Star Entertainment Grapples with Mounting Losses and Negative Cashflow

Star Entertainment Group has reported an EBITDA loss of $5.5 million for October, bringing its total EBITDA loss for the first four months of the financial year to approximately $17.6 million. The company’s CEO, Steve McCann, warned shareholders during the Annual General Meeting that negative cash flow has now become a recurring monthly issue.

McCann, who took over as CEO in June following his tenure at Crown Resorts, emphasized the challenges ahead as Star works to recover from its financial crisis and regain regulatory suitability. He acknowledged that the company faces subdued business volumes and significantly higher compliance costs, adding that the road to recovery would be prolonged.

He explained to shareholders that the business remains at a critical liquidity juncture, with material negative cash flow each month. McCann appealed for continued support from shareholders, lenders, and other stakeholders, stressing that time is needed to implement Star’s reset remediation plan and refine its strategy to return to profitability.

Highlighting the financial strain of Star’s transformation, McCann pointed out that the cost of external advisory services remains elevated. Additionally, a challenging consumer environment and new business practices have adversely impacted the company’s gaming operations, particularly in the premium player segment.

One such practice, mandatory carded play, introduced at The Star Sydney on August 19, 2024, has led to a 15.5% decline in daily average revenue compared to the four weeks before its implementation.

McCann underscored the importance of improving Star’s trading performance while simultaneously advancing its cultural transformation and remediation efforts. He emphasized that rebuilding trust with regulators and the community would be a gradual process, requiring significant effort.

Star has recently secured a $65 million debt facility from its lenders, with an additional $65 million tranche contingent on the company raising $97.5 million in subordinated capital, obtaining regulatory approvals, and securing lender approval for its strategic plan.

This strategic plan involves a major shift in Star’s organizational structure, transitioning from a group-led centralized model to a property-led model. McCann explained that under this new framework, each property would make key strategic, financial, risk, and operational decisions through its respective CEO and leadership team. Independent state-based boards would provide governance oversight for each property.

The new model, McCann noted, aligns with regulatory expectations for closer supervision of operations at the property level. It also aims to streamline operations, eliminate redundancies, and achieve essential cost savings. He highlighted that diversifying revenue streams through non-gaming services, such as entertainment, food and beverage, and accommodation, would be a core component of the company’s strategy.

In its latest financial update, Star reported an 18% year-on-year revenue decline to $230 million and an $11.7 million EBITDA loss for the third quarter of 2024.

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