The Star Entertainment Group has updated its investors on operating conditions and outlook for the remainder of the group’s 2023 financial year due to current earnings performance being at “unprecedented low levels”.
The group has stated in an update that it is experiencing “a significant and rapid deterioration in operating conditions”, particularly at its The Star Sydney and The Star Gold Coast properties.
In response to the situation, the group’s board and management are implementing a range of initiatives to reduce operating costs including 500 job losses, as well as a strategic review for its Sydney location.
The Star noted that the deterioration has been caused by the “compounding impact of regulatory operating restrictions and exclusions”, as well as an “emerging weakness in consumer discretionary spending behaviour”.
As a result, The Star has experienced “unprecedented low levels” during its current earnings performance (excluding the COVID period).
Looking at the properties mentioned above, the group stated that The Star Sydney “continues to operate in an uneven competitive environment” in relation to “regulatory settings for complimentary services in its private gaming areas”.
In addition, The Star reported the strong domestic revenue performance in H1 FY23 at the group’s Queensland properties has “deteriorated in recent weeks, particularly at the Gold Coast”.
Taking this into account and if current conditions do not materially change, The Star estimates that its underlying EBITDA for FY23 will be between AUS$280m and $310m, including the impact of its initiatives to reduce operating costs.
Regarding the operating costs initiatives, The Star has announced that it will:
- Reduce approximately 500 FTE positions across the group (excluding risk management and remediation resources).
- Cancel short-term and other incentives for FY23.
- Freeze salaries for non-EBA employees.
Together with the previously announced $40m operational initiatives, the group believes these actions will deliver “a combined ongoing reduction in group operating expenditure of more than $100m annualised compared to FY23”.
These actions are also being undertaken “independent of any potential impact from the proposed casino duty rate increases” in New South Wales.
In addition, The Star is asking Barrenjoey Capital Partners to assist in the strategic review of The Star Sydney and consider “any structural alternatives available to maximise value for the group’s shareholders”.
Elsewhere, the group is also continuing the proposed sale of Sheraton Grand Mirage Resort Gold Coast and is accelerating existing debt funding arrangement refinancing plans to help improve its liquidity position and increase covenant headroom.
The Star also “intends to engage with the NSW Government, the Queensland Government and AUSTRAC in respect of casino duty rates and flexibility on payment terms in relation to any current and future penalties” and work with regulators to return over time to suitability.