Star auditor raised red flags about debt-laden Queensland operations

Star Entertainment’s auditor raised several red flags last year about the ability of the company’s debt-laden Queensland operation to continue as a going concern.

Brisbane’s Queen's Wharf has been a significant financial drag on Star due to expensive delays.

Star Entertainment’s auditor raised several red flags last year about the ability of the company’s debt-laden Queensland operation to continue as a going ­concern.

Star Entertainment Queensland made a loss of $392m last year, compared to a profit of $29.3m in 2022, as the company incurred expensive delays on its $3.6bn Queen’s Wharf project and costly regulatory challenges, according to filings with ASIC.

The heavy losses were concerning enough for auditor EY to flag material uncertainties as to the subsidiary’s ability to continue as a going concern.

Star Entertainment Group this week disclosed it was seeking advice on liquidity amid a $300m cash crunch that threatened to lead to the collapse of the firm.

It is understood the future of the company now hinges on the Queensland and NSW governments deferring hundred of millions of dollars in tax.

According to people close to the company, that would free up much-needed cash for Star and give more confidence to banks and other investors to back the company with more money.

It also would allow Star to proceed with asset sales worth up to $220m, including the offloading of the Heritage buildings in Brisbane.

Star Entertainment Queensland’s annual report in both 2023 and 2022 flagged regulatory ­issues affecting its parent company, including the possible loss of its Sydney casino licence.

Those uncertainties meant Star may not have been able to provide the necessary financial ­support required to maintain the going concern status of its Queensland subsidiary, which was in charge of building the flagship Queen’s Wharf project. The directors concluded that the uncertainties were “not sufficiently onerous” to prevent the company settling its obligations.

Nevertheless, EY concluded that “these matters indicate that material uncertainties exist that may cast significant doubt on the company’s ability to continue as a going concern”.

EY accepted the assurances of Star Entertainment’s Qld’s directors that they were planning to take appropriate action, including a planned capital raising, to allow the company to continue as a going concern.

Star Entertainment’s financial and regulatory problems came to a head last week when the NSW Independent Casino Commission said the Bell II inquiry raised continued concerns about the company’s suitability to retain its Sydney casino licence.

Queen's Wharf welcomed guests last week at its five-star hotel. Picture: John Gass

The same day, Star deferred release of the group’s annual financial results, leading to the suspension of its shares on the ASX. Star Entertainment CEO Steve McCann and his board are now locked down in crisis talks with bankers and government representatives in an attempt to nail down a refinancing deal for the company.

Star late on Wednesday issued a statement saying it was reviewing its financial and liquidity position with various advisers as it tries to finalise its preliminary ­financial accounts for the 2024 financial year. Queensland Premier Steven Miles said his government was in talks with the company about possible deferral of tax payments to protect almost 3000 jobs at Queen’s Wharf. Any lifeline granted in Queensland would make it harder for NSW to reject similar help, given Star employs close to 4000 people in Sydney.

Mr Miles on Thursday ruled out waiving tax liabilities altogether. “No one is entertaining waiving any funds owed. We want to make sure taxpayers receive the full dividend from this project, but the fact is we won’t receive that dividend if the Queens Wharf Brisbane closes,” Mr Miles said. “There’s a range of moving parts, but these are detailed negotiations, and I’m not going to get into every element of it. Clearly, some of it will be conditional.”

Mr Miles said his priority was protecting the jobs of workers.

Separately, a secret probity report into a key partner in Queen’s Wharf will be released if Queensland’s LNP wins next month’s state election.

The report into Chow Tai Fook Enterprises – which owns a 25 per cent stake in Queens Wharf – was ordered by the state government in 2022 after allegations of the company’s links to organised crime figures.

After a 16-month probe by the state’s gaming regulator, Queensland’s Labor government declared Chow Tai Fook a suitable casino operator in May, with Attorney-General Yvette D’Ath saying there was “insufficient evidence” the company was unsuitable.

But now the state government is facing accusations that it helped Chow Tai Fook block the release of the report in the Supreme Court, just days before the Queen’s Wharf casino opened.

Opposition justice spokesman Tim Nicholls said taxpayers deserved to see what was in the report that they paid for, and pledged an LNP government would “absolutely” publish it if the party won the October 26 state election.

“If that needs to be tested in the court, we will test it in the court,” Mr Nicholls said.

“If that suitability report is as clean as we would be led to believe by the government, why did the government go to court with Chow Tai Fook to seek its suppression? I think Queenslanders will want to know that the holder of the gaming licence for the biggest development in Brisbane in the past 10 years is totally above board.”

Originally published as Star auditor raised red flags about debt-laden Queensland operations