Star Entertainment Cuts 500 Jobs and Amends 2023 Earnings Forecast
Star Entertainment Group, one of Australia’s leading entertainment and gambling companies, reportedly announced that it will cut 500 jobs in an attempt to set off a series of regulatory restrictions and fines and the weak customer spending causing the overall decline of the casino performance. As Reuters reports, such a performance compelled the company to announce a modification of its annual revenue forecast and face an 11% decline in share prices.
Reducing Operating Expenses:
Star Entertainment will reportedly cut the announced job count across the group and suspend financial incentives and bonuses previously anticipated for the group’s employees for the financial year ending December 31, 2023. The move aims to reduce the company’s operating expenses and set off part of the earnings lost from the weaker-than-expected customer spending behavior in Star’s casino facilities.
Star’s spokesperson told Reuters that the company has about 8,000 employees – with 4,500 of the total number employed at the Sydney waterfront casino only – and that the job cuts account for around 6.25% of Star’s workforce. However, the company’s move triggered an instant decline of 11.4% in its share prices to settle at the level of A$1.205, which is the worst drop recorded since mid-February. As the ASX 200 benchmark index (.AXJO) reportedly designated Star as the biggest indexed loser, Star’s savings from job reductions are likely to be swallowed by the lower share prices.
Star reportedly said that its Sydney resort – together with other Gold Coast casinos – is facing difficult operating conditions as ” regulatory operating restrictions and low consumer spending behavior” are combined to make a cumulative impact on the facility operations.
Strict regulatory restrictions affected Australian casino operators over the past two years. These included casino tax proposals in New South Wales, measures to prevent gambling addiction, but also allegations of breaches of anti-money laundering laws imposing significant fines to Star Entertainment. The company faced disputes and suspensions of licenses and paid a $100 million fine to New South Wales and Queensland, as well as a $150 million provision for the AUSTRAC money laundering claims.
Amended 2023 Forecast:
These events may have significantly contributed to the negative impact on the company’s current operations. Star reportedly said: “To put the operating environment into perspective, the group’s current earnings performance is at unprecedented low levels, excluding the COVID-19 period.”
The current circumstances made the company amend its forecast for fiscal 2023. Star reportedly said that it expects its earnings before EBITDA) to be between A$280 million ($188.44 million) and A$310 million, different from the previously expected range between A$330 million and A$360 million.
The source also reports that Star Entertainment has made arrangements to conduct a strategic review of The Star Sydney looking for alternative solutions to maximize shareholder values. As for the proposed sale of Sheraton Grand Mirage Resort Gold Coast, the company is expecting bids and meanwhile speeding up debt repayment to improve the group’s liquidity.
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