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Star expects full-year revenue drop after “challenging” Q4

| By Robert Fletcher
Star Entertainment Group is forecasting a year-on-year drop in revenue for its 2024 financial year as “challenging” trading conditions that have impacted the operator in recent months continued in Q4.
Star Q4 full year

In a trading update issued today (24 June), Star warns of expected revenue declines in both FY24 and Q4. Star’s financial year is due to conclude later this week on 30 June.

For the full year, revenue is set to be between AU$1.68bn (£879.6m/€1.04bn/US$1.11bn) and $1.69bn. Even at the upper end of this range, it would be 11.1% behind the $1.90bn posted in FY23.

Detailing the guidance, Star references “challenging” trading conditions that have been constant since its last update in April. It also highlights higher operating costs due to ongoing remediation and transformation activities, as well as increased resourcing in risk and control functions.

These come in the wake of a damning inquiry into the New South Wales Independent Casino Commission, with a second currently under way.

As a result, Star is also forecasting a decline in adjusted EBITDA. For FY24, this is expected to be between $165m and $180m, with the upper end being 43.2% lower year-on-year.

What happened in Q4 at Star?

With Q4 concluding this week, Star also issued forecasts on certain figures, including a 3.3% year-on-year drop in revenue, as well as a 4.3% quarter-on-quarter decline. Again, Star pointed to a challenging economic environment and cost of living pressures as main drivers for the declines.

Star says revenue from premium gaming rooms has continued to decline and will likely be down 16.5% for the quarter. Main gaming floor performance has seen an uptick, with Q4 revenue set to rise 5.2%, but this is not enough to halt the expected overall fall.

Looking at each property, Star Sydney revenue is set to drop 0.9%, Star Gold Coast 4.9% and Treasury Brisbane 6.9%.

In terms of costs, Star says Q4 operating expenses will likely be slightly higher than in Q3 at $92.5m. Average operating costs for the first half of the year were $90.3m. 

Star puts higher spending down to ongoing remediation and transformation linked to the restructure of the business after the first Bell inquiry. With this in mind, Star will explore several initiatives to reduce its overall operating cost base moving forward. Details of potential initiatives were not disclosed. 

The group also issued an update on possible asset sales. These include the Treasury casino, hotel and car park, with talks over a deal in motion. Star is also considering selling other, non-core assets, with further updates due when it posts its FY24 results later in the year.

Star close to naming new CEO

In other news, Star has announced several leadership changes. David Foster has exited his director role after stepping down as chair in April. Anne Ward has already been confirmed as his replacement.

Meanwhile, Star expects to make an announcement on a new group CEO and managing director “in the near term”. Robbie Cooke left the position in March but has remained in a consultancy role while Star seeks a permanent replacement. 

Star has appointed interim group chief financial officer Neale O’Connell as acting CEO. In addition, chair Ward has assumed additional responsibilities, also on an interim basis.

These changes come after Star last month also named Jeannie Mok, formerly of Crown Resorts, as group chief operating officer (COO). Another recent outgoing is Jessica Mellor, who is stepping down as CEO of Star Gold Coast

What does the future look like for Star?

The forecast revenue decline and leadership changes all link in with wider issues at Star. The most significant development in recent times is Star being told it faces a second inquiry from the New South Wales Independent Casino Commission (NICC)

Adam Bell SC, who oversaw the first Bell report, is leading the inquiry. He is looking at how Star has implemented recommendations from the first. 

Star was declared unsuitable to hold a casino licence in New South Wales in September 2022 after the initial investigation uncovered a catalogue of anti-money laundering and social responsibility failings. Incidentally, some of the changes it implemented have led to higher costs highlights in the Q4 and FY24 trading update.

The second inquiry launched in February, with a final report sent last month. Details of this are yet to come to light.

However, there was some good news for Star in May. Queensland announced a further delay to a planned licence suspension, with this being pushed back to 20 December.

Star was sanctioned in Queensland in December 2022 over a series of failings, being fined $100.0m and told its licence would be suspended.

The group was given 12 months to resolve issues and prove it was suitable for a licence. An initial 1 December 2023 deadline was pushed back to 31 May this year after Star submitted a draft remediation plan to address issues. 

Queensland authorities are delaying this again as they want to see the second Bell Inquiry before making a final decision. 

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