Star Entertainment Group has forecast a drop of revenue year on year for the 2024 financial period as the “challenging trading conditions” that have affected it in recent months, continued into Q4.
Star has issued a trading report today (24th June) warning of revenue decreases expected in FY24 as well as Q4. Star’s fiscal year will end this coming week, on the 30th of June.
For the full year, revenue is set to be between AU$1.68bn (PS879.6m/EUR1.04bn/US$1.11bn) and $1.69bn. The revenue for FY23 was $1.90bn, so even at the top end of the range it is 11.1% below that.
Star’s guidance cites “challenging trading conditions” that have persisted since the last update, in April. The company also highlights increased operating costs as a result of ongoing remediation, transformation and resourcing activities in the risk and control function.
The New South Wales Independent Casino Commission was the subject of an investigation that led to a damning report. A second inquiry is currently underway.
Star also predicts a decrease in EBITDA. This is estimated to range between $165m-$180m for FY24. The upper limit will be 43.2% less than last year.
What has happened at Star in Q4?
Star, which is wrapping up Q4 this week, also released forecasts for certain numbers, such as a revenue drop of 3.3% on an annual basis, and a quarterly decline of 4.3%. Star attributed the main reasons for these declines to an economic climate that is challenging and rising costs of living.
Star reports that revenue in premium gaming rooms continues to fall and is expected to be 16.5% lower for the third quarter. The main gaming floor has improved, and Q4 revenues are expected to increase by 5.2%. However, this will not be enough to stop the overall decline.
Star Sydney’s revenue will drop by 0.9%. Star Gold Coast is expected to fall 4.9%. Treasury Brisbane, 6.9%.
Star estimates that Q4 costs will be higher at $92.5m than Q3. The average operating cost for the first six months of this year was $90.3m.
Star attributes the higher expenditures to remediation and transformative efforts linked to the restructuring of the company after the Bell investigation. Star will therefore explore a number of initiatives in order to lower its operating costs. The details of the potential initiatives have not been disclosed.
A group update was also released on the possible sale of assets. The group is in talks to sell the Treasury Casino, Hotel and Car Park. Star also considers selling non-core assets. Further updates will be provided when the company posts its FY24 Results later this year.
Star is close to selecting a new CEO
Star announced several changes in its leadership. David Foster has stepped down from his role as director after leaving the chair position in April. Anne Ward is his confirmed replacement.
Star is also expecting to announce a new managing director and group CEO “in the very near future”. Robbie Cooke, who left his position as CEO in March, has been working in the Star consulting team while they search for a replacement.
Star appointed Neale O’Connell, interim chief financial officer of the group as its acting CEO. Chair Ward also assumed new responsibilities on a temporary basis.
The changes follow Star’s appointment of Jeannie Mok, former CEO at Crown Resorts as Group Chief Operating Officer (COO) last month. Jessica Mellor is another recent departure. She is leaving her position as CEO at Star Gold Coast.
How does Star’s future look?
Star’s forecasted revenue drop and changes in leadership are all linked to larger issues. Star was recently informed that it will be facing a second investigation by the New South Wales Independent Casino Commission.
Adam Bell SC who was the SC that oversaw the Bell Report, leads the investigation. The inquiry is looking into how Star implemented the recommendations of the first.
Star’s casino license in New South Wales was revoked in September 2022 following an initial investigation that revealed a number of failures in anti-money laundering, social responsibility and corporate governance. In fact, the company’s Q4 trading update and FY24 financial report highlight the higher costs incurred by some of its changes.
A final report was sent to the government last month. The second investigation began in February. The details of the second inquiry are still a mystery.
Star received some positive news in May. Queensland has announced that a licence suspension planned for 20 December will be delayed.
Star’s licence was suspended in Queensland after it received a $100.0m fine and a number of other sanctions in December 2022.
It was decided to give the group 12 months in order to fix any issues, and show that it is suitable for licensing. Star’s initial deadline of 1 December 2023 was moved to 31 May after it submitted a remediation plan.
The Queensland government is delaying the decision again, as it wants to wait until they have seen the results of the second Bell Inquiry.
