In a trading update issued today, 24 June, Star Entertainment Group has warned of expected revenue declines in both the full financial year of 2024 (FY24) and the final quarter (Q4). The company’s financial year is set to conclude on June 30, marking the end of what has been a difficult period dominated by challenging trading conditions and increased operational costs.
For the entire financial year, Star projects revenue to be between AU$1.68 billion (£879.6 million/€1.04 billion/US$1.11 billion) and AU$1.69 billion. Even at the higher end of this range, the figure would represent a significant 11.1% drop from the AU$1.90 billion reported in the previous financial year, FY23.
Star attributes this downturn to several persistent challenges. Since their last update in April, the company has been grappling with a difficult trading environment, compounded by higher operating costs related to ongoing remediation and transformation initiatives. These efforts have become necessary after a damning inquiry was conducted by the New South Wales Independent Casino Commission, with another inquiry currently ongoing.
As a direct consequence of these adverse conditions, Star is also forecasting a decline in adjusted EBITDA for FY24. Projections peg EBITDA to fall between AU$165 million and AU$180 million, with the upper limit being a steep 43.2% reduction from the previous year.
With Q4 ending this week, Star has also provided forecasts for specific figures. Expectations indicate a 3.3% year-on-year drop in revenue and a 4.3% decline when compared to the third quarter. The company continues to blame the challenging economic environment and the pervasive pressures of the cost of living as primary reasons for these declines.
Star’s premium gaming rooms have seen a consistent downward trend, with revenue likely to fall by 16.5% for the quarter. Although the main gaming floor has shown some signs of recovery, with Q4 revenue expected to increase by 5.2%, this positive performance isn’t sufficient to counteract the overall revenue decline.
Breaking down the performance by property, Star Sydney is projected to see a revenue drop of 0.9%, Star Gold Coast’s revenue is set to decline by 4.9%, and Treasury Brisbane is expected to experience a 6.
.9% drop.
On the cost front, Star anticipates Q4 operating expenses to be slightly higher than in Q3, coming in at AU$92.5 million. This marks an increase from the average operating cost of AU$90.3 million during the first half of the year. The additional spending stems largely from ongoing efforts to restructure the business following the first Bell inquiry. Looking ahead, Star intends to explore several initiatives to reduce its operating cost base, though specific details of these initiatives have yet to be disclosed.
In terms of asset management, Star provided an update on possible asset sales. Discussions are underway concerning the sale of the Treasury casino, hotel, and car park, with additional non-core assets also being considered for sale. Further updates on these developments are expected when Star releases its FY24 results later in the year.
The company is also undergoing substantial leadership changes. David Foster has stepped down from his role as director after resigning as chair in April, with Anne Ward confirmed as his replacement. Star is expected to announce a new group CEO and managing director in the near term, following the departure of Robbie Cooke in March. Despite leaving his position, Cooke has remained in a consultancy role while the search for his replacement continues. Meanwhile, Neale O’Connell, the interim group chief financial officer, has been appointed as acting CEO. In addition, Anne Ward has assumed additional responsibilities on an interim basis.
Further leadership shifts include the recent appointment of Jeannie Mok, formerly of Crown Resorts, as group chief operating officer (COO). Additionally, Jessica Mellor will be stepping down as CEO of Star Gold Coast.
These changes and the forecasted revenue declines are part of broader issues that Star has been facing. The most notable development is the impending second inquiry by the New South Wales Independent Casino Commission (NICC), led by Adam Bell SC, who oversaw the first Bell report. He is examining how Star has implemented recommendations from the original investigation. In September 2022, Star was deemed unsuitable to hold a casino license in New South Wales after a series of anti-money laundering and social responsibility failings were uncovered.
The second inquiry began in February and submitted its final report last month, though details have yet to be released to the public.
In some positive news for Star, Queensland authorities announced in May that a planned license suspension would be delayed until December 20. This comes after Star was sanctioned in December 2022, being fined AU$100 million and told that its license would be suspended. Initially given 12 months to address issues and demonstrate suitability for a license, deadlines have been pushed, with the latest extension granted to allow authorities to review the findings of the second Bell Inquiry before making a final decision.
Star submitted a draft remediation plan, and asks continue to delay the license suspension in hopes of meeting regulatory requirements moving forward.
In summary, Star Entertainment Group faces a challenging period with predicted revenue declines, high operational costs, and significant leadership changes. As it navigates these turbulent times, all eyes remain on further developments from inquiries and the final decisions regarding its licenses in both New South Wales and Queensland.
