The Star Entertainment Group
Annual Report 2020

Plain-text annual report

ANNUAL REPORT 2020 CONTENTS SECTION CONTENTS 1 2 3 4 5 6 7 8 INTRO 03 04 OUR VISION OUR HIGHLIGHTS MESSAGES 06 08 CHAIRMAN CEO BOARD AND EXECUTIVE TEAM 10 12 BOARD OF DIRECTORS EXECUTIVE TEAM GROUP PERFORMANCE 14 15 FY2020 GROUP PERFORMANCE PROPERTY PERFORMANCE HIGHLIGHTS KEY PROJECTS 16 18 19 QUEEN’S WHARF BRISBANE THE STAR SYDNEY THE STAR GOLD COAST SUSTAINABILITY 20 20 22 24 30 32 33 34 37 38 39 SUSTAINABILITY TIMELINE SUSTAINABILITY HIGHLIGHTS SUSTAINABILITY STRATEGY DELIVERING WORLD-CLASS PROPERTIES LEADING COMPANY WORK HEALTH AND SAFETY GUEST WELLBEING TRUSTED COMMUNITY PARTNERS TALENTED TEAMS SUPPORTING TEAM MEMBER WELLBEING AND CONNECTIVITY THROUGH COVID-19 DIVERSITY AND INCLUSION GROUPS DIRECTORS’, REMUNERATION AND FINANCIAL REPORT 42 57 78 DIRECTORS’ REPORT REMUNERATION REPORT FINANCIAL REPORT SHAREHOLDER INFORMATION 141 144 145 146 146 146 SHAREHOLDER INFORMATION CORPORATE INFORMATION COMPANY DIRECTORY CORPORATE GOVERNANCE STATEMENT DETAILS ANNUAL GENERAL MEETING DETAILS KEY DATES Front cover: Queen’s Wharf Brisbane development planned to open in 2022. © Destination Brisbane Consortium. Artist impression only. Subject to approvals. PAGE 3 OUR VISION To be Australia’s leading integrated resort company by fully harnessing our unique opportunities in each property, to provide the most thrilling guest experiences in ways that truly reflect the unique character of our cities. In FY2020, The Star Entertainment Group made significant strides in realising its vision of becoming Australia’s leading integrated resort company despite the disruptive impacts of COVID-19. The construction phase of projects in South East Queensland continued at pace, while The Star Sydney delivered the new Sovereign, a world-class premium gaming facility. Queen’s Wharf Brisbane integrated resort development. © Destination Brisbane Consortium. Artist impression only. Subject to approvals. PRIORITIES VALUES SERVICE COMMITMENTS PILLARS THRILLING EXPERIENCES ACCESSIBLE LUXURY SHAREHOLDER VALUE OWNERSHIP WORLD-CLASS PROPERTIES TRUE TEAMWORK WELCOMING CITY PRIDE LOCAL SPIRIT LEADERSHIP IN LOYALTY EXCELLENCE IN GUEST SERVICE TALENTED TEAMS LIVE IT Be Human BRING IT Be Your Best Self OWN IT Be a Star Player DELIVER IT Be the Perfect Host ANNUAL REPORT 2020PAGE 4 PAGE 5 OUR HIGHLIGHTS FINANCIALS NORMALISED EBITDA ($m) NORMALISED NPAT ($m) (before significant items) 568.0 556.5 429.6 420.7 600 500 400 300 200 100 0 244.1 223.7 176.1 120.8 300 250 200 150 100 50 0 FY2018 FY2019 FY2020 (Jul 2019-Feb 2020) FY2018 FY2019 FY2020 (Jul 2019-Feb 2020) FY2020 FULL YEAR FY2020 FULL YEAR OVER $590 MILLION estimated spend on 3,000+ suppliers Australia wide ‘GLOBAL LEADER’ Casino and Gaming Industry sector on the 2019 Dow Jones Sustainability Index FORBES 5 STAR RATING The Darling Sydney was the only luxury hotel in New South Wales to receive the prestigious Forbes Five-Star rating in FY2020. It has achieved this for four consecutive years. AROUND $21 MILLION in financial hardship assistance and paid pandemic leave distributed to team members REFINITIV DIVERSITY & INCLUSION INDEX Ranked 2nd in Australia, and 25th globally EQUIVALENT OF 100,900 MEALS donated to food rescue charities in New South Wales and Queensland Dorsett hotel and apartments tower currently under development. © Destination Gold Coast Consortium. Artist impression only. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 6 MESSAGES PAGE 7 I also thank my fellow directors on the Group’s now well-established Board for their ongoing commitment and decisiveness throughout the challenging year that was FY2020. As announced with the company’s FY2020 financial results, Zlatko Todorcevski retired from the Board on 31 August 2020 following his appointment as Chief Executive Officer and Managing Director of Boral Limited. On behalf of the Board, and personally, I thank Zlatko for his substantial contribution and service, and wish him the very best in his new role. It was a year where unexpected obstacles emerged at a time when the business had pleasing momentum. Together, as a Board and Management, we acted swiftly but with the necessary caution to optimise in the final few months the opportunity to resume operations, albeit under restrictive conditions. On behalf of the Board, I extend an invitation to all shareholders to join and experience our first virtual Annual General Meeting to be held via our share registry’s online platform in October 2020 and thank you, as always, for your support for the company and its vision to be Australia’s leading integrated resort company. John O’Neill AO Chairman The Star Entertainment Group CHAIRMAN’S MESSAGE The 2020 financial year was an extraordinary and challenging period. The unforeseen emergence of COVID-19 and the attendant recession tested the resilience and agility of entire communities. The impact on the business sector and the domestic and global economy in general, and the tourism/hospitality/entertainment industries on a micro level, was pronounced. The word unprecedented was oft-used but accurately captured the disruption and pain experienced by individuals, corporations and populations worldwide. The closure of Australia’s international borders, followed by the introduction of restrictions on movements and gatherings as well as spatial distancing restrictions and the eventual shutdown of our properties in March 2020 with less than a day’s notice, required decisive action. Due to those Government directed closures, more than 95% of our almost 9,000 staff had to be temporarily stood down. The company was necessarily focused on reducing cash burn and increasing liquidity. Operating expenditure was reduced from just under $100 million per month to $10 million a month by May 2020. Negotiations commenced swiftly, and were successful, for The Star Entertainment Group to obtain increased liquidity from domestic banks and to secure covenant waivers from the banks and USPP note holders. I want to thank Managing Director and CEO Matt Bekier, and his Management team, for traversing such difficult terrain to reach the outcomes achieved. The personal and human impacts arising from the crisis were, and continue to be, significant. The Board and Management have been mindful of potential ramifications for our workforce, and mitigation programs developed. All team members temporarily stood down received two weeks of paid pandemic leave at the outset of the property shutdowns at a cost of $18 million. Senior executives took pay cuts and the Board endorsed reduced directors’ fees. The company immediately registered for JobKeeper and a hardship program was introduced, which saw around $3 million distributed to more than 600 of our most impacted staff. As we move into FY2021, we will continue to have the best interests of our team members at the forefront of our thinking. For the period from July 2019 to February 2020, and prior to the property closures, the company delivered a strong earnings result, as detailed further in this Annual Report. This follows the successful implementation of organisational structure reset and cost management measures implemented from 2HFY2019. In light of this performance in 1HFY2020 the Board declared an interim dividend of 10.5 cents per share (fully franked). With the onset of COVID-19 related restrictions, payment of the interim dividend was deferred until 2 July 2020 and was fully underwritten. As announced on 31 March 2020 in conjunction with the deferral of the interim dividend, there was no final dividend for FY2020. The Board remains committed to maintaining a balance sheet that positions The Star Entertainment Group for the post-COVID-19 recovery. I take this opportunity to confirm to shareholders that the fundamental earnings prospects for the Group remain unchanged, underpinned by valuable long-term licences in sought after destinations, and with ongoing investments in our network of integrated resorts. The Board and Management therefore remain focused on continuing to deliver upon the company’s strategic growth projects. This includes large-scale projects with the company’s long-term, strategic joint venture partners Far East Consortium and Chow Tai Fook Enterprises. In particular, the following underline the strength of strategic and execution capability across the joint venture partners: • The uninterrupted and continued on time and on budget delivery of the Queen’s Wharf Brisbane project, coupled with finalising its $1.6 billion project debt funding during FY2020. • The uninterrupted delivery with our joint venture partners, of the Dorsett hotel and apartment tower at the Gold Coast to program. Importantly in Queensland, we also welcomed the end of the Gold Coast second casino licence process by the Queensland Government in July 2020. On behalf of the Board, I congratulate Matt Bekier and the Management team on their continued commitment and energy, which enabled delivery of key strategic priorities in FY2020 while managing the response to the COVID-19 situation. Dorsett hotel and apartments tower currently under development. © Destination Gold Coast Consortium. Artist impression only. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 8 MESSAGES PAGE 9 CEO’S MESSAGE The 2020 financial year presented an unexpected adversary in the COVID-19 pandemic. But the challenges presented to The Star Entertainment Group and other organisations, as outlined by the Chairman, also shone a light on the quality of our workforce. I want to take the opportunity at the start of this message to extend my sincerest gratitude to our committed team members whose efforts in such difficult times have been inspirational. The enforced shutdowns of our properties in Sydney and Queensland occurred in late March 2020 with the warning that we may have to endure those closures for up to six months. However, when opportunities arose to partially open at various stages of the COVID-19 journey, our teams acted safely, swiftly and efficiently to ensure operations could be resumed in different forms or with limited capacity. On 15 May 2020, the first easing in restrictions saw Sokyo at The Star Sydney become the first high-end restaurant in Australia to reopen, with only 10 guests permitted to attend. The following night, Nineteen at The Star Gold Coast was the first high-end restaurant in Queensland to resume operations. On 1 June 2020, we partially reopened Sydney gaming areas. Queensland casinos followed on 3 July 2020. These were welcome milestones, but capacity constraints continued to prevent us returning to pre-COVID operational levels. As a result, around 30% of our workforce remained stood down by the end of FY2020. The importance of our people and the personal hardships many of them faced were never lost on Management and the Board. Importantly, we remained focused on delivering our strategic objectives. We concluded a gaming tax and gaming machine exclusivity agreement with the NSW Government that ensures The Star Sydney will be the only casino in the State to operate gaming machines until at least 2041. Our new $250 million Sovereign area for high-tier loyalty members also opened to hugely supportive reviews. We believe it to be the finest private gaming room in the country. Another key strategic goal was achieved on the Gold Coast where the long-standing Global Tourism Hub process was terminated in mutual agreement with the Queensland Government. After three attempts in eight years to generate interest for a multi-billion-dollar development and a second casino, the threat of competition on the Gold Coast has faded. In light of our continued investment in South East Queensland, we believe the Gold Coast market will not support a second casino. In Brisbane, the $1.6 billion project debt funding package for the Queen’s Wharf project was executed on terms agreed pre-COVID-19. Around 75% of total project costs are now under lump sum terms. COVID-19 restrictions that led to considerably reduced vehicular traffic also allowed work at Queen’s Wharf to proceed with extended hours for truck access. The project remains on time and on budget for a 2022 opening. During the last four months of FY2020, the need to be agile and adhere to COVID-Safe practices also created opportunities to develop new ways of working. The “Table for 2” high-end dining-at-home experience was a successful entrepreneurial initiative that has long-term possibilities. The financial year returned a strong performance in the pre-COVID-19 period from July 2019 to February 2020, delivering record normalised and domestic earnings against the prior comparable period. While revenue was solid in the period, much of the earnings growth was the result of the reorganisation undertaken early in the financial year that yielded a more effective structure and released some $45 million of annual costs. The onset of COVID-19 and the forced closure of all our properties stopped the positive momentum and caused a significant deterioration of the full year financial results. As earlier indicated, a comprehensive response to mitigate these impacts was undertaken. Detailed results are contained elsewhere in this Annual Report. The Group continues to follow growth strategies designed to install the organisation as Australia’s leading integrated resort company. There were also achievements in FY2020 that showcased our commitment to tourism, sustainability and the cities in which we operate, including: • Retaining a Forbes Five-Star rating for The Darling hotel in Sydney • Recognition as the global leader in the Casino & Gaming Industry sector of the Dow Jones Sustainability Index for the fourth consecutive year • Ranking 2nd in Australia and 25th globally on the 2019 Refinitiv Diversity and Inclusions Index • Achieving ‘Bronze Employer’ status at the Australian LGBTQ Inclusion Awards • Committing to net-zero carbon emissions for wholly owned and operated assets by 2030 • Ongoing partnership with the Sydney Gay and Lesbian Mardi Gras • Celebrating International Women’s Day with the ‘Walk and Talk for Women in Leadership’ • Donating almost 34,000kg of food to charities. The Star Entertainment Group has the following priorities for the 2021 financial year: • Operations 0 Driving a COVID-19 earnings recovery, including a rapid refocus on local markets and domestic tourism, addressing Sydney competition, operating expenses and liquidity • Balance Sheet 0 De-gearing through cash preservation and capital recycling • Execute the capital light model 0 Further deliver on the centralised operating model, complete investment projects on time and budget and execute in a capital efficient way. In closing, I wish to thank the Board and Management for their invaluable support during the unexpected and challenging circumstances we encountered in FY2020. I could not have asked more of my Management team and our front-line staff. I greatly appreciate their efforts. Matt Bekier Managing Director and Chief Executive Officer The Star Entertainment Group Queen's Wharf Brisbane integrated resort development. © Destination Brisbane Consortium. Artist impression only. Subject to approvals. ANNUAL REPORT 2020ANNUAL REPORT 2020 PAGE 10 BOARD AND EXECUTIVE TEAM BOARD AND EXECUTIVE TEAM PAGE 11 BOARD OF DIRECTORS JOHN O’NEILL AO | Chairman and Non-Executive Director Diploma of Law; Foundation Fellow of the Australian Institute of Company Directors; Member of the Order of Australia; French decoration of Chevalier de la Légion d’Honneur John O’Neill was formerly Managing Director and Chief Executive Officer of Australian Rugby Union Limited, Chief Executive Officer of Football Federation Australia, Managing Director and Chief Executive Officer of the State Bank of New South Wales, and Chairman of the Australian Wool Exchange Limited, as well as a Director of Tabcorp Holdings Limited. Mr O’Neill was also the inaugural Chairman of Events New South Wales, which flowed from the independent reviews he conducted into events strategy, convention and exhibition space, and tourism on behalf of the New South Wales Government, as well as a Director of Rugby World Cup Limited. Mr O’Neill is currently Chairman of Queensland Airports Limited and a member of the Advisory Council of China Matters. He is also a member of the 2032 Brisbane Olympic Bid Advisory Board to the Premier of Queensland. MATT BEKIER | Managing Director and Chief Executive Officer Master of Economics and Commerce; PhD in Finance Matt Bekier is a member of the Board of the Australasian Gaming Council. Mr Bekier was previously Chief Financial Officer and Executive Director of the Company and also previously Chief Financial Officer of Tabcorp Holdings Limited from late 2005 and until the demerger of the Company and its controlled entities in June 2011. Prior to his role at Tabcorp, Mr Bekier previously held various roles with McKinsey & Company. GERARD BRADLEY | Non-Executive Director Bachelor of Commerce; Diploma of Advanced Accounting; Fellow of the Institute of Chartered Accountants; Fellow of CPA Australia; Fellow of the Australian Institute of Company Directors; Fellow of the Institute of Managers and Leaders Gerard Bradley is the Chairman of Queensland Treasury Corporation and related companies, having served for 14 years as Under Treasurer and Under Secretary of the Queensland Treasury Department. He has extensive experience in public sector finance in both the Queensland and South Australian Treasury Departments. Mr Bradley has previously served as Chairman of the Board of Trustees at QSuper. His previous non-executive board memberships also include Funds SA, Queensland Investment Corporation, Suncorp (Insurance & Finance), Queensland Water Infrastructure Pty Ltd, and South Bank Corporation. Mr Bradley is currently a Non-Executive Director of Pinnacle Investment Management Group Limited and a Director of the Winston Churchill Memorial Trust. BEN HEAP | Non-Executive Director Bachelor of Commerce (Finance); Bachelor of Science (Mathematics) Ben Heap has wide-ranging experience in asset and capital management as well as technology and digital businesses. He has extensive business strategy, innovation, investment and governance expertise. Mr Heap is a Founding Partner of H2 Ventures, a venture capital investment firm and a Director of its related private companies. He is a Non-Executive Director of Colonial First State Investments Limited (a subsidiary of the Commonwealth Bank of Australia), the Vice President of Gymnastics Australia and a member of the Australian Commonwealth Government’s Fintech Advisory Group. Mr Heap is also a Non-Executive Director of Redbubble Limited and Chair of its People and Nomination Committee. Mr Heap was previously Managing Director for UBS Global Asset Management in Australasia and prior to this, Head of Infrastructure for UBS Global Asset Management in the Americas. He held a number of directorships associated with these roles. Earlier in his career, Mr Heap was Group Executive, E-Commerce & Corporate Development for TAB Limited. KATIE LAHEY AM | Non-Executive Director Bachelor of Arts (First Class Honours); Master of Business Administration; Member of the Order of Australia Katie Lahey has extensive experience in the retail, tourism and entertainment sectors and previously held chief executive roles in the public and private sectors. Ms Lahey is currently a Director of Carnival Corporation & plc, and is a member of the National Indigenous Culinary Institute Advisory Board. Ms Lahey was previously the Chair of Carnival Australia and the Chairman Australasia of Korn Ferry International. In addition, Ms Lahey was also a member of the boards of David Jones Limited, Australia Council Major Performing Arts, Hills Motorway Limited, Australia Post and Garvan Research Foundation. SALLY PITKIN | Non-Executive Director Doctor of Philosophy (Governance); Master of Laws; Bachelor of Laws; Fellow of the Australian Institute of Company Directors Sally Pitkin is a company director with over 20 years’ experience as a Non-Executive Director and board member across a wide range of industries in the private and public sectors. She has extensive experience in the gaming industry. Dr Pitkin is a former lawyer and senior corporate partner with a national law firm. Dr Pitkin is currently the Chair of Super Retail Group Limited and a Non-Executive Director of Link Administration Holdings Limited. RICHARD SHEPPARD | Non-Executive Director Bachelor of Economics (First Class Honours); Fellow of the Australian Institute of Company Directors Richard Sheppard has had an extensive executive career in the banking and finance sector including an executive career with Macquarie Group Limited spanning more than 30 years. Mr Sheppard was previously the Managing Director and Chief Executive Officer of Macquarie Bank Limited and chaired the boards of a number of Macquarie’s listed entities. He has also served as Chairman of the Commonwealth Government’s Financial Sector Advisory Council. Mr Sheppard is currently the Chairman and a Non-Executive Director of Dexus Property Group and a Non-Executive Director of Snowy Hydro Limited. He is also Honorary Treasurer of the Bradman Foundation. ZLATKO TODORCEVSKI | Non-Executive Director (Retired on 31 August 2020) Bachelor of Commerce (Accounting); Masters of Business Administration; Fellow of CPA Australia; Fellow of Governance Institute of Australia Zlatko Todorcevski is an experienced executive with over 30 years’ experience in the oil and gas, logistics and manufacturing sectors. He has a strong background in corporate strategy and planning, mergers and acquisitions, and strategic procurement. He also has deep finance expertise across capital markets, investor relations, accounting and tax. Mr Todorcevski was previously the Chief Financial Officer of Brambles Limited. Prior to that, he was Chief Financial Officer of Oil Search Limited and the Chief Financial Officer for Energy at BHP. Mr Todorcevski is currently a Non-Executive Director of Coles Group Limited and a member of the Council of the University of Wollongong. He is also the Chief Executive Officer & Managing Director of Boral Limited, taking up the position on 1 July 2020. