Star chair Ben Heap yet to decide whether he’ll join exodus after $163m writedown of Pyrmont casino
Ben Heap says whether he will stay on as chairman of Star Entertainment will be a decision for the board that will be made at the appropriate time.
Star Entertainment chairman Ben Heap says he is yet to decide whether to join other directors in leaving the company as a royal commission-style inquiry forces him to wipe $162.5m off the value of its flagship casino.
Despite revenue from Star Sydney rebounding to pre-pandemic levels in the past three months, the gaming group’s suitability to hold a NSW casino licence has been questioned, threatening its main money-earner. The inquiry, headed by Adam Bell SC on behalf of the NSW Independent Liquor & Gaming Authority, heard Star allowed wealthy gamblers with alleged links to triad gangs to continue to play at its Pyrmont casino, flouted money laundering laws and misled its banker NAB and ultimately the Bank of China, among other wrongdoing.
Mr Bell is set to hand down his report next Wednesday, with ILGA deciding when to publicly release it and make the final call on whether Star should retain its NSW casino licence.
“There is a heightened risk in relation to the regulatory environment and our re-earning of confidence and trust with our regulator in NSW. With that in mind, it was appropriate that we reflect that heightened level of risk,” Mr Heap said.
“We were really quite pleased with the underlying business performance. That gives us a lot of confidence in the underlying sort of sustainability of the business. What’s important for us now is the execution of our renewal program, to rebuild that trust and confidence.”
The writedown pushed Star to report a $198.6m statutory loss in the year to June 30. Revenue dipped 1.2 per cent to $1.53bn as pandemic shutdowns earlier in the year hit operations in NSW and Queensland.
Adding to the uncertainty was rival Crown Resorts opening the gaming floor of its $2.2bn casino in Barangaroo two weeks ago. Mr Heap said it was too early to gauge the impact.
But unlike The Star, Crown’s complex will not feature poker machines – only table games.
Mr Heap – who became interim chairman in June following the resignation of John O’Neill – said he was yet to decide whether he would stay at the company after spearheading its renewal, which included appointing new directors and executives.
“Whether I stay on as chairman is ultimately a decision for the board which will be made at the appropriate time,” he said.
“My first job was to put in place a really high-quality CEO in Robbie Cooke, to build out the management team and I appointed someone like Scott Wharton, who’s joined us to run Sydney and run our transformation program,” said Mr Heap, adding that the Bell inquiry had been a “cathartic experience” but “one that provides the foundation for the future success of The Star”.
A separate inquiry into Star’s Queensland operations is also under way. Gambling reform advocates are calling for that review to be dramatically widened to investigate the awarding of the $3.6bn Queen’s Wharf contract, after revelations that red flags were raised about links to organised crime.
The Weekend Australian revealed on Saturday that state probity officials were concerned about links between Star’s Hong Kong partner, Chow Tai Fook and Macau gambling boss Stanley Ho and his alleged triad connections, but the joint venture won the bid after CTF voluntarily removed some people from the bid. Mr Heap declined to comment on the media reports.
“In the context of the public hearings commencing this week in connection with the review of The Star’s casino operations in Queensland being conducted by Robert Gotterson, and the ongoing review being conducted by Adam Bell in relation to The Star Sydney, The Star does not consider it appropriate to comment at this time,” he said.
UBS analyst Suthesh Jeyakandan said while “strong trading” continued at The Star, the group was yet to ascertain the impacts from Crown Sydney and cost pressures were expected to continue. Meanwhile Macquarie analysts, who have an outperform rating with a $3.60 price target, said it was likely Crown Sydney would cause some disruption to The Star. “Trading is above expectations in early FY23, but likely to see some disruption from Crown Sydney and economic challenges and costs are tracking slightly higher than expected,” analysts told investors.
Since the NSW inquiry began most of its executive leadership – including chief executive Matt Bekier, chief financial officer Harry Theodore, chief legal and risk officer Paula Martin and NSW chief casino officer Greg Hawkins – have resigned, with directors indicating they too will go.
Gross revenue at Star Sydney fell 6 per cent to $781m, while earnings before interest and tax dived 143 per cent to a $36m loss.
The company said earnings suffered from the closure of the property for 102 days and other Covid-19 restrictions. But it said that on an unrestricted basis, revenue in the June quarter was “strong” and “consistent with pre-Covid levels”. “Slots revenue in the June quarter is up 17 per cent on pre-Covid levels while domestic tables were down 8 per cent,” the company told investors.
The company said revenue across its Brisbane operations fell 6 per cent to $326m and EBIT dived 56 per cent to $38m.
Star will not pay a dividend.
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