Sydney casino sale off the cards as Star reports $2.4b loss

Star Entertainment Group chief executive Robbie Cooke says the embattled wagering operator is no longer planning to offload its flagship Sydney casino, claiming the business is in a more viable position.

Mr Cooke assured Star was in a better position to ride the wave of weak consumer discretionary spending and hefty regulatory penalties as he reaffirmed a commitment made to the NSW government to maintain headcount at the Pyrmont casino in exchange for a tax reprieve.

Star Entertainment boss Robbie Cooke says remediation is the company’s top priority. Louie Douvis

“When [former NSW treasurer] Matt Kean proposed the increase in our casino duty ... it was set at a level which just put the business in a non-viable position. Back then we were facing the need to do a strategic review of the Sydney operation,” Mr Cooke told The Australian Financial Review.

“Given now that the new government has actually done a comprehensive review of the duty regime, and we’ve now got certainty and that has meant we have a viable proposition, jobs are no longer at threat and we no longer need to do that strategic review. That’s no longer on the agenda.”

Mr Cooke’s comments follow Star’s $2.4 billion annual loss, slashing more than $2 billion from the value of its three casinos.

A potential AUSTRAC fine, four class actions and two revoked state casino licences weighed on the embattled casino operator’s 2023 financial year, culminating in a $2.2 billion non-cash impairment of The Star Sydney, The Star Gold Coast and Treasury Brisbane.

Mr Cooke said the damage to the company’s social licence was felt by team members but assured investors the business was stabilising despite the high level of regulatory uncertainty. “We’re seeing a consistency in performance,” he said, flagging the return of complimentary drinks to VIP members.

“We are hopeful the reintroduction of complimentary drinks ... does bring back an uplift in some business as it attracts more people to our private gaming rooms.”

Treasurer’s reprieve

Revenue climbed 22 per cent to $1.9 billion for the 2023 financial year, a figure which was affected the previous year by COVID-19 restrictions. Statutory earnings before interest, tax, depreciation and amortisation excluding any significant items was slightly above previously announced guidance at $317 million for the year ending June 30, an increase of $79 million.

But it was the move by NSW Treasurer Daniel Mookhey this month to defer duty rates for poker machines until 2030 that has taken the potential sale of Star’s flagship asset off the table.

Star engaged Barrenjoey Capital Partners as part of a strategic review of its Sydney property in April, an asset it has poured $1.3 billion into over more than a decade. Mr Cooke said the company’s $100 million program (which resulted in 500 job losses) and NSW tax reprieve took the Sydney sale off the agenda.

The delay to tax increases – which will lift duty rates by up to 51.6 per cent – is conditional on Star maintaining a workforce of more than 3000 at its flagship Sydney casino. “We’re very comfortable with the commitments ... we’ve cycled through that softness and maybe that’s what Crown’s now experiencing,” Mr Cooke said.

Star’s Sydney casino revenue increased 27 per cent to $978 million for the year, driven by a large increase in non-gaming revenue. EBITDA climbed 57 per cent to $127 million.

Star is continuing to refinance its debt, and the adjusted NSW casino duty rates will help with this process. Christina Katsibouba, Star’s chief financial officer, said the group needed refinancing to improve flexibility.

“There is quite a lot of interest and quite a variety of proposals as well. We are open-minded about the best structure for the refinance,” Ms Katsibouba said. Mr Cooke said he had not approached major shareholder Bruce Mathieson about refinancing the business.

Star is still waiting on the outcome of legal action launched by AUSTRAC for alleged breaches of anti-money laundering and counter-terrorism laws and four class actions. It has provisioned for a $150 million penalty. Its rival, Crown Resorts, was fined $450 million.

Mr Cooke said he had no visibility over an investigation by Queensland’s office of liquor and gaming into Star’s Queen’s Wharf joint venture partner, Chow Tai Fook Enterprises, and the impact it could have on Star’s operation.

The regulator is assessing whether it is a suitable casino owner after an ABC investigation raised the Chinese firm’s alleged links to organised criminal associations. “We’re not aware of the detail of that review ... we don’t know what the likely outcome is. We really just have to wait and see,” M Cooke said.

Star’s share price has dropped more than 60 per cent this year, but was up 6 per cent at $1 in afternoon trading. The group did not pay a final dividend.