Star Entertainment Faces Multibillion-Dollar Loss

By Byron Kaye and Archishma Iyer

(Reuters) – Australia’s No.2 casino operator, Star Entertainment, has reported a second consecutive multi-billion-dollar annual loss as it wrote down the value of its venues and indicated potential asset sales to raise cash, highlighting the precarious state of the industry.

The company reduced the value of its casinos in Sydney, Brisbane, and the Gold Coast by A$1.4 billion due to “challenging trading conditions” and regulatory changes, such as the switch to mandatory cashless gambling. This pushed the company’s bottom line to a loss of A$1.7 billion, compared to a loss of A$2.4 billion the previous year.

Just a day prior, Star had secured a new debt facility, but it needed cash to sustain operations. The company earmarked A$300 million worth of non-core assets for sale, revealing its annual results on Thursday, four weeks after the usual reporting deadline.

The trading update depicts a business caught in a perfect storm impacting Australia’s casinos. Alongside multiple inquiries into violations of anti-money laundering rules faced by Star and its larger rival, Crown Resorts, COVID-19 led to extended closures and a freeze on tourism.

Persistent high costs for energy, mortgages, and groceries have diminished discretionary spending, weakening gamblers’ spending power. A government-ordered inquiry recently delivered negative findings about Star’s governance at its Sydney venue, potentially resulting in tougher regulatory scrutiny and fines.

“We need to turn the business around, we need to arrest the current situation of negative EBITDA,” new CEO Steve McCann stated on an analysts’ call, referring to earnings before interest, tax, depreciation, and amortization.

McCann noted that the company is managing inflated cost levels and has identified A$100 million in potential annual savings.

“This business has been clearly on its knees.”

Star’s shares have been suspended from trading by the Australian Securities Exchange due to missing the 60-day reporting requirement for the year ending June. The company expects trading to resume on Friday, according to McCann.

Market strategist Jessica Amir from trading platform Moomoo warned, “It will be a tough time ahead. Australians have depleted their savings, and the savings-to-net-income ratio is at a new low.”

If Star does not see a return of Chinese nationals—who previously represented most of its revenues—she suggested the market may question the company’s ability to sustain its debt package’s interest rate, which some might view as indicative of a junk bond.

Star did not provide profit forecasts but indicated that daily average revenue had decreased by 10.7% since implementing mandatory cashless gambling in certain areas and daily cash limits of A$5,000 in Sydney, aimed at curbing problem gambling.

($1 = A$1.4611)