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 12 BOARD AND EXECUTIVE TEAM EXECUTIVE TEAM BOARD AND EXECUTIVE TEAM PAGE 13 MATT BEKIER | Managing Director and Chief Executive Officer GREG HAWKINS | Chief Casino Officer (NSW) As CEO of The Star Entertainment Group, Matt has guided the organisation and each of its properties through a period of significant change and transformation, including winning the tender for the $3.6 billion Queen’s Wharf Brisbane development, refurbishment and expansion of The Star Gold Coast (including two luxury hotels and a $2 billion master plan) and embedding The Star Sydney as the city’s premier tourism, dining and entertainment destination. With a focus on domestic and international tourism to the cities and communities in which we operate, Matt is driving The Star Entertainment Group’s vision of becoming Australia’s leading integrated resort company. HARRY THEODORE | Chief Financial Officer Harry joined The Star Entertainment Group in 2011. He was appointed to Chief Financial Officer in November 2019 and is responsible for the Group’s finance, strategy, investor relations and IT functions. Prior to his current role, he had several leadership positions including Head of Strategy and Investor Relations and most recently Chief Commercial Officer – where he led the Queen’s Wharf Brisbane bid and the Group’s joint venture partnerships with Chow Tai Fook Enterprises and Far East Consortium in addition to a number of other commercial and finance functions. Prior to joining The Star Entertainment Group, Harry held the role of Director – Head of Gaming and Food & Beverage in the equities research team at the Royal Bank of Scotland and prior to that was a lawyer with Allens Arthur Robinson. PAULA MARTIN | Chief Legal & Risk Officer and Company Secretary Paula has over 15 years’ experience in the gaming industry, first with Tabcorp Holdings Limited and continuing with The Star Entertainment Group. Following consolidation of the legal, risk, regulatory and compliance functions, Paula was appointed to the role of Chief Legal & Risk Officer in August 2019. She has a broad commercial law and regulatory background, having first practised with King & Wood Mallesons in the telecommunications, information technology and competition law areas. KIM LEE | Chief People and Performance Officer Kim Lee commenced at The Star Entertainment Group in 2015 and brings with her more than 18 years’ experience in human resource roles across various sectors. To facilitate The Star Entertainment Group’s expansion across its three properties and significant increase in its workforce, Kim has led the People and Performance team to ensure those plans are matched with highly capable leaders and teams which deliver superior customer service outcomes. Through Kim’s leadership and advocacy, The Star Entertainment Group has become a more diverse and inclusive environment. The Group has set targets across four key area: gender, multicultural, LGBTQI and age and tracks its performance against internal and external benchmarks. Kim personally champions gender issues via her association with, and board directorship on, Women in Gaming and Hospitality Australasia. Greg was appointed to the role of Chief Casino Officer (NSW) at The Star Entertainment Group in July 2020, and is responsible for The Star Sydney’s gaming strategy and gaming revenue growth. Prior to his current role, he has served in a variety of senior positions with The Star Entertainment Group including Group Casino Officer and as Managing Director at The Star Sydney. He has over 22 years’ experience spanning key Australasian and Asian gaming markets. Greg joined The Star Entertainment Group from Melbourne where he was Chief Executive of Crown Melbourne. Prior to this he was based in Macau for five years and oversaw the development and operation of hotels and casino there, including The City of Dreams integrated resort. Greg has extensive operational and strategic gaming experience and provides valuable insight into the Asian VIP and premium mass market sectors. GEOFF HOGG | Chief Casino Officer (QLD) Geoff has more than 20 years of operational casino experience at a senior executive level. He was appointed to his current position on 1 July 2020. Prior to this, Geoff had groupwide responsibility for operations at The Star Sydney, The Star Gold Coast, the Gold Coast Convention & Exhibition Centre and Treasury Brisbane. He was also Managing Director Queensland for The Star Entertainment Group for over 10 years. Geoff is an active participant in the Queensland business community and in particular, the tourism and entertainment industry. He is a member of the Responsible Gambling Advisory Committee, a director on the National Retail Association and a Board Director of Major Events Gold Coast. GEORGE HUGHES | Chief Marketing Officer George joined The Star Entertainment Group in 2017 and is responsible for its marketing activities. Prior to that, he worked for David Jones where he was responsible for direct and digital marketing, customer insights, loyalty and customer relationship management. Since his appointment, George has unified the marketing team and sought to drive brand growth nationally. He has transformed the business unit and brought together specialist, functional expertise and talent both existing within the team as well as that available outside the business and from a variety of sectors. George has a wealth of executive experience in diverse roles across marketing, customer engagement, finance, M&A and strategy, gained in the retail, entertainment, postal and banking sectors. ALISON SMITH | Group Executive External Affairs Alison has been with The Star Entertainment Group since mid-2015. Her role covers government, industry and media relations, as well as internal communications. In addition to her role with The Star, Alison is Chair of the Brisbane Festival board, an executive committee member of The Committee for Brisbane, Vice President of the Queensland Futures Institute Corporate Affairs Council and a Board Director of Women in Gaming and Hospitality Australasia. Prior to joining The Star Entertainment Group, Alison worked in the public and private sectors in information and communications technology, transport, energy, police and corrective services. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 14 GROUP PERFORMANCE GROUP PERFORMANCE PAGE 15 FY2020 GROUP PERFORMANCE PROPERTY PERFORMANCE HIGHLIGHTS Group Performance Highlights Sydney The Star Entertainment Group delivered strong performance across all business segments before the onset of COVID-19. However, FY2020 results were impacted by temporary property closures from 23 March 2020. The Group implemented comprehensive actions to mitigate the effect of the pandemic. The Group’s long-term growth strategy remains unchanged, with key milestones achieved over FY2020 despite COVID-19 disruptions. NORMALISED STATUTORY Jul 19 to Feb 20 FY 2020 Jul 19 to Feb 20 FY 2020 $m vs pcp $m vs pcp $m vs pcp $m vs pcp 1,817.7 ↑7.5% 1,972.9 ↓21.1% 1,586.1 ↓7.6% 1,748.9 ↓30.4% 1,527.4 ↑4.2% 1,657.1 ↓23.3% 1,347.4 ↓10.1% 1,487.0 ↓31.1% 420.7 ↑12.1% 429.6 ↓22.8% 263.8 ↓35.0% 282.0 ↓49.0% Gross Revenue Net Revenue1 EBITDA2 NPAT3 • Solid earnings growth on flat revenue prior to COVID-19 • Domestic earnings growth accelerated from 1H FY2020 into January-February 2020 vs pcp • Operating expenses down 1.7% prior to COVID-19 • International VIP Rebate business broadly stable prior to COVID-19 Gross Revenue Net Revenue EBITDA NORMALISED STATUTORY Jul 19 to Feb 20 FY 2020 Jul 19 to Feb 20 FY 2020 $m vs pcp $m vs pcp $m vs pcp $m vs pcp 1,076.0 ↑0.3% 1,182.5 ↓27.5% 1,051.0 ↑3.9% 1,169.5 ↓25.4% 928.9 255.2 ↑1.1% 1,016.4 ↓26.1% 918.1 ↑4.8% 1,022.3 ↓21.9% ↑6.3% 276.9 ↓24.6% 246.9 ↑21.4% 284.1 ↓7.6% 176.1 ↑15.6% 120.8 ↓46.0% 61.7 ↓64.6% (94.6) ↓147.8% Queensland (Gold Coast and Brisbane) Strong performance prior to COVID-19 (July 2019 to February 2020 vs pcp4), FY2020 results impacted by COVID-19 property closures • Normalised5 NPAT up 15.6% prior to COVID-19, down 46.0% over FY2020 • Domestic EBITDA up 8.3% with margin expansion prior to COVID-19 • Statutory results impacted by unusually low actual win rate in International VIP Rebate business Comprehensive response to mitigate COVID-19 impacts • Safeguarded staff and customers • Secured $200 million of additional liquidity and June 2020 covenant waivers • Preserved cash (reduced expenditures, underwritten interim dividend, suspension of dividend policy) • $112 million post-tax significant items largely COVID-19 related Strategy unchanged, key milestones achieved QUEEN’S WHARF BRISBANE • Construction proceeding to plan, approximately 75% under lump-sum contract • Debt financing completed on terms agreed prior to COVID-19 THE STAR SYDNEY • Agreed to long-term gaming tax and casino electronic gaming machine exclusivity through to FY2041 • Long-term development potential THE STAR GOLD COAST • Dorsett hotel and apartments tower construction proceeding to plan • Favourable conclusion to Gold Coast second casino process. • Very strong normalised earnings growth prior to COVID-19 • Very strong domestic earnings growth accelerated into January-February 2020 • Operating costs well managed • Gold Coast demonstrating improved returns on investment – normalised EBIT up 69.8% prior to COVID-19 • Statutory results impacted by unusually low actual win rate in International VIP Rebate business Gross Revenue Net Revenue EBITDA NORMALISED STATUTORY Jul 19 to Feb 20 FY 2020 Jul 19 to Feb 20 FY 2020 $m vs pcp $m vs pcp $m vs pcp $m vs pcp 741.7 ↑20.2% 790.4 ↓9.1% 535.1 ↓24.2% 579.4 ↓38.8% 598.5 ↑9.5% 640.7 ↓18.5% 429.3 ↓31.0% 464.7 ↓45.3% 165.5 ↑22.3% 152.7 ↓19.2% 16.9 ↓91.6% (2.1) ↓100.9% Three Year Statutory Financial Results Summary6 Gross Revenue Net Revenue7 EBITDA EBIT Significant Items (after tax) NPAT (before significant items) Earnings Per Share (cents) Full Year Dividend (cents) FY2018 FY2019 FY2020 $m vs pcp $m vs pcp $m vs pcp 2,579.5 ↑6.1% 2,514.0 ↓2.5% 1,748.9 ↓30.4% 2,084.0 ↓1.2% 2,158.1 ↑3.6% 1,487.0 ↓31.1% 484.4 ↓19.2% 552.8 ↑14.1% 282.0 ↓49.0% 297.2 ↓31.7% 347.0 ↑16.8% 77.0 ↓77.8% 36.7 ↑312.4% 18.4 ↑49.9% 112.2 ↑509.8% 184.8 ↓32.4% 216.4 ↑17.1% 17.6 ↓91.9% 17.5 ↓45.3% 21.6 ↑23.4% (10.3) ↓147.7% 20.5 ↑28.1% 20.5 - 10.5 ↓48.8% 1 Net of player rebates and promotional allowances 2 EBTIDA is before equity accounted investments profits/ losses and significant items. 3 Normalised NPAT is after equity accounted investments profits/ losses and before significant items. 4 Prior comparable period. 5 Normalised results reflect the underlying performance of the business as they remove the inherent win rate volatility of the International VIP Rebate business. Normalised results are adjusted using an average win rate of 1.35% on actual turnover, taxes and revenue share commissions, unless otherwise stated, and are before significant items. 6For further information, please refer to the financial report contained in the Annual Report for the relevant financial year. 7 Net of player rebates and promotional allowances following the adoption of AASB 15 from 1 July 2018. FY2018 comparable have also been restated. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 16 KEY PROJECTS Excavation phase of Queen’s Wharf Brisbane development at June 2019 QUEEN’S WHARF BRISBANE The $3.6 billion Queen’s Wharf Brisbane development is being delivered by Destination Brisbane Consortium – a joint venture led by The Star Entertainment Group alongside its Hong Kong-based partners, Chow Tai Fook Enterprises and Far East Consortium. Expected to open in late 2022, Queen’s Wharf Brisbane will transform the CBD with four new luxury hotels, around 50 new restaurants, cafes and bars, 2,000 residential apartments, and also offer more than 12 football fields of public space. During the 2020 financial year, the transformational Queen’s Wharf Brisbane development reached significant milestones. These included: • The completion of Waterline Park, a vibrant new public space opposite South Bank on the Brisbane riverfront as well as a 500 metre pedestrian walkway and an upgraded segregated bikeway • The launch of the Queen’s Wharf Brisbane visitor centre and the Queen’s Wharf Residences display suite • The near completion of the five levels of basement car park levels and excavation works. Close to 400,000m3 of material removed from the site, 90 per cent of which was recycled • The commencement of construction of all four towers, structures that will house three of four new luxury hotel brands as well as the 667-apartment Queen’s Wharf Residences tower • The progression of ‘The Landing’ which provides 6,500m2 of new public space that sits above the river opposite South Bank, to become Brisbane’s newest parkland. With main construction works well underway, the development will continue to take shape across the 2021 financial year. The Star Entertainment Group will continue to operate Treasury Brisbane until the new integrated resort opens and the transition to a new casino occurs. The Queen’s Wharf Brisbane development is the largest private sector project in Queensland and will employ more than 2,000 workers during peak construction and create more than 8,000 jobs in Queensland when fully operational. Queen's Wharf Brisbane integrated resort development. © Destination Brisbane Consortium. Artist impression only. Subject to approvals. Construction phase of Queen’s Wharf Brisbane development at June 2020 ANNUAL REPORT 2020PAGE 18 KEY PROJECTS KEY PROJECTS PAGE 19 THE STAR SYDNEY In the 2020 financial year, The Star Entertainment Group delivered several key projects at The Star Sydney, including: • The launch of Bar Tikram, led by The Star Sydney’s talented Executive Chef, Dany Karam of BLACK Bar & Grill, showcasing a relaxed Mezze style share food menu • The new Sovereign (Sydney’s best private gaming and entertainment venue) was completed, with the official launch taking place on 3 July 2020. The facility consists of: 5,000m2 floor space including four private dining rooms and gaming salons 83 pieces of multicultural art 5 tonnes of Turkish and Italian marble A 500,000-piece stainless steel sculpture by Beijing artist Zheng Lu Views overlooking Sydney’s Darling Harbour A new ‘Chairman’s’ premium gaming area for our Diamond members and their guests. THE STAR GOLD COAST The 2020 financial year saw the next phase of The Star Gold Coast’s $2 billion master plan continued, with the following key projects advanced during the year: • Construction of stage one, the 700-plus room Dorsett hotel and The Star Residences apartment tower continued. The development (being delivered by Destination Gold Coast Consortium, a joint venture development comprising The Star Entertainment Group and its Hong Kong-based partners, Chow Tai Fook Enterprises Limited and Far East Consortium International Limited) is expected to be completed in 2022 • The second stage will deliver a 650-plus room 5-star hotel and apartments tower (also being delivered by Destination Gold Coast Consortium). Pre-sales of the residential apartments are progressing. The $250 million Sovereign is Sydney’s best premium gaming and entertainment venue The Star Gold Coast will be home to Australia’s first Dorsett hotel, complete with signature views of the Gold Coast and complementary resort amenities. The hotel and apartments tower is due for completion in 2022. Development of the Dorsett hotel and apartments tower over FY2020 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 20 SUSTAINABILITY SUSTAINABILITY PAGE 21 SUSTAINABILITY TIMELINE Sustainable Design Guidelines first released Waste Management Strategy developed and expansion of recycling streams to include organics in Sydney Resource consumption metrics and targets developed and a reporting framework introduced Completed $870 million transformation of The Star Sydney, and construction of The Darling Commenced Sustainability Team Member Engagement Program Released the Group’s first Sustainability Strategy Group and Property Sustainability Committees commenced Listed on the FTSE4 Good Index Committed to long term carbon and water reduction targets to achieve a 30% reduction by 2023 against the FY2013 base year on an intensity basis Achieved the global leadership position of the Casino and Gaming Industry sector in the DJSI Qualified for inclusion in RobecoSAM’s ‘The Sustainability Yearbook’ Rebranded to “The Star Entertainment Group” The Star Entertainment Group is selected by the Queensland Government as preferred tenderer for Queen’s Wharf Brisbane Sustainable Procurement Policy released Completed portfolio wide energy and water audits Launched the Energy and Water Project Pipeline to target resource reduction SUSTAINABILITY HIGHLIGHTS Achieved the global leadership position of the Casino and Gaming Industry sector in the Dow Jones Sustainability Index for the fourth consecutive year (2016 - 2019) LAUNCHED ‘Beyond 2020 The Star’s Sustainability Action Plan’ 2022 & BEYOND Opening of Dorsett hotel and apartments tower at The Star Gold Coast (early 2022) Opening of Queen’s Wharf Brisbane (2022) Targeting 90% coverage of third-party certified environmental ratings across the Group’s portfolio by 2022 45% female, 45% male (with remaining 10% gender neutral) representation in level 1-3 leadership levels by 2025 20% Asian representation in leadership levels 1-3 by 2025 Achieved 5 Stars in the Group’s first certified NABERS Energy Tenancy rating for the Sydney corporate office Queen’s Wharf Brisbane becomes the first development in Brisbane to be awarded a 6 Star Green Star Communities rating by the Green Building Council of Australia Conducted climate impact risk assessments with mitigation and adaptation actions Launched new Sustainable Design and Operational Standards for more energy and water efficient buildings Retained DJSI leadership position of the Casino and Gaming Industry sector (for second year) Launched ‘Beyond 2020 – The Star’s Sustainability Action Plan’ Committed to net-zero carbon emissions for our wholly owned and operated assets by 2030 Achieved third-party certified environmental ratings for over 50% of the Group’s portfolio Donated or scheduled to recycle 100% of uniforms from the opening of the new Sovereign Awarded a ‘Bronze Employer Recognition’ at the 2020 Australian LGBTQ Inclusion Awards Targeting completion of the first Green Star Performance rating for The Star Gold Coast Targeting the release of the Group’s first stand alone Sustainability Report Renewed Green Event Guide for guests to be released An agreement to source a minimum of 25% renewable energy Reporting in alignment with the United Nations Sustainable Development Goals and targets Completion of the Group’s carbon emissions reduction pathway towards net-zero by 2030 First Global Reporting Initiative Report released Achieved a 16.7% reduction in carbon emissions intensity from the FY2013 base year Responsible Supply Chain Management Plan developed for implementation Supplier Code of Conduct released Achieved a '5 Star Green Star Interiors' rating for the Sydney corporate office Retained DJSI leadership position of the Casino and Gaming Industry sector (for third year) Launch of group-wide Single-Use Plastic Reduction Commitment Completed 50 projects within the Energy and Water Project Pipeline – saving $4.3m+ over previous five-year period Water’s Edge Parkland and Walkway at Queen’s Wharf Brisbane opened to the public Achieved a ‘Green Star’ Performance rating for The Star Sydney Maintained a 5 Star NABERS Energy Tenancy rating for the Sydney corporate office Funded the Group’s first Seabin at Jones Bay Wharf to reduce litter and improve water quality Recognised on the 2019 Refinitiv Diversity and Inclusion Index (second in Australia and 25th globally) Retained DJSI leadership position of the Casino and Gaming Industry sector (for fourth year) Committed to net-zero carbon emissions for our wholly owned and operated assets by 2030 Over 33,600 kilograms or the equivalent of 100,900 meals donated to food rescue charities on the 2019 Refinitiv Diversity and Inclusion Index (2nd in Australia and 25th globally) ‘Bronze Employer Recognition’ at the 2020 Australian LGBTQ Inclusion Awards 33,600 KG RECOGNISED AWARDED Achieved third-party certified environmental ratings for over 50% of the Group’s portfolio Donated or scheduled to recycle 100% of uniforms from the opening of the new Sovereign Maintained a 5 Star NABERS Tenancy rating for the Sydney corporate office ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 22 SUSTAINABILITY SUSTAINABILITY PAGE 23 SUSTAINABILITY STRATEGY The Star Entertainment Group’s sustainability approach continues to focus on creating long-term value in the management of environmental, social and governance risks and opportunities and increasing performance year on year. In FY2020, the Group’s sustainability strategy ‘Our Bright Future’ entered its fourth year. The sustainability strategy combines the Group’s key priorities and objectives in a four-pillar framework that supports the Group’s business plan. The four sustainability strategic objectives are: We strive to be Australia’s leading integrated resort company We build and operate world-class properties We actively support guest wellbeing We attract, develop and retain talented teams. MATERIALITY The Group remains focused on identifying and responding to material issues that are reaffirmed annually through our rigorous materiality assessment process. The materiality assessment identifies the Group’s key emerging and operational environmental, social and governance issues and seeks to respond to these as part of the Sustainability Strategy’s key priorities. In the 2020 financial year, the Group’s key material issues have remained consistent with the previous year. As a result of aligning the materiality assessment with the United Nations Sustainable Development Goals and Targets, the Group is able to support the goals further through business key performance indicators and targets within the sustainability strategy and the sustainability action plan. The FY2020 materiality assessment process was completed and validated in mid-March 2020. Since that time, the business has continued to monitor the impacts of the COVID-19 pandemic and expects any changes to be reflected in the materiality assessment to be completed in March 2021. MATERIALITY MATRIX The following materiality matrix outlines our significant issues assessed by their ‘Importance to The Star’ and ‘Importance to external stakeholders’. All issues have been classified as ‘Emerging/Strategic’ or ‘Ongoing/Operational’. Most Material Issues Community wellbeing and trust~ Responsible gaming~ Privacy and security^ Ethical business operation~ S R E D L O H E K A T S O T E C N A T R O P M I Climate resilience^ Sustainable and ethical supply chain^ Healthy environments~ Sustainable precincts^ Minimising environmental impacts~ ESG transparency~ Guess safety & security~ Employee health, safety & wellbeing~ Sustainable business performance^ Diversity inclusion and equal opportunity~ Employee engagement and development~ IMPORTANCE TO THE STAR LEADING COMPANY GUEST WELLBEING WORLD-CLASS PROPERTIES TALENTED TEAMS ^ EMERGING/ STRATEGIC ~ ONGOING/ OPERATIONAL MATERIAL ISSUE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS LEADING COMPANY WORLD-CLASS PROPERTIES GUEST WELLBEING TALENTED TEAMS Ethical business operation Community wellbeing and trust 9, 16 16, 17 Privacy and security 16 Sustainable and ethical supply chain 9, 12, 17 ESG transparency 12, 16 Sustainable business performance 8 Climate resilience 7, 13 Minimising environmental impacts through operating efficiently 7, 12, 13, 14, 15 Sustainable precincts 9, 11, 13, 14, 15 Responsible gaming Safety and security Healthy environments 3, 11 3 3 Diversity, inclusion and equal opportunity 5, 8, 10 Employee engagement and development 4, 8 Employee health, safety and wellbeing 3, 8 ANNUAL REPORT 2020ANNUAL REPORT 2020 PAGE 24 SUSTAINABILITY SUSTAINABILITY PAGE 25 DELIVERING WORLD-CLASS PROPERTIES The Star Entertainment Group develops and operates world-class, liveable, environmentally sustainable and resilient integrated resorts and precincts. The Group continues to support this strategic commitment by designing and building for efficiency and it commitment to third party environmental ratings. Targeting 90% coverage of third-party certified environmental ratings across the Group’s portfolio by 2022 Targeting net-zero carbon emissions by 2030 for the Group’s owned and operated assets Targeting a 30% reduction in carbon and water intensity by FY2023 against the FY2013 base year To date, the Group has third party certified environmental ratings for over 50% of its controlled properties which includes a 5 Star Green Star Interiors rating, a 5 Star NABERS Tenancy rating, a Green Star Performance rating and commitments to further Green Star Performance and Design and As Built ratings. Destination Gold Coast Consortium (on behalf of its joint venture partners) continued to work towards a 5 Star Green Star Design and As Built rating commitment for the Dorsett hotel and apartments tower (to be constructed on Broadbeach Island, Broadbeach, Queensland). During the 2020 financial year, a Green Star Commitment Agreement was also registered for the second tower (Tower 2) to achieve a 5 Star Green Star Design & As Built v1.2 rating in line with the Dorsett hotel and apartments tower. As part of the construction of Dorsett hotel and apartments tower, a successful