Star Entertainment flags loss, underpayments

Investors in the under-investigation casino operator have to brace for an up to $75m first-half loss besides multimillion dollars in staff repayments.

The Star Entertainment Group’s Sydney casino is part of an Austrac investigation. Picture: Brendon Thorne/Bloomberg.

Casino operator Star Entertainment Group’s financial challenges are growing with a first-half loss of $73-75m and a $13m provision for remediation related to staff underpayments over six years.

The group, which is subject to an investigation into its Sydney and Queensland casino operations by anti-money-laundering agency Austrac, said first-half earnings have been materially impacted by pandemic-related property shutdowns, operating restrictions and border closures.

First-half normalised earnings before interest, taxes, deductions and amortisation are likely to come in between $28m and $30m and the group expects to report a normalised net loss of $73-75m, it told investors on Monday.

Statutory EBITDA is forecast at $30-32m (before significant items) and statutory net loss at $73-75m (post significant items).

Star Entertainment Group CEO Matt Bekier, pictured at Treasury Casino, Brisbane, has apologised for payment shortfalls. Picture: Richard Walker

The forecast result compares to normalised earnings of $226m in the prior corresponding period and a normalised net profit of $63m. Statutory EBITDA (before significant items) was $233m and statutory NPAT at $51m in the prior corresponding period.

Operationally, its Star Sydney casino – closed from the start of the period to October 11 – recorded strong revenue growth on reopening, but the Queensland casinos’ total revenue remained stable (on pcp) when open, despite border closures and Covid-19-related operating restrictions.

Separately, the group also identified underpayment of wages to about 2200 current and former salaried team members through a six-year retrospective wage review of salaried team members underpinned by modern awards.

In some cases, team members were found to not be ‘better off overall’ as the annual salary was not sufficient to compensate them for equivalent award entitlements such as overtime and penalty rates.

The Star’s workforce was paid approximately $3.3bn across the same six-year period.

The Fair Work Ombudsman and the United Workers Union have been informed with Star saying it has “improved its processes, systems and training” and has a plan in place to ensure salaried team members’ pay is correct moving forward.

Managing director and chief executive Matt Bekier apologised to team members impacted by the payment.

“We are committed to doing the right thing by acting transparently.

“Our priority is to address this issue and to ensure that it doesn’t happen again,” he said.

Star Entertainment will report its first-half results on February 17 amid growing regulatory scrutiny.

Last month, Austrac extended its ongoing investigation into Star’s Sydney operations to include the Queensland casinos at Gold Coast and Brisbane.

Austrac is investigating potential breaches of anti-money-laundering laws from 2016 to 2019 across a number of casino operators, and initiated the Star inquiry in June last year.

The Queensland Office of Liquor and Gaming Regulation is also working with Austrac as it continued its inquiries.

The NSW Independent Liquor & Gaming Authority has roped in Adam Bell – the lead senior counsel assisting a similar inquiry into Star’s rival, Crown Resorts – to undertake a review of Star’s Sydney operations.

ILGA’s public hearings are scheduled for next month with a conclusion expected by June.

The loss and regulatory developments cast further doubts Star will emerge as a repeat rival bidder for Crown, which is working through Blackstone’s $8.9bn buyout proposal.

Star made a $12bn scrip merger proposal in May last year before it was withdrawn in July.

Star shares rose 0.8 per cent to $3.58 on Monday.