Australia’s Star Entertainment Group has announced it will cut 500 full-time jobs, cancel executive bonuses and freeze the salaries of non-EBA (enterprise bargaining agreement) employees due to a significant deterioration of operating conditions at its Sydney and Gold Coast casinos.
The actions, which will be complemented by a strategic review of possible structural alternatives to further increase value for shareholders, were revealed in a Wednesday ASX filing, with Star claiming it will save the group AU$100 million (US$67 million) in annual operational expenditure.
It also comes amid fears the NSW state government is about to impose a significant tax hike on Star’s gaming revenues, potentially raising the current 32% tax on electronic gaming machines to more than 60%.
However, Star said Wednesday that of greater concern has been a “significant and rapid deterioration in operating conditions” – particularly at The Star Sydney and The Star Gold Coast – driven by recently introduced operating restrictions imposed in the wake of multiple state inquiries into its operations. It also cited an emerging weakness in consumer discretionary spending behaviour.
“The Star Sydney continues to operate in an uneven competitive environment as it relates to the regulatory settings for complimentary services in its private gaming areas,” Star said.
Likewise, “the strong 1H23 performance at the Group’s Queensland properties as reported in February, which was driven by strong domestic revenues in that period (relative to pre-COVID levels), has deteriorated in recent weeks, particularly at the Gold Coast.
“To put the operating environment into perspective, the Group’s current earnings performance is at unprecedented low levels (excluding the COVID-19 period).
“If these current conditions continue for the balance of the financial year and do not materially change, underlying FY23 EBITDA is expected to be in the order of AU$280 million to AU$310 million (US$188 million to US$209 million), including the FY23 impact of the cost initiatives described below.
“The FY23 underlying EBITDA excludes provisions for fines, costs associated with the ongoing regulatory reviews (legal, consultant and other costs) and any one-off costs associated with the Group’s cost initiatives, all of which will be treated as significant items.”
Star, which has already been fined AU$200 million (US$134 million) by regulators in NSW and Queensland and faces further punishment from AML watchdog AUSTRAC for failings uncovered during the NSW Bell inquiry, said it “intends to engage with the NSW Government, the Queensland Government and AUSTRAC in respect of casino duty rates and flexibility on payment terms in relation to any current and future penalties.”
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