SYDNEY, AUSTRALIA: The Star Entertainment Group, one of Australia’s largest casino operators, has announced it will be cutting 500 jobs and freezing salaries and incentives as part of a plan to extract AUD 100 million ($77 million) from its costs.
The decision comes as the group’s earnings have taken a significant hit in recent months due to a rapid decline in trading across its casinos, particularly at The Star Sydney and Star Gold Coast.
In a trading update to the Australian Securities Exchange (ASX), the company said it now expects to post underlying earnings of between AUD 280 million and AUD 310 million ($215 million and $239 million) for this financial year, which is a significant downgrade from its previous forecast.
The financial headwinds are separate to the controversial poker machine tax rise that the New South Wales (NSW) government may introduce in July, which the group has already warned would inflict a AUD 100 million annual hit on The Star Sydney.
According to The Star, the decline in earnings has largely been driven by the compounding impact of regulatory operating restrictions and exclusions, as well as emerging weaknesses in consumer discretionary spending behavior.
To combat the financial pressures, the casino group has committed to cutting 500 jobs across its operational and corporate divisions, canceling the group’s short-term incentives for this financial year, and implementing a salary freeze for non-EBA employees.
The Star has engaged Barrenjoey Capital Partners to review The Star Sydney and consider any structural alternatives available to maximize value for the group’s shareholders.
While the bulk of the operational redundancies are expected to be Star Sydney employees, a timeline and breakdown of the cuts are yet to be decided.
Additionally, The Star is accelerating its previously foreshadowed plans to refinance its existing debt funding arrangements, with a focus on improving the group’s liquidity position and separately increasing covenant headroom in light of the current earnings environment.
The casino operator also intends to engage with the NSW and Queensland governments, as well as AUSTRAC, in respect of casino duty rates and flexibility on payment terms in relation to any current and future penalties.
This is the second market downgrade in two months for The Star, which saw its share price plunge to a record low in February after it flagged a AUD 1.6 billion ($1.2 billion) hit to its operations if the planned tax on NSW poker machine profits is enacted from July. Following Wednesday’s announcement, the group’s share price fell more than 10% in morning trading to AUD 1.22 ($0.94). The company had been relying on high yields from its Queensland casinos to buoy flailing turnover from its flagship Pyrmont premises.
The Star’s share price has fallen by more than 50% since it was stripped of its two state casino licences at the end of last year. Despite the setbacks, the group remains committed to progressing with its proposed sale of the Sheraton Grand Mirage on the Gold Coast.
SYDNEY, AUSTRALIA: The Star Entertainment Group, one of Australia’s largest casino operators, has announced it will be cutting 500 jobs and freezing salaries and incentives as part of a plan to extract AUD 100 million ($77 million) from its costs.
The decision comes as the group’s earnings have taken a significant hit in recent months due to a rapid decline in trading across its casinos, particularly at The Star Sydney and Star Gold Coast.
In a trading update to the Australian Securities Exchange (ASX), the company said it now expects to post underlying earnings of between AUD 280 million and AUD 310 million ($215 million and $239 million) for this financial year, which is a significant downgrade from its previous forecast.
The financial headwinds are separate to the controversial poker machine tax rise that the New South Wales (NSW) government may introduce in July, which the group has already warned would inflict a AUD 100 million annual hit on The Star Sydney.
According to The Star, the decline in earnings has largely been driven by the compounding impact of regulatory operating restrictions and exclusions, as well as emerging weaknesses in consumer discretionary spending behavior.
To combat the financial pressures, the casino group has committed to cutting 500 jobs across its operational and corporate divisions, canceling the group’s short-term incentives for this financial year, and implementing a salary freeze for non-EBA employees.
The Star has engaged Barrenjoey Capital Partners to review The Star Sydney and consider any structural alternatives available to maximize value for the group’s shareholders. While the bulk of the operational redundancies are expected to be Star Sydney employees, a timeline and breakdown of the cuts are yet to be decided.
Additionally, The Star is accelerating its previously foreshadowed plans to refinance its existing debt funding arrangements, with a focus on improving the group’s liquidity position and separately increasing covenant headroom in light of the current earnings environment.
The casino operator also intends to engage with the NSW and Queensland governments, as well as AUSTRAC, in respect of casino duty rates and flexibility on payment terms in relation to any current and future penalties.
This is the second market downgrade in two months for The Star, which saw its share price plunge to a record low in February after it flagged a AUD 1.6 billion ($1.2 billion) hit to its operations if the planned tax on NSW poker machine profits is enacted from July.
Following Wednesday’s announcement, the group’s share price fell more than 10% in morning trading to AUD 1.22 ($0.94). The company had been relying on high yields from its Queensland casinos to buoy flailing turnover from its flagship Pyrmont premises.
The Star’s share price has fallen by more than 50% since it was stripped of its two state casino licences at the end of last year. Despite the setbacks, the group remains committed to progressing with its proposed sale of the Sheraton Grand Mirage on the Gold Coast.
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