In a significant development within the Australian gambling sector, Star Entertainment Group has called for an immediate hiatus on its trading activities on the Australian Securities Exchange (ASX). This request came in the wake of a critical communication issued on the 19th of February by the New South Wales (NSW) Independent Casino Commission, which governs the licensing and regulation of casino operations in the state.
This sudden move by Star arises from the Commission signaling the initiation of an inquiry as per the provisions of the NSW Casino Control Act 1992, a piece of legislation that provides the framework for the functioning and oversight of casino activities within the state. Although the specifics of the Commission’s inquiry have not been made public, the gravity of the situation required Star to take the proactive measure of suspending its stock trading until further details are clarified or until the 21st of February, whichever date arrives first.
Star Entertainment, with its primary operation at The Star Sydney, is no stranger to the regulatory spotlight. The request for a trading halt comes shortly after the company agreed to a job security deal within the state. This binding agreement, finalized just last week, mandates that Star must sustain a minimum level of workforce at its Sydney operation as a condition of its ongoing business.
Furthermore, as part of the accord reached with NSW Treasurer Daniel Mookhey, Star agreed to start a trial phase for cashless and carded play at its Sydney casino. This step is in anticipation of broader reforms targeted for implementation later in the year, reflecting a broader movement towards modernizing and regulating gambling practices within the industry.
In a move to solidify its financial and operational base post various regulatory obstacles, Star Entertainment negotiated concessions on casino duty rates in August of the previous year. Since then, the company has been focused on transition planning to ensure the stabilization of its Sydney activities and to prevent further operational reductions.
Despite these efforts, Star Entertainment’s quest to re-establish its standing in the gambling community continues. In September 2022, the company faced a setback when it was declared unsuitable to hold a casino license in NSW, following a report by Adam Bell SC, which highlighted long-standing deficiencies in anti-money laundering measures and social responsibility within The Star Sydney.
Progress has been made subsequent to Adam Bell SC’s report, with Star Sydney reportedly having implemented 22 out of 30 recommended remedial measures. However, the operator is still navigating through troubled waters with a looming suspension in Queensland, exposure to four class actions, and a prospective penalty from the Australian Transaction Reports and Analysis Centre (AUSTRAC) concerning its affiliations with Chinese junket operators, entities known for their high-roller gambling operations.
Reflecting on the substantial regulatory scrutiny, Star’s fiscal disclosures have revealed a notably precarious picture. The group posted a staggering full-year net loss of AU$2.4 billion, citing substantial exceptional expenditures, including nearly $2.8 billion in “significant items,” a category denoting the numerous fines and costs incurred due to regulatory action.
Among these costs were a $2.2 billion non-cash impairment tagged for goodwill and property assets in Sydney, Gold Coast, and Treasury Brisbane. Additional financial drains included regulatory and legal expenses amounting to $595 million, debt restructuring costs of $54 million, and redundancy payments totaling $16 million. The last fiscal year concluded with these outlays far outstripping the positive direction of an EBITDA standing at AU$317 million, resulting in the company’s hefty after-tax loss.
As stakeholders, investors, and the broader market keenly await further information on the nature of the inquiry by the NSW Independent Casino Commission, Star Entertainment Group braces for the implications this investigation may carry for its continued operations in the Australian gaming landscape.