design review was submitted during the year to the Green Building Council of Australia. To date, the tower has recycled over 90% of its construction waste and is targeting outcomes above the requirements of the 5 Star Green Star rating where possible. In the manufacture of the concrete required for construction, 40.4% of the portion of Portland cement has been replaced with a more sustainable option, fly ash, which is a by-product from industrial processes. To ensure the use of recycled content, 46% of the fine aggregate in the concrete mix is repurposed, manufactured sand. To reduce potable water consumption, 93% of the water used in the concrete manufacture is reclaimed and/or recycled. Destination Brisbane Consortium (on behalf of The Star Entertainment Group and its joint venture partners) continues towards delivery of a 6 Star Green Star Communities rating for the Queen’s Wharf Brisbane precinct, 6 Star Green Star Design & As Built ratings for all new buildings, and Australian best practice sustainability outcomes on the repurposing of existing heritage buildings. CLIMATE CHANGE RESPONSE The Star Entertainment Group has identified climate change as a material issue and acknowledges its potential impacts. The Group recognises the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and importantly that the Group’s investments may be susceptible to future changes in climate. Within the year, the Group has been working to align its existing climate related projects and targets to the TCFD recommendations through a progressive roadmap. In 2020, the Group released its first disclosure report on the company website detailing our progress to date against the four framework areas of Governance, Strategy, Risk Management and Metrics and Targets. In 2020, the Group expanded its commitment to a low carbon future by setting a target to achieve net-zero carbon emissions for its wholly owned and operated assets by 2030 as a long-term measure. The pathway to achieve this target includes the purchasing of renewable energy (in progress), the assessment of onsite solar, continuing the company’s energy efficiency program and developing a carbon offsetting strategy. The Group remains committed to immediate action through its interim targets to achieve a 30% reduction in carbon and water intensity by FY2023 against the base year FY2013. The Group continues to prioritise and improve the resilience of business operations and assets. Climate change risk and response has been embedded into our risk register and management processes and climate mitigation and adaptation requirements form part of the Group’s Sustainable Design and Operational Standards which can be found on the company website. Resource consumption and carbon emissions management continue to be both a material issue and a focus which are managed by the continuation of energy audits and physical climate risk assessments. REPORTING AND ASSURANCE The Star Entertainment Group has prepared its reporting ‘in accordance’ with the Global Reporting Initiative (GRI) Standards (Core option). The index can be found on the company website and provides a guide on where information can be found throughout the Group's reporting suite as it relates to the GRI reporting requirements. In line with the Group’s commitment to expanding sustainability disclosures annually, this report has also included additional disclosures to progress the reporting level to ‘comprehensive’ over time. The Star Entertainment Group has obtained ‘Limited Assurance’ by EY for FY2020 across its energy and carbon data. The assurance opinion can be found on the company website. GREEN BUILDING RATINGS STATUS THE STAR ENTERTAINMENT GROUP HAS ACHIEVED 50% THIRD PARTY CERTIFIED ENVIRONMENTAL RATINGS ACROSS ITS PORTFOLIO QUEEN’S WHARF BRISBANE 6 Star Green Star Communities v1 rating 6 Star Green Star Design & As Built v1.1 rating for non-residential new buildings Industry Best Practice Design & As Built v1.1 ratings for existing heritage buildings Green Star Performance ratings for each non-residential building THE STAR GOLD COAST, BROADBEACH ISLAND, BROADBEACH, QLD Green Star Performance rating THE DORSETT HOTEL AND APARTMENTS TOWER 5 Star Green Star Design v1.1 Review 5 Star Green Star Design & As Built v1.1 rating THE STAR GOLD COAST - TOWER 2 5 Star Green Star Design v1.1 Review 5 Star Green Star Design & As Built v1.1 rating THE STAR SYDNEY, 80 PYRMONT STREET, PYRMONT, NSW Green Star Performance rating THE STAR ENTERTAINMENT GROUP’S SYDNEY CORPORATE OFFICE, 60 UNION STREET, PYRMONT, NSW 5 Star NABERS Tenancy rating 5 Star Green Star Interiors rating KEY COMMITTED ACHIEVED ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 26 SUSTAINABILITY RESOURCE EFFICIENCY PROJECTS The Star Entertainment Group continues to invest in and enhance its integrated resorts. With several expansion projects underway, energy use is expected to increase across the properties in the coming years as we open and operate more floor space. To mitigate against these increases, the Group continues to target resource efficiency through building design and operations and through an active engineering program to reduce carbon emissions, energy use and cost. To ensure energy and water efficiency is achieved in refurbishment and development projects, the Group’s Sustainable Design and Operational Standards (available on the company’s website) have been applied to all large-scale development projects. The Standards are aligned to green building ratings criteria and ensure projects achieve best practice sustainable outcomes. The Group’s Energy and Water Project Pipeline, first established in FY2015, continues to prioritise, monitor and track projects that deliver cost and environmental benefits. Utilising a building optimisation and analytics platform, a total of 107 small scale tuning and efficiency projects were completed from July 2019 to March 2020 at The Star Sydney and The Star Gold Coast. Several efficiency opportunities are ongoing at both properties and will continue into FY2021. To track the benefit of efficiency projects, resource consumption performance is measured and reported in absolute terms and as intensity metrics on a per visitor and per square metre basis. In FY2020, 21 tuning and efficiency projects were completed at The Star Sydney, delivering savings of 55,246 kWh in energy use, 45 tonnes of carbon emissions and $8,287 in cost. Two trial projects were activated in February 2020 involving carpark fan sensors and dead band setpoints. The carpark fan trial project, completed in March 2020, identified benefits from adjusting temperatures to prevent carpark fans running excessively for cooling purposes. Standard operating speeds were reduced from 100% to 60% on average with no effect to comfort levels. The project is expected to save an estimated $48,000 per annum. The dead band trial involved introducing temperature set point dead bands into the air conditioning logic. As common industry practice, these adjustments are expected to deliver ongoing savings as our property reopens to full operating capacity. The Star Sydney Facilities and Sustainability Team developed a water saving maintenance program to test for leakage and excessive tap flowrates. Since August 2019, more than 350 taps have been adjusted, with expected savings of 20,000 litres per day and $23,000 in annual water costs. A capital upgrade project to seal parts of the main gaming floor was completed in June 2020 and is expected to provide tangible energy savings, whilst also improving guest comfort levels. At The Star Gold Coast, 86 tuning and efficiency projects were implemented during FY2020 as a result of the building optimisation and analytics system, delivering savings of over 232,620kWh in energy use, 184 tonnes of carbon emissions and $34,893 in cost. As a result of energy audits, two capital upgrade projects were completed in FY2020. A heat pump replacement project is expected to save over $230,000 in energy use costs per annum and avoid 322 tonnes of carbon emissions per year. A steam optimisation project is expected to save approximately $112,000 in energy costs and avoid 173 tonnes of carbon emissions at the property. SUSTAINABILITY RESOURCE PERFORMANCE PAGE 27 11.4 TONNES 1,335 KG 11.4 tonnes of furniture, equipment, uniforms and hotel linen donated – a total of 28.5 tonnes since the program began 1,335 kilograms of soap donated to Soap Aid’s ‘Hotel to Hands’ program 13,800 CAPSULES 13,800 Nespresso capsules recycled ENERGY AND CARBON EMISSIONS In the 2020 financial year, the Group’s total emissions in carbon dioxide equivalents (CO2-e) from purchased gas and electricity were 94,945 tonnes. This footprint equates to a decrease of 11.1% from FY2019 which was 106,845 tonnes and an overall decrease of 12.6% from base year FY2013 which was 108,595 tonnes. The Star Entertainment Group’s FY2020 emissions were comprised of 8,952 Scope 1 emissions and 85,993 Scope 2 emissions. On an intensity basis, carbon emissions per square metre decreased by 12.6% from 0.35 tonnes CO2-e per square metre in FY2019 to 0.31 tonnes CO2-e per square metre in FY2020. Overall carbon emissions intensity per square metre reduced by 26.2% in FY2020 from FY2013 contributing positively to the Group’s target to achieve a 30% reduction in emissions intensity per square metre by FY2023 against base year FY2013. With 14 million visitors in FY2020 (down from previous years due to the COVID-19 pandemic) carbon emissions intensity on a per visitor basis increased from 5.69 kilograms CO2-e per visitor in FY2019 to 6.38 kilograms CO2-e per visitor in FY2020 which is expected to decline in FY2021 when venues reopen fully. The Group’s total energy consumption from purchased gas and electricity for FY2020 was 555,911 gigajoules (GJ), which was a 13.1% decrease from FY2019 which was 639,726 GJ and an 8.5% decrease from base year FY2013. On an intensity basis, energy per square metre reduced by 14.5% from 2.11 GJ per square metre in FY2019 to 1.80 GJ per square metre in FY2020 and decreased by 22.7% against base year FY2013. Energy consumption per visitor increased in FY2020 by 9.8% from 34.05 MJ per visitor in FY2019 to 37.38 MJ per visitor in FY2020, as a result of reduced visitation due to COVID-19 impacts. Energy consumption per visitor increased 0.4% overall from base year FY2013 and is expected to reduce again in FY2021. The decline in carbon emissions and energy consumption both on an absolute and intensity basis was expected due to property closures and restricted operations between March and June 2020 in line with Government regulations. Both large scale plant upgrades and energy efficiency initiatives in the Group’s Energy and Water Project Pipeline were delivered between July 2019 and March 2020 contributing to the energy and carbon emissions reductions within the year. CARBON EMISSIONS ENERGY CONSUMPTION 0.42 108,595 0.35 106,845 0.31 94,945 2.34 607,476 2.11 693,726 1.80 555,911 6.65 5.69 6.38 37.22 34.05 37.38 FY2013 (BASE YEAR) FY2019 FY2020 FY2013 (BASE YEAR) FY2019 FY2020 CARBON EMISSIONS (TONNES CO2-E) EMISSIONS INTENSITY (KG CO2-E/VISITOR) ENERGY CONSUMPTION (GJ) ENERGY INTENSITY (MJ/VISITOR) EMISSIONS INTENSITY (TONNES CO2-E/SQM) EMISSIONS INTENSITY (GJ/SQM) Notes: The Group’s total carbon emissions, as reported, equate to emissions from purchased gas and electricity only, which aligns with the Group’s targets that cover our material sources of carbon emissions. Additional sources of Scope 1 emissions include refrigerant gases and fuel consumption, both of which comprise less than 1% of total emissions for the year. Additionally, 1.1% of FY2020 utility invoices were unbilled at the time of reporting (from water), based on cost. The missing usage has been estimated as 0.0% (17MWh) for electricity, 0.0% (31GJ) for gas. Square metres are square metres of conditioned space only, which is defined as space that has been mechanically heated or cooled that the Group had operational control over at the end of each financial year. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 28 SUSTAINABILITY SUSTAINABILITY PAGE 29 POTABLE WATER USE INCREASING RECYCLING PARTNERING AND ENGAGEMENT The Group’s total potable water consumption was 644,025 kilolitres (kL) in the 2020 financial year, a decrease of 22% from FY2019 and a decrease of 6.5% from base year FY2013 which was 688,440 kL. Water consumption intensity per square metre decreased by 23.3% in FY2020 from 2.73 kL per square metre in FY2019 to 2.09 kL per square metre in FY2020. Water intensity decreased by 21%, moving towards the Group’s target of a 30% reduction in water intensity per square metre by FY2023 against base year FY2013. On a per visitor intensity basis, the Group’s water intensity decreased by 1.5% from 43.96 litres per visitor in FY2019 to 43.30 litres per visitor in FY2020. However, the Group experienced a slight increase of 2.6% against base year FY2013. Water efficiency activities (including water auditing and leak detection projects) were conducted from July 2019 to March 2020 which contributed to the reduction in water use in FY2020. A significant portion of the reduction during FY2020 was due to property closures and restricted operations from March 2020 to June 2020 when minimal water was consumed. The Group remains focused on waste reduction as a material issue and increasing its recycling targets each year to lift performance. Waste and recycling figures include all waste generated from operations. The Group benchmarks waste and recycling performance against the base year FY2013 to ensure that improvements are measurable. In FY2020, the Group diverted 30 recycling streams from landfill including batteries, organics, soft plastics, cardboard, linen and uniforms. The Group’s recycling rates have increased from 10% overall waste diversion in FY2013 to 37% diversion in FY2020 across all operations. A slight reduction in recycling rates was experienced in FY2020 as a result of the waste collection dock being relocated at The Star Gold Coast which caused disruption to recycling and waste services. Training and education remain a priority, with behaviour change activities scheduled into FY2021 to ensure that recycling intensity increases over time. WATER CONSUMPTION RECYCLING RATES 2.65 688,440 42.19 FY2013 (BASE YEAR) 2.73 825,971 2.09 644,025 43.96 43.30 FY2019 FY2020 0.002 10% 0.03 FY2013 (BASE YEAR) 0.010 39% 0.007 37% 0.16 0.14 FY2019 FY2020 WATER CONSUMPTION (KL) WATER INTENSITY (L/VISITOR) WATER INTENSITY (KL/SQM) RECYCLING RATE (%) RECYCLING RATE INTENSITY (KG/VISITOR) RECYCLING INTENSITY (TONNES/SQM) Notes: 1.1% of FY2020 utility invoices were unbilled at the time of reporting based on cost (from water). The missing usage has been estimated as 5.8% (37ML) for water. The FY2013 base year for waste has been recalculated. ‘Recycling intensity’ kg/visitor has been used in FY2017 to FY2020, not ‘waste to landfill intensity kg/visitor’ as used in FY2016, which better reflects recycling performance. PROGRESS IN REDUCING SINGLE-USE PLASTICS The Star Entertainment Group continued to replace single-use plastics with compostable and more sustainable alternatives over the 2020 financial year in line with our Single-use Plastic Reduction Strategy and public commitment. During FY2020, 41 non-sustainable items were replaced with 33 sustainable alternatives and ordering systems were updated to ensure that only sustainable alternatives were available. To support the business transition to new compostable products, a Sustainable Product Replacement Guide was developed to assist our food and beverage team, events team and suppliers with the switch. Despite heavily impacted trading from March 2020 due to COVID-19, there was a 12% uplift in compostable takeaway container purchases and a 4% increase in compostable cup purchases across the business as a result of removing single-use plastic items from ordering systems. Where sustainable product alternatives are not currently available, the Group continues to actively work with suppliers to customise and create alternatives for our guests and the wider market. Testing of new projects to market for durability and functionality led to the introduction of compostable sugarcane plastic bowls, takeaway containers, and sushi containers and lids. The Star Entertainment Group continues to be active in local government programs and partnerships to support and deliver sustainability outcomes within the business and across the industry. The Group is a founding partner of the City of Sydney’s Sustainable Destination Partnership, a collaboration of accommodation, entertainment and tourism organisations working together to achieve a more sustainable Sydney. The Group’s representatives chair the Leadership Panel and co-chair the project orientated Technical Working Groups. The Group is also a long-term member of City of Sydney’s CitySwitch program. The Group’s sustainability team partnered with national waste contract provider Veolia to engage team members across all properties for National Recycling Week in November 2019 and subsequently trained 480 team members on recycling best practice. Across the Group, the Sustainability Advisory Board and the Executive Sponsor, the Chief Legal and Risk Officer, oversee sustainability governance, performance and strategy and report on the progress to the Board’s People, Culture and Social Responsibility Committee. Property Sustainability Committees continue to engage team members at the property level to support sustainability education and direct operational outcomes. SUSTAINABLE SUPPLY CHAIN The Star Entertainment Group continues to take a long-term view to managing and maintaining relationships with suppliers and contractors, which enables the company to proactively identify and implement improvements in the sustainability of sourcing and property management activities. In FY2020, the Group extended this commitment by commencing its response to the Modern Slavery Act 2018. In FY2021, the Group will undertake an extensive review into five key strategic suppliers and collaboratively work with them to build enhanced visibility of our extended supply chain. This process will then be refined and progressively rolled out based on risk and criticality of suppliers to complement ongoing risk assessment and assurance activities. In the first three quarters of the 2020 financial year, the Group continued to risk assess its suppliers, with a focus on critical and high-risk suppliers. Due to the COVID-19 pandemic, the Group’s existing goal of 60% of Tier 1 suppliers was deferred to calendar year 2021, whilst 100% of new suppliers were assessed on environmental, social, and governance risks prior to being onboarded. Following the closure of its properties on 23 March 2020 in line with government COVID-19 directions, all non-essential services and associated contracts were placed on hold across the Group’s food and beverage, hotel and gaming operations to reduce waste, with all commitments entered into prior to closure being honoured. As we were progressively able to reopen certain areas of the business, we commenced the resumption of supplier engagement to the fullest extent that our limited operations allowed. SOVEREIGN OPENING - 100% OF OLD UNIFORMS TO BE RECYCLED In conjunction with The Star Sydney’s Sovereign redevelopment, new uniforms were issued to all team members working in gaming, food and beverage, security and premium services. Consistent with the Group’s commitment to reducing waste and increasing recycling rates, 100% of the old, worn uniforms were either repurposed or scheduled for recycling – over 10,300 pieces in total. Whilst the domestic textile recycling market is immature compared to overseas markets, The Star Sydney identified a number of avenues to ensure all of the old garments avoided landfill. St Vincent de Paul collected over 6,000 pieces of uniform for reuse in both domestic and international markets. Over 4,000 worn gaming vests will be processed by Australian textile recovery technology firm BlockTexx back to their raw materials of ethylene polyester and cotton cellulose for reuse as new products, including textiles, packaging and building products. A further 300 items, including suit pants, jackets and buttoned shirts were donated to ‘Dress for Success’, a local charity that provides a dressing and support service for women to seeking employment. FOOD DONATIONS Following state and federal government directives to close all non-essential businesses on 23 March 2020, all restaurants and food outlets across the Group’s properties were impacted. Team members from across the business quickly mobilised to help donate fresh food and produce (which were at risk of perishing) to our community partners and food rescue organisations. Working with OzHarvest and Foodbank Queensland, The Star Sydney, The Star Gold Coast and Treasury Brisbane helped feed the most vulnerable members in the community, and saved over 33 tonnes of food going to landfill - the equivalent of 100,900 meals. The Star Sydney and The Star Gold Coast continued to provide monthly donations of 800 kilograms on average, of fresh fruit and vegetables towards OzHarvest’s healthy school’s program. