A prominent Australian entertainment conglomerate, Star Entertainment Group, reported a substantial deficit of 2.4 billion Australian dollars for the entire fiscal year. This financial shortfall, equivalent to 1.6 billion US dollars, 1.5 billion euros, or 1.2 billion pounds, was primarily attributed to depreciation in the value of its gambling establishments in Sydney, Gold Coast, and Brisbane.
Star Entertainment Group has encountered numerous financial penalties in recent times. The company disclosed that “significant items” within its expenditure for the fiscal year ending June 30, 2023, amounted to 2.8 billion Australian dollars.
This figure included a non-cash impairment of 2.2 billion Australian dollars related to intangible assets and property assets associated with its casinos in Sydney, Gold Coast, and Brisbane. Furthermore, the company incurred 595 million Australian dollars in regulatory and legal fees, 54 million Australian dollars in debt restructuring expenses, and 16 million Australian dollars in redundancy costs.
These substantial expenses offset a growing 317 million Australian dollars in earnings before interest, taxes, depreciation, and amortization (EBITDA), ultimately leading to a 2.4 billion Australian dollar after-tax loss.
Over the preceding year, Star Entertainment Group has confronted difficulties linked to anti-money laundering practices and lapses in social responsibility. These issues originated primarily from its connections with Chinese gambling intermediaries. This includes potential fines from the Australian Transaction Reports and Analysis Centre (AUSTRAC), four class-action lawsuits, and temporary suspensions of state casino licenses in New South Wales and Queensland.
Following a challenging year, Star Entertainment Group is actively working to address its difficulties.
Robbie Cooke, the chief executive and managing director of Star Entertainment Group, stated: “To characterize the past year as difficult is a significant understatement of what Star Entertainment has actually endured over the past twelve months.
“The effects of a damaged social license are influencing team members in numerous ways each day, emphasizing the necessity to comprehend the privilege and accountability that accompany holding a casino license.”
Cooke informed investors on a conference call following the release of earnings that the group was no longer contemplating the sale of its Sydney property after the recent New South Wales government decision to reduce proposed tax hikes.
Revenue Increased After COVID Restrictions Were Lifted
Star Entertainment Group’s total revenue grew by 22% to A$1.9 billion in the 2023 fiscal year, a figure influenced by COVID-19 restrictions in the previous year.
Sydney’s revenue rose by 26.5% year-over-year, with electronic gaming machines up 30%, table games up 19%, and non-gaming revenue up 49%. Revenue was affected by the tightening of restrictions in mid-September 2022, which led to an increase in excluded customers. It also faced intense competition from nearby Crown Resorts.
Star Entertainment Group’s Gold Coast revenue increased by 20% year-over-year. This included electronic gaming machines up 9%, table games up 7%, and non-gaming revenue up 52%.
The Star Gold Coast experienced a strong start, benefiting from a surge in domestic tourism and consumer spending after COVID-19, as well as the return of conference business.
## Global Travel Contests and Local Tourism
Nevertheless, the second fiscal quarter of 2023 witnessed a dip in performance due to the resurgence of global travel and rivalry from local tourism. Heightened controls resulted in an increase in turned-away patrons.
Brisbane’s income rose by 15% year-over-year, with electronic gaming machines up 17%, tables up 8%, and non-gaming income up 34%.
Star Entertainment Group reported statutory earnings before interest, taxes, depreciation, and amortization, excluding any significant items, slightly exceeding previously announced projections. The total was $317 million, a rise of $79 million.
## Star Entertainment Group Anticipates AUSTRAC Lawsuit Resolution
Star Entertainment Group is still awaiting the resolution of a lawsuit filed by AUSTRAC for alleged violations of anti-money laundering and counter-terrorism regulations. The company has prepared for a potential A$150 million penalty. Its competitor, Crown Resorts, agreed to a A$450 million regulatory settlement.
Chief Executive Officer Cook added, “As a team, we are determined to regain the trust and confidence of our community, including our regulators, government, shareholders, employees, and customers.”
“We fully comprehend the responsibilities that come with holding our licenses and are committed to transforming our leadership and culture. This journey has commenced, and we know there is much work to be done.”
Cook characterized the overhaul as “top priority” for Star Entertainment Group entering the 2024 fiscal year. This will include a substantial increase in anti-money laundering resources.
The organization is experiencing a significant transformation, with modifications to both its executive team and internal functions. The chief executive officer declared that they are taking action to enhance their risk mitigation, responsible gaming, and anti-money laundering protocols. They are also introducing more robust governance and accountability mechanisms. The CEO highlighted their dedication to a multi-year strategy to address these matters and are taking steps to improve their financial crime management and harm reduction initiatives.
