The Australian gambling company, Star Entertainment Group, is facing a challenging period and is implementing a new strategy to reduce expenses and reorganize its operations. The company has announced that it is experiencing a significant decline in its business environment.
Star Entertainment, which has been the subject of several investigations into its conduct, attributed the difficult situation to the combination of regulatory changes and restrictions, along with a decrease in consumer spending. This led to the company’s decision to restructure.
The company also mentioned that its Sydney Star Casino, the largest source of revenue for the group, is operating in a competitive market due to the termination of its high-value customer relationships.
These relationships have been a subject of intense scrutiny during the company’s controversies and have raised concerns about potential infiltration by criminal organizations.
Furthermore, the company stated that the strong performance of its Queensland properties in the first half of 2023 has weakened in recent weeks, particularly at its Gold Coast property.
To ensure a clearer understanding of the operational landscape, the organization’s current financial performance is at an all-time low (excluding the COVID-19 pandemic period), the company stated.
Star cautioned that if this trend persists into the current fiscal year, it anticipates FY23 underlying EBITDA to fall between A$280 million and A$310 million. At the lower end of this range, this would represent a 32.3% decrease from the A$413.6 million reported by the company in its FY22 financial report.
The company indicated that its earnings forecasts do not encompass anticipated expenses related to regulatory pressures. This includes the impact of cost-reduction and restraint measures the business intends to implement.
“FY23 underlying EBITDA excludes provisions for fines, expenses associated with ongoing regulatory assessments (legal, consulting, and other costs), and any one-time expenses related to the Group’s cost initiatives, all of which will be treated as significant items,” the company stated.
In response to these challenges, Star has unveiled a series of new cost and restructuring initiatives to aid in its operation within this new environment.
The company intends to reduce approximately 500 full-time equivalent positions across its operations, but this will not affect its risk management and remediation resources. Additionally, the company plans to suspend incentive programs across all businesses, along with a salary freeze for all non-union employees.
The organization stated: “These actions, coupled with the previously revealed $40 million operational plans, are anticipated to decrease the Group’s operating costs by over $100 million annually, compared to the 2023 fiscal year.”
The organization also disclosed that it is “progressing” plans previously declared to sell its Gold Coast Sheraton Hotel, and stated it anticipates receiving proposals soon.
The organization additionally mentioned it is “expediting” plans previously alluded to for refinancing its existing debt financing agreements, with a focus on enhancing the Group’s liquidity position, as well as aiding the business in adapting to the new earnings landscape.
The organization stated: “Furthermore, the Group will continue to collaborate with regulatory bodies, as well as New South Wales administrators and Queensland special administrators, to implement business changes to support the restoration of fitness over time.”
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