Star to restructure as business warns of “deteriorating” conditions

Star, which has been the target of multiple parliamentary inquiries into misconduct, said that it intends to restructure due to the compounding impact of regulatory operating conditions and exclusions which, when combined with an “emerging weakness” in consumer spending, has led to this adverse environment.

The business also said that its Star Sydney casino – representing the largest single source of revenue for the group – “continues to operate in an uneven competitive environment” due to the impact of ending its junket affiliations.

These had been a particular source of controversy for the operator during its scandal and led to questioning regarding whether the casino had been infiltrated by organised criminal elements.

Meanwhile, the business added, its strong 1H FY23 performance the company reported in its Queensland properties had “deteriorated in recent weeks”, in particular at its Gold Coast property.

“To put the operating environment into perspective, the group’s current earnings performance is at unprecedented low levels (excluding the Covid-19 period),” said the business.

Star warned that if these conditions continue for the financial year, underlying FY23 EBITDA is expected to be in the order of $280m-$310m. At the lower end, this would represent a 32.3% decline in EBITDA compared to the $413.6m the business reported in its FY22 financial report.

Cost and restructuring initiatives

This total includes the impact of cost cutting and restricting initiatives that the business plans to take. However, the business said its earnings estimate does not include expected costs related to its regulatory pressures.

“The FY23 underlying EBITDA excludes provisions for fines, costs associated with the ongoing regulatory reviews (legal, consultant and other costs) and any one-off costs associated with the group’s cost initiatives, all of which will be treated as significant item,” said the company.

In response to these pressures, Star announced a raft of new cost and restructuring initiatives to help it operate in the new environment.

The company plans to reduce approximately 500 FTE positions across the business, although this will exclude its risk management and remediation resources. Additionally, the company plans to cancel all incentive programmes across the business, as well as a salary freeze for all non-union employees.

“These actions, together with the previously announced $40 million of operational initiatives, are expected to deliver a combined ongoing reduction in group operating expenditure of more than $100 million annualised compared to FY23,” said the company.

The company is also “continuing to progress” on the previously announced sale of its Sheraton Grand Mirage Resort Gold Coast property, with the company saying that it expects bids to be received shortly.

Refinancing plans

The business also said it is “accelerating” previously hinted at plans to refinance its existing debt funding arrangements, with a focus on improving the group’s liquidity position, as well as helping the company cope in the new earnings environment.

“In addition, the group continues to work with regulators and the NSW manager and Queensland special manager to remediate its businesses, to support a return to suitability over time,” said the company.