Star Entertainment Group Reports AU$800 Million Investment to Counter AU$1.26 Billion Deficit

The Star Entertainment Group, grappling with a difficult situation, revealed a substantial investment of AU$800 million to counter its AU$1.26 billion deficit in the initial six months of 2022.

The significant loss was primarily attributed to a AU$988 million non-cash devaluation of the group’s Sydney holdings, stemming from the expenses and sanctions incurred due to the company’s ongoing regulatory issues.

Last year, the Bell Inquiry, a New South Wales legislative probe into the company’s property’s anti-money laundering and responsible gambling shortcomings, deemed the operator “unfit” to possess a license in the state.

To maintain operations, Star Entertainment Group embarked on a costly overhaul aimed at altering its culture and operations to prevent a recurrence of the numerous serious failings that occurred in its previous operations.

A Trying Situation

Robbie Cooke, Chief Executive Officer and Managing Director of Star Entertainment Group, emphasized the challenging regulatory environment.

“We are satisfied with the ongoing robust performance at our Queensland properties, while performance at The Star Sydney has been affected by operational modifications arising from the Bell Inquiry findings and heightened competition,” Cooke stated.

Cook highlighted that the main goal is to restore lost confidence and demonstrate the company’s worthiness of maintaining its gambling permit. As part of this endeavor, the chief executive stated the company will back statewide programs in progress concerning cashless gaming and minimizing harm.

“Our focus has been, and will continue to be, collaborating with our regulatory bodies and the NSW and Queensland governments to promptly rectify our operations so that we can strive to regain suitability.”

Financial Performance

The enterprise produced earnings of A$1.01 billion for the six months ending December 31, a 75.6% year-over-year surge.

Additional revenue, plus net profit sharing from joint ventures, contributed A$8.7 million to total revenue during the half-year period.

However, several expenses resulted in a decrease in revenue, leading to an overall deficit. Depreciation, amortization, and impairment amounted to A$1.08 billion, a remarkable A$986.1 million higher than the first half of 2021.

Employee expenses of A$376.5 million were the second-highest cost for the period. This was followed by A$350 million in fines and penalties and A$103.9 million in other expenditures.

The remaining costs were comprised of a number of other expenses, including government taxes and levies, property costs, and cost of goods sold.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) was A$199.7 million for the period, a 550.5% increase compared to the same period last year.

The gaming operator utilized capital procured through equity financing to settle outstanding corporate liabilities and enhance overall financial flexibility.

Beyond raising capital, the enterprise renegotiated its financial ties with creditors, securing covenant relief from banking institutions.

The debt reduction and novel funding sources were implemented to mollify creditors, likely in response to numerous existential threats confronting the company.

**Impairment Charges**

Earlier this month, the company released an earnings update and forecast, indicating that it anticipates recording non-cash impairment charges ranging from A$400 million to A$1.6 billion.

The company declared that this would be attributed to a multitude of factors, including operational modifications implemented following the Bell Review, and an inquiry by the New South Wales (NSW) Parliament into the casino’s anti-money laundering (AML) and responsible gambling practices, which concluded the casino was “unsuitable” to retain a casino license.

Additional justifications for the impairment charges encompass the NSW Casino Control Act Amendment, and the escalation in NSW casino tax rates in 2024.

The company asserted that the impairment charge would attain the higher estimate if the casino tax rate were to nearly double from 32% to 60.67%, as proposed by the NSW government in December.

While the ultimate effect of recent alterations to rules and legislation remains unclear, we’ve adopted a cautious strategy in assessing the worth of our holdings. This has resulted in a non-cash write-down that will be included in our financial outcomes for the first six months of fiscal 2023. Robbie Cooke, the Group’s Chief Executive Officer and Managing Director, made this statement.

Subscribe to the iGaming News Newsletter.