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The Star Entertainment Group (ASX: SGR) posted a $302 million bottom-line loss in the first half of FY25, driven by a downturn in trading that was led by cash limits on punters in Sydney and a loss of market share on the Gold Coast – a position exacerbated by poor public perception of the company amid its financial woes.
But in positive news, The Star revealed today that it received $100 million on 9 April 2025 as promised from US casino group Bally’s Corporation as part of a $300 million refinancing deal announced last week to keep the company afloat.
The funds came just in time, with the group noting it had $98 million in available cash just two days later, on 11 April 2025.
The first-half loss off $302 million comes on top of a $1.69 billion loss recorded in the second half of FY24, a result impacted by a non-cash impairment of $1.44 billion. This means The Star recorded a combined net loss of $1.996 billion in calendar 2024 – a year in which the group was dogged by liquidity concerns.
The Star booked a further $166 million in significant items in the latest half-year result, which should have been released in February but was delayed while the group secured the new debt funding deal.
The impairment partly included the group’s divestment of its share in the Destination Brisbane Consortium to its Hong Kong partners, Chow Tai Fook Enterprises and Far Eastern Consortium, which could see The Star eventually abandon the Brisbane market to focus on its Gold Coast and Sydney properties.
The interim result for FY25 revealed a further deterioration of business activity across The Star’s casino portfolio during the period with normalised revenue of $650 million down 25 per cent from $866 million a year earlier.
EBITDA slumped from a profit of $114 million in the first half of FY24 to a loss of $26 million, while normalised net profit after tax slumped to a loss of $136 million – down from a $25 million profit previously.
The Star notes that its trading performance in the first half was hit by the introduction of mandatory carded play and cash limits at The Star Sydney and challenging trading conditions and market share loss at The Star Gold Coast.
The period was further disrupted by the transition from Treasury Brisbane to the new $3.6 billion Queen’s Wharf development where a phased opening of The Star Brisbane was initiated on 29 August last year.
The Star CEO Steve McCann says one of the big impacts on the business has been a “very poor” customer experience as the group implemented the roll-out of carded play, cash limits and time limits for punters – particularly at The Star Sydney where these new government initiatives have come into effect.
“People have been impacted by the suddenness of the communications occurring, by the way that their play has had to change and it’s fair to say that The Star’s existing financial position has also added to an environment which is less attractive for our customers than it should be,” says McCann.
“We are working hard on re-establishing those customer relationships and reactivating some customers who are not coming to The Star any more because they don’t like that combination of impacts that they don’t experience at pubs and clubs.”
McCann notes that total gaming machine revenue across NSW and Queensland has increased in recent years, but it’s a sector in which The Star has seen its market share decline.
“If we are to regain a material portion of that market share we will be able to restore our revenue to profitable levels,” he says.
“In order for us to do that, we need to work on our own initiatives and also work with the governments and regulators to help demonstrate that we can run an environment of safer gambling and fully carded play in a way that clearly demonstrates others can do it as well.”
While McCann is confident this will lead to a level playing field in the sector, one that allows The Star to go head-to-head with pubs and clubs, he says “it’s likely to take a few years to achieve”.
In the latest half-year results, The Star notes that while monthly trading stabilised in the second quarter of FY25, compared to the first quarter, conditions took a turn for the worse in the March quarter this year when revenue fell 9 per cent across the group compared to the previous three months.
“The decline was more pronounced at The Star Gold Coast, which declined 13 per cent in Q3 compared to Q2, partially due to generally softer trading conditions but also the closure of the property for five days due to ex-Tropical Cyclone Alfred and the gradual return to a pre-closure run rate following re-opening,” says the company.
“The Star Sydney revenue has declined by 8 per cent in Q3 compared to Q2, reflecting a seasonal softening in revenue The Star continues to be impacted by an uneven competitive environment with pubs and clubs, which continues to negatively impact on operating performance.”
Meanwhile, The Star says its deal to exit the Destination Brisbane Consortium remains on track to be completed by the end of June.
The company is currently targeting the execution of long-form documentation by the end of this month.
Under the terms of that deal, The Star will have rights to manage The Star Brisbane until March next year – after which the Hong Kong owners of the property can opt for a new operator to step in.
However, Bally’s last week told Business News Australia that it would prefer The Star to continue to manage the Brisbane property in tandem with the Gold Coast and Sydney once the deal is finalised.
The $300 million Bally's refinancing deal is being supported by Australian pubs baron and The Star’s largest shareholder Bruce Mathieson who is contributing $100 million of the total. Once finalised, the convertible note offering will give noteholders control of 56.7 per cent of The Star's issued capital.
The Star says it is also finalising long-form documentation for the refinancing deal, with the proposal set to go to a shareholder vote in late June this year.
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