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Star Entertainment posts wider loss as regulatory squeeze, carded play weigh

Star Entertainment Reports Widened Losses Amid Regulatory Pressures and Shift to Carded Play

SYDNEY - Star Entertainment Group, one of Australia's leading casino operators, has announced a significant widening of its annual losses, attributing the downturn to stringent regulatory measures and the impending implementation of mandatory carded play systems. The company, which operates major venues in Sydney, Brisbane, and the Gold Coast, revealed in its latest financial disclosures that it posted a normalized net loss after tax of A$13.6 million for the fiscal year ending June 30, a stark contrast to the A$9.3 million profit recorded in the previous year. This financial setback underscores the mounting challenges facing the gaming industry in Australia, where increased oversight and compliance requirements are reshaping operations and profitability.

The primary drivers behind this widened loss include a combination of regulatory squeezes and operational disruptions. Star Entertainment has been under intense scrutiny following a series of inquiries into its practices, particularly at its flagship Star Sydney casino. These probes, initiated by state regulators, have highlighted issues such as anti-money laundering failures, inadequate responsible gambling measures, and governance lapses. As a result, the company has faced hefty fines, license suspensions, and the need for substantial investments in compliance infrastructure. In the fiscal year, Star incurred exceptional costs totaling A$125 million related to these regulatory matters, including remediation efforts and legal fees. This figure represents a significant drain on resources, pushing the statutory net loss to A$168.7 million, up from A$2.4 million the year prior.

Adding to the financial strain is the broader economic environment impacting consumer spending. The company noted a decline in high-roller activity, particularly from international visitors, amid global economic uncertainties and travel restrictions lingering from the pandemic era. Domestic patronage has also softened due to cost-of-living pressures, with Australians tightening their belts on discretionary entertainment. Revenue from the company's core gaming operations fell by 8% to A$1.68 billion, reflecting reduced footfall and lower average spends per visitor. Non-gaming segments, such as hotels and restaurants, provided some offset with a modest 2% revenue increase to A$320 million, but this was insufficient to counterbalance the gaming downturn.

A key focal point in the announcement was the anticipated impact of mandatory carded play, set to be rolled out across New South Wales casinos from August 2024. This initiative, mandated by the state government as part of broader gambling harm minimization reforms, requires all players to use a digital card linked to their identity for electronic gaming machines (pokies). The system aims to track gambling behavior, enforce spending limits, and prevent problem gambling by allowing for real-time interventions. However, Star Entertainment executives have expressed concerns that this shift could deter casual players and reduce overall revenue. In their outlook statement, the company projected that carded play could lead to a 10-15% drop in gaming machine revenue in the initial implementation phase, as patrons adjust to the new requirements or opt out altogether.

CEO Robbie Cooke, in comments accompanying the results, emphasized the company's commitment to navigating these challenges. "We are operating in a highly regulated environment, and while these measures are necessary for the long-term sustainability of the industry, they do present short-term headwinds," Cooke said. He highlighted ongoing efforts to enhance compliance, including the appointment of new board members with expertise in risk management and the rollout of advanced monitoring technologies. Despite the losses, Star reported positive developments in its transformation program, which includes asset sales and cost-cutting initiatives aimed at streamlining operations. For instance, the company has divested non-core properties and reduced its workforce by 5% to achieve annual savings of A$50 million.

Looking ahead to fiscal 2025, Star Entertainment's guidance paints a cautious picture. The company forecasts normalized earnings before interest, tax, depreciation, and amortization (EBITDA) to range between A$175 million and A$215 million, down from A$256 million in the just-ended year. This projection factors in the full-year impact of carded play, potential further regulatory fines, and ongoing remediation costs estimated at A$100 million. Analysts have echoed these concerns, with some downgrading their ratings on Star's stock, which has plummeted over 50% in the past 12 months amid the scandals.

The broader context of Star's troubles is rooted in a nationwide crackdown on the casino sector following high-profile scandals. Similar to rival Crown Resorts, which was acquired by Blackstone in 2022 after its own regulatory woes, Star has been forced to overhaul its business model. In New South Wales, the Independent Casino Commission has imposed strict conditions on Star Sydney's license, including the appointment of a special manager to oversee operations. This oversight has limited the casino's ability to offer certain promotions and has mandated enhanced staff training on ethical practices.

Industry experts suggest that these reforms, while painful, could ultimately benefit operators like Star by restoring public trust and attracting a more sustainable customer base. "The shift to carded play is a game-changer," said gaming analyst Sarah Thompson from Macquarie Group. "It will weed out high-risk behaviors but might initially suppress revenues as players adapt. Long-term, it could lead to a healthier industry with fewer legal risks."

Star's financial position remains precarious, with net debt standing at A$1.2 billion, prompting speculation about potential capital raisings or partnerships. The company has ruled out immediate asset sales but is exploring joint ventures for its Brisbane Queen's Wharf development, a A$3.6 billion integrated resort expected to open in stages through 2024. This project, delayed by construction issues and the pandemic, is seen as a potential bright spot, with projections of adding A$500 million in annual revenue once fully operational.

In response to the results, Star's shares fell 4% in early trading on the Australian Securities Exchange, reflecting investor unease. Competitors like Crown, now under private ownership, and smaller operators are watching closely, as similar regulations could soon extend to other states. Queensland, home to Star's Gold Coast and Brisbane properties, is considering its own carded play mandates, which could further impact the company's performance.

Despite the gloom, Star Entertainment is positioning itself for recovery through innovation and diversification. Investments in digital platforms, such as online booking systems for non-gaming amenities, and partnerships with tourism bodies aim to boost visitor numbers. The company is also ramping up responsible gambling initiatives, including voluntary exclusion programs and AI-driven monitoring to detect at-risk behaviors early.

As Australia grapples with the social costs of gambling, Star's story serves as a cautionary tale for the industry. With regulatory pressures showing no signs of abating, the path forward will require not just financial resilience but a fundamental shift toward ethical operations. For now, stakeholders are left to ponder whether these reforms will salvage or further strain an already beleaguered sector.

This extensive summary captures the essence of Star Entertainment's financial challenges, regulatory environment, and future outlook, drawing on the key details from the Reuters report. The company's ability to adapt will be crucial in determining its survival in an increasingly scrutinized market. (Word count: 1,028)

Read the Full reuters.com Article at:
[ https://www.reuters.com/markets/asia/star-entertainment-posts-wider-loss-regulatory-squeeze-carded-play-weigh-2025-07-30/ ]