The embattled casino group released a trading update to the ASX on Wednesday, which revealed it now expects to post underlying earnings of between $280 million and $310 million this financial year following a rapid decline in trading over the past couple of months. The downgrade pertains to Star Entertainment’s 2023 financial results and is separate to previously announced financial headwinds, which relate to a controversial poker machine tax rise that the NSW government may introduce in July.

“The group is experiencing a significant and rapid deteriorating in operating conditions, particularly at The Star Sydney and Star Gold Coast. This has largely been driven by the compounding impact of regulatory operating restrictions and exclusions, and by emerging weaknesses in consumer discretionary spending behaviour,” The Star said.

The Star has committed to 500 redundancies across its operational and corporate divisions from its 8000-strong workforce and will cancel the group’s short-term incentives for this financial year, as well as implement a salary freeze for non-EBA employees in an attempt to reduce the group’s operating expenditure by more than $100 million.

It has also engaged Barrenjoey Capital Partners to undergo a review of The Star Sydney.

The bulk of the operational redundancies are expected to be Star Sydney employees, but a timeline and breakdown is yet to be decided. “Barrenjoey are also working with The Star to consider any structural alternatives available to maximise value for the group’s shareholders”.

Sources close to the group said a takeover of the Pyrmont casino had never seemed more likely. Star Entertainment will progress with its proposed sale of the Sheraton Grand Mirage on the Gold Coast.

“The group is accelerating its previously foreshadowed plans to refinance its existing debt funding arrangements, with a focus on improving the group’s liquidity position and separately increasing covenant headroom in light of the group’s current earnings environment,” it said.

“To help improve the group’s liquidity position and maximise the prospects of a successful refinancing given the challenging operating environment, The Star intends to engage with the NSW government, the Queensland government and AUSTRAC in respect of casino duty rates and flexibility on payment terms in relation to any current and future penalties.”

It’s the second market downgrade in two months. The group’s share price plunged to a record low after it flagged a $1.6 billion hit to its operations in February if a planned tax on NSW poker-machine profits is enacted from July. Following Wednesday’s announcement, the casino group’s share price fell more than 10 per cent in morning trading to $1.22. The group had been relying on high yields from its Queensland casinos to buoy flailing turnover from its flagship Pyrmont premises.

It’s share price has fallen by more than 50 per cent since it was stripped of its two state casino licences at the end of last year.

The Star has been a vocal critic of the former government’s proposed casino tax increase, warning that the new duty rate would inflict a $100 million annual hit on the Sydney casino that it could not weather.

This masthead on Monday revealed union bosses had sought an urgent meeting with NSW Treasurer Daniel Mookhey over growing fears mass job cuts would be unavoidable if the casino was slapped with a higher tax rate.

While Star’s statement on Wednesday said its decision to axe jobs was “independent of any potential impact from the proposed casino tax increases in NSW”, industry figures and unions insist the looming tax burden is a further compounding factor.

The United Workers Union, which represents thousands of Star’s Sydney hospitality, gaming, security and cleaning workers, said the performance update only heightened the risk for workers.

“Today’s announcement is a decision about the existing cost base and existing revenue streams on the assumptions there is no tax. So if the tax was to come in as proposed, any decision on job cuts would be of a magnitude greater than the proposal out today,” said United Workers Union director Dario Mujkic. “If anyone was thinking the conversation about potential job losses was overblown, today should solidify that it’s not overblown. This is a business clearly under pressure.”

The Star’s pain began after two independent inquiries in Queensland and NSW recommended The Star be stripped of its casino licences, following a 2021 investigation by The Sydney Morning Herald, The Age and 60 Minutes. The investigation alleged the company enabled suspected money laundering, large-scale fraud and foreign interference in its Australian casinos, even though its board was warned its anti-money-laundering controls were failing.

By Amelia McGuire and Lucy Cormack