Compliance, Crown weigh on Star's revenue

Star Entertainment has posted a revenue drop at its flagship Sydney casino as the embattled company deals with regulatory troubles and rising competition.

Australia's second-biggest casino operator on Tuesday said revenue at its Sydney casino was down 11 per cent from pre-COVID levels in the period from July 1 to November 15.

"Our Queensland casinos are performing strongly while Sydney has been impacted by compliance changes post the Bell Review along with some competition impacts," newly-appointed managing director Robbie Cooke told shareholders at the company's annual general meeting.

Revenue at the Brisbane and Gold Coast casinos was up 9 per cent and 32 per cent respectively, helping boost the group's overall domestic revenue by 1.0 per cent. 

The update comes three months after bigger rival Crown Resorts opened the doors of its Sydney casino after more than two years of regulatory troubles of its own that led to an overhaul of management and change in ownership.

Mr Cooke said Sydney Crown's targeted program to market its business had been anticipated and Star would implement its own approach to defending its customer base. 

"That is part of the normal competition that you will see when you've got two properties in one market," he said.

By 1510 AEDT, Star Entertainment shares were down 1.5 per cent at $2.87 each in a firm Australian market. But the company has lost a quarter of its value so far this year after falling out of favour with regulators.

Last month, the NSW casino regulator took the unprecedented step of suspending Star's Sydney casino licence and fining the company $100 million after an inquiry revealed a litany of compliance failures including ties with crime gang-linked junket operators and Chinese debit card transactions disguised as hotel expenses.

The venue has continued to trade under a licence held by a regulator-appointed manager but it prompted the wholesale exit of Star's top management and hiring of new staff.

A similar review in Queensland has declared Star unfit to hold its two casino licences there after finding the company neglected anti-money laundering and responsible gaming duties and deliberately misled regulators.

Star is awaiting the outcome of that report, which could include suspension of its casino licences in the state and a hefty fine. It is separately facing an investigation from federal money-laundering watchdog AUSTRAC as well as two securities class action lawsuits. 

"Our current expectation is that remediation costs in FY23 will be in the range of $35 million to $45 million," Mr Cooke told shareholders on Tuesday.

He expects about half of these costs to be recurring beyond FY24.

Star chairman Ben Heap, who took on the role in June, repeatedly apologised to shareholders for the company's previous conduct and detailed the steps being taken to re-earn trust.

These include permanently exiting junkets, closing international offices and bank accounts, rebuilding the board and senior leadership team and increasing staffing to ensure responsible gambling and monitor financial crime.

"The onus is now on us to remediate and to show the regulator we can be suitable to again be afforded the privilege of holding a casino licence in NSW," he said.