Star flags ‘going concern’ doubts as Qld tax breaks revealed

Star Entertainment has warned it may not have the funds to survive much longer, as it emerged it has received millions of dollars in tax deferrals from the Queensland government.

Star Casino in Brisbane. Picture: NewsWire / Glenn Campbell

Star Entertainment has warned there is “material uncertainty” over whether it can continue operating as it was revealed that the cash-strapped casino operator has already received millions of dollars worth of tax deferrals from the Queensland government.

Star in an update to the market on Monday said that revenue had plunged in the December quarter, exacerbating its cash crunch amid rising costs at its new $3.9bn Queen’s Wharf precinct in Brisbane, fines from regulators and tighter gambling controls.

It had $78m in available cash at the end of December after revealing earlier this month it had burnt through more than $100m in just three months.

Star said that given the reduction in the group’s cash pot and its “ongoing financial and liquidity challenges”, the board was continuing to seek external advice in respect of its duties, including “safe harbour” provisions. These provide legal protection for directors to manage a struggling company’s affairs while they explore restructuring.

“While discussions continue with respect to a range of different solutions, there is no certainty that any of these negotiations will … increase the group’s liquidity position,” Star said.

“In the absence of one or more of those arrangements, there remains material uncertainty as to the group’s ability to continue as a going concern.”

Star CEO Steve McCann made a last-ditch plea on Friday for the NSW and Queensland governments to provide a temporary pause on gaming taxes to help protect the jobs of the company’s 9000 workers. “We need time to reset the business,” he said.

Star has flagged concerns about its future given cash burn. Picture: AFP

NSW Premier Chris Minns over the weekend was adamant that there would be no more government assistance, while Queensland Premier David Crisafulli left the door ajar, saying his government would “consider any requests that come forward”.

The Australian can reveal Queensland’s revenue office has already deferred $9.6m worth of Star’s gaming and payroll tax liabilities last year, under “standard hardship processes”.

The revenue office refused to answer questions about the initial deferral, including whether it had been paid back, with a Queensland government spokeswoman saying: “The Star’s financial affairs are a matter for itself, and we are unable to comment on individual taxpayer matters.”

But well-placed sources said the revenue office last year extended the due date of Star’s August 2024 tax liabilities and waived late fees.

The former state Labor government then went into negotiations in September for a larger financial lifeline, and offered Star a 12-month tax deferral, capped at $100m. Under the proposed deal, Star would have been required to pay off its tax bill over a 24-month period with interest charged at the government’s cost of debt, which was around 4.7 per cent.

The deal, which fell through, was contingent on the company guaranteeing the retention of a minimum number of full-time equivalent employees across its Queensland operations and halting any incentives or performance bonuses for executives.

Queensland Council of Unions general secretary Jacqueline King on Monday said that any taxpayer-funded relief for Star must come with a job guarantee for workers at the new $3.9bn Queen’s Wharf precinct.

“Star casino is obviously an important component of the Brisbane CBD in terms of forward planning, but it’s also critical that the workers who’ve been em­ployed there are looked after,” she told The Australian. “We can’t have an establishment that size which is understaffed.

“Star casino itself should really sit down and look at what it can bring to the table and I think it’s fair enough that things like the payment of executive bonuses and corporate salaries are considered.”

Staff across the group remain concerned about their job security, with one telling The Australian on Monday that “uncertainty surrounding our future has been weighing heavily on everyone, particularly with the widely reported financial challenges the company is ­facing.”

Staff at Queen’s Wharf are about to start Enterprise Agreement negotiations as they battle cost of living increases and ongoing concern about the future.

Star Entertainment chief executive Steve McCann.

“Historically, during these negotiations, we’ve often been told that there isn’t enough money in ‘the bucket’ to provide a meaningful pay increase,” one staff member said. “With the company’s current financial position now more public than ever, it’s hard not to feel apprehensive about this year’s agreement and what it will mean for us moving forward.”

Star’s revenue fell 15 per cent to $299m in the December quarter, even as it narrowed its losses to $8m from $18m.

“There is continued weakness in the operating performance of the group due to the ongoing challenging consumer environment, the impact of mandatory carded play and cash limits in NSW as well as costs associated with ongoing remediation activities,” the company said.

Operating expenses fell 18 per cent to $52m due to lower corporate costs, reduced activity and the closure of the Treasury Brisbane casino.

Star said it was working towards the fulfilment of essential conditions before it could access the second $100m of a $200m financial package from its financiers, announced last year. It accessed the first $100m late last year.

“A number of these conditions remain challenging to meet given the group’s current circumstances,” Star said.

In particular the group’s capacity to raise $150m of subordinated debt was limited in the short term in the absence of additional liquidity solutions.

Revenue at Star Sydney declined by 6 per cent compared to the previous quarter, impacted by the implementation of mandatory carded play and cash limits which took effect across the casino on October 19. Since that date revenue declined a further 16 per cent compared to the four-week daily average prior to August 19.

Revenue generated at its 50 per cent-owned Queen’s Wharf precinct was $121m with profit of $14m. This excluded certain centralised corporate costs at the precinct, which is jointly owned with Hong Kong-based Far East Consortium and Chow Tai Fook Enterprises.

Star shares slumped almost 18 per cent to 11.5c on Monday, bringing its year-to-date losses to 40 per cent.

Originally published as Star flags ‘going concern’ doubts as Qld tax breaks revealed