After a "challenging" fourth quarter, Star anticipates a yearly revenue decline.

After a "challenging" fourth quarter, Star anticipates a yearly revenue decline.

 Star Entertainment Group is predicting that its revenue would decrease year-on-year for the fiscal year 2024. This is due to the fact that "challenging" market conditions, which have been affecting the operator in recent months, remained in the fourth quarter.
 4th quarter of the year
 Star warns of predicted revenue declines in both the fiscal year 24 and the fourth quarter in a trading update that was given today (24 June).  This coming week, on June 30th, Star's fiscal year is scheduled to come to a close formally.

 Between AU$1.68 billion (£879.6 million/€1.04 billion/US$1.11 billion) and $1.69 billion is the expectation for revenue for the entire year.  It would be 11.1% behind the $1.90 billion that was reported in FY23 even if it were to reach the upper end of this range.

 Star makes mention to "challenging" trading conditions, which have been unchanged since the company's most recent update in April, when it has been providing guidance.  Additionally, it indicates higher operating costs as a result of continuous remediation and transformation initiatives, in addition to increased resources in risk and control roles.

 In the wake of a damning investigation of the New South Wales Independent Casino Commission, they have been brought to light, and a second investigation is currently being conducted.

 As a consequence of this, Star anticipates a decrease in adjusted EBITDA as well.  With the upper end being 43.2% lower year-on-year, it is anticipated that this will be between $165 million and $180 million for the fiscal year 24.

 What took place during the fourth quarter at Star?
 This week marks the end of the fourth quarter, and Star has also provided projections for some data. These projections include a decrease in revenue of 3.3% year-on-year and a decrease of 4.3% quarter-on-quarter on average.  A hard economic environment and challenges brought on by rising costs of living were cited by Star once more as the primary factors contributing to the decrease.

 Star reports that revenue from premium gaming rooms has experienced a continuous fall and is expected to have a decline of 16.5% for the quarter.  The performance of the main gaming floor has improved, and revenue for the fourth quarter is projected to increase by 5.2%; nonetheless, this is not sufficient to stop the anticipated decline in overall revenue.

 When looking at each individual property, it is anticipated that income will decrease by 0.9% at Star Sydney, 4.9% at Star Gold Coast, and 6.9% at Treasury Brisbane.

 According to Star, the operational expenses for the fourth quarter are expected to be $92.5 million, which is somewhat higher than the operating expenses for the third quarter.  The first half of the year had an average operating cost of $90.3 million during the period. 

 According to Star, the increased cost can be attributed to ongoing remediation and transformation that is connected to the reorganisation of the company that occurred after the initial Bell probe.  When this is taken into consideration, Star will investigate a number of different strategies in order to lower its overall operational cost base going forward.  There was no disclosure of the specifics of various proposed efforts. 

 In addition, the group provided an update regarding the potential sale of assets.  Included in this are the Treasury casino, hotel, and parking lot, and negotiations over a sale are now underway.  Star is also contemplating the sale of other assets that are not considered to be core, and additional updates are expected to be provided when the company reports its results for the fiscal year 24 later on in the year.

 The next CEO of Star is getting close to being named.
 A number of leadership changes have been announced by Star, according to other news.  After resigning from his position as chair in April, David Foster has now resigned from his duties as director.  The replacement of this individual has already been confirmed to be Anne Ward.

 While this is going on, Star anticipates making an announcement on a new group CEO and managing director "in the almost immediate future."  Robbie Cooke resigned from his position in March, but he has continued to work via Star in a consulting capacity while the company searches for a permanent replacement. 

 Neale O'Connell, who acts as Star's temporary group chief financial officer, has been promoted to the position of acting CEO.  Furthermore, chair Ward has taken on additional tasks, which are also now being carried out on an interim basis.

 As a result of these changes, Star has also appointed Jeannie Mok, who was formerly employed by Crown Resorts, to the position of group chief operating officer (COO) in the last month.  Recently, Jessica Mellor, who was serving as the Chief Executive Officer of Star Gold Coast, has resigned from her position. 

 What does the future hold for Star, and how does it look?
 There are broader problems at Star that are connected to the anticipated reduction in income as well as the changes in leadership.  The New South Wales Independent Casino Commission (NICC) has informed Star that it would be subject to a second investigation, which is among the most significant developments that have occurred in recent decades.

 Adam Bell SC, who was in charge of the initial Bell report, is currently in charge of the investigation.  His focus is on analysing how Star has executed the recommendations that were made in the first place. 

 Following the initial inquiry, which revealed a number of failures in terms of anti-money laundering and social responsibility, Star was deemed unfit to hold a casino licence in the state of New South Wales in September of 2022.  As a side note, some of the adjustments that it implemented have resulted in greater costs, which are highlighted in the trading report for the fourth quarter and the fiscal year 24.

 The second investigation was initiated in February, and the final report was delivered the previous month.  There is still a lack of information regarding this matter.

 The month of May, on the other hand, brought Star some encouraging news.  A licensing suspension that was scheduled to take place in Queensland has been postponed until the 20th of December, according to an announcement made by the state.

 The state of Queensland imposed sanctions against Star in December 2022 due to a string of failures, including a fine of ten million dollars and the announcement that its licensing will be suspended.

 The group was given a year to settle any concerns that arose and demonstrate that it was qualified to receive a licence.  Following Star's submission of a draft remediation plan to resolve concerns, the intended deadline of December 1, 2023 was extended out to May 31, this year. 

 The authorities in Queensland are delaying this once more because they want to wait until they have seen the results of the second Bell Inquiry before making a final decision.