Star Casino to fire 500 staff amid $100m in cost cutting as shares plunge by 11%
The Australian firm’s horror run is continuing as it revealed a “significant and rapid deterioration” in operations and potentially low earnings.
The horror run for casino giant Star Entertainment Group has continued with the company revealing it was set to slash 500 roles, cancel bonuses and implement a salary freeze for some staff.
The business blamed a “significant and rapid deterioration” in operating conditions, particularly at its Sydney and Gold Coast casinos in a bombshell announcement to the ASX.
“This has largely been driven by the compounding impact of regulatory operating restrictions and exclusions, and by an emerging weakness in consumer discretionary spending behaviour,” it said in a statement.
“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.”
It revealed the casino group’s current earnings performance is at “unprecedented low levels” and if this does not change it full year earnings will drop to between $280 million and $310 million.
At its half-year results in February, its earning guidance had been higher at $330 million to $360 million.
The announcement saw its shares plunge by 11 per cent.
Star said the drop in earnings included taking into account the cost of axing jobs but had not factored in potential fines and costs associated with regulatory reviews and any “one off” costs.
The organisation said the reduction of its headcount would hit 500 roles but would exclude risk management and remediation resources, while the cancellation of bonuses for the 2023 financial year and a salary freeze would help it save $100 million annually.
This would also include savings worth $40 million as part of “operational initiatives” previously announced, it added.
“The above steps are being undertaken independent of any potential impact from the proposed casino duty rate increases in NSW,” it noted.
Financial company Barrenjoey Capital Partners are also working on a strategic review of The Star Sydney to consider any “structural alternatives available”.
The group was still seeking to sell the Sheraton Grand Mirage Resort Gold Coast and bids are due soon as it hopes to improve its liquidity position and maximise its chances of refinancing.
It will also engage with the NSW and Queensland governments and financial intelligence agency Austrac on casino duty rates and flexibility on payment terms in relation to any current and future penalties.
The group said it will continue to work with regulators in both states to remediate its businesses to support “a return to suitability over time”.
Star has been hit by scandals after it was found unfit to hold a casino licence in NSW following a damning inquiry into its “confronting” conduct last year.
A report by Adam Bell SC into the group’s activity was released by NSW independent Casino Commission over alleged criminal activities that took place at The Star in Sydney.
He said it had allegedly allowed money laundering, criminals to gamble in its casino and assisted with organised crime.
In Queensland, where Star Entertainment Group owns Treasury Casino in Brisbane and The Star Gold Coast, it also copped a massive fine and was given 12 months to “get its house in order” and prove why it shouldn’t face a 90-day licence suspension in the state in December last year.
In February, Star Entertainment Group’s shares plunged to a record low after it issued a shock profit warning that its first half-year earnings could take a whopping hit of $1.6 billion.
Shares in the casino operator plunged by 18.7 per cent to $1.52 after the announcement – dropping them to what could be a record low. Its previous low was $1.61 in March 2020.
Star Entertainment was deemed “unsuitable” to hold casino licences in Queensland in October following the explosive findings of an independent report.
The expert review, led by Robert Gotterson, made 12 recommendations to enhance integrity, minimise potential for harm, ensure probity and restore public confidence in the operations of Queensland casinos.
Star revealed that as a result of operational changes implemented after both the Bell and Gotterson reviews it was facing the staggering $1.6 billion slump in its earnings.
It said it had written down the value of Star’s assets by between $400 million to $1.6 billion based on operational changes, while a proposed increase to NSW state casino duty rates would also impact.
Revenue had been particularly affected at its Sydney casino, while the opening of Crown at Barangaroo had also seen increased competition.
“This saw an increase in the number of excluded patrons and a reduced level of complimentary services and benefits in private gaming areas impacting both slots and table games performance,” the company said.
“The Star has also been impacted by increased competition since the opening of Crown Sydney in August 2022.”
“This saw an increase in the number of excluded patrons and a reduced level of complimentary services and benefits in private gaming areas impacting both slots and table games performance,” the company said.
“The Star has also been impacted by increased competition since the opening of Crown Sydney in August 2022.”
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