As Star Entertainment Group navigates a challenging financial landscape, the well-known casino operator reported a notable decline in revenue for the third quarter, alongside its ongoing struggles with regulatory compliance and changes in executive leadership.
The company faced a 4.6% revenue drop in comparison to the third quarter of the previous year, a period marked by significant upheaval. Star withheld comprehensive third-quarter financial results but offered insights into the key elements affecting its performance.
Troubles for Star compounded earlier this year with the announcement from The New South Wales Independent Casino Commission. A second probe, succeeding the consequential Bell report and dubbed Bell Two, commenced on February 19, with a scheduled conclusion on May 31. Prompted by the inquiry’s initiation, Star sought a brief suspension of trade for its ordinary shares on the Australian Securities Exchange.
Revelations from the initial Bell report had laid bare extensive deficiencies within Star’s Sydney operation, particularly in anti-money laundering protocols and responsible gambling measures. Out of 30 remediation recommendations, the organization had implemented 22 by the one-year mark post-publication.
Bell Two’s primary objective is to scrutinize Star’s internal culture and evaluate the ramifications of the preceding Bell report. Financial figures revealed declining revenues in the premium gaming rooms across Star’s establishments – The Star Sydney saw a steep 19.3% decrease, The Star Gold Coast revenue dropped by 20.0%, and Treasury Brisbane recorded a 28% shrinkage in revenue from these high-roller zones.
Conversely, general gaming floor revenue offered a silver lining, posting a 5.4% increase at The Star Sydney, 4.6% rise at The Star Gold Coast, and a 6.4% upswing at Treasury Brisbane. Nonetheless, the decline in premium gaming rooms’ revenue led to an overarching 4.6% fall in total revenue across the three venues.
During the quarter, Star was accountable for gaming levies and taxes to the tune of $105.0 million, marking a slight reduction from the same period in the previous year. January proved to be the most taxing, as well as the most profitable month for the company, with net revenue peaking at $146.6 million.
Operational expenses, however, climbed to a quarterly high of $97.1 million in March, culminating at $276.3 million for the quarter. Nevertheless, Star highlighted a 4.2% decrease in expenses, attributing it to expanded resources dedicated to risk management, control protocols, and company transformation efforts.
The company’s normalized EBITDA saw an 11.5% downturn, settling at $37.9 million. Conversely, normalized net profit before significant items offered a positive note, turning around from a $6.0 million loss in the prior year to a $9.3 million gain. Still, significant pre-tax items contributed to a $10.8 million loss, ultimately leading to a net loss after tax of $6.8 million—a stark improvement from the $49.7 million loss recorded in the same quarter of 2023.
In March, shortly after Bell Two was launched, the company witnessed organizational upheaval with the departures of CEO Robbie Cooke and CFO Christina Katsibouba. David Foster assumed the responsibilities of executive chair on an interim basis as the search for a new CEO unfolded.
Retention of executive leadership has been an ongoing challenge for Star, with Cooke representing the fourth CEO within a single year following his November 2022 appointment. His predecessors included Matt Bekier, who resigned amid an investigation into The Star Sydney that began in June 2021, as well as John O’Neill, and Geoff Hogg.
Compounding Star’s woes, the company has had to face numerous regulatory hurdles. Deemed “unsuitable” to maintain its licence in Queensland, Star had its licence suspended and was fined $100 million in October 2022. Similarly, its New South Wales licence was also suspended indefinitely, and the company was instructed to pay a penalty of the same amount.
As the Star weathers the adverse effects of its regulatory circumstances and management instability, the gaming industry and investors keep a close watch on how it will navigate through the tumult of Bell Two’s findings and the necessary corporate restructuring.
