The Star to cut 15-20 per cent of its 2000 salaried staff as domestic and international revenue falls

UPDATED: The Star Entertainment Group will cut up to 20 per cent of its 2000 salaried staff as softening domestic and international conditions impact its bottom line.

The Star expects lower revenue compared to last year.

THE Star Entertainment Group will cut up to 20 per cent of its 2000 salaried staff as softening domestic and international conditions impact its bottom line.

In a trading update to investors this morning, The Star said it expected normalised net earnings — which takes into account one-off items and the theoretical win rate of the casino’s gamblers — of between $550 and $560 million, compared to $568 million in FY2018.

The Star said it would bring forward its cost-cutting, framed as a “creation of centres of excellence in gaming and marketing”, which it said would save $40-$50 million a year once in full effect by the end of September.

Shares in the group plunged almost 17 per cent from $4.51 to $3.745 by 12.30pm, wiping more than $700 million dollars from its market capitalisation.

Despite posting record earnings for the first half of the year, The Star said turnover from its international VIPs was down 31.1 per cent in the second half of the year so far, with “challenging macro-economic conditions” in its domestic markets; lower hold rates on gaming tables; and disruption from its renovations in Sydney also hurting its results.

Star CEO Matt Bekier. Photo: Sam Ruttyn

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In a conference call for investors this morning, Star CEO Matt Bekier said the group would “remove duplication” across its casinos, axing “middle management positions” in finance, gaming, food and beverage, human resources, IT and more.

Mr Bekier said the cuts would be made to staff who were non-customer facing “to some extent”.

Quizzed by an analyst about why the staff cuts had not been considered sooner, Mr Bekier said it was because revenue was not meeting expectations, adding that overall costs had grown at less than one per cent.

“I think you need to give me a little bit more credit here in terms of keeping costs under control,” he said.

“Next year’s going to be challenging and we need to cut into the fixed costs base.”

Mr Bekier declined to provide further details on specific roles that would be axed but said central staff would make decisions for casinos at Brisbane, Gold Coast and Sydney instead of staff at individual sites.

“As soon as staff have been informed about who’s going and what’s being centralised, we will let you know,” he said.

Staff leaving The Star Gold Coast at the end of their shifts this evening. Photograph: Jason O'Brien.

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Mr Bekier said The Star had begun “crunching numbers” on centralising after May results showed signs of softening.

“I realise that this announcement, the top line, would be a disappointment to many of you,” he told investors and analysts.

“But I hope this discussion has given you confidence that there are positive signs here and that management is responding as best we can in a changing environment.”

The Star said its poker machine revenue was up 1.6 per cent, with a flat result in Sydney countered by Brisbane and the Gold Coast increasing market share.

Revenue on gaming tables was down 0.8 per cent on the same time last year, and non-gaming revenue was up 1.2 per cent.

It said the group’s capital works program was progressing to plan, with construction of its Dorsett Hotel and Star Residences under way and pre-sales under way for its $500 million fourth hotel and apartment tower at Broadbeach.

The Star did not give a construction start date for the latest tower, saying it was subject to market conditions, pre-sales and approvals.

The under-construction five-star Dorsett hotel next door, which has more than 90 per cent of 400 apartments already sold, is scheduled for completion by 2022.