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Shares hit record low for big Australian casino group
Drinks brands supplying casinos in New South Wales will be wincing after shares in Star Entertainment Group tumbled 22% following a duty hike proposal.
Whether it’s poker, blackjack or trying your luck on the slot machines, enjoying a drink is something many of us associate with a visit to a casino. However, a proposed new tax reform could severely impact the profit margins of one of Australia’s biggest casino groups, which may have a knock-on effect on what is stocked behind the bar, and how much it will cost.
Australia’s Star Entertainment Group has warned of an up to AU$1.6 billion “impairment charge” in its first-half earnings. The shocking figure comes in the wake of a proposed casino duty hike in New South Wales, which has sent shares in the company plummeting to a record low. Shares for the country’s second-largest casino operator dropped to 21.9% to an all-time low of AU$1.465.
If the change does come into effect, the cash raised by the suggested tax increase could go towards helping communities impacted by bushfires and floods, New South Wales government officials have suggested.
The tax reform proposal was announced in December and is likely to take hold from July 2023. Star Entertainment has warned that as its operations in Sydney, one of Australia’s largest cities and the capital of New South Wales, made up half of the group’s revenues in 2021, the company’s profitability would be severely challenged.
According to MarketWatch, Star intends to urgently review its operating model and Sydney arm of the business, if the proposal does indeed go ahead.
The company has also said it would incur remediation costs of AU$20 million in the six months to the end of December as it tried to improve compliance procedures. The latter is in response to the group’s federal court hearing after it was accused of systemic non-compliance with anti-money laundering and counter-terrorism financing laws.
The casino group, which has around 8,000 employees, reported an annual net loss in August and its share price more than halved in value last year.
If the business is unable to keep its head above water, then drinks companies could face losing one of their biggest customers by the end of the year.