In a trading update issued today, June 24, Star Entertainment Group has flagged a significant downturn in financial performance, projecting a decrease in revenue for both the fiscal year ending June 30 and the just-concluded fourth quarter.
Star’s financial projections for the fiscal year 2024 suggest revenue will fall 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, this would represent an 11.1% drop from the AU$1.90 billion earned in the fiscal year 2023. The company cited persistent “challenging” trading conditions since its April update and soaring operational costs driven by ongoing remediation and transformation activities, as well as increased focus on risk and control functions, as key reasons for the slump.
These challenging conditions come in the aftermath of an intense inquiry by the New South Wales Independent Casino Commission, with a second inquiry currently in progress, further straining Star’s operations.
In light of these hurdles, Star also anticipates a sharp decline in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The forecast for fiscal year 2024 places adjusted EBITDA between AU$165 million and AU$180 million, marking a staggering 43.2% decrease year-on-year at the upper end of the range.
With the fourth quarter of the financial year nearing its end, Star has shared a gloomy outlook on various performance metrics. It forecasts a 3.3% decline in revenue compared to the same quarter last year and a 4.3% quarter-on-quarter drop. Once again, the tough economic environment and cost of living pressures are cited as major contributors to these declines.
Revenue from premium gaming rooms has shown a continued decline and is projected to fall by 16.5% for the quarter. Although the main gaming floor is expected to post a 5.2% increase in revenue for the fourth quarter, it is not enough to offset the overall revenue reduction.
Breaking down the performance by property, Star Sydney’s revenue is expected to decline by 0.
.9%, Star Gold Coast by 4.9%, and Treasury Brisbane by 6.9%. On the expense front, Star projects that operating costs for the fourth quarter will be slightly above those of the third quarter, reaching approximately AU$92.5 million, compared to an average of AU$90.3 million in the first half of the year.
The company attributes these rising expenses to ongoing restructuring efforts following the first Bell inquiry. However, Star is exploring several cost-reduction initiatives, details of which remain undisclosed at this time.
The trading update also includes an update on potential asset sales, with the Treasury casino, hotel, and car park being discussed for sale. Star is also considering selling other non-core assets, with further updates expected when the financial year 2024 results are published later this year.
On the leadership front, several significant changes have taken place. David Foster has stepped down from his position as director, following his resignation as chair in April. Anne Ward has been confirmed as Foster’s replacement. Additionally, Star expects to announce a new group CEO and managing director shortly, following Robbie Cooke’s departure from the role in March, though he has remained on as a consultant.
Star has appointed interim group chief financial officer Neale O’Connell as acting CEO, while Chair Ward has taken on additional interim responsibilities. Another recent key appointment is Jeannie Mok, formerly of Crown Resorts, as group chief operating officer (COO). Simultaneously, Jessica Mellor is stepping down as CEO of Star Gold Coast.
These leadership changes and the projected revenue decline are intertwined with broader issues facing Star. The most notable recent development is the announcement of a second inquiry by the New South Wales Independent Casino Commission (NICC), led by Adam Bell SC, who was responsible for the first Bell report. This new inquiry is scrutinizing Star’s implementation of the initial report’s recommendations.
In September 2022, Star was deemed unfit to hold a casino license in New South Wales due to a range of anti-money laundering and social responsibility failings identified in the first investigation. The second inquiry began in February, with a final report issued last month, the details of which are yet to be disclosed.
In a bit of positive news, Queensland authorities have delayed the planned suspension of Star’s license until December 20, granting the company more time to address issues highlighted in previous sanctions. Star was fined AU$100 million in December 2022 and faces potential license suspension, but authorities have allowed additional time pending the outcome of the second Bell inquiry.
As Star navigates these turbulent times, the company’s focus remains on addressing regulatory challenges and stabilizing its financial outlook amidst an ever-evolving competitive landscape.
