The Star wipes $819m from Queen’s Wharf as group losses hit $4b over two years

The Star this afternoon posted a $1.685 billion bottom-line loss for FY24, taking total deficits over the past two financial years to more than $4 billion.

Today’s long-awaited earnings release follows an announcement last night of plans for a $150 million capital raising, as prescribed by the company’s corporate lenders who also handed the company a $200 million debt lifeline to the group.

The Star had cash of $130 million on 31 August 2024, with the company saying it faces “significant near-term liquidity requirements” including the funding of the group’s operations and its ongoing remediation and transformation activities as required by casino regulators in Queensland and NSW.

The company also revealed it will need additional equity contributions to the Destination Brisbane Consortium’s (DBC) Queen’s Wharf Brisbane development and for outflows expected to meet its ongoing regulatory requirements.

Delving into the latest unaudited financial results, The Star has revealed a general downturn in business conditions across all of its properties, with Sydney the hardest hit.

The Star Sydney slumped to an EBIT loss of $12 million for the year, as revenue fell 11 per cent to $878 million. The EBIT result compares with an $18 million profit in FY23.  

The Star Gold Coast’s revenue was down 10 per cent to $456 million, but the venue managed to deliver EBIT of $35 million – down 24 per cent.

The Star Brisbane suffered an 8 per cent fall in revenue to $344 million, with EBIT down 45 per cent to $31 million.

However, the opening of the Queen’s Wharf property in the city on 29 August this year led to a strong opening weekend, buoyed by visitors to the Riverfire Festival.

The Star reports that during the initial trading period for the week ended 10 September, gaming revenue in the new Brisbane casino was up almost 20 per cent on the average weekly performance at Treasury in September last year.

While group revenue fell 10 per cent to $1.678 billion in FY24, The Star still managed to eke out a $12 million net profit after tax for the year – down 71 per cent from a yar earlier.

Trading performance deteriorates

The Star says its trading performance deteriorated over the second half of FY24, a trend that has continued into the current year.

The Star today reported an EBITDA loss of $6.6 million and $1.1 million respectively for July and August. This compares with EBITDA of $20.3 million and $21.6 million for these respective months in 2023.

Massive writedowns in the value of the company’s assets again skewed The Star’s bottom line.

In addition to the $819 million impairment of its Brisbane assets, The Star wrote down $337 million from the value of Sydney business and $274 million on the Gold Coast.

The impairments reflect both the challenging trading conditions and the company’s regulatory changes which are expected to hit earnings.

According to The Star’s CEO Steve McCann, the company broadly faces “significant challenges” from an earnings, liquidity and balance-sheet perspective.

“We recognise and appreciate the support provided to date by our stakeholders as The Star puts in place a new management team and strategy to implement a remediation and transformation program, and return the company to a more sustainable footing,” says McCann.

“We have identified a range of initiatives to improve business performance and cashflow, as well as providing the organisation with additional liquidity.

“However, time and flexibility are required to implement these initiatives.”

McCann says as the company works through these initiatives The Star’s board and management team “remain focused on demonstrating suitability to hold our casino licenses and regaining the trust and support of our regulators and the broader community while seeking to enhance shareholder value.”

Apart from the writedowns in the value of its properties, The Star also reported $100 million in significant items associated with regulatory fines, penalties and legal costs, including $16.7 million in relation to the Bell Two inquiry completed earlier this year.

The $23 million profit on the sale of the Sheraton Grand Mirage Gold Coast, finalised in November last year, hardly made a dent on the significant items total.

Looking ahead, the company’s liquidity will be further tested through its remediation and transformation spend which in FY25 is expected to hit $100 million, comprising operating costs of $63 million and capex of $37 million.

It also has join-venture equity contributions to make for its destination Brisbane Consortium with Queen’s Wharf development partners, the Hong Kong-based Chow Tai Fook Enterprises and Far Eastern Consortium.

It is also expecting more outflows related to regulatory issues, including AUSTRAC’s civil penalty proceedings and underpaid casino duty in NSW.

Update - Friday 25 September

Shares in The Star fell sharply after resuming trading today. The shares which fell to a low of 21 cents after opening were last trading at 25 cents at 1:30pm AEST, down 44 per cent from their previous close.