ASX-listed Star Casino is persevering today, despite the company being strapped with a $100 million fine and license suspension.
To the surprise of many, the Star Entertainment Group Ltd (ASX: SGR) share price is 1.3% higher than where it finished yesterday. Then again, nearly 90% of the top 200 listed companies are in the green today following a rebound in US markets overnight.
For Star shareholders, answers to old questions have only created new ones. For instance, how will this large financial punishment impact the company? Does Star even have a lazy $100 million lying around in cash to foot the bill?
Let's dive into the details.
Where will the money come from?
As previously covered, the NSW Independent Casino Commission handed down a $100 million fine to Star yesterday upon its determination.
This, in conjunction with the removal of its license, was the result of findings into the company failing to appropriately operate. Now the question on the lips of shareholders is: What's next?
For starters, the ASX-listed Star Casino will need to find a hefty $100 million somewhere to pay for its wrongdoings. However, the company only held $82 million in cash and equivalents at the end of June 2022.
Notably, there is a considerable amount of debt already on the company's balance sheet. At the end of FY22, Star had over $1.3 billion in interest-bearing liabilities. Furthermore, cash flows for the latest financial year were as follows:
- Cash flows from operating activities: $176.2 million
- Cash flows from investing activities: -$122 million
- Cash flows from financing activities: -$40.1 million
Overall, the ASX-listed Star Casino finished the full year with only $14.1 million worth of positive cash flow. This could mean shareholders will need to go even longer without dividends.
It seems Star might need to do one (or a combination of three things): raise capital/debt, cut back expenses, and/or increase income; in order to pay its fine.
CEO's take on ASX-listed Star Casino
The recently appointed new CEO, Robbie Cooke, shared his thoughts following the outcome. As reported by The Australian, Cooke said:
The business is not broken. [But we need to show] that we are operating at the highest intergrity level.
There is a 100 per cent desire from the Star point of view that we want to get the business back to suitability. We are very determined to put in place systems and procedures that are necessary to do that.
On a positive note, Cooke will have the chance to redeem Star. A potential alternative outcome was the complete shutdown of the casino operator. Though, the NICC decided that such an option wouldn't have been productive.
Star Casino has suffered on the ASX so far this year. The damage toll has reached nearly 30% on a year-to-date basis.
