Australia’s embattled The Star says that it’s going to be laying off some 500 full-time employees and implementing salary freezes, as it attempts to reduce its operating expenditure by over AU$100 million ($67.4 million) amongst what it calls ‘a significant and rapid deterioration in operating conditions’.
The group notes that the impacts are being particularly felt at its Star Sydney and Star Gold Coast properties, with a reversal in ‘strong domestic revenues’ at the Gold Coast property in the first quarter.
In particular the group points to ‘the compounding impact of regulatory operating restrictions and exclusions, and by an emerging weakness in consumer discretionary spending behavior’.
The Star’s casino properties are still being managed by an independent party, after having been found to be non-compliant with gaming legislation. The reviews into the group’s return to suitability are ongoing.
The group notes that its ‘current earnings performance is at unprecedented low levels (excluding the COVID-19 period)’, with The Star expecting its underlying FY23 EBITDA to be ‘in the order of AU$280 million ($188 million) to AU$310 million ($209 million)’. However, the figures are conditional upon the cost reductions, including the mass layoff.
The figure also ‘excludes provisions for fines, costs associated with the ongoing regulatory reviews […] and any one-off costs associated with the Group’s cost initiatives’.
The steps outlined by the group to reduce costs are also ‘being undertaken independent of any potential impact from the proposed casino duty rate increases in NSW’. The group had previously noted that it was expecting losses of up to $1.11 billion due to both the possible changes to the state’s casino act and tax rates and the legal cases filed against it. The group also registered a loss of $861 million for the half-year period ended December 31st.
The group’s now considering ‘structural alternatives’ for The Star Sydney, continuing with the proposed sale of its Sheraton Grand Mirage Resort Gold Coast (bids are expected ‘shortly’) and ‘accelerating’ its debt refinancing plans.
The group recently raised some $531 million under its retail offer and equity raising action, including pulling additional funding from Queen’s Wharf Brisbane partners Chow Tai Fook and Far East Consortium.