to a planned license suspension, now pushed back to 20 December. Star was sanctioned in Queensland in December 2022 over a series of failings, resulting in a AU$100 million fine and a license suspension. The group was given 12 months to address issues and prove its suitability for a license. An initial deadline of 1 December 2023 was extended to 31 May this year after Star submitted a draft remediation plan. Queensland authorities have delayed this again, awaiting the results of the second Bell Inquiry before making a final decision.