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 30 SUSTAINABILITY LEADING COMPANY The Star Entertainment Group provides a variety of engaging entertainment experiences at its properties. RESPONSIBLE GAMBLING Most of our guests enjoy gambling as part of their leisure and entertainment experience and do so within their financial means. Unfortunately, a small percentage of our guests may experience some difficulty in controlling their gambling. The Group’s responsible gambling program promotes early identification and intervention with guests who may be exhibiting signs of problem gambling. The objective of the responsible gambling program is to minimise the potential harm caused by gambling (such as financial hardship, emotional distress and relationship breakdown), and to provide guests with the ability to make informed decisions about managing their gambling behaviours. Each property operates under a ‘Responsible Gambling Code of Practice’ which sets the standards and requirements to be followed for the responsible delivery of gambling products and services. Key operational elements of our responsible gambling program are: We provide guests with readily accessible information about problem gambling, including symptoms and treatment options We monitor the amount of time a guest spends on property and encourage regular breaks in play A comprehensive training program including mandatory responsible gambling training for all our team members We work with external support agencies to provide assistance to problem gamblers We offer sensitive and confidential support to guests seeking to exclude themselves from attending one or more of our casinos (we have in place agreements with selected Gambling Help Services in Queensland and New South Wales to allow individuals to self-exclude from a casino without having to attend the casino in person) We assist guests who have self-excluded from our casinos to also self-exclude from other gambling venues Where we believe there is sufficient reason to do so, we exclude people who are at risk of gambling problems, including on the basis of third-party information We prevent intoxicated guests from participating in gambling activities We prohibit the cashing of cheques to fund gambling activities (other than by prior arrangement) We do not allow betting on credit terms We conduct advertising and marketing campaigns in compliance with applicable regulations and industry codes of practice Our security and surveillance staff are trained to prevent minors and excluded persons from gaining access to gaming areas. We have a dedicated Responsible Gambling Team that oversees all areas of the responsible gambling program (including compliance with the Responsible Gambling Policy) across the Group. SUSTAINABILITY PAGE 31 RESPONSIBLE SERVICE OF ALCOHOL Excessive consumption of alcohol can have serious adverse health, social and economic consequences for individuals, their family and friends, and for the broader community. The Group’s responsible service of alcohol (RSA) practices comply with relevant state-based legislation, regulations and liquor licences supported by a group RSA policy framework. At each property, all team members who are directly involved in the service or supply of alcohol, including those supervising or managing these processes, must have a current RSA training course certificate. All other employees are also required to complete in-house RSA training upon commencement of employment, even though they are not directly involved in the service or supply of alcohol. In addition to strict refusal of entry policies, each property has in place processes for: • Monitoring that guests on the premises are not unduly affected by excess consumption of alcohol • Empowering food and beverage managers to identify high-risk periods and manage consumption by limiting the amount of drinks that can be purchased at any one time • Mandatory reporting of all serious RSA related incidents (to be documented within the approved incident reporting databases and records). The Group’s properties have also taken the following measures to support responsible service of alcohol: • The use of toughened or tempered glass for many of the beverages served in the public areas of the Gold Coast and Brisbane casino properties (excluding restaurants) • The use of toughened or tempered glass in the main gaming floor venues and the use of plastic drinking vessels at Sky Terrace, the Sports Bar and Marquee Nightclub during restricted periods at The Star Sydney. $100 million+ contributed to Queensland’s Gambling Community Benefit Fund since 1987 $14.6 million contributed to the Responsible Gambling Fund (NSW) in FY2020 Board oversight of our responsible gambling program is provided by the People, Culture and Social Responsibility Committee. At each of our casinos, a Patron Liaison Manager from the Responsible Gambling Team supports the business in giving effect to the responsible gambling program. Each of the Patron Liaison Managers is a member of the National Association for Gambling Studies Inc., which is a non-profit organisation that aims to promote discussion and research into all areas of gambling activity. The Patron Liaison Managers report directly to the Group Manager Responsible Gambling. The position of Group Manager Responsible Gambling was introduced in April 2019 to manage the Responsible Gambling Team and to drive continuous improvement of the responsible gambling program. The recently created position reports directly to the General Manager Social Responsibility. In Queensland, a Patron Liaison Manager attends Responsible Gambling Network meetings on the Sunshine Coast, the Gold Coast and in Brisbane. The meetings are conducted by the Gambling Help service in Queensland and are attended by industry participants and the Queensland Office of Liquor and Gaming Regulation. The Responsible Gambling Network provides a forum to exchange information and views about approaches to responsible gambling and find solutions to improve the management of problem gambling. A percentage of gaming taxes paid by the Group is directed to the Gambling Community Benefit Fund in Queensland (previously the Jupiters Casino Benefit fund). In the 2020 financial year, the Group contributed $14.6 million to the Responsible Gambling Fund (NSW). The reduced FY2020 contribution was a direct result of COVID-19 restrictions placed on The Star Sydney from 23 March 2020. Funds are allocated, through the New South Wales Government, to support various projects and services that aim to reduce and prevent the potential harms associated with problem gambling. We engage BetCare, a dedicated independent counselling service, to provide assistance for distressed guests, including 24/7 crisis intervention. BetCare also assists with gambling assessments for guests seeking revocation of self-exclusion agreements and provides specialised responsible gambling training to our Patron Liaison Managers. BetCare is available at all of our casino properties. In the 2020 financial year we completed the development of Guest Support Centres at each casino property. These centres are readily accessible away from the main gaming area, to offer guests safe and discrete access to specialist gambling support and counselling services. The Star Sydney has begun an operational trial of facial recognition technology to assist in preventing excluded guests from entering our Sydney property. Such technology has improved substantially in recent years and is now generally effective in casino environments. We are assessing the operational impact and demands before considering the group-wide adoption of this technology. Preventing minors from entering alcohol restricted or gaming areas is a significant focus of the Group's harm reduction programs and is a significant duty of our security and surveillance teams. Team members are trained extensively in respect of identifying minors and security team members have substantial business processes designed to reduce the risk of minors accessing restricted areas. ANNUAL REPORT 2020ANNUAL REPORT 2020 PAGE 32 SUSTAINABILITY SUSTAINABILITY PAGE 33 WORK HEALTH AND SAFETY GUEST WELLBEING Promoting guest wellbeing by providing a safe and enjoyable environment across our properties is of paramount importance to The Star Entertainment Group. Collectively, The Star Entertainment Group’s properties welcome around 20 million guests each year, however visitation was around 14 million in FY2020, impacted by COVID-19. The Group’s properties continued to deliver a range of world-class food and beverage, accommodation, theatre and entertainment options for local, domestic and international tourists. The Group is committed to providing all guests with a safe, secure and comfortable experience at each of our properties. Our properties are subject to a high level of oversight from various external regulators. The Group works with police, casino regulators and the local community in each city so our properties remain safe for all of our guests. We take a zero-tolerance approach to illegal, undesirable and anti-social behaviour in conjunction with our Responsible Gambling and Responsible Service of Alcohol (RSA) practices. SECURITY AND SURVEILLANCE The Star Entertainment Group’s properties maintain leading security and surveillance operations. All properties are supported by 24 hours-a-day seven-days-a-week security and surveillance operations. Across the Group’s three properties, our security and surveillance team comprises over 400 team members. Each property has in place standard operating procedures to deal with and respond to any suspected undesirable conduct. An incidents register is maintained at each property and the internal compliance team reviews all requirements and conducts regular audits to support compliance with relevant legislation and policies. NEIGHBOURHOOD ENGAGEMENT The Star Sydney maintains a ‘Neighbourhood Advisory Panel’ that engages the local community and advises of the property’s ongoing operations and provides opportunity to suggest solutions to address concerns and neighbourhood issues. In addition, The Star Sydney distributes a community newsletter to around 5,000 residents and businesses in the Pyrmont area, providing updates of its plans. In Queensland, online development updates are provided for residents and stakeholders. In March 2020, The Star Entertainment Group, alongside its Hong Kong-based partners, Chow Tai Fook Enterprises and Far East Consortium opened the Queen’s Wharf Brisbane Visitor Centre to the public. The Visitor Centre's major attraction is an interactive, locally-made 3D model of the $3.6 billion development including surrounding CBD and South Bank areas. Other features include: a display dedicated to showcasing the precinct’s 190+ year European heritage with photos and artefacts; a media room to watch videos including time-lapse camera footage of the construction to date; a project timeline; and a photo booth where guests can picture themselves in the future precinct. Our goals include eliminating work related injuries,illnesses and unsafe work practices and promoting the health and welfare of our team members. In FY2020 we continued to drive improvements in six key areas. Our safety management system Reporting and quality of data The management of our critical risks Learning from every incident Assurance activities Injury management Operating safely has always been paramount at The Star Entertainment Group’s properties, however COVID-19 has necessitated an even greater focus on caring, engagement and compliance. In the 2020 financial year, we continued to pursue our goal of minimising work related injuries and illnesses, and eliminating unsafe work practices. We also continued to promote the physical and psychological health and welfare of our team members. Further development of our safety management system and extensive engagement and consultation with our team members has made us even more reliable, consistent and efficient, and most importantly it has continued to set the foundations for our culture of care and continuous improvement. We have reduced our injuries resulting in time off work by 16% from 2019. Improved safe work practices, focus on risk mitigation, safety in the design phase of construction, timely reporting, comprehensive injury management, leader accountability and personal responsibility have all played a part. Our increased focus on the mental health and wellbeing of our team members has continued with mental health training developed for all managers and leaders. In partnership with our employee assistance provider, bespoke interactive sessions have been presented to team members, with a focus on self-care as well as learning how to identify and support team members who are experiencing difficult times. Detailed guidance is provided for how to manage emergency situations and for when it is appropriate to assist with referrals for medical or psychological intervention. With increased promotion of our Employee Assistance Program, including face-to-face wellness and coaching sessions and comprehensive online resources, coupled with the challenges created by COVID-19, we have seen an increase in the uptake of these services. Significant construction activity has continued throughout the year and we have worked closely with contractors to identify, assess and manage risk when planning and executing our building projects to ensure a safe environment for all those who work at, stay at and visit our properties. TOTAL RECORDABLE INJURY FREQUENCY RATE (TRIFR) FY2016 – 24.4 FY2017 – 23.2 FY2018 – 14.8 FY2019 – 14.7 FY2020 – 14.5 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 34 SUSTAINABILITY SUSTAINABILITY PAGE 35 TRUSTED COMMUNITY PARTNERS The Star Entertainment Group aims to foster and maintain close connections with the local communities and cities in which we operate. Through annual collection, giving and donation programs, we endeavour to support community groups, charitable organisations and events that are important to, and reflect the values of, our team members, our communities and our cities. We provide support in a variety of ways including corporate philanthropy, team members volunteering and sharing their expertise as well as in-kind use of our world-class venues, facilities and provision of food and beverage for charity events. In the last financial year, we contributed over $7 million in donations, community grants and sponsorships. Although we were forced to temporarily close our doors on 23 March 2020 due to COVID-19 restrictions, we were able to assist local community and business groups impacted by the pandemic with over $121,000 in donations. This included Innari Inc., Currumbin Wildlife Hospital, Pyrmont Ultimo Chamber of Commerce and Volunteering Queensland. In FY2020, we also undertook an extensive evaluation of our charitable and community donation programs across each property. The aim of this evaluation was to ensure that our commitments maximise the benefit and positive impact for all stakeholders, aligns to each property’s values and reflects its local spirit. As we emerge from the impacts of COVID-19, we look forward to announcing strategic charitable partners for FY2021 and beyond. During The Star Gold Coast Magic Millions Carnival in January 2020, we also worked with our partners and organisers to raise additional funds for the national bushfire relief appeal throughout the 12-day carnival. The Star Gold Coast kickstarted the drive with a $50,000 donation, while the appeal raised more than $1.1 million in total. Although various events were impacted by COVID-19, we continued to be involved in partnerships that drive tourism and economic prosperity to the region. These include positioning The Star Gold Coast as Naming Rights Partner of Gold Coast Magic Millions Carnival and Race-day, and host and event partner of the TV Week Logie Awards. THE STAR GOLD COAST In the 2020 financial year, The Star Gold Coast maintained several long-term relationships with key charity partners in Queensland, including Surf Life Saving Queensland (SLSQ), Cancer Council Queensland, Gold Coast Hospital Foundation and Currumbin Wildlife Hospital. We also worked closely with a variety of charitable groups and community partners to help raise further funds to assist those most in need in the local community, across our region and in Queensland. As part of an annual collection and giving program with our selected community partners and other fundraising initiatives, The Star Gold Coast donated nearly $200,000. To mark The Star Gold Coast’s 25-year partnership with SLSQ, we served a craft beer made by SLSQ and Newstead Brewing Co., Nineteen 09, on tap at two of our venues – Harvest Buffet and M&G Café and Bar. A portion of proceeds from the sale was allocated to supporting volunteer surf lifesavers. Supporting national and state bushfire fundraising efforts, The Star Gold Coast raised $50,000 by diverting its 2020 New Year’s Eve fireworks budget and donating all profits from drinks sold on the night at Garden Kitchen and Bar to the ‘GIVIT’ bushfire relief appeal. TREASURY BRISBANE Treasury Brisbane supported a variety of community focused and charitable organisations that reflect our values of ‘Local Spirit’ and ‘City Pride’. In September 2019, Treasury Brisbane partnered with Brisbane Festival to bring to life one of the country’s largest international arts and cultural events for the sixth year in a row. Treasury Brisbane has also continued its support of a variety of multicultural and community events including: • Festitalia Italian Festival • Vietnamese Lunar Festival • Participating in the National Trust of Queensland’s ‘Brisbane Open House’ event by opening the Treasury Brisbane building to the public and conducting tours. In the 2020 financial year, our team members continued their support of, and volunteered at Ronald McDonald House South East Queensland (RMHSEQ) through the ‘Make-A-Meal’ program and the Christmas toy drive. Since The Star Entertainment Group’s partnership with RMHSEQ commenced in 2014, over 100 chefs and 30 stewards have volunteered their time and expertise to help feed families. SLSQ volunteers with Jessica Mellor, The Star Gold Coast COO and SLSQ Board President Mark Fife ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 36 SUSTAINABILITY Lunar New Year 2020 celebrations at The Star Sydney THE STAR SYDNEY The Star Sydney continued to support significant events, charitable groups and organisations that are important to the city and the local Pyrmont community. As part of its ongoing community donations and giving program, The Star Sydney allocated over $148,000 to local groups and charities across Sydney. These included: The partnership ensures that official naming rights for The Star Championships continues through to 2022. The Star will also have naming rights for The Star Mile run as a part of The Everest Carnival line-up in October 2020 and 2021. The Star Sydney continued a variety of partnerships and sponsorships including: • Pyrmont Cares – a group that provides household goods, furniture and whitegoods to those in greatest need • NSW Rugby League • Pyrmont Ultimo Chamber of Commerce – which supports local businesses • Innari Inc – a grassroots Indigenous organisation which assists families and individuals who are homeless or at risk of homelessness • Lifeline Australia • Ultimo Public School and Fun Run • OzHarvest. In February 2020, The Star Sydney expanded its commitment to racing in New South Wales and The Star Entertainment Group’s 20-year association with Australian Turf Club (ATC) with a new three-year sponsorship deal. The agreement secured The Star Sydney as the Official Entertainment Partner of the ATC, as well as naming rights to Sydney Autumn Racing Carnival’s showpiece, The Star Championships. • Sydney Gay and Lesbian Mardi Gras • Queer Screen (a not-for-profit arts organisation that showcases LGBTQI screen content) • Sydney FC • Sydney Swans • City of Sydney’s Lunar New Year Festival • ARIA Awards • AACTA Awards. SUSTAINABILITY TALENTED TEAMS PAGE 37 The Star Entertainment Group is delighted to train the next generation of world-class hospitality and tourism team members. We are committed to developing talented teams that deliver exceptional guest experiences, and in turn, create shareholder value. DEVELOPING FUTURE TALENT The Star Academy centres around three pillars of learning: The Foundation Centre, The Skills Centre and The Leadership Centre. The Star Academy’s objectives are to offer outstanding, accessible development programs and learning journeys, to facilitate professional career development within the Group and personal growth through the following training programs: Graduate Programs Traineeships Apprenticeships (The Star Culinary Institute) Internal Career Development Pathways Leadership Coaching and Development The formal trainee programs, the Graduate Programs and The Star Culinary Institute form part of the overall attraction and retention strategy for the Group. THE STAR CULINARY INSTITUTE The Star Culinary Institute (SCI) operates under The Skills Centre, nurturing and developing future talent in the culinary sector. In the 2020 financial year, the Group hosted 108 apprentices with a gender diversity breakdown of 38% female and 62% male. The program’s success was reflected in its apprentice retention and employment rates of 86% and 83% respectively. In 2018, a school-based apprenticeship program was piloted at The Star Gold Coast to generate a talent pathway into the full-time program. Working with an independent training organisation (Icon), year 10 and 11 students who are studying a Certificate II or Certificate III in Hospitality or Commercial Cookery are invited to join the SCI apprenticeship program on a part-time basis. The school-based apprenticeship program has been so well accepted, it has an ongoing waitlist of young talent wishing to join the program at The Star Gold Coast. The same apprenticeship program has now been launched in Sydney with the support of the New South Wales Department of Education. The program’s delivery framework continues to evolve and lead the way in training future chefs. The apprenticeship program has a positive external brand within the hospitality industry, professional associations and education sector. The attraction for apprentices is the diversity of training on offer through the variety of outlets at the Group’s properties which provide the apprentices with valuable experiences working with different cuisines, production and service offerings, whilst receiving expert mentorship from senior chefs. One of the major highlights was the international recognition of our apprentice, Cristopher Matkowski. Cristopher proudly represented both The Star Entertainment Group and Australia at the 2019 WorldSkills competition held in Kazan, Russia. This competition is referred to as the “Olympics” for trade and vocational skills. The process for WorldSkills competitions commences in Australia and SCI prepares a team of New South Wales and Queensland apprentices to compete in the challenge under the SCI banner. The apprentices are trained in-house and by TAFE NSW or TAFE Queensland, with the support from the Group’s preferred suppliers. Cristopher has now graduated from the culinary apprenticeship program and is a Commis Chef at Flying Fish at The Star Sydney. Other international opportunities were created through external competitions hosted by education partners and professional associations. The apprentices are proud to represent the Group internationally, whilst gaining new skills, cultural awareness and an international experience to share with other apprentices and chefs. The Group continues to attract highly talented and diverse university graduates into the expanding graduate program across all locations. The graduates learn on-the-job, developing their career skills by working within the operations teams and on dedicated projects with the executive team. To date, all successful graduates have been offered employment opportunities with the Group upon completion of the graduate program. The 2020 graduate program is focussing on developing women in leadership, with a 50/50 gender split. ELEVATING PREMIUM GUEST SERVICE Offering premium guest service across our world-class properties is key to the Group delivering exceptional and unique experiences. In preparation for the opening of the new Sovereign for our most valued guests, a premium service standard and guest service program was designed to elevate our current guest service commitments and provide relevant training. The premium guest service program commenced delivery in early March 2020, with 250 team members completing the program in the first few weeks. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 38 SUSTAINABILITY SUSTAINABILITY PAGE 39 SUPPORTING TEAM MEMBER WELLBEING AND CONNECTIVITY THROUGH COVID-19 The physical health, emotional, and financial wellbeing of our team members has remained at the forefront of our focus throughout the COVID-19 crisis. On 23 March 2020, the Group announced the closure of all its property operations in Sydney, Gold Coast and Brisbane following a shut-down order by the Australian Government. SOCIAL CONNECTION AND LEARNING SUPPORT The need for our team members to be socially connected was recognised. To support this connectivity and as a way to promote two-way-communications with a largely stood down workforce, we established The Star Connected Facebook page. More than 95% of the Group’s approximately 9,000 workforce was stood down following the initial announcement. In reaction, the Group took immediate steps to provide support to our team members. The Star Connected Facebook group has welcomed over 4,600 team members who received continuous updates on COVID-19 and had an opportunity to remain connected with colleagues and leaders. DIVERSITY AND INCLUSION GROUPS Our diversity and inclusion program sits at the heart of The Star Entertainment Group’s culture, and is represented in all areas of our team members’ experience. These include our Employee Values Proposition, our Vision, our Values, our Service Commitment and our talent and development strategies. Our team member-led working groups focus on four key areas of diversity: multicultural; LGBTQI; gender; and age. In the 2020 financial year, the working groups re-evaluated the Group’s diversity targets with the support of the Board. To guide our actions and responses, a range of support materials and initiatives were deployed to shape our collective resilience. Support and initiatives deployed included: PHYSICAL SUPPORT • From January 2020, all team members were welcome to bring and wear their own medical face mask. • The Group also offered a supply of face masks for team members (on request) and to ensure correct application and removal of face masks, qualified nurses were available on-site to offer instructions. • Extra hand sanitisers were distributed across all back of house areas including team cafes, bathrooms, team entry, and kitchens. HEALTH AND WELLBEING SUPPORT • A range of practical tips including COVID-19 specific podcasts, YouTube videos, and mental health support links and resources to keep our people healthy, shared regularly via email and on the Group’s dedicated COVID-19 intranet page • To ensure a centralised point for all information and team member communications, a dedicated intranet page was established • The Star COVID-19 Hotline was established to help team members with coronavirus related health questions manned by specialist registered nurses available 24/7 to answer any medical or leave questions about COVID-19. DIRECT ACCESS TO COVID-19 SUPPORT FOR LEADERS AND TEAM MEMBERS Immediately following the Australian Government’s shut-down order, a dedicated email address was established for a working team (the MyQueries team) to receive and respond to all non-health related queries from team members and leaders. The MyQueries team responded to over 22,000 emails. FINANCIAL AND EMPLOYMENT RELATED SUPPORT In March 2020, the Group offered two weeks of paid Pandemic Leave in addition to existing statutory leave entitlements and other employment obligations, to assist team members impacted by the COVID-19 pandemic. Partnerships were established with Woolworths, the Queensland Government and NOVA Partners, and communications were activated via email and on the Group’s intranet to notify team members of alternative job opportunities and free training. In May 2020, the Group implemented the ‘Star Offers Support’ (SOS) initiative to provide additional financial support for team members experiencing sudden and severe financial hardship as a result of the COVID-19 pandemic. This initiative assisted over 600 team members with SOS payments totalling around $3 million, alongside the paid pandemic leave distribution of $18 million. Bernice Colcomb, Chef De Cuisine - The Star Culinary Institute and Rebecca Merhi, Junior Sous Chef at Flying Fish at The Star Sydney MULTICULTURAL DIVERSITY - Unity@The Star GENDER DIVERSITY - WOMEN@TheStar SPONSOR: Greg Hawkins, Chief Casino Officer (NSW) SPONSOR: Paula Martin, Chief Legal & Risk Officer TARGET: 20% Asian representation of leaders (levels 1 - 3) by 2023. AIM: To leverage and champion our cultural diversity to become Australia’s leading integrated resort company, creating inclusive frameworks to promote career development for all team members and to extend personalised excellence to our guests TARGET: 45% female and 45% male representation of leaders (levels 1 - 4) by 2023 (with the remaining 10% reflecting scope for non-binary gender identities). AIM: To promote gender equality in all aspects of our business by championing change and advocating opportunities for all individuals. LGBTQI DIVERSITY - SPECTRUM AGE DIVERSITY - Young@Heart SPONSOR: George Hughes, Chief Marketing Officer SPONSOR: Geoff Hogg, Chief Casino Officer (QLD) TARGET: LGBTQI-inclusive employer as measured by increasing our scores on the Australian Workplace Equality Index (AWEI) by 5% year-on-year TARGET: Providing a welcoming culture for our mature aged Team Members as measured by our employee engagement survey. AIM: To foster a safe, inclusive and welcoming environment for LGBTQI team members and guests, and to enable everyone to be their best and true self. AIM: To encourage everyone to be their best self at every age and every stage, primarily through the provision of greater career support for mature aged employees and through a range of policies and practices that allow for people to optimise their career. DIVERSITY & INCLUSION RECOGNITION AND AWARDS REFINITIV DIVERSITY & INCLUSION INDEX The Star Entertainment Group was ranked number 2 in Australia, and number 25 globally in the 2019 Refinitiv Diversity and Inclusion Index. AUSTRALIAN WORKPLACE EQUALITY INDEX In 2020, The Star Entertainment Group was recognised as a Bronze Employer in the Australian Workplace Equality Index. ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 40 SUSTAINABILITY PAGE 41 EVENTS AND CELEBRATIONS REWARD & RECOGNITION In FY2020, The Star continued its reward and recognition framework first established in the previous financial year. The annual Star Awards Gala, an event to celebrate and show appreciation of team members, was scheduled for September 2020 but has been postponed as a result of COVID-19. The Star Awards is our premier program for rewarding and recognising top performers - team members who are delivering thrilling guest experiences and leaders who are living our values and demonstrating leadership competencies. Team members are recognised across four key areas: Guest Excellence, Service Support, Leadership and a Team Award. In FY2020, formal recognition was awarded to 543 team members (including all nominated team members and the quarterly winners). In addition, the Group recognised approximately 700 team members for long-term tenures of 5, 10, 20 and 30 years of service via its ‘Let’s Celebrate’ initiative. CHANGE LEADERSHIP & ORGANISATIONAL EFFECTIVENESS Recent organisational changes provided an opportunity to simplify and look at consistency across the business. This assisted the Group's ability to adapt and respond effectively to the COVID-19 crisis. To assist our leaders in navigating change and new ways of working, a series of two-hour workshops were held across the Group’s properties to refocus and re-energise its 200-plus leadership cohort. These workshops highlighted the long term objectives of the organisation and aimed to equip our leaders with the capability and mindsets required to lead enterprise-wide cultural transformation post change and in readiness for completion of the Queen’s Wharf Brisbane development. The Group’s annual ‘Walk and Talk’ event celebrates International Women’s Day. Around 400 leaders and team members came together across our three properties to take action against inequality and to raise awareness against gender bias. The Star Sydney has been an active participant and sponsor of the Sydney Gay and Lesbian Mardi Gras for the past five years. At the 2020 event, 70 team members, including senior management, from across Sydney, Brisbane and the Gold Coast participated in the parade. More than half of the Group’s 9,000 team members come from culturally diverse backgrounds, and collectively are fluent in over 70 languages and dialects. EQUALITY AT THE STAR • The Group is actively reducing the gender pay gap through targeted renumeration increases which has resulted in a year-on-year decrease of the gap for salaried team members • The percentage of women promoted to manager positions increased by 23.28% to 42.9% in FY2020. • Overall female representation has remained at just above 44% for the past three years. • Female representation in levels 1, 2, 3 and 4 has steadily increased in the past three years. SHAPING OUR CULTURE The Group’s culture is underpinned by its 'Values', ‘Strategy on a Page’, ‘Star Quality’, and ‘Guest Excellence programs’. A series of executive forums were held over the 2020 financial year to further explore the mindsets, behaviours and traits necessary to support the Group’s cultural framework. As a result of this exploration, the following activities were undertaken: • Executive Leadership Cultural Assessment, including interviews with Executive Leadership Teams (ELT) and a cultural fitness diagnostic survey where 14 one-on-one interviews were held with ELT and select direct reports • ELT and select direct reports attended a 4.5 hour Cultural Alignment session • ELT and select direct reports attended a Future State Cultural BluePrint planning session. RELAUNCH OF CAREERS WEBSITE AND RECRUITMENT CAMPAIGN To reflect and showcase the Group’s commitment to hiring, developing and promoting team members regardless of age, gender, sexual orientation or cultural background, and to support our future growth plans, The Star launched the ‘You’re Welcome’ recruitment campaign via its refreshed careers website www.thestarcareers.com. DIRECTORS’, REMUNERATION AND FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 THE STAR ENTERTAINMENT GROUP LIMITED A.C.N. 149 629 023 ASX CODE: SGR AND ITS CONTROLLED ENTITIES CONTENTS DIRECTORS’ REPORT AUDITOR’S INDEPENDENCE DECLARATION REMUNERATION REPORT FINANCIAL REPORT Consolidated income statement Consolidated balance sheet Consolidated statement of cash flows Consolidated statement of changes in equity Notes to the financial statements A. Key income statement disclosures B. Key balance sheet disclosures C. Commitments, contingencies and subsequent events D. Group structure E. Risk management F. Other disclosures G. Accounting policies and corporate information DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT PLEASE NOTE: Page numbering from the original Directors’, Remuneration and Financial Report released to ASX on 20 August 2020 are also included for reference 42 56 57 78 78 79 80 81 82 83 88 98 99 108 114 124 133 134 ANNUAL REPORT 2020ANNUAL REPORT 2020 PAGE 42 PAGE 43 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 Directors' Report for the year ended 30 June 2020 The Directors of The Star Entertainment Group Limited (the Company) submit their report for the consolidated entity comprising the Company and its controlled entities (collectively referred to as the Group) in respect of the financial year ended 30 June 2020. 1. Directors The names and titles of the Company's Directors in office during the financial year ended 30 June 2020 and until the date of this report are set out below. Directors were in office for this entire period.  Directors John O'Neill AO Matt Bekier Gerard Bradley Ben Heap Katie Lahey AM Sally Pitkin Richard Sheppard Zlatko Todorcevski Chairman and Non-Executive Director Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 2. Operating and Financial Review The Operating and Financial Review for the year ended 30 June 2020 has been designed to provide shareholders with a clear and concise overview of the Group’s operations, financial position, business strategies and prospects. The review also discusses the impact of key transactions and events that have taken place during the reporting period and material business risks faced by the Group, to allow shareholders to make an informed assessment of the results and future prospects of the Company. The review complements the Financial Report and has been prepared in accordance with the guidance set out in ASIC’s Regulatory Guide 247. 2.1. Principal activities The principal activities of the Group are the management of integrated resorts with gaming, entertainment and hospitality services. The Group operates The Star Sydney (Sydney), The Star Gold Coast (Gold Coast) and Treasury Brisbane (Brisbane). The Group also manages the Gold Coast Convention and Exhibition Centre on behalf of the Queensland Government and invests in a number of strategic joint ventures. 2.2. Business strategies The key long term strategic priorities for the Group, in pursuit of its vision to be Australia's leading integrated resort company, remain unchanged:  Create world class integrated resorts with local spirit;  Manage planned capital expenditure programs on time and budget to deliver value and returns for shareholders;  Increase volume of high-value visitation from local, domestic and international markets through continued emphasis on loyalty and gaming strategies;  Grow the domestic and International VIP Rebate business;   Identify, retain, develop and engage a highly talented team of employees across properties and the Group; and Improve customer experience, including providing customers with tailored product and service offerings. The Group has continued to make good progress on all these key strategic priorities during the year, despite the impact of COVID-19, with:   Solid domestic earnings growth pre-COVID-19, including growth from Gold Coast investments; Comprehensive response to COVID-19 pandemic - safeguarded customers and staff, secured group funding, reduced operating expenditure during closure and positioned the business for post-pandemic recovery; Long term agreement to FY2041 was concluded with the NSW Government, providing regulatory certainty over gaming taxes, casino exclusivity in relation to electronic gaming machines and other key issues; Cessation of the process to create a second integrated resort on the Gold Coast with no requirement for additional capital expenditure; Joint venture growth projects are proceeding to plan, including $1.6 billion in debt funding secured for Queen’s Wharf Brisbane on terms agreed pre-COVID-19;     Ongoing construction of first Gold Coast joint venture tower and continued presales for second tower; and  Delivery on time and on budget of the upgraded and expanded Sovereign in Sydney, opened on 3 July 2020. Looking forward into FY2021, the focus will be on the following key priorities: Operational priorities   Safely and effectively lift performance through the COVID-19 recovery; Address the introduction of casino competition into the Sydney market through leveraging the newly opened Sovereign, upgrades to the loyalty program, focused marketing and sales plans, and retention of key staff; Continue to differentiate the value proposition of each of the properties through brand, depth and breadth of gaming offer, loyalty, customer service, hospitality and tourism; and  Maintain operating expenses disciplines. Balance sheet priorities  Maintain robust cash position through ongoing management of capital expenditures and suspension of the   dividend; Constructive engagement with lenders to obtain covenant waivers that are likely to be required; and Continue capital recycling program of non-core operating assets, including the Sydney carpark, VIP assets, and other options. Strategic priorities remain unchanged   Deliver on operating model by leveraging improved capabilities and retain cost management benefits; and Progress investment strategy in Sydney, the Gold Coast masterplan, and Queen’s Wharf Brisbane in partnership with Chow Tai Fook (CTF) and Far East Consortium (FEC). The Directors have excluded from this report any further information on the likely developments in the operations of the Group and the expected results of those operations in future financial years, as the Directors have reasonable grounds to believe that to include such information will be likely to result in unreasonable prejudice to the Group. 2.3. Group performance The Group continued executing its growth strategy despite an unprecedented environment. Whilst acknowledging the impacts of COVID-19 have been challenging, the fundamental earnings opportunity for the Group remains unchanged, underpinned by valuable long-term licences in sought after destinations. Group performance in FY2020 was significantly affected by COVID-19. Following Federal and State Government directives requiring the closure of all non-essential businesses, the Group ceased gaming, food and beverage, banqueting and conferencing operations at all its properties from 23 March 2020. Hotel accommodation remained open in a significantly reduced capacity. The Star Sydney re-opened on a highly restricted basis from 1 June 2020 in accordance with a COVID-Safe Plan which complied with NSW Government health orders. At the re-opening, The Star Sydney was initially limited to serving up to 500 customers at one time due to COVID-19 spatial distancing requirements. The Star Gold Coast and Treasury Brisbane did not re-open until 3 July 2020. The closure of the Group’s properties on 23 March 2020 followed a period of lower visitation and revenue, impacted by border closures and travel restrictions as a response to COVID-19. Given the exogenous disruption and property closures as a result of COVID-19, the Group’s financial performance in FY2020 may be considered over 1 July 2019 to 29 February 2020 (the Group’s performance pre-COVID-19) as well as over FY2020 (incorporating the property closures and restricted trading). Gross revenue, before commissions, of $1,748.9 million was down 30.4% on the prior comparable period (pcp). For the period to February 2020, gross revenue, before commissions of $1,586.1 million was down 7.6% on the pcp, largely due to the unusually low win rate in the International VIP Rebate business of 0.69% (1.45% in the pcp). This was partially offset by 2.4% growth in domestic revenue, driven by broad based growth across the Queensland properties. Normalised1 revenue increased 7.5% to $1,817.7 million, reflecting growth in International VIP Rebate volumes, up 25.3%. State Government imposed restrictions lead to a deterioration of revenue post February 2020, as social distancing measures were progressively imposed, up to closure of the properties on 23 March 2020. Gross revenues post February 2020 of $162.8m includes $31.5m related to the Sydney property re-opening in June and revenue initiatives during closure. For the period to February 2020, operating costs were flat on pcp, reflecting domestic and International VIP volume growth, higher wages, performance based provisioning and International VIP debt provisioning, offset by cost out benefits. Gaming taxes and levies were down 2.3%, in line with lower revenue. Significant expense items ($7.7 million before tax) relate to written off costs related to the Sydney Ritz-Carlton Tower. 1 Normalised results reflect the underlying performance of the business as they remove the inherent win rate volatility of the International VIP Rebate business. Normalised results are adjusted using an average win rate of 1.35% of actual turnover, gaming taxes and commissions on revenue share programs. Normalised earnings exclude significant items. 1 2 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 44 PAGE 45 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 Directors' Report for the year ended 30 June 2020 Post February 2020, operating costs were $108.9 million, which includes approximately $10 million per month during property closures. Gaming taxes and levies were $12.5 million, reflecting the significantly reduced revenue over this period. Significant expense items ($148.2 million before tax) relate to increased provision for VIP debts, asset impairments and one-off COVID-19 related expenditures. Earnings before interest, tax, depreciation, amortisation (EBITDA) (excluding significant items) of $282.0 million was down 49.0% on pcp. Normalised EBITDA (excluding significant items) of $429.6 million was down 22.8% on pcp. For the period to February 2020, EBITDA (excluding significant items) of $263.8 million was down 35.0% on pcp. Normalised EBITDA (excluding significant items) of $420.7 million was up 12.1% on pcp. Depreciation and amortisation expense of $205.0 million was down 0.4% on pcp, reflecting $9.0 million of one-off accelerated depreciation in the pcp, partially offset by $8.1 million of depreciation on leased assets, introduced for the first time in FY2020 following adoption of the new accounting standard AASB 16 Leases. Finance costs of $48.4 million (excluding significant items) were up 37.1%, reflecting the higher average drawn debt balances. Net loss after tax was $94.6 million. Normalised net profit after tax, excluding significant items, was $120.8 million, down 46.0% on the pcp. Basic and Diluted Earnings per Share were both (10.3) cents (both 21.6 cents in the pcp). 2.4. Group financial position The Group remains committed to maintaining a balance sheet that positions it for post-COVID-19 recovery. No final dividend was declared, and the interim dividend was deferred, allowing for settlement via a fully underwritten share issue on 2 July 2020. In accordance with the conditions of debt covenant waivers at 30 June 2020, no further cash dividends will be paid until the Group’s gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times. Patron receivables continue to be recovered, however collection has been subdued due to closure of casinos in the region and international travel restrictions limiting VIP patron visitation. An additional provision reflecting the increased uncertainty of recovery has been recognised, limiting the Group’s exposure to outstanding trade receivables to $53.7 million. Trade and other payables of $324.0 million were down 5.0%, reflecting reductions to operating expenditure during property closures, partially offset by the 2020 interim dividend declared but not yet paid. Net debt2 was $1,382.7 million (30 June 2019: $972.6 million). The Group refinanced its bank facilities, increasing the total facility limit to $1.2 billion, and secured a further $200.0 million short term facility, providing additional liquidity through the COVID-19 pandemic. Operating cash flow before interest and tax was $157.6 million (30 June 2019: $478.8 million) with an EBITDA to cash conversion ratio of 102% (30 June 2019: 92%). 2.5. Segment operations The Group comprises the following three operating segments:  Sydney;  Gold Coast; and  Brisbane. Refer to note A1 for more details of the financial performance of the Company’s operating segments. The activities and drivers of the results for these operations are discussed below. Sydney Gross revenue was $1,169.5 million, down 25.4% on the pcp and EBITDA (excluding significant items) was $284.1 million, down 7.6% on the pcp. Normalised EBITDA was $276.9 million, down 24.6% on the pcp. The property was subject to progressively imposed social distancing measures through March 2020, culminating in closure of the property on 23 March 2020. While the property was re-opened on 1 June 2020, this was under restricted capacity limits. For the period to February 2020, gross revenue was $1,051.0 million, up 3.9% on pcp. International VIP Rebate revenue was $225.6 million, up 17.4% on pcp due to an improved win rate of 1.22% (1.02% in the pcp). Domestic revenue was up 0.7%, driven by non-gaming revenue. Hotel cash revenue was up 5.4% due to higher occupancy and rates while food and beverage cash revenue, up 7.1%, benefited from a full year of trading in the new outlets. Domestic gaming revenue was flat on a strong pcp. Normalised gross revenue in Sydney was $1,076.0 million, up 0.3% on the pcp. For the period to February 2020, gaming taxes and levies of $247.8 million were up 2.4% on the pcp, in line with increased revenue. Sydney’s average non-rebate tax rate was 31.3%, down from 31.5% in the pcp (top marginal tax rate of 50.0% in both years). Operating expenditure of $423.4 million was down 1.7% on the pcp, reflecting increased domestic volumes and higher wages offset by lower International VIP Rebate volumes. 