Star Entertainment is facing financial and operational challenges, as daily gambling revenue at its Sydney casino plummeted by 15.5% in the wake of cash gambling restrictions. The decline in revenue follows the introduction of carded play requirements and AUD5,000 ($325,600) cash limits in select areas in August, which expanded to the entire gaming floor in October.
Chief executive Steve McCann addressed shareholders during the company’s annual general meeting in Brisbane, revealing that the business is grappling with “material negative cashflow on a monthly basis.” He emphasized the company is “at a critical point in our liquidity.”
The company reported an underlying loss of AUD27 million ($17.5 million) before significant items for the first four months of fiscal 2025. McCann acknowledged the immediate revenue decline might be an initial reaction to the changes but admitted that Star is still assessing the long-term impact. “We need to make sure that we understand what the revised revenue model is for our business across gaming and non-gaming over time,” he said.
McCann and Star chair Anne Ward, both relatively new to their roles, outlined the company’s uphill battle to maintain solvency while restoring regulatory confidence. Ward described the challenges as multifaceted, involving liquidity concerns, operational stability, and compliance with a remediation program aimed at regaining casino license suitability.
“Continuing as a going concern will require us to be successful in relation to a range of matters,” Ward explained. These include securing additional funding, meeting conditions for debt drawdowns, implementing cost-reduction measures, and progressing asset sales.
Star has completed documentation for AUD200 million ($130 million) in debt funding, but this is tied to strict conditions, including a 13.5% interest rate and asset-backed security. An additional AUD150 million ($97.6 million) must be raised from investors to access the second tranche of funding.
Star’s troubles extend beyond financial performance. The company has been under intense regulatory scrutiny following revelations of anti-money laundering and counter-terrorism compliance failures in 2021. A subsequent probe led by Adam Bell, SC, found Star unsuitable to hold a casino license in New South Wales, criticizing its previous management as “dysfunctional.”
In Queensland, a separate investigation into the company’s Hong Kong-based partner, Chow Tai Fook Enterprises (CTFE), has raised further concerns. The former Queensland government deemed CTFE suitable as a casino operator, despite its links to Alvin Chau, a jailed figure associated with controversial junket operations.
Additionally, AUSTRAC, Australia’s anti-money-laundering regulator, is assessing a fine for Star that could reach hundreds of millions of dollars, compounding the operator’s financial woes.
Star is relying on asset sales to raise AUD300 million ($195.6 million), but analysts suggest the company may need an additional $400 million ($260.4 million) to remain viable. The dire financial outlook has already shaken investor confidence, with long-time stakeholder Perpetual recently offloading most of its shares, causing Star’s stock to plunge to a record low of 20 cents.
Amid mounting pressure, analysts at Macquarie Equities speculate that Star may need to sell any and all assets at “fair and reasonable prices” to stabilize its finances.
Original article: https://www.yogonet.com/international/news/2024/12/02/86959-star-entertainment-faces-plunging-revenue-liquidity-crisis-due-to-gambling-restrictions
