Star Entertainment (ASX:SGR) shares were down 7% at lunchtime Monday on the ASX after a pre-end-of-year trading update spelled out gloomy news for the embattled casino group and its banks.
The shares were at 45.5 cents (after a low of 45 cents) in the wake of the update, which revealed a slide in revenue, a significant drop in earnings, lower high-roller gambler numbers, and continuing talks to sell assets but no actual sales.
According to the update, trading conditions have remained difficult since its last statement in April, due to the challenging economic environment and cost-of-living pressures.
Group revenue for the fourth quarter of FY 2024 is expected to be 4.3% below the previous quarter and 3.3% below the prior corresponding period.
Star blamed this on falling revenues from its Premium Gaming Rooms (PGRs), which is offsetting growth from Main Gaming Floor (MGF) revenue, where all the poker machines are located.
As a result, the company expects group revenue for the year ending next Sunday (June 30) to be between $1.675 billion and $1.685 billion. This will be down from $1.868 billion in 2022-23.
As a result, the downturn, together with higher operating costs from ongoing remediation and transformation activities, has damaged earnings, which could end up being around half of what they were a year ago before one-off items.
Star forecasted that 2024 normalized group EBITDA would be in the range of $165 million to $180 million. This represents a significant decline from FY 2023's normalized EBITDA of $317 million.
Given that Star only made a net profit of $41 million in 2022-23, it is looking at a rather large loss from operations this year.
That will be before any one-off items, though it is unlikely they will go anywhere near the massive $2.48 billion booked a year ago.
In response, Star Entertainment will seek to expedite a range of initiatives to further reduce its operating cost base, including asset sales in Sydney, Brisbane, and the Gold Coast.
On Monday, it said it would sell the Festival Hall car park in Brisbane.
The statement made no mention of its banks, but in the past, Star has said it won concessions on covenant testing and other help from its financiers.