2 Net debt is shown as interest bearing liabilities (excluding lease liabilities), less cash and cash equivalents, less net position of derivative financial instruments. The Sydney property is a Leadership Partner for Sydney’s Lunar Festival, a proud major sponsor and participant in the Sydney Gay and Lesbian Mardi Gras, a Foundation Partner of the Australian Turf Club and participates in The Everest, the world’s richest race on turf. It is also a sponsor of the Sydney Swans, New South Wales Rugby League (NSW Blues) and Sydney FC. The property also contributed to various charities during the period, including Lifeline, Pyrmont Cares Inc and Kookaburra Kids Foundation. Queensland (Gold Coast and Brisbane) Gross revenue was $579.4 million, down 38.8% on the pcp and EBITDA (excluding significant items) was ($2.1) million, down 100.9% on the pcp. Normalised EBITDA was $152.7 million, down 19.2% on the pcp. The properties were subject to progressively imposed social distancing measures through March 2020, culminating in closure on 23 March 2020. Both properties remained closed through 30 June 2020. The COVID-19 pandemic has had a significant impact on the Queensland properties. For the period to February 2020, gross revenue was $535.1 million, down 24.2% on pcp. Domestic revenue growth of 5.2% was broad based, and primarily driven by realisation of investments into the Gold Coast property. Gaming revenue grew across both slots and table, while non-gaming benefited from an uninterrupted year of open food and beverage outlets and greater room rates in the hotels. International VIP Rebate revenue was $14.4 million, down 93.2%. Despite turnover of $16.4 billion, up 80.3%, revenue declined due to an extraordinarily low win rate of 0.09% (2.33% in the pcp). Normalised gross revenue in Queensland was $741.7 million, up 20.2% on the pcp. For the period to February 2020, gaming taxes and levies were down 10.8% on the pcp, in line with decreased revenues. Operating expenses of $295.4 million across the Queensland properties was up 2.2% on the pcp. This was driven by increased domestic and international volumes, higher wages and newly commissioned assets on the Gold Coast, offset by continued cost management. The Star Gold Coast is the home of the TV Week Logie Awards and major sponsor of The Star Magic Millions Raceday and Carnival. The Brisbane property was a sponsor of the Brisbane Festival and Brisbane Racing Club. The Queensland properties also contributed to various charities and not-for-profit organisations including Surf Life Saving Queensland, Cancer Council Queensland and Currumbin Wildlife Sanctuary. International VIP Rebate business The results of the International VIP Rebate business are embedded in the segment performance overviews above. For the period to February 2020, the International VIP Rebate business turnover was $34.9 billion, up 25.3% on the pcp. The actual win rate of 0.69% was below both the win rate for the pcp of 1.45% and the theoretical rate of 1.35%. Statutory revenue was $240.0 million, down 40.5% on the pcp, compared to normalised International VIP Rebate business revenue of $471.6 million (up 25.3% on the pcp). Player rebates and levies of $261.9 million were down 26.4% on pcp, reflecting the lower win rate. 2.6. Significant changes in the state of affairs and future developments Other than those stated within this report, there were no significant changes in the state of affairs of the Group during the financial year. The section below discusses the impact of key transactions and events that have taken place during the reporting period. Sydney Sydney's casino licence continues until 2093. Agreement was reached with the NSW Government on gaming taxes applicable to the property until the end of FY2041. Effective from FY2022, the new 20-year arrangement will comprise flat rates of gaming tax as a percentage of revenue. Further, agreement was reached on key issues which provide regulatory certainty, including an agreement to preserve The Star Sydney as the exclusive casino provider of electronic gaming machines in the two casino Sydney market. Capital expenditure in the year was approximately $200 million. On 3 July 2020, the upgraded and expanded Sovereign was launched with a soft opening. Initial customer response has been positive. The project was delivered on time and on budget. Gold Coast The Group currently holds a perpetual casino licence to operate The Star Gold Coast. The Group owns Broadbeach Island on which the casino is located. The Group has previously disclosed a major redevelopment of the property of up to $845 million capital spend, including a new tower with joint venture partners CTF and FEC. The construction of the tower continues and is expected to be approximately $370 million. Equity contributions towards the first tower are complete, with remaining costs to be funded out of secured project level debt facilities. Other works in the $845 million capital spend program have been completed. Presales on the second tower are progressing (execution subject to presales and all other approvals). Once developed, the scale of the property under the masterplan is proposed to be expanded to approximately 1,400 hotel rooms and residences with signature gaming facilities, over 20 restaurants and bars, and substantial resort facilities and attractions. The Group’s share of the proposed investment is expected to be approximately $578 million (prior to the sale of any apartments). 3 4 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 46 PAGE 47 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 The Queensland Government has ceased the process to create a Global Tourism Hub or second integrated resort on the Gold Coast and has confirmed it has no intention of reviving the market process for a new integrated resort. The Group continues to focus on delivery of its major investment projects in Queensland. Capital expenditure, excluding equity investments into the new tower with joint venture partners CTF and FEC, in the current year was approximately $30 million across various minor projects. The Group also continues to manage the Gold Coast Convention and Exhibition Centre adjacent to the casino. Brisbane In November 2015 contractual close was reached between the Queensland Government and Destination Brisbane Consortium (DBC) on the Queen’s Wharf Brisbane development. DBC’s Integrated Resort ownership structure requires capital to be contributed 50% by the Group and 25% each by CTF and FEC. The Group will act as the operator under a long-dated casino management agreement. The Group holds a perpetual casino licence in Queensland that is attached to the lease of the current Treasury site that expires in 2070. Upon opening of the Integrated Resort, the Group’s casino licence will be surrendered and DBC will hold a casino licence for 99 years including an exclusivity period of 25 years. CTF and FEC will each contribute 50% of the capital to undertake the residential and related components of the broader Queen’s Wharf Brisbane development. The Group is not a party to the residential apartments development joint venture. Shell, core and façade work is underway, with construction progressed above ground. Works have been uninterrupted by the COVID-19 pandemic, however appropriate contingencies are in place should an issue arise. Target total project costs are estimated to be approximately $2.4 billion, excluding government payments and Treasury Brisbane repurposing costs, with increased capital return expectations. Hotel fit out costs were contracted in 2H FY2020, bringing the total project costs under lump sum terms to approximately 75%. A further 13%, related to the next stage of hotel fit out, is expected to be contracted in 1H FY2021. $1.6 billion project level debt facility was established in May 2020. The debt runs for a 5.5 year term, which includes approximately 3 years of operating performance and was negotiated prior to COVID-19 market disruptions. The Group has approximately $100 million in remaining equity contributions, after which the remaining construction costs will be funded via the new debt facility. Directors' Report for the year ended 30 June 2020 2.7. Risk management The Group takes a structured approach to identifying, evaluating and managing those risks which have the potential to affect achievement of strategic objectives. The commentary relating to Principle 7 in the Company’s Corporate Governance Statement describes the Group’s risk management framework which is based on ISO31000, the international standard on risk management. The Corporate Governance Statement can be viewed on the Company’s website. The COVID-19 pandemic has resulted in additional risk focus areas for the Group being identified and monitored during Q3 and Q4 of FY2020 and through the phased re-opening of the resort facilities. The Group has established a Working Committee to provide oversight during the re-opening process and will undertake regular scenario-based risk assessments to inform prompt decision making. In addition, the Group has developed specific COVID-19 situation related key performance indicators that will be monitored and reviewed by the Risk and Compliance Committee in FY2021 to support effective risk management in a more fluid environment. Details of the Group’s major risks and associated mitigation strategies are set out below. The mitigation strategies are designed to reduce the likelihood of the risk occurring and/or to minimise the adverse consequences of the risk should it happen. However, some risks are affected by factors external to, and beyond the control of, the Group. Risk and description Mitigation strategy Competitive Position The potential effect of increased competition in the Group’s key markets of Sydney, Brisbane and Gold Coast. Realising value from capital projects The ability to generate adequate returns from the in capital projects. financial capital invested Human capital management The ability to attract, recruit and retain the right people leadership and operational roles. key for Effective management of key stakeholders The ability to engage with key stakeholders to satisfy without interests the Group’s operations or compromising achievement of strategic objectives. the Group’s competing Geo-political and regulatory changes The potential effect of political or regulatory changes in Australia affecting the operation of casinos, or the potential effect of changes in the administration of laws in foreign countries affecting the ability of foreign nationals to travel to and/or bring funds to Australia. 5 The Group’s vision is to be Australia’s leading integrated resort company. Substantial investments have been made to develop new or improved venue facilities in all key markets, and to improving customer service capabilities of employees. Revenue sources have also been diversified. The Group has implemented a comprehensive project management framework and employed appropriately skilled and experienced project managers to reduce the risk of delays in completion and/or overruns in costs of capital projects. The Group continues to improve capital efficiency, through reduced capital outlook and potential capital recycling of supporting assets. The Group markets and promotes its portfolio of attractive resort facilities to achieve the level of customer patronage required to deliver the expected returns on investment. The Group has in place a variety of avenues to attract, recruit and develop high performing and high potential employees. It undertakes training and development programs to provide employees with career development opportunities. The Group regularly conducts employee engagement surveys to monitor for emerging issues which might affect the ability to retain talented employees. The Group’s diversity and inclusion programs are widely recognised as being among the best in the industry. The Group has developed strong communication lines with a variety of stakeholder groups, including State governments in New South Wales and Queensland, key Federal and State regulators, investors, media and unions. The Group has also developed partnerships with a number of local community groups and charitable organisations. The Group continuously monitors for potential legislative changes or changes in relevant government policy in the States and countries in which it conducts business operations. This includes matters core to the integrity of gaming operations such as gaming regulatory compliance, responsible gaming and service of alcohol and Anti- Money Laundering and Counter-Terrorism Financing (AML & CTF) Act compliance. The Group has dedicated regulatory and compliance teams and a specialist AML & CTF compliance team that has recently enhanced the Group's AML Program. The Group also makes representations to government and industry groups to promote effective, appropriate and consistent regulatory and policy outcomes. 6 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 48 PAGE 49 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 Risk and description Mitigation strategy the to protect Data and systems security and reliability The ability integrity of confidential business or customer data which is collected, used, stored, and disposed of in the course of business operations, and the ability to maintain the security and operating reliability of key business systems. Major business disruption events The ability to anticipate, prevent, respond to and recover from events which have the potential to prevent the continued operation of one of the Group's resort facilities, or which inhibit the ability of guests being able to visit one of its resort facilities for a sustained period of time. People health and safety The ability to operate the Group’s resort facilities without affecting the safety, security and wellbeing of its guests and employees. Financial management The ability to maintain financial performance and a strong balance sheet which enables the Group to fund future growth opportunities on commercially acceptable terms. Corporate governance The ability to maintain a strong and effective governance structure which supports a culture of and compliance. accountability, transparency, The Group has a dedicated IT security function which continuously tests and monitors technology systems to detect and block viruses and other threats to the security of the Company's data. Employees are regularly trained on the importance of maintaining effective cyber security and data privacy processes. The Group’s business continuity framework enables early identification of material risks to the continued operation of a resort facility. The framework is supported by a suite of emergency response, crisis management, and disaster recovery plans that are regularly tested and updated. The Group takes a risk based approach to managing health and safety including with respect to COVID-19. Critical safety risks have been identified with mitigation plans in place. Dedicated health and safety and injury management specialists are employed at each resort facility. To assist in maintaining the safety and security of its guests and employees, each resort facility employs a substantial number of security and surveillance personnel to provide support in monitoring existential threats and managing potential incidents on a real time basis. The Group annually establishes a financial budget and 5 year plan which underpin the setting of performance targets incorporated in management incentive plans. Financial performance is continuously monitored for any variations from annual financial budgets and market expectations. The core business produces strong cashflow, allowing the Group to maintain low to moderate levels of debt while allowing shareholders to be paid dividends. The Group has a well-defined governance framework which identifies the roles and responsibilities of the Board, the Board Committees and senior management. The Group also has a complementary set of key policies, compliance with which is monitored on an ongoing basis. The Group operates an integrated “3 lines of defence” model to identify and manage key risks and to provide assurance that critical controls are effective in managing those risks. 2.8. Environmental regulation and performance The Group is committed to sustainability leadership in the entertainment sector and reducing resource consumption across its operations. The Group has in place a five-year Sustainability Strategy, 'Our Bright Future', which is focused on building business capacity and delivering continuous improvement in the management of environmental, social and governance issues (ESG). The Sustainability Strategy is aligned to the business strategy and groups ESG objectives and targets into four key pillars:  we strive to be Australia's leading integrated resort company;  we actively support guest wellbeing;  we attract, develop and retain talented teams; and  we develop and operate world class properties. The Sustainability Strategy is underpinned by a structured materiality assessment process that is conducted annually to ensure ESG issues remain relevant. In January 2020, the Group released ‘Beyond 2020, The Star’s Sustainability Action Plan’ to support the delivery of the Sustainability Strategy pillars. The Star’s Beyond 2020 Sustainability Action Plan highlights the Group’s achievements to date, material issues, priorities, commitments and future goals. Directors' Report for the year ended 30 June 2020 As part of the Group’s commitment to building world class properties, the Group continues to target sustainable reductions in resource use through capital, and operational energy and water improvement projects. Within the year, the Group expanded its commitment to a low carbon future by setting a target to achieve net-zero carbon emissions for its wholly owned and operated assets by 2030 as a long term measure. The pathway to achieve this target includes the purchasing of renewable energy and the assessment of onsite solar, continuing the company’s energy efficiency program and developing a carbon offsetting strategy. The Group remains committed to immediate action through its interim targets to achieve a 30% reduction in carbon and water intensity by FY2023 against the base year FY2013. An active energy and water project pipeline, first established in FY2014, continues to monitor and track projects that deliver cost and environmental benefits. To ensure energy and water efficiency is achieved in refurbishment and development projects, the Group’s Sustainable Design and Operational Standards have been applied to achieve greener building outcomes by specifying energy efficient technologies and best practice water and waste management. Implementation of these Standards has led to Green Star Performance and NABERS Ratings, enabling the benchmarking of operational performance of The Star's assets. The Company’s offices at 60 Union Street, Pyrmont, New South Wales have achieved a 5 Star Green Star Interiors Rating as part of the refurbishment process. The Group retained the global leadership position in the Casino and Gaming Industry in the Dow Jones Sustainability Index for the fourth year running. The Group's Global Reporting Index (GRI) report is published on the Company's website, demonstrating a ‘core’ level of compliance. The GRI Reporting Standards are the most widely used standards for sustainability reporting, and represent global best practice for reporting on economic, environmental and social impacts. The Company is registered under the National Greenhouse Energy Reporting System (NGERS) and reports all energy consumption and greenhouse gas emissions to the Federal Government each year. The Company’s Environmental Management Policy, Sustainability Strategy and Action Plan, Materiality Assessment and Sustainable Design and Operational Standards can be found on the Company’s website. Sustainability performance and progress against the Sustainability Strategy is reported to the People, Culture and Social Responsibility Committee regularly. 3. Earnings per share (EPS) Basic and diluted EPS for the financial year was (10.3) cents (2019: 21.6 cents), 147.7% down on the pcp predominately due to the impact of the COVID-19 pandemic. EPS is disclosed in note F3 of the Financial Report. 4. Dividends 4.1. Dividend payout An interim dividend of 10.5 cents per share (fully franked) was declared on 19 February 2020 and payable on 1 April 2020. However, due to the impact of COVID-19, payment of the interim dividend was deferred and paid on 2 July 2020. In order to maintain a balance sheet that positions the Group for a post COVID-19 recovery, no final dividend was declared. In accordance with agreed terms associated with the waiver of covenants at 30 June 2020 from debt providers, no further cash dividends will be paid until gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times. Further detail can be found in the ASX Announcement - Deferral of 1H FY2020 Dividend and Changes to Dividend Policy (dated 31 March 2020). 5. Significant events after the end of the financial year On 2 July 2020, the Group issued 30,730,998 new shares to settle the interim dividend (refer to note A6). Existing shareholders who elected to participate in the Dividend Reinvestment Plan (DRP) received 6,849,977 new shares. In accordance with the underwriting agreement, Credit Suisse Equities (Australia) Limited received 23,881,021 new shares in exchange for $75.1 million cash to fund the dividend cash payment. Other than those events that have already been disclosed in this report or elsewhere in the Financial Report, there have been no other significant events occurring after 30 June 2020 and up to the date of this report that have materially affected or may materially affect the Group’s operations, the results of those operations or the Group’s state of affairs. 