In a trading update issued today (24 June), Star Group has warned of an expected drop in revenue for both the fourth quarter (Q4) and the full financial year 2024 (FY24), which is set to conclude later this week on 30 June. The group cites persistent “challenging” trading conditions, rising operational costs, and economic pressures for the anticipated downturn.
For the full financial year, Star projects its revenue to be between AU$1.68 billion (£879.6 million/€1.04 billion/US$1.11 billion) and AU$1.69 billion. At the higher end of this range, this still represents an 11.1% decrease compared to the AU$1.90 billion posted in FY23. The company’s guidance highlights constant challenges experienced since its last update in April, driven by increasing operating costs attributed to ongoing remediation and transformation initiatives and enhanced resourcing in risk and control functions.
The increased costs follow a damning inquiry by the New South Wales Independent Casino Commission (NICC) and suggest a continuity of financial strain. A further inquiry is currently underway, examining the implementation of recommendations from the initial investigation.
Due to these factors, Star is also forecasting a decline in its adjusted EBITDA. For FY24, adjusted EBITDA is expected to range between AU$165 million and AU$180 million, with the upper limit reflecting a 43.2% reduction from the previous year.
In detailing Q4 forecasts, Star anticipates a 3.3% revenue drop year-on-year and a 4.3% decrease quarter-on-quarter. These declines are attributed to a challenging macroeconomic environment and cost-of-living pressures affecting customer spending.
Notably, revenue from premium gaming rooms is expected to continue its decline, projected to be down by 16.5% for the quarter. While the main gaming floor has seen a 5.2% revenue increase in Q4, this upturn is insufficient to counter the overall negative trend.
Analyzing performance by property, Star Sydney’s revenue is set to drop by 0.9%, Star Gold Coast by 4.
.9%, and Treasury Brisbane by 6.9%. These figures paint a worrying picture of performance across Star’s portfolio.
Regarding costs, Star indicates that Q4 operating expenses will likely surpass those in Q3, projected at AU$92.5 million, whereas the average operating costs for the first half of the year stood at AU$90.3 million. The higher spending is primarily due to the ongoing efforts related to the company’s restructure post the initial Bell inquiry.
Looking forward, Star is exploring multiple initiatives to reduce its overall operating cost base, although specific details of these plans were not disclosed. Part of this cost-control strategy may involve potential asset sales, including the Treasury casino, hotel, and car park, with current discussions over a deal in progress. Star is also considering divesting other non-core assets, with further updates anticipated when FY24 results are released later this year.
In addition to these financial updates, Star has announced several changes in leadership. David Foster has exited his director role after stepping down as chairman in April. Anne Ward has already been confirmed as his successor. Meanwhile, Star has stated that it expects to announce a new group CEO and managing director “in the near term.” Robbie Cooke, who vacated the CEO position in March, remains in a consultancy role as Star seeks a permanent replacement.
Moreover, Neale O’Connell, initially appointed as interim group chief financial officer, has assumed the acting CEO role. Chair Anne Ward has also taken on additional interim responsibilities. Last month, Star appointed Jeannie Mok, formerly of Crown Resorts, as group chief operating officer (COO). Jessica Mellor, the CEO of Star Gold Coast, has also departed.
The expected revenue decline and the leadership changes are part of broader, ongoing issues at Star, with the most significant recent development being the second NICC inquiry led by Adam Bell SC. This inquiry examines Star’s adherence to recommendations from the initial inquiry, which deemed Star unsuitable to hold a casino license in New South Wales in September 2022 after uncovering numerous anti-money laundering and social responsibility shortcomings. Efforts to address these issues have contributed to the higher costs highlighted in the trading update.
The second inquiry began in February, with a final report submitted last month, although details have yet to emerge.
Despite the multitude of challenges, there was a glimmer of hope for Star in May, when Queensland authorities announced a further delay to a planned license suspension until 20 December. Star was sanctioned in December 2022 with a AU$100 million fine and faced a license suspension. The original deadline of 1 December 2023 for addressing these issues was extended to 31 May and has now been further delayed pending the outcomes of the second Bell inquiry.
