Some Star Entertainment employees are paying the price for the casino operator s in Australia. As the company continues to reel from multimillion-dollar fines and increased scrutiny, it has announced that it will let go of more than 6% of its workforce.
Vehicles line up to drop off guests at a Star Entertainment casino. The casino operator is facing financial headwinds for its past regulatory transgressions. (Image: Gold Coast Bulletin)Although unionized positions are safe, Star will eliminate 500 jobs from its 8,000-strong workforce. With the pink slips, the company will implement a freeze on bonuses and salaries and introduce other measures it hopes will help keep it from sinking further.
To put the operating environment into perspective, the Group s current earnings performance is at unprecedented low levels (excluding the COVID-19 period), Star Entertainment explained in an ASX filing.
In a trading update provided to the Australian Securities Exchange (ASX), Star revealed that its pretax profits are set to drop by AU$80-$280 million (US$53.78-$188.24 million).
The company, which owns casinos in Sydney, Brisbane, and the Gold Coast, said it is experiencing significant and rapid deterioration in operating conditions that are hitting hard at and Star Gold Coast.
Star acknowledged that the drop resulted from past transgressions, including money laundering and document forgery, among other charges. Changes in consumer spending are also impacting its bottom line.
More TroubleThe operator, which several Australian states determined was unfit to hold a casino license, also plans to sell its Sheraton Grand Mirage on the Gold Coast. If everything goes according to plan, it expects to save at least AU$100 million (US$67.23 million) in the next fiscal year through its announced measures.
NSW AU$100 million and temporarily suspended its license following an inquiry that found the company had misled regulators and shareholders for years. Queensland then followed suit with a similar fine.
Australia s financial watchdog, the Australian Transaction Reporting and Analysis Centre (AUSTRAC) is also targeting the company in its own investigation. Star isn t alone, though, as Crown Resorts has also come under fire for similar violations. Crown also had to pay fines to regulators and AUSTRAC.
Falling RatesThe cuts and freezes join a downgrade of projected financial success for Star. It previously expected EBITDA (earnings before interest, taxes, depreciation, and amortization) of AU$330-AU$360 million (US$221.73-$241.88 million) for 2023.
The announcement has already forced shareholders to back off. Star was trading steadily at around AU$1.35 (US$0.91) for the past week before losing ground on Wednesday. As of publication, it had dropped to AU$1.21 (US$0.81) before recovering slightly to AU$1.26 (US$0.85).
If the market conditions it is witnessing now don t change, the range will fall to AU$280-AU$310 million (US$188.13-$208.3 million). That could be a difference of as much as 22%.