7 8 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 50 PAGE 51 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 Directors' Report for the year ended 30 June 2020 6. Directors' qualifications, experience and special responsibilities The details of the Company's Directors in office during the financial year and until the date of this report (except as otherwise stated) are set out below. Current Directors Gerard Bradley Current Directors John O'Neill AO Chairman (from 8 June 2012); Non-Executive Director (from 28 March 2011) Diploma of Law; Foundation Fellow of the Australian Institute of Company Directors; Officer of the Order of Australia; French decoration of Chevalier de la Legion d'Honneur Experience: John O’Neill was formerly Managing Director and Chief Executive Officer of Australian Rugby Union Limited, Chief Executive Officer of Football Federation Australia, Managing Director and Chief Executive Officer of the State Bank of New South Wales, and Chairman of the Australian Wool Exchange Limited, as well as a Director of Tabcorp Holdings Limited. Mr O’Neill was also the inaugural Chairman of Events New South Wales, which flowed from the independent reviews he conducted into events strategy, convention and exhibition space, and tourism on behalf of the New South Wales Government, as well as a Director of Rugby World Cup Limited. Mr O'Neill is currently Chairman of Queensland Airports Limited. Mr O'Neill also chairs the Bates Smart Advisory Board and is a member of the Advisory Council of China Matters. He is also a member of the 2032 Brisbane Olympic Bid Advisory Board to the Premier of Queensland. Special Responsibilities: Mr O’Neill is Chairman of the Board and an ex-officio member of all Board committees. Directorships of other Australian listed companies held during the last 3 years: Nil Matt Bekier Managing Director and Chief Executive Officer (from 11 April 2014) Executive Director (from 2 March 2011) Master of Economics and Commerce; PhD in Finance Experience: Matt Bekier is a member of the Board of the Australasian Gaming Council. Mr Bekier was previously Chief Financial Officer and Executive Director of the Company and also previously Chief Financial Officer of Tabcorp Holdings Limited from late 2005 and until the demerger of the Company and its controlled entities in June 2011. Prior to his role at Tabcorp, Mr Bekier held various roles with McKinsey & Company. Special Responsibilities: Nil Directorships of other Australian listed companies held during the last 3 years: Nil Non-Executive Director (from 30 May 2013) Bachelor of Commerce; Diploma of Advanced Accounting; Fellow of the Institute of Chartered Accountants; Fellow of CPA Australia; Fellow of the Australian Institute of Company Directors; Fellow of the Institute of Managers and Leaders Experience: Gerard Bradley is the Chairman of Queensland Treasury Corporation and related companies, having served for 14 years as Under Treasurer and Under Secretary of the Queensland Treasury Department. He has extensive experience in public sector finance in both the Queensland and South Australian Treasury Departments. Mr Bradley has previously served as Chairman of the Board of Trustees at QSuper. His previous non-executive board memberships also include Funds SA, Queensland Investment Corporation, Suncorp (Insurance & Finance), Queensland Water Infrastructure Pty Ltd, and South Bank Corporation. Mr Bradley is currently a Non-Executive Director of Pinnacle Investment Management Group Limited and a Director of the Winston Churchill Memorial Trust. Special Responsibilities: • Chair of the Risk and Compliance Committee • Member of the Audit Committee • Member of the Investment and Capital Expenditure Review Committee Directorships of other Australian listed companies held during the last 3 years: • Pinnacle Investment Management Group Limited (1 September 2016 to present) Ben Heap Non-Executive Director (from 23 May 2018) Bachelor of Commerce (Finance); Bachelor of Science (Mathematics) Experience: Ben Heap has wide-ranging experience in asset and capital management as well as technology and digital businesses. He has extensive business strategy, innovation, investment and governance expertise. Mr Heap is a Founding Partner of H2 Ventures, a venture capital investment firm and a Director of its related private companies. He is a Non-Executive Director of Colonial First State Investments Limited (a subsidiary of the Commonwealth Bank of Australia), the Vice President of Gymnastics Australia and a member of the Australian Commonwealth Government’s Fintech Advisory Group. Mr Heap is also a Non-Executive Director of Redbubble Limited and Chair of its People and Nomination Committee. Mr Heap was previously Managing Director for UBS Global Asset Management in Australasia and prior to this, Head of Infrastructure for UBS Global Asset Management in the Americas. He held a number of directorships associated with these roles. Earlier in his career, Mr Heap was Group Executive, E-Commerce & Corporate Development for TAB Limited. Special Responsibilities: • Member of the Risk and Compliance Committee • Member of the Remuneration Committee • Member of the People, Culture and Social Responsibility Committee Directorships of other Australian listed companies held during the last 3 years: • Redbubble Limited (20 April 2020 to present) 9 10 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 52 PAGE 53 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 Directors' Report for the year ended 30 June 2020 Current Directors Katie Lahey AM Sally Pitkin Non-Executive Director (from 1 March 2013) Bachelor of Arts (First Class Honours); Master of Business Administration; Member of the Order of Australia Experience: Katie Lahey has extensive experience in the retail, tourism and entertainment sectors and previously held chief executive roles in the public and private sectors. Ms Lahey is currently a Director of Carnival Corporation & plc, and is a member of the National Indigenous Culinary Institute Advisory Board. Ms Lahey was previously the Chair of Carnival Australia and the Chairman Australasia of Korn Ferry International. In addition, Ms Lahey was also a member of the boards of David Jones Limited, Australia Council Major Performing Arts, Hills Motorway Limited, Australia Post and Garvan Research Foundation. Special Responsibilities: • Chair of the People, Culture and Social Responsibility Committee • Member of the Remuneration Committee • Member of the Risk and Compliance Committee Directorships of other Australian listed companies held during the last 3 years: Nil Non-Executive Director (from 19 December 2014) Doctor of Philosophy (Governance); Master of Laws; Bachelor of Laws; Fellow of the Australian Institute of Company Directors Experience: Sally Pitkin is a company director with over 20 years’ experience as a Non-Executive Director and board member across a wide range of industries in the private and public sectors. She has extensive experience in the gaming industry. Dr Pitkin is a former lawyer and senior corporate partner with a national law firm. Dr Pitkin is currently the Chair of Super Retail Group Limited and a Non-Executive Director of Link Administration Holdings Limited. Special Responsibilities: • Chair of the Remuneration Committee • Member of the Audit Committee • Member of the People, Culture and Social Responsibility Committee Directorships of other Australian listed companies held during the last 3 years: • Super Retail Group Limited (1 July 2010 to present) • Link Administration Holdings Limited (23 September 2015 to present) • IPH Limited (23 September 2014 to 20 November 2017) Current Directors Richard Sheppard Zlatko Todorcevski Non-Executive Director (from 1 March 2013) Bachelor of Economics (First Class Honours); Fellow of the Australian Institute of Company Directors Experience: Richard Sheppard has had an extensive executive career in the banking and finance sector including an executive career with Macquarie Group Limited spanning more than 30 years. Mr Sheppard was previously the Managing Director and Chief Executive Officer of Macquarie Bank Limited and chaired the boards of a number of Macquarie’s listed entities. He has also served as Chairman of the Commonwealth Government’s Financial Sector Advisory Council. Mr Sheppard is currently the Chairman and a Non-Executive Director of Dexus Property Group and a Non-Executive Director of Snowy Hydro Limited. He is also Honorary Treasurer of the Bradman Foundation. Special Responsibilities: • Chair of the Investment and Capital Expenditure Review Committee • Member of the Audit Committee • Member of the Risk and Compliance Committee Directorships of other Australian listed companies held during the last 3 years: • Dexus Property Group (1 January 2012 to present) Non-Executive Director (from 23 May 2018) Bachelor of Commerce (Accounting); Masters of Business Administration; Fellow of CPA Australia; Fellow of Governance Institute of Australia Experience: Zlatko Todorcevski is an experienced executive with over 30 years' experience in the oil and gas, logistics and manufacturing sectors. He has a strong background in corporate strategy and planning, mergers and acquisitions, and strategic procurement. He also has deep finance expertise across capital markets, investor relations, accounting and tax. Mr Todorcevski was previously the Chief Financial Officer of Brambles Limited. Prior to that, he was Chief Financial Officer of Oil Search Limited and the Chief Financial Officer for Energy at BHP. Mr Todorcevski is currently a Non-Executive Director of Coles Group Limited and a member of the Council of the University of Wollongong. He is also the Chief Executive Officer & Managing Director of Boral Limited. Special Responsibilities: • Chair of the Audit Committee • Member of the Risk and Compliance Committee • Member of the Investment and Capital Expenditure Review Committee Directorships of other Australian listed companies held during the last 3 years: • Adbri Limited/Adelaide Brighton Limited (22 March 2017 to 15 June 2020) • Coles Group Limited (19 November 2018 to present) 11 12 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 54 PAGE 55 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors' Report for the year ended 30 June 2020 7. Directors' interests in securities At the date of this report (except as otherwise stated), the Directors had the following relevant interests in the securities of the Company: Name Current John O'Neill AO Matt Bekier Gerard Bradley Ben Heap Katie Lahey AM Sally Pitkin Richard Sheppard Zlatko Todorcevski Ordinary Shares Performance Rights 133,800 1,008,905 75,000 40,000 46,907 45,900 200,000 155,000 Nil 2,535,329 Nil Nil Nil Nil Nil Nil 8. Company Secretary Paula Martin holds the position of Chief Legal & Risk Officer and Company Secretary. She holds a Bachelor of Business (Int. Bus.), a Bachelor of Laws and a Graduate Diploma in Applied Corporate Governance. Paula has over 14 years' experience in the gaming industry, first with Tabcorp Holdings Limited and continuing with The Star Entertainment Group. Following consolidation of the legal, risk, regulatory and compliance functions, Paula was appointed to the role of Chief Legal & Risk Officer in August 2019. Paula has a broad commercial law and regulatory background, having first practised with King & Wood Mallesons in the telecommunications, information technology and competition law areas. She is a member of the Queensland Law Society, Association of Corporate Counsel (Australia) and the Governance Institute of Australia. 9. Board and Committee meeting attendance During the financial year ended 30 June 2020, the Company held 14 meetings of the Board of Directors (including 6 unscheduled meetings which were attended by all Directors). The numbers of Board and Committee meetings attended by each of the Directors during the year are set out in the table below. Investment & Capital Expenditure Review Committee A B A B A B A B A B A B People, Culture & Social Responsibility Committee Risk and Compliance Committee Remuner- ation Committee Audit Committee Board of Directors 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 4 - 4 4 4 4 4 4 4 - 4 - - 4 4 4 4 - 4 4 4 4 4 4 4 - 4 4 4 - 4 4 5 - 2 5 5 5 1 3 5 - - 5 5 5 - - 3 - 1 3 3 3 - 2 3 - - 3 3 3 - - 1 - 1 1 1 1 1 1 1 - 1 - - - 1 1 Directors John O'Neill AO Matt Bekier c Gerard Bradley Ben Heap Katie Lahey AM Sally Pitkin Richard Sheppard Zlatko Todorcevski A - Number of meetings attended as a Board or Committee member. B - Maximum number of meetings available for attendance as a Board or Committee member. c The Managing Director and Chief Executive Officer is not a member of any Board Committee but may attend Board Committee meetings upon invitation. This attendance is not recorded here. Details of the functions and memberships of the Committees of the Board and the terms of reference for each Board Committee are available from the Corporate Governance section of the Company’s website. Directors' Report for the year ended 30 June 2020 10. Indemnification and insurance of Directors and Officers The Directors and Officers of the Company are indemnified against liabilities pursuant to agreements with the Company. The Company has entered into insurance contracts with third party insurance providers, in accordance with normal commercial practices. Under the terms of the insurance contracts, the nature of the liabilities insured against and the amount of premiums paid are confidential. 11. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the end of the financial year. 12. Non-audit services Ernst & Young, the external auditor to the Company and the Group, provided non-audit services to the Company during the financial year ended 30 June 2020. The Directors are satisfied that the provision of non-audit services during this period was compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The nature and scope of each type of non-audit service provided did not compromise auditor independence. These statements are made in accordance with advice provided by the Audit Committee. The Audit Committee reviews the activities of the independent external auditor and reviews the auditor’s performance on an annual basis. Limited authority is delegated to the Company's Chief Financial Officer for the pre-approval of audit and non-audit services proposed by the external auditor, limited to $50,000 per engagement and capped at 40% of the relevant year's audit fee. Delegated authority is only exercised in relation to services that are not in conflict with the role of statutory auditors, where management does not consider the services to impair the independence of the external auditor and the external auditor has confirmed that the services would not impair their independence. Any other non- audit related work to be undertaken by the external auditor must be approved by the Chair of the Audit Committee. Further details relating to the Audit Committee and the engagement of auditors are available in the Corporate Governance Statement. Ernst & Young, acting as the Company’s external auditor, received or is due to receive the following amounts in relation to the provision of non-audit services to the Company: Description of services Fees for other assurance and agreed-upon-procedures services (including sustainability assurance) under contractual arrangements where there is discretion as to whether the service is provided by the auditor Fees for other advisory and compliance services Total of all non-audit and other services $000 90.0 224.4 314.4 Amounts paid or payable by the Company for audit and non-audit services are disclosed in note F12 of the Financial Report. 13. Rounding of amounts The Star Entertainment Group Limited is a company of the kind specified in the Australian Securities and Investments Commission’s ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. In accordance with that Instrument, amounts in the Financial Report and the Directors’ Report have been rounded to the nearest hundred thousand dollars unless specifically stated to be otherwise. 14. Auditor's independence declaration Attached is a copy of the auditor's independence declaration provided under section 307C of the Corporations Act 2001 (Cth) in relation to the audit of the Financial Report for the year ended 30 June 2020. The auditor's independence declaration forms part of this Directors’ Report. This report has been signed in accordance with a resolution of Directors. John O'Neill AO Chairman Sydney 20 August 2020 13 14 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 56 PAGE 57 AUDITOR'S INDEPENDENCE DECLARATION REMUNERATION REPORT (AUDITED) FOR THE YEAR ENDED 30 JUNE 2020 =jfklQgmf_ *((?]gj_]Klj]]l Kq\f]qFKO*(((9mkljYdaY ?HG:gp*.,.Kq\f]qFKO*(() L]d2#.)*1*,0---- >Yp2#.)*1*,0-1-1 ]q&[ge'Ym 9m\algjÌkAf\]h]f\]f[]<][dYjYlagflgl`] 5 years $m < 1 year $m 1 - 5 years $m > 5 years $m 64.1 2.0 99.5 165.6 318.7 21.8 10.7 128.9 480.1 - - - - - 872.2 37.8 69.6 979.6 - - - - - 75.0 90.2 464.5 629.7 104.3 10.0 235.5 349.8 338.3 201.6 9.2 33.5 582.6 - - - - - 335.4 43.7 191.1 570.2 - - - - - - 90.2 490.4 580.6 Net outflow (314.5) (979.6) (629.7) (232.8) (570.2) (580.6) 67 68 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 110 PAGE 111 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 (ii) Derivative financial instruments 2020 2019 < 1 year $m 1 - 5 years $m > 5 years $m < 1 year $m 1 - 5 years $m > 5 years $m Financial assets Interest rate swaps - receive AUD floating Cross currency swaps - receive USD fixed Financial liabilities Interest rate swaps - pay AUD fixed Cross currency swaps - pay AUD floating Cross currency swaps - pay AUD fixed 0.4 128.9 129.3 9.1 107.6 13.6 130.3 0.6 69.6 70.2 8.2 26.2 54.2 88.6 - 464.5 464.5 - 219.1 253.2 472.3 Net (outflow)/inflow (1.0) (18.4) (7.8) 2.4 33.5 35.9 8.4 13.1 13.6 35.1 0.8 5.3 191.1 196.4 13.9 137.5 54.2 205.6 - 490.4 490.4 - 231.5 266.8 498.3 (9.2) (7.9) For floating rate instruments, the amount disclosed is determined by reference to the interest rate at the last repricing date. For foreign currency receipts and payments, the amount disclosed is determined by reference to the AUD/USD rate at balance sheet date. (iii) Financial instruments - sensitivity analysis Interest rates - AUD and USD The following sensitivity analysis is based on interest rate risk exposures in existence at year end. At 30 June, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows: 2020 AUD + 0.5% (50 basis points) - 0.5% (50 basis points) USD + 0.5% (50 basis points) - 0.5% (50 basis points) 2019 AUD + 0.5% (50 basis points) - 0.5% (50 basis points) USD + 0.5% (50 basis points) - 0.50% (50 basis points) Net profit after tax higher/(lower) $m Other comprehensive income higher/(lower) $m (3.4) 3.4 - - (1.6) 1.6 - - 12.4 (12.5) (10.4) 10.9 12.9 (13.3) (11.2) 11.7 69 Notes to the financial statements For the year ended 30 June 2020 The movements in profit are due to higher/lower interest costs from variable rate debt and investments. The movement in other comprehensive income is due to an increase/decrease in the fair value of financial instruments designated as cash flow hedges. The numbers derived in the sensitivity analysis are indicative only. Significant assumptions used in the interest rate sensitivity analysis include:  reasonably possible movements in interest rates were determined based on the Group's current credit rating and mix of debt, relationships with financial institutions and the level of debt that is expected to be renewed, as well as a review of the last two years' historical movements and economic forecaster's expectations;  price sensitivity of derivatives is based on a reasonably possible movement of spot rates at the balance sheet dates; and  the net exposure at the balance sheet date is representative of what the Group was, and is expecting to be, exposed to in the next twelve months. Foreign Exchange The following sensitivity analysis is based on foreign currency risk exposures in existence at the balance sheet date. At 30 June, had the AUD moved, as illustrated in the table below, with all other variables held constant, post tax profit and other comprehensive income would have been affected as follows: Judgements of reasonably possible movements: Net profit after tax higher/(lower) Other comprehensive income higher/(lower) Net profit after tax higher/(lower) Other comprehensive income higher/(lower) 2020 $m - - 2020 $m 10.2 (14.0) 2019 $m - - 2019 $m 16.4 (17.0) AUD/USD + 10 cents AUD/USD - 10 cents There is no movement in net profit after tax as the Group has fully hedged its foreign currency exposure to the USPP. The movement in other comprehensive income is due to an increase/decrease in the fair value of financial instruments designated as cash flow hedges. Management believes the balance sheet date risk exposures are representative of the risk exposure inherent in the financial instruments. The numbers derived in the sensitivity analysis are indicative only. Significant assumptions used in the foreign currency exposure sensitivity analysis include:  reasonably possible movements in foreign exchange rates were determined based on a review of the last two years' historical movements and economic forecaster's expectations;  the reasonably possible movement of 10 cents was calculated by taking the USD spot rate as at balance sheet date, moving this spot rate by 10 cents and then re-converting the USD into AUD with the 'new spot-rate'. This methodology reflects the translation methodology undertaken by the Group;  price sensitivity of derivatives is based on a reasonably possible movement of spot rates at the balance sheet dates; and  the net exposure at the balance sheet date is representative of what the Group was, and is expecting to be, exposed to in the next twelve months. 70 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 112 PAGE 113 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 Notes to the financial statements For the year ended 30 June 2020 E2 Additional financial instruments disclosures (i) Fair values The fair value of the Group's financial assets and financial liabilities approximates their carrying value as at the balance sheet date. There are various methods available in estimating the fair value of a financial instrument. The methods comprise: Level 1 Level 2 the fair value is calculated using quoted prices in active markets. the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). the fair value is estimated using inputs for the asset or liability that are not based on observable market data. Level 3 All of the Group's derivative financial instruments are valued using the Level 2 valuation techniques, being observable inputs. There have been no transfers between levels during the year. Interest rate swaps and cross currency swaps The fair value of cross currency contracts is calculated as the present value of expected future cash flows of these instruments. Key variables include market pricing data, discount rates and credit risk of the group or counterparty where relevant. Variables reflect those which would be used by the market participants to execute and value the instruments. Forward currency contracts Fair value is calculated using forward exchange market rates at the balance sheet date. USPP Fair value is calculated using discounted future cash flow techniques, where estimated cash flows and estimated discount rates are based on market data at the balance sheet date, in combination with restatement to current foreign exchange rates. (ii) Financial instruments - interest rate swaps Interest rate swaps meet the requirements to qualify for cash flow hedge accounting and are stated at fair value. These swaps are used to hedge the exposure to variability in cash flows attributable to movements in the reference interest rate of the designated debt or instrument and are assessed as highly effective in offsetting changes in the cash flows attributable to such movements. Hedge effectiveness is measured by comparing the change in the fair value of the hedged item and the hedging instrument respectively each quarter. Any difference represents ineffectiveness and is recorded in the income statement. The notional principal amounts and periods of expiry of the interest rate swap contracts are as follows: 2020 $m 2019 $m Less than one year One to five years More than five years Notional Principal 98.0 200.0 - 298.0 - 198.0 - 198.0 Fixed interest rate range p.a. 1.0% - 6.0% 2.4% - 6.0% Net settlement receipts and payments are recognised as an adjustment to interest expense on an accruals basis over the term of the swaps, such that the overall interest expense on borrowings reflects the average cost of funds achieved by entering into the swap agreements. (iii) Financial instruments - cross currency swaps (cash flow hedges) Cross currency swap contracts are classified as cash flow hedges and are stated at fair value. These cross currency swaps, in conjunction with interest rate swaps are being used to hedge the exposure to the cash flow variability in the value of the USD debt under the USPP and are assessed as highly effective in offsetting changes in movements in the forward USD exchange rate. Hedge effectiveness is measured by comparing the change in the fair value of the hedged item and the hedging instrument respectively each quarter. Any difference represents ineffectiveness and is recorded in the income statement. Financial instruments - cross currency swaps (fair value hedges) These cross currency swaps are being used to hedge the exposure to fair value changes of the USD debt under the USPP as a result of fluctuations in the underlying USD to AUD exchange rate and US interest benchmark and are assessed as highly effective. The decrease in fair value of the cross currency swaps at fair value of $22.0 million (2019: $17.9 million) has been recognised in finance costs and offsetting gain on the USPP borrowings. The ineffectiveness recognised in FY2020 was immaterial. The principal amounts and periods of expiry of the cross currency swap contracts are as follows: Less than one year One to five years More than five years Notional principal 2020 2019 AUD $m USD $m AUD $m USD $m 98.1 - 433.4 531.5 105.0 - 338.4 443.4 - 98.1 433.4 531.5 - 105.0 338.4 443.4 Fixed interest rate range p.a. 4.3% - 5.9% 4.3% - 5.9% The terms and conditions in relation to interest rate and maturity of the cross currency swaps are similar to the terms and conditions of the underlying hedged USPP borrowings as set out in note B7. (iv) Reconciliation of movement in financing activities 2020 Interest bearing lease liabilities) (refer to note B7) liabilities (excluding Net derivative assets (refer to note B3) 2019 Interest bearing liabilities (refer to note B7) Net derivative assets (refer to note B3) Opening $m Cash flows $m Changes in fair values Foreign exchange movement Option premium Borrowing costs Closing $m $m $m $m $m (1,162.3) (382.0) 75.4 - (22.0) 43.6 (10.7) - (820.0) (296.0) 31.7 - (17.9) 43.7 Opening Transition Interest (32.7) - Cash flows 5.5 - 5.3 - 3.7 (1,567.8) 119.0 - (1.0) (1,162.3) - 75.4 Additions Other costs Closing $m $m $m $m $m $m $m 2020 Lease liabilities (refer to note B7) - (58.4) (4.0) 9.4 (4.1) (0.1) (57.2) 71 72 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 114 PAGE 115 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 F Other disclosures F1 Other comprehensive income Net gain/(loss) on derivatives Tax on above items recognised in other comprehensive income F2 Income tax (i) Income tax benefit The major components of income tax benefit/(expense) is: Current tax benefit/(expense) Adjustments in respect of current income tax of previous years Deferred income tax benefit/(expense) Income tax benefit/(expense) reported in the income statement Aggregate of current and deferred tax relating to items charged or credited to equity: Current tax benefit reported in equity Deferred tax (expense)/benefit reported in equity Income tax (expense)/benefit reported in equity Income tax expense A reconciliation between income tax benefit/(expense) and the product of accounting profit before income tax multiplied by the income tax rate is as follows: Accounting (loss)/profit before income tax benefit/(expense) At the Group's statutory income tax rate of 30% - Non assessable gain on sale - Recognition of temporary differences - Research & Development tax offset - Over provision in prior years - Other items Aggregate income tax benefit/(expense) Effective income tax rate 2020 $m 13.2 (4.0) 9.2 2020 $m 8.1 (1.8) 28.5 34.8 1.3 (4.0) (2.7) (129.4) 38.8 - 2.0 - (1.8) (4.2) 34.8 %26.9 2019 $m (7.7) 2.3 (5.4) 2019 $m (80.0) (0.6) (0.1) (80.7) 0.8 2.2 3.0 278.7 (83.6) 2.9 1.3 0.6 (0.6) (1.3) (80.7) %28.9 73 Notes to the financial statements For the year ended 30 June 2020 (ii) Deferred tax balances The balance comprises temporary differences attributable to: 2020 Employee provisions Other provisions and accruals Impairment of trade receivables Unrealised financial liabilities Other Tax losses Deferred tax assets set off Intangible assets Property, plant and equipment Unrealised financial assets Other Balance 1 July 2019 $m Recognised in the income statement $m Recognised directly in equity $m Balance 30 June 2020 $m Other $m 20.9 21.5 3.4 39.4 2.3 - 87.5 (68.2) (131.3) (27.0) (31.7) (258.2) 0.9 (3.6) 27.8 (1.0) 4.9 - 29.0 (17.3) 21.8 - (5.0) (0.5) - - - 8.9 - - 8.9 - - (12.9) - (12.9) - - - - - 7.8 7.8 - - - - - 21.8 17.9 31.2 47.3 7.2 7.8 133.2 (85.5) (109.5) (39.9) (36.7) (271.6) Net deferred tax (liabilities)/assets (170.7) 28.5 (4.0) 7.8 (138.4) Balance 1 July 2018 $m Recognised in the income statement $m Recognised directly in equity $m Balance 30 June 2019 $m Other $m 2019 Employee provisions Other provisions and accruals Impairment of trade receivables Unrealised financial liabilities Other Deferred tax assets set off Intangible assets Property, plant and equipment Unrealised financial assets Other 19.9 14.9 7.9 30.1 4.2 77.0 (72.1) (134.3) (18.2) (25.2) (249.8) 1.0 6.7 (4.5) 18.1 (2.0) 19.3 3.9 3.0 (19.8) (6.5) (19.4) - - - (8.8) - (8.8) - - 11.0 - 11.0 Net deferred tax (liabilities)/assets (172.8) (0.1) 2.2 - - - - - - - - - - - - 20.9 21.6 3.4 39.4 2.2 87.5 (68.2) (131.3) (27.0) (31.7) (258.2) (170.7) 74 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 116 PAGE 117 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 (iii) Tax consolidation Effective June 2011, The Star Entertainment Group Limited (the Head Company) and its 100% owned subsidiaries formed an income tax consolidation group. Members of the tax consolidation group entered into a tax sharing arrangement that provides for the allocation of income tax liabilities between the entities should the Head Company default on its tax payment obligations. At balance date, the possibility of default is remote. Tax effect accounting by members of the tax consolidation group Members of the tax consolidation group have entered into a tax funding agreement effective June 2011. Under the terms of the tax funding agreement, the Head Company and each of the members in the tax consolidation group have agreed to make a tax equivalent payment to or from the Head Company, based on the current tax liability or current tax asset of the member. Deferred taxes are recorded by members of the tax consolidation group in accordance with the principles of AASB 112 'Income Taxes'. Calculations under the tax funding agreement are undertaken for statutory reporting purposes. The allocation of taxes under the tax funding agreement is recognised as either an increase or decrease in the subsidiaries' intercompany accounts with the Head Company. The Group has chosen to adopt the Group Allocation method as outlined in Interpretation 1052 'Tax Consolidation Accounting' as the basis to determine each members' current and deferred taxes. The Group Allocation method as adopted by the Group will not give rise to any contribution or distribution of the subsidiaries' equity accounts as there will not be any differences between the current tax amount that is allocated under the tax funding agreement and the amount that is allocated under the Group Allocation method. (iv) Income tax payable The balance of income tax payable is the net of current tax and tax instalments/refunds during the year. A current tax liability arises where current tax exceeds tax instalments paid and a current tax receivable arises where tax instalments paid exceed current tax. The income tax (payable)/receivable balance is attributable to: 2020 Tax consolidated group - year ended 30 June 2020 a Tax consolidated group - year ended 30 June 2019 b Prior years Total Australia Overseas subsidiaries (Payable) / receivable 1 July 2019 Decrease / (increase) in tax payable Tax instalment paid Over provision of tax $m - (18.4) 6.2 (12.2) - (12.2) $m 7.8 (0.8) 0.7 7.7 - 7.7 $m - 19.5 - 19.5 0.3 19.8 $m - - - - - - Receivable 30 June 2020 $m - 0.3 6.9 7.2 0.3 7.5 Other $m (7.8) - - (7.8) - (7.8) Loss for current year recognised as deferred tax asset. The decrease in tax payable is an amendment to the income tax return relating to the application of the tax consolidation reset and depreciation for capital projects. Total a b 2019 Tax consolidated group - year ended 30 June 2019 Tax consolidated group - year ended 30 June 2018 Prior years Total Australia Overseas subsidiaries Total (Payable) / receivable 1 July 2018 $m (Increase) / decrease in tax payable $m Tax instalment paid $m Over provision of tax $m - (84.2) (2.1) 1.8 (0.3) - (0.3) 2.5 0.4 (81.3) - (81.3) 65.8 2.0 - 67.8 - 67.8 - 1.5 - 1.5 - 1.5 Other $m - 0.1 - 0.1 - 0.1 (Payable) / receivable 30 June 2019 $m (18.4) 4.0 2.2 (12.2) - (12.2) 75 Notes to the financial statements For the year ended 30 June 2020 F3 Earnings per share Net profit after tax attributable to ordinary shareholders Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2020 $m (94.6) (10.3) (10.3) 2019 $m 198.0 21.6 21.6 2020 Number 2019 Number Weighted average number of shares used as the denominator a 914,599,793 917,322,730 Adjustment for calculation of diluted earnings per share: Adjustment for Performance Rights 718,294 1,589,665 Weighted average number of ordinary shares and potential ordinary shares as used as the denominator in calculating diluted earnings per share at the end of the year 915,318,087 918,912,395 a The weighted average number of shares takes into account the weighted average effect of changes in treasury shares during the year. F4 Other assets Current Prepayments Other assets Non current Rental paid in advance Other assets Other assets above are shown net of impairment of nil (2019: nil). F5 Trade and other payables Trade creditors and accrued expenses Dividend payable Interest payable 2020 $m 57.2 2.7 59.9 - 40.4 40.4 222.3 96.4 5.3 324.0 2019 $m 49.4 2.6 52.0 9.7 37.9 47.6 338.3 - 2.6 340.9 Trade and other payables of $324.0 million were down 5.0%, predominately relating to the reduction in safe keeping and patron deposits as a result of a decrease in IRB volume and over all reduced trading levels impacted by property closures and government restrictions on pcp, partially offset by deferral of the 2020 interim dividend to subsequent to year end, due to the exceptional circumstances associated with COVID-19 (refer to note A6). 76 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 118 PAGE 119 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 F6 Provisions Current Employee benefits Workers' compensation Other a Non-current Employee benefits Other Notes to the financial statements For the year ended 30 June 2020 F7 Other liabilities Current Customer loyalty deferred revenue a Other deferred revenue Non current Other 2020 $m 63.2 7.7 - 70.9 9.2 1.3 10.5 2019 $m 60.9 6.6 32.4 99.9 8.6 8.3 16.9 2020 $m 20.7 0.8 21.5 5.9 5.9 2019 $m 17.1 1.7 18.8 5.9 5.9 a Restructuring and redundancy provision relating to Group reorganisation in FY2019. Reconciliation Reconciliations of each class of provision, except for employee benefits and other (current), at the end of each financial year are set out below: Workers' compensation reconciliation 2020 Carrying amount at beginning of the year Provisions made during the year Provisions utilised during the year Carrying amount at end of the year 2019 Carrying amount at beginning of the year Provisions made during the year Provisions utilised during the year Carrying amount at end of the year Workers' compensation (current) $m Other (non- current) $m 6.6 4.2 (3.1) 7.7 6.9 1.4 (1.7) 6.6 8.3 - (7.0) 1.3 5.0 3.3 - 8.3 Nature and timing of provisions Workers' compensation The Group self insures for workers' compensation in both New South Wales and Queensland. A valuation of the estimated claims liability for workers' compensation is undertaken annually by an independent actuary. The valuations are prepared in accordance with the relevant legislative requirements of each state and 'Professional Standard 300' of the Institute of Actuaries. The estimate of claims liability includes a margin over case estimates to allow for the future development of known claims, the cost of incurred but not reported claims and claims handling expenses, which are determined using a range of assumptions. The timing of when these costs will be incurred is uncertain. a The Group operates customer loyalty programs enabling customers to accumulate award credits for gaming and on-property spend. A portion of the spend, equal to the fair value of the award credits earned, is treated as deferred revenue, and recognised in the income statement when the award is redeemed or expires. F8 Treasury shares During the year, the Group purchased 3,859,774 (2019: 1,458,361) of its own shares for use to settle future employee share based payment schemes. Opening balance 1 July Value of treasury shares purchased Closing balance 30 June Opening balance 1 July Number of treasury shares purchased Closing balance 30 June 2020 $m 6.7 12.2 18.9 2019 $m - 6.7 6.7 2020 Number 1,458,361 3,859,774 2019 Number - 1,458,361 5,318,135 1,458,361 77 78 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 120 PAGE 121 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 F9 Share capital and reserves (i) Share capital Ordinary shares - issued and fully paid a Purchase of treasury shares b Issuance fees 2020 $m 2019 $m 3,063.0 3,070.2 (12.2) - (6.7) (0.5) 3,050.8 3,063.0 a There is only one class of shares (ordinary shares) on issue. These ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company, in proportion to the number and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. The Company does not have authorised capital nor par value in respect of its issued shares. b The Group purchased 3,859,774 (2019: 1,458,361) of its own shares for use to settle future employee share based payment schemes. Movements in ordinary share capital Balance at beginning of the year Balance at the end of the year 2020 2019 Number of shares Number of shares 917,322,730 917,322,730 917,322,730 917,322,730 On 2 July 2020, the Group issued 30,730,998 new shares to settle the interim dividend (refer to note C3). (ii) Reserves (net of tax) Hedging reserve a Cost of hedging reserve b Share based payments reserve c 2020 $m (16.6) 3.2 16.8 3.4 2019 $m (27.5) 4.9 7.0 (15.6) Nature and purpose of reserves a The hedging reserve records the spot element of fair value changes on the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge. b The spot element of derivative contracts are designated as hedging instruments with fair value changes recorded in the hedging reserve. The forward element is recognised in other comprehensive income and accumulated in a separate component of equity under costs of hedging reserve. c The share based payments reserve is used to recognise the value of equity settled share based payment transactions provided to employees, including Key Management Personnel as part of their remuneration. Refer to note F11 for further details on these plans. Notes to the financial statements For the year ended 30 June 2020 (iii) Capital management The Group's objectives when managing capital are to ensure the Group continues as a going concern while providing optimal returns to shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends to be paid to shareholders, return capital to shareholders or issue new shares. Gearing is managed primarily through the ratio of net debt to earnings before interest, tax, depreciation, amortisation, impairment, significant items and share of the net loss of associate and joint venture entities. Net debt comprises interest bearing liabilities, with US dollar borrowings translated at the 30 June 2020 USD/AUD spot rate of 1.4999 (2019: 1.4261), after adjusting for cash and cash equivalents and derivative financial instruments. The Group’s capital management also aims to ensure that it meets financial covenants attached to the interest bearing loans and borrowings that define capital structure requirements. There have been no breaches of the financial covenants of any interest bearing loans and borrowings in the current period. The Star secured a full waiver of its gearing and interest cover covenants for the 30 June 2020 covenant testing date from all its debt providers. Other than these banking covenants, the Group is not subject to externally imposed capital requirements. Gross Debt Net Debt a EBITDA b Gearing ratio (times) c 2020 $m 1,625.0 1,382.7 155.1 8.9 x 2019 $m 1,162.3 972.6 519.8 1.9 x a Net debt is shown as interest bearing liabilities (excluding lease liabilities), less cash and cash equivalents, less net position of derivative financial instruments. b EBITDA is a non-IFRS disclosure and stands for earnings before interest, tax, depreciation, amortisation and impairment. c Gearing ratio (times) has increased 7.0x. EBITDA has been negatively effected by the exceptional circumstances associated with COVID-19, which saw the closure of the Group's properties during FY2020. Net debt was also impacted by the cashflow reduction associated with the closure of the properties. F10 Reconciliation of net profit after tax to net cash inflow from operations Note A4 F11 A5 D5 Net profit after tax - Depreciation, amortisation and impairment - Employee share based payments expense - Gain on disposal of property, plant and equipment - Finance costs - Share of net loss of associate and joint venture entities - Gain on disposal of Gold coast land Working capital changes - Decrease/(increase) in trade and other receivables and other assets - Decrease/(increase) in inventories - (Decrease)/increase in trade and other payables, accruals and provisions - (Decrease)/increase in tax provisions Net cash inflow from operating activities 2020 $m (94.6) 228.5 9.0 (0.7) 52.6 12.1 - 128.8 1.1 (142.7) (55.9) 138.2 2019 $m 198.0 205.8 2.1 (0.9) 35.7 0.6 (9.7) (33.9) (2.0) 6.8 8.9 411.4 Operating cash flow before interest and tax was $157.6 million, down 67.1% on the pcp, due to the exceptional circumstances associated with COVID-19. The EBITDA to cash conversion ratio was 102%. 79 80 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 122 PAGE 123 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 Notes to the financial statements For the year ended 30 June 2020 F11 Employee share plans Long term incentive plan During the current and prior periods, the Company issued Performance Rights under the long term incentive plan to eligible employees. The share based payment expense of $1.8 million (2019: $0.7 million) in respect of the equity instruments granted is recognised in the income statement. The number of Performance Rights granted to employees and forfeited or lapsed during the year are set out below. 2020 Grant Date 21 September 2015 5 October 2016 2 October 2017 3 October 2018 3 October 2019 2019 Grant Date 26 September 2014 21 September 2015 5 October 2016 2 October 2017 3 October 2018 Balance at start of year Granted during the year 621,767 1,062,560 1,600,456 1,599,402 - - - - - 1,874,038 Forfeited during the year a - 861 140,031 132,105 - Lapsed during the year b 621,767 - - - - 4,884,185 1,874,038 272,997 621,767 Vested during the year Balance at end of year - - - - - - - 1,061,699 1,460,425 1,467,297 1,874,038 5,863,459 Balance at start of year Granted during the year 921,619 665,548 1,146,415 1,734,717 - - - - - 1,599,402 Forfeited during the year 3,224 43,781 83,855 134,261 - 4,468,299 1,599,402 265,121 Lapsed during the year Vested during the year Balance at end of year - - - - - - 918,395 - - - - - 621,767 1,062,560 1,600,456 1,599,402 918,395 4,884,185 Grants from 26 September 2014 include a market based hurdle (relative total shareholder return (TSR)) and an EPS component. Grants from 2 October 2017 include a market based hurdle (relative TSR), an EPS component and a return on investment capital (ROIC) component. The Performance Rights have been independently valued. For the relative TSR component, valuation was based on assumptions underlying the Black-Scholes methodology to produce a Monte-Carlo simulation model. For the EPS and ROIC component, a discounted cash flow technique was utilised. The total value does not contain any specific discount for forfeiture if the employee leaves the Group during the vesting period. This adjustment, if required, is based on the number of equity instruments expected to vest at the end of each reporting period. a The number of Performance Rights forfeited during the year is net of Performance Rights reinstated for employees who were terminated in FY19 as part of the Group reorganisation, but subsequently deemed good leavers. The number of Performance Rights reinstated is 48,650 from the 5 October 2016 grant, 43,678 from the 2 October 2017 grant and 27,963 from the 3 October 2018 grant. b Performance rights granted on 21 September 2015 were tested on 21 September 2019 and did not vest. The TSR percentile rank for the Company was 14.93%, below the 50th percentile rank. The EPS performance was 22.4 cents, below the 33.5 cents threshold. As a result, these Performance Rights lapsed and no shares were issued to participants. The key assumptions underlying the Performance Rights valuations are set out below: Equity retention plan During the current period, the Company granted restricted shares under the equity retention plan to eligible employees. The share based payment expense of $1.3 million (2019: $1.4 million) in respect of the equity instruments granted is recognised in the income statement. The number of restricted shares granted to employees and forfeited during the year are set out below. 2020 Grant Date 1 July 2019 2019 Grant Date 1 July 2018 Balance at start of year Granted during the year Forfeited during the year Lapsed during the year Vested during the year Balance at end of year 1,433,959 201,410 317,750 - - 1,317,619 Balance at start of year Granted during the year Forfeited during the year Lapsed during the year Vested during the year Balance at end of year - 1,458,361 24,402 - - 1,433,959 The shares are purchased on-market and are granted to participants at no cost, subject to a service condition of five years. Participants are entitled to dividends and may benefit from share price growth over the vesting period. Short term incentive plan Due to the exceptional circumstances associated with COVID-19, the Board resolved to exercise its discretion to make a significantly reduced equity award under the FY2020 short term incentive plan. The award will be delivered as a share based payment, subject to a holding lock of one year from the date of issue. A share based payment expense of $5.9 million has been recognised in the income statement. F12 Auditor's remuneration Fees to Ernst & Young (Australia): - Fees for auditing the statutory financial report of the parent and consolidated group* fees - for other assurance and agreed-upon-procedures services (including sustainability assurance) under contractual arrangements where there is discretion as to whether the service is provided by the auditor - Fees for other advisory and compliance services Total fees to Ernst & Young Australia 2020 $ 2019 $ 1,029,652 1,067,766 90,000 224,419 88,860 - 1,344,071 1,156,626 *includes $31,000 for overseas entities. The auditor of the Company and its controlled entities is Ernst & Young. From time to time, Ernst & Young provides other services to the Group, which are subject to strict corporate governance procedures encompassing the selection of service providers and the setting of their remuneration. The Chair of the Audit Committee (or authorised delegate) must approve any other services provided by Ernst & Young to the Group. F13 Assets held for sale Share price at date of grant Expected volatility in share price Expected dividend yield Risk free interest rate Average Fair Value per Performance Right Aircraft Vessel Effective grant date Test and vesting date 21 September 2015 21 September 2019 5 October 2016 2 October 2017 3 October 2018 5 October 2020 2 October 2021 3 October 2022 25 September 2019 25 September 2023 $ 4.82 5.89 5.17 5.21 4.20 % 28.00 % 25.03 % 24.40 % 22.76 % 22.00 % % %2.70 %2.74 %2.98 %4.66 %- % %1.98 %1.68 %2.28 %2.14 %0.72 $ 3.53 4.27 4.02 3.77 3.66 81 In June 2020, the Group tendered for sale an aircraft and a vessel. The sales are expected to be completed before the end of October 2020. The assets were classified as 'held for sale' and measured at the lower of their carrying value and fair value less costs to sell at the time of reclassification. This resulted in an impairment expense of $13.3 million (2019: nil) (refer to note A7). The assets' fair values were determined by reference to independent market data. This is a level 2 measurement as per the fair value hierarchy set out in note E2(i). 82 2020 $m 32.5 4.7 37.2 2019 $m - - - ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 124 PAGE 125 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 Notes to the financial statements For the year ended 30 June 2020 G Accounting policies and corporate information Significant accounting policies are contained within the financial statement notes to which they relate and are not detailed in this section. Corporate Information The Star Entertainment Group Limited (the Company) is a company incorporated and domiciled in Australia. The Financial Report of the Company for the year ended 30 June 2020 comprises the Company and its controlled entities (collectively referred to as the Group). The Company's registered