The Star Cuts 500 Staff as it Seeks to Reduce Costs
Australian casino titan The Star has initiated a massive layoff round as it seeks to lower its cost base, reports indicate that at least 500 full-time staff are included in the cuts. On top of the massive layoff round the organization will conduct a review of the Sydney casino. The embattled casino has been dealing with a barrage of complaints and lawsuits over the past 2 years, following an investigation into systemic money laundering and failure to enforce KYC checks on underage customers gambling at their venues.
Star casino in Sydney is under immense financial pressure as the group deals with a series of blows, hundreds of millions of dollars in fines, plummeting earnings performance, and mass layoffs. It’s make or break time for The Star’s strategic leadership.
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It’s said that The Star is currently experiencing a major deterioration of working conditions on their premises, and unless immediate actions are taken to improve the operating conditions then the very existence of the business is under threat. As part of the review, at least 500 staff are to be sacked, salaries for the staff remaining will be frozen, and the fate of the flagship casino in Sydney is being considered.
With such a difficult macroeconomic environment, the flailing gaming group has consulted with Barrenjoey Capital Partners to accelerate and refine the cost cutting initiatives.
Ensuring the runway can last until Q4 2024 is the modus operandi for any cash-strapped company in the current climate. It’s not clear what the fallout from a looming global debt crisis and ongoing supply shocks will be to the macroeconomy. But maximizing cash reserves is certainly the smartest path forward.
The Star Exploring Strategic Alternatives to Protect Shareholders
Cash-strapped The Star didn’t divulge the details exactly what it referred to as strategic alternatives, but what we do know is there are a number of viable options being tabled. Not least of which is the potential to sell the casino to an outside investor. This is being considered as one of the most likely options given that the group is fast tracking the sale of some of its other assets including a Gold Coast based Sheraton hotel.
Government fines have inflicted deep liquidity droughts at the company, and the firm has been struggling to find cash to meet its obligations in some cases. As part of the effort to slow down the damage, the firm will engage the Austrac regulator to seek out a revised repayment schedule that gives more flexibility to the casino. Whether or not the regulators are willing to give flexibility on these fine payments remains to be seen though.
It’s a serious business that The Star finds themselves in when it comes to fine repayments, and not one that will be easy to navigate themselves out of. Both the Queensland and New South Wales regulators have imposed $100m fines in 2022, and a further $150m fine is expected to arrive when Austrac concludes its own investigations.
The Star’s Future Remains Uncertain
Given the unprecedented fines incurred by the group that could total $250m, the future of The Star has never been more uncertain. The board has to take drastic measures now to ensure the survival of the business and protect its shareholders. Ironically, the staff that were far removed from the decisions that led The Star down a path of criminality and violating regulatory laws will be the ones that have to lose their jobs as a result.
With over 8,000 employees, The Star represents one of Australia’s largest gaming employers. With venues in the Gold Coast and Sydney it’s expected that the firm will seek to reduce their cost centers ever further until some long-term financial security is felt. The struggle to generate revenue during the last couple of years due to Covid and lowered consumer demand has left the firm exposed financially.
The initiatives already taken by The Star which included reducing staff salaries and canceling other incentive structures promised to the teams is expected to reduce the operating expenditure for the 2022/2023 financial year by $100m. Whilst the earnings performance remains at an unprecedentedly low level, the firm will have to continue to innovate on mechanisms to reduce costs and ensure their survival.
