Australia’s Star Entertainment Group Ltd on Wednesday announced 500 job cuts and trimmed its annual earnings forecast, sending its shares 11% lower, as regulatory restrictions and weak consumer behaviour dent the casino operator’s earnings.
The company will lay off some full-time equivalent employees across the group, cancel short-term and other incentives for fiscal 2023, among others, to reduce its operating expenditure.
Star’s spokesperson told Reuters the company has about 8,000 employees, putting the job cuts at around 6.25% of its workforce. About 4,500 of the total headcount is placed at its Sydney waterfront casino, the spokesperson said.
Star’s stock dropped as much as 11.4% to A$1.205, marking its worst intraday drop since mid-February, and was the biggest loser on the ASX 200 benchmark index.
Star’s Sydney and Gold Coast casinos in particular are facing adverse operating conditions, with earnings taking a hit owing to compounding impact of regulatory operating restrictions and low consumer spending behaviour, Star said.
Over the past two years, Australian casino operators have been plagued with regulatory scrutiny on allegations of breaches of anti-money laundering laws, with proposed casino duty hike in New South Wales also posing significant challenges.
“To put the operating environment into perspective, the group’s current earnings performance is at unprecedented low levels, excluding the COVID-19 period,” the company said.
If current conditions persist, Star said it expects underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) for fiscal 2023 to be between A$280 million ($188.44 million) and A$310 million. Its prior expectation was between A$330 million and A$360 million.
Star has hired Barrenjoey Capital Partners to conduct a strategic review of The Star Sydney and look for any “structural alternatives” to maximise shareholder values.
The company was also progressing on the proposed sale of Sheraton Grand Mirage Resort Gold Coast, with indicative bids expected shortly, and said it was speeding up debt refinancing plans to improve liquidity position.
Reuters