The Star Entertainment Group, a leading casino operator in Australia, has reported significant losses for the six-month period ending 31 December. The losses were primarily attributed to a non-cash impairment of AU$988 million related to regulatory difficulties and penalties. The company has faced challenges following the Bell review, which found it “unsuitable” to hold a license in New South Wales (NSW). To address these issues, Star underwent a costly transformation to improve its culture and operations. Despite the financial setback, the company recorded a significant increase in revenue, driven by its Queensland-based properties. Star’s CEO, Robbie Cooke, emphasized the need to regain trust and demonstrate suitability for holding casino licenses.
Regulatory Landscape and Operational Changes:
Robbie Cooke acknowledged the challenging regulatory landscape, with operational changes impacting trading at The Star Sydney due to the outcome of the Bell review and increased competition. Rebuilding trust and demonstrating suitability have become top priorities for the company. Star aims to support state-wide initiatives on cashless gaming and harm reduction as part of its efforts to remediate the business and work constructively with regulators and managers.
Financial Performance and Impairment Charges:
Despite a 75.6% increase in revenue to AU$1.01 billion compared to the previous year, various costs contributed to an overall loss. Depreciation, amortization, and impairment amounted to AU$1.08 billion, a significant increase from H1 2021. Employment costs and fines and penalties were also substantial contributors to the expenses. Nevertheless, earnings before interest, tax, depreciation, or amortization (EBITDA) saw a notable increase of 550.5% to AU$199.7 million. To address its financial situation, the company has raised equity to repay outstanding debts and renegotiated financial relationships with creditors, securing covenant relief.
Impairment Charge and Outlook:
In an earnings update, Star Entertainment Group anticipated a non-cash impairment charge ranging from AU$400 million to AU$1.6 billion. Factors contributing to the charge include operational changes following the Bell review, the NSW parliamentary inquiry on anti-money laundering and safer gambling practices, amendments in the NSW casino control act, and potential increases in casino duty rates. The company’s prudent approach to assessing asset value resulted in the impairment charge, which will be recognized in its 1H FY23 results. The higher estimate of the charge is contingent on the proposed doubling of the NSW casino duty rate by the government.
The Star Entertainment Group’s recent financial results highlight the significant challenges it faces due to regulatory difficulties and impairment charges. The company’s losses, driven by penalties and operational changes, underscore the need for a renewed focus on compliance and rebuilding trust. Despite the setbacks, Star experienced strong revenue growth in its Queensland-based properties. By raising equity and renegotiating financial relationships, the company aims to address its financial obligations and maintain liquidity. The impairment charge, reflecting uncertainties in regulatory and legislative developments, further emphasizes the need for prudence and proactive measures. As Star Entertainment Group navigates these challenges, its commitment to remediation, compliance, and operational improvements will be key to its future success.