Star Entertainment has seen its shares drop by 22 per cent after it hinted at a potential A$1.6bn impairment charge.
Publishing its first-half 2023 and full year 2023 earnings outlook, this charge, which converts to $1.11bn, will relate to its first-half earnings from a proposed casino duty hike in New South Wales, proposed by the NSW Government on December 17, 2022.
Star’s CEO and Managing Director, Robbie Cooke, noted: “Whilst the outcome of recent regulatory and legislative developments remains uncertain, we have taken a prudent approach to assessing the carrying value of our assets, which has resulted in a non-cash impairment charge which will be recognised in our 1H FY23 results.
“We are engaged in constructive discussions with the NSW Government in relation to the proposed casino duty rate changes.
“We are singularly focused on working with our regulators and the NSW Manager and Queensland Special Manager to remediate our businesses, as we seek to return to suitability.
“Our key priority is to regain the trust of our community and demonstrate to our regulators that we are suitable to hold our casino licences. Aligned to that, we continue to support the NSW Premier’s initiatives around cashless gaming and improved harm minimisation across the industry.”
The company also stated within the report that its trading performance has been “adversely impacted” by several factors, alongside the aforementioned duty tax, pointing to operating restrictions from mid-September following the Bell Review.
This, according to Star, saw an increase in the number of excluded patrons and a reduced level of complimentary services and benefits in private gaming areas. It also highlighted increased competition for its revenue results since the opening of Crown Sydney in August last year.
The Star noted that, if implemented, it intends to undertake an urgent review of the property’s operating model and assets, with a view of maximising value of the group’s shareholders. Furthermore, the company’s Sydney operations witnessed domestic revenue was down 13.5 per cent on pre-COVID levels.
Looking into the firm’s other operations, the Star Gold Coast experienced a jump in domestic revenue by 30 per cent on pre-COVID levels, achieving its highest revenue result on record.
Moving over to its Treasury Brisbane property, this holding has seen domestic revenue up by nine per cent on pre-COVID levels, with the firm noting record performances across slots, main gaming floor tables and hospitality.
Cooke added: “We have been pleased with the ongoing strength of trading across our Queensland based properties, while trading at The Star Sydney has been impacted by operational changes associated with the outcome of the Bell Review as well as competition from Crown Sydney.”
Following ongoing remediation actions, The Star has incurred remediation costs of $20m in 1H FY23, which included an increase in headcount including the use of “surge” third party consultants to improve compliance processes as the firm seeks to return to licence suitability.
The Star is also expected to report underlying EBITDA of A$195m to A$205m in the first half of 2023.
