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The Star Entertainment Group (ASX: SGR) has warned that its future hinges on its ability to secure additional funding despite a marginal improvement in underlying earnings in the December quarter.
The casino group had available cash of $78 million at the end of December, down from the $79 million unaudited figure announced earlier this month.
However, a massive cost-cutting program by the group and revenue growth recorded at The Star Gold Coast have helped stabilise earnings over the last two months of 2024.
Revenue in the second quarter of FY25 fell 15 per cent to $299 million compared with the first quarter of this financial year, delivering an EBITDA loss of $8 million for the period, excluding significant items.
The EBITDA loss is down from an $18 million deficit in the first three months of FY25.
However, The Star says it achieved breakeven group EBITDA over the last two months of the quarter, aided by stronger revenue in December and cost-cutting initiatives.
The latest quarterly update shows little improvement in the company’s dire liquidity position, as the company’s directors continue to rely on the safe harbour provisions of the corporations law as they explore alternative liquidity solutions.
“While discussions continue with respect to a range of different solutions, there is no certainty that any of these negotiations will result in one or more definitive arrangements that might materially increase the group's liquidity position,” says the company.
“In the absence of one or more of those arrangements, there remains material uncertainty as to the group's ability to continue as a going concern.”
The Star had been hoping by now to have secured the second $100 million tranche of a new debt facility negotiated late last year, but the conditions to meet this second payment “remain challenging”.
“In particular, the group's capacity to raise $150 million of subordinated debt is limited in the short term in the absence of additional liquidity solutions,” says The Star.
“In addition to seeking to fulfill the conditions precedent for Tranche 2 of the new facility, the group continues to also explore other possible liquidity solutions.”
The Star’s revenue slump in the second quarter has been blamed on a “challenging consumer environment”, the impact of mandatory carded play and cash limits in NSW and the closure of Treasury Brisbane as the company transitioned to the new Queen’s Wharf development in Brisbane’s CBD.
Operating expenses were down $52 million, or 18 per cent, compared with the previous quarter due to lower corporate costs, reduced activity and the closure of the Treasury Brisbane casino which accounted for $22 million of the cost savings.
Revenue at The Star Sydney fell 6 per cent from three months earlier following mandatory carded play and cash limits which were introduced on 19 October 2024. Despite the fall in revenue, EBITDA improved due to lower corporate costs.
The Star Gold Coast saw revenue lift 3 per cent quarter on quarter, while hospitality revenue was up 7 per cent for the quarter and 2 per cent up on the same period a year earlier.
However, gaming revenue on the Gold Coast was down slightly for the quarter and 13 per cent lower than a year earlier, a result that was offset by improved margins due to lower corporate costs.
The group’s Queensland operations have yet to be hit by mandatory carded play, betting pre-commitments and cash limits – legislation for which was passed by the state government in March last year.
The Star Brisbane’s financial results are reported by Destination Brisbane Consortium, in which The Star has a 50 per cent stake with its Hong Kong partners Far East Consortium and Chow Tai Fook Enterprises.
Under that agreement, the company recognises its operator fee as revenue and corporate costs are allocated to the property as the associated expense.
The resort generated revenue of $121 million during the second quarter, producing EBITDA of $14 million.
The Star’s shares were trading at 12.7c, down 1.3c, at 11.19am (AEDT).
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