Star Entertainment Group has reported a first-half loss of $302 million, deepening its financial woes and prompting the urgent need for a rescue deal to ensure continued operations. The results, delayed for over a month, were finally filed with the Australian Securities Exchange (ASX), paving the way for the company’s shares to resume trading after a suspension.

Star posts steep first-half loss as bailout rescues casino giant:

Covering the period from July 1 to December 31, 2023, the figures revealed a 25 percent drop in group revenue to $650 million and a staggering 32 percent fall in domestic gaming revenue. Compared to a $9 million loss during the same period the previous year, the financial downturn was far more severe than many anticipated. The drop was attributed largely to regulatory changes, the closure of Treasury Brisbane Casino, and diminishing market share in Sydney and the Gold Coast.

According to Star, it ended the reporting period with $98 million in available cash, following an initial $100 million injection from a newly secured rescue deal. Yet, in its filing, the company cautioned that “there remains material uncertainty regarding the group’s ability to continue as a going concern,” even with the capital inflows.

To avoid collapse, Star finalized a $300 million recapitalization agreement with U.S.-based casino operator Bally’s Corporation and Australian investor Bruce Mathieson’s Investment Holdings. The deal, pending shareholder approval, will give Bally’s a controlling 56.7 percent stake in Star. That stake is expected to be shared with the Mathieson family, who already own 10 percent of the company.

Under the agreement, Bally’s is set to contribute $250 million, with the remaining $50 million coming from Mathieson. Of the initial funding, $33 million will be convertible at 8 cents per share, while the rest will take the form of subordinated debt. The remaining $200 million is contingent on further approvals. According to Star CEO Steve McCann, “We’re very hopeful the Bally and [Mathieson] capital injections … will provide us the time and breathing space to work on those revenue initiatives and turn this business around over the medium term.”

Reforms and revenue collapse:

Star’s financial and operational difficulties stem largely from recent casino reforms imposed in New South Wales and Queensland. The company was forced to introduce mandatory carded play and cash limits at its venues, beginning in October. These compliance rules, part of broader anti-money laundering measures, dramatically altered customer behavior and contributed to a 20 percent drop in revenue at the flagship Sydney property, which brought in just $362.2 million during the period—down from $720 million a decade ago.

In Queensland, revenue from the Gold Coast casino slumped 11.7 percent to $92.9 million, with the company citing “challenging trading conditions caused by casino operating reforms and market share loss.”

According to Australian Broadcasting Corporation (ABC News), CEO Steve McCann addressed the impact of these changes, stating, “One of the things that we have experienced has been a very poor customer experience as we’ve implemented the rollout of carded play cash limits, time limits and also our enhanced customer due diligence processes.” He added, “We are working hard on re-establishing those customer relationships and reactivating some customers who are not coming to the Star anymore.”

To bolster liquidity, Star completed several divestments, including the $60 million sale of its Sydney Event Centre and its leasehold interest in Treasury Brisbane Casino. It also finalized the sale of its 50 percent share in the Queen’s Wharf Brisbane development to joint venture partners Chow Tai Fook Enterprises and Far East Consortium, generating an additional $53 million.

Though Star had previously indicated it may offload further non-core assets, McCann confirmed that “the group was not considering the sale of any further non-core assets ‘at this point of time,’” as it finalizes its agreement with Bally’s.

Star has also implemented $100 million in annualized cost reductions and continues to explore new revenue opportunities, including improvements in customer experience and leasing non-gaming areas. McCann expressed cautious optimism, noting that anticipated government regulations for pubs and clubs may soon level the playing field for licensed casinos, offering Star a more competitive environment in the future.

Despite these efforts, regulatory pressure remains intense. All three Star-operated properties in Sydney, Brisbane, and the Gold Coast are currently under supervision by government-appointed managers, increasing compliance costs while revenue remains strained.