Star set to post $75m half-year loss after COVID closures
Australia’s second largest casino operator is poised to post a massive net loss due to the impacts of the coronavirus pandemic during the first half of the financial year.
The Australian Financial Review reports that Star Entertainment will post a net loss of up to $75 million, as it also vows to repay $13 million for underpaying up to 2200 workers.
Shares jumped around on news of the expected statutory net loss between $73 million and $75 million, slumping 2.25 per cent in mid-morning trade before clawing back losses to close 1.26 per cent higher at $3.60 on February 7.
Kelly Amato, a director at Fitch Ratings, said investors broadly expected the downgrade because patrons were either shut out of the casino complexes completely during lockdown or shied away from venturing out as the omicron variant ripped through the community in the first half of the 2022 financial year.
“The Star’s earnings downgrade isn’t entirely surprising given the industry-wide challenges over the back-end of 2021 for gaming companies,” Ms Amato said.
“We expected the delta-related lockdowns in Sydney and Melbourne and then the outbreak of omicron at the end of the year to have a negative effect on earnings on casino operators, particularly The Star and Crown with their flagship properties in the cities,” she said.
The casino operator told the market to expect statutory earnings before interest, tax, depreciation and amortisation to be between $30-32 million.
Years of employee underpayment triggers backpay
The casino giant, which employs workers at its casinos in Sydney, Brisbane and the Gold Coast, also told investors it had underpaid current and former workers $13 million over six years.
The Star’s review found up to 2200 workers’ salaries failed the “better off overall” test, meaning The Star did not adequately compensate for equivalent award entitlements such as overtime and penalty rates.
The repayments will cover back payments, interest and superannuation.
The Star’s managing director and chief executive officer Matt Bekier apologies, pledging to fix the system to “ensure that it doesn’t happen again”.
“We apologise to any team member impacted by the payment shortfall and we are committed to doing the right thing by acting transparently,” he said.
This comes as The Star’s executives prepare for public grilling over allegations of money laundering and infiltration by organised crime figures at its casinos.
The NSW inquiry will hold public hearings in March, helmed by Adam Bell SC, the former counsel assisting the NSW Bergin Inquiry, which found The Star’s rival Crown Resorts unfit to open its waterfront casino in Sydney based on similar allegations.
The Bell probe was the first announced in January as part of a scheduled review of The Star’s casino licence in NSW, but the inquiry was widened after it was alleged The Star enabled suspected money laundering and infiltration of organised crime at its casinos in NSW and Queensland.
NSW and Commonwealth set to look into money laundering allegations at The Star
The Commonwealth’s anti-money tsar AUSTRAC is looking at potential breaches of anti-money laundering and counter-terrorism financing laws around customer due diligence, and proper adoption of anti-money laundering protections.
The investigation covers the 2016 and 2019 financial years.
Queensland’s police and gaming watchdog has also launched investigations into The Star’s operations.
Still, management posted an upbeat outlook for its Sydney casino, which was closed from the start of the financial reporting period to October 11, 2021, and hit again by the shadow lockdown sparked by omicron in December and January.
The company said the flagship property in Pyrmont recorded strong revenue growth after it reopened in October following the lockdown, with revenue up 29 per cent on the prior corresponding period from October 11 to December 31, 2021.
“But the prevalence of the omicron variant of COVID-19 impacted trading results in December and January, with a peak in mid-January,” the company said.
“The impact has subsequently eased and trading continues to progressively improve.”
While the casino giant didn’t provide indicators on its Gold Coast and Brisbane operations, the company said revenue was “stable on the prior corresponding period when the casinos were open.”
Ms Amato said Fitch is expecting the sector to improve over 2022 as “Australia continues to transition to living with the virus, both in terms of the lifting of formal restrictions and people adjusting to the ‘new normal’.”.
The Star will report half-year results on February 17.
