Star Entertainment to cut 500 jobs, freeze salaries, cancel exec. bonuses amid deteriorating operating conditions

Australian casino operator Star Entertainment is set to cut 500 jobs, freeze salaries, and cancel all executive bonuses after experiencing "a significant and rapid deterioration in operating conditions,", particularly at its Sydney and Gold Coast casinos. The company flagged earnings of between $280 million and $310 million to the ASX yesterday. This was still an improvement on 2022’s COVID-affected earnings of $237 million. 

In a statement to the ASX, the company said: "To put the operating environment into perspective, the group's current earnings performance is at unprecedented low levels (excluding the COVID-19 period)." Star has been under scrutiny after probes in New South Wales, and Queensland found that it allowed criminals to conduct business at its casinos, misled regulators, and engaged in "inherently deceptive and unethical" conduct.

The financial forecasts exclude provisions for potential fines and costs arising from ongoing regulatory reviews. "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," the operator said in a statement to the ASX.

Treasury Casino in Brisbane

This announcement follows the new NSW government's decision to conduct an urgent review of proposed casino tax increases, which led Star to write down the value of its Sydney casino by $988 million. In a trading update provided to the stock exchange, the operator revealed its earnings before tax was set to drop by $80 million to $280 million. The company cited regulatory operating restrictions and exclusions, as well as emerging weaknesses in consumer discretionary spending behavior, as the main drivers of the deteriorating conditions.

The company owns and operates the Treasury Casino in Brisbane, The Star Gold Coast, and The Star Sydney. It also has a 50% stake in the Sheraton Mirage resort on the Southport Spit on the Gold Coast, which is up for sale, and manages the Gold Coast Convention and Exhibition Centre on behalf of the Queensland Government.

According to the company, the 500 job cuts will come from across the workforce of 8,000 but will exclude risk management roles. In other updates, the company said it was "continuing to progress the proposed sale of the Sheraton Grand Mirage Resort Gold Coast, with indicative bids from interested parties due shortly."

The Star Gold Coast

Star Entertainment is also accelerating its plans to refinance existing debt funding arrangements, focusing on improving the group's liquidity position and increasing covenant headroom in light of the current earnings environment. The company intends to engage with the NSW Government, the Queensland Government, and AUSTRAC regarding casino duty rates and flexibility on payment terms for any current and future penalties.

The casino operator hopes to cut $100 million in expenditures for the next financial year. In February, Star reported a net loss after tax of $1.3 billion for the December half of last year, including fines of more than $200 million following inquiries in Queensland and NSW, which both found Star 'unfit' to hold a license. The company also factored in another $150 million hit, expected to be levied by financial watchdog AUSTRAC.

In response to inquiries, the operator said it was willing to do 'whatever necessary' to restore legitimacy and appointed a law firm as an independent monitor, promising a cultural overhaul. The inquiries were prompted by media investigations alleging that Star casinos enabled suspected money laundering and large-scale fraud.

The Star Sydney

The Independent Casino Commission in NSW appointed former National Rugby League boss Nicholas Weeks as an independent special manager to oversee Star's operations in both NSW and Queensland. The Queensland government has threatened to suspend Star's gaming license if the operator cannot demonstrate it has cleaned up its act by the end of this year.

Star Entertainment Group Ltd dropped 14c in early trading to a low of $1.22, down from its 52-week high of $2.98 in April last year, having usually traded above $4 for the six years before COVID-19.