Star set to cut 500 jobs as it grapples with regulatory headwinds

Star Entertainment Group, Australia’s largest gambling group, has submitted a new update to the Australian Stock Exchange (ASX) in which it detailed plans to drastically reduce the number of full-time jobs, cancel executive bonuses and freeze the salaries of non-EBA employees.

The decision will impact 500 full-time jobs held by employees. The Group cited significant deterioration of its operations at its flagship Gold Coast and Sydneycasinos to motivate this. Similarly, regulatory headwinds have prompted the company to act quickly in a bid to avoid further financial hardship.

The decision does not come lightly and it’s an attempt by Star to engage in major cost-cutting which should help it save AU$100m ($67m) in operational expenditure. Star has been forced to act in response of what it has described a continuously deteriorating operational environment. Most recently, the New South Wales (NSW) government confirmed that it would seek to hit electronic gaming machines with a 60% tax, a significant increase from the current 32% tax that the operator pays.

Both The Star Sydney and The Star Gold Coast have been impacted as a result. In the statement, Star said: "The Star Sydney continues to operate in an uneven competitive environment as it relates to the regulatory settings for complimentary services in its private gaming areas."

This is not the only reason why the group has had to act preemptively and engage in a far-reaching job-cutting program. There have been shifts in consumer discretionary spending, the Group added, arguing that consumers had become more reluctant to spend, thus biting into Star’s bottom line. Star confirmed that its current earnings performance is at a historically low level – excluding the COVID-19 pandemic – which has necessitated further intervention.

Star is also preparing for possible future inroads with regulators. So far, the Group has been hit with penalties to the tune of AU$200m ($134m) across its operations in NSW and Queensland. The possibility exists, however, that further penalties may be imposed on the company, with AUSTRAC, Australia’s anti-money laundering watchdog becoming the latest regulator to consider a financial penalty against the Group.

Despite the difficult decisions, Star is also keeping an eye on the future. In the update, the company confirmed that it is progressing with the proposed sale of the Sheraton Grand Mirage Resort Gold Coast. The Group is similarly looking into plans to refinance its debt funding arrangements and strengthen its overall liquidity position.

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