Stargroup has entered its fifth week of suspension from the ASX as the ATM business attempts to get its financial affairs in order.

What started as a debt restructure of as much as $9.5 million has resulted in chief executive Todd Zani resigning from his other roles of chairman and managing director, and a review of the whole business.

“A strategic review of the business is still ongoing and the debt restructuring previously advised is making progress but still requiring additional time,” Stargroup told investors on Tuesday.

Stargroup (ASX:STL), which is worth $13.8 million, has otherwise been quiet on the announcement front lately.

Mr Zani directed questions to the board.

Company secretary Sungki Lee told Stockhead:

“Stargroup has some debt which the board would like to see decrease, and to that extent it is in discussions in order to effect a restructure of at least some of it. This debt restructure has nothing to do with the major banks ending their ATM fees.

“In relation to the strategic review, the board felt it was an appropriate time to conduct it.”

Future looked bright

Until October 17 when the trading halt was called, the only blips this year were a delay in nailing down funding to buy ATM business Indue and a breach of ASX rules by issuing shares to Mr Zani without getting shareholder approval, which has since been rectified.

Stargroup owns or manages 2923 ATMs for which it charges fees of around $2.50 to pull out cash.

The future has looked bright: a South Korean banking services company in which Stargroup owns 11.28 per cent had strong full year results.

In July, the company said it had its 14th consecutive quarter of revenue growth (although it didn’t say how much that was).

In September Stargroup secured its first banking customer, Goldfields Money, to use its network, and a deal was hatched with bitcoin advisory DigitalX (ASX:DCC) to build a network of bitcoin ATMs in Australia.

Not much appears to have happened on the bitcoin front, however. DigitalX CEO Leigh Travers had no new information to add this week to that released in early September, but Mr Lee says that as far as they know the arrangement is still in place.

ATM fees scrapped

However, that same month the big four banks scrapped (almost) all ATM fees and shareholders and journalists began asking hard questions about a business model reliant on those fees.

One of the lesser reasons behind the banks’ move was because people are taking out less cash.

Reserve Bank data shows that in 2007, $145 billion was withdrawn from ATMs. By 2016 this had fallen to $135 billion.

In 2007 around 70 per cent of consumer payments were made with cash, but that fell to 37 per cent in 2016.

“It looks like there’s some really challenging structural headwinds to the business as it stands,” says Cyan Asset Management’s Dean Fergie.

“Everything is going cashless, so if you’re running a network of ATMs of course you’ll be under the pump.”

House of cards

Mr Zani assured shareholders that their ATM investment was secure.

“We have always suggested that as a result of our machines being located in convenient locations like pubs, clubs, nightclubs, 7-eleven stores, service stations, remote sites and other similar locations — usually where banks are not interested in locating their devices — we are insulated in the event of bank policy changes.”

But this came 10 days after the annual report, which indicated its 509 wholly-owned ATMs are used on average less than twice a day each. On Stargroup’s numbers that’s 595 transactions per machine per year.

Revenue shot up 128 per cent to $8.4 million but so did the loss — widening 370 per cent to $5.9 million.

It had free cash on hand of $7777.