Star Entertainment Group has posted a revenue drop at its flagship Sydney casino and warned of a substantial impairment charge in its upcoming half-year results.
The embattled casino operator on Monday said it anticipated a non-cash impairment charge of between $400 million to $1.6 billion against its first-half results, in relation to its NSW business.
Star attributed the writedown to operational changes after a regulatory inquiry that resulted in its casino licence in the state being suspended, as well as a likely increase in NSW casino duty rates starting in the 2023/24 financial year.
"Whilst the outcome of recent regulatory and legislative developments remains uncertain, we have taken a prudent approach to assessing the carrying value of our assets, which has resulted in a non-cash impairment charge which will be recognised in our 1H FY23 results," Group CEO Robbie Cooke said in a statement.
By 1430 AEDT, Star Entertainment shares had slumped more than 20 per cent to $1.50 - after the stock hit its lowest level since March 2020 earlier in the session. Shares have lost nearly 50 per cent of their value during the past 12 months.
NSW's gaming regulator suspended Star's Sydney licence in October and slapped a record $100 million fine on the company after an inquiry found the casino had allowed money laundering to take place inside private rooms and identified numerous compliance failures.
A similar review in Queensland also fined Star $100 million and found it unfit to hold the two casino licences in the state after the company neglected anti-money laundering and responsible gaming duties in the state.
Shareholders have separately launched a class action against the group over its failure to disclose money laundering links to organised crime.
The regulatory troubles have hit Star's performance with the company incurring compliance and remediation costs of $20 million, including to increase headcount over the first half.
On Monday, Star said revenue at its main Sydney casino for the six months to December was down 13.5 per cent on pre-Covid levels.
Overall group revenue was down just 1 per cent though, buoyed by 30 per cent jump at Star Gold Coast and a 9 per cent lift at the Brisbane Treasury.
Star expects to report underlying earnings between $195 million and $205 million in the first half, when official results are released on February 23.
Star said it has also been impacted by increased competition since the opening of rival Crown's new Sydney casino in August 2022.
The company's operational challenges look set to continue after the NSW government in December announced without consultation that it would increase taxes on the state's two casinos.
"If implemented in their current form, the proposed duty rate increases would have a significant adverse impact on the profitability of The Star Sydney, further compounded by the changing operating and competitive environment," the group said, while flagging the impairment charge.
"In this scenario, The Star intends to undertake an urgent review of The Star Sydney's operating model and assets, with a view to maximising value for the group's shareholders."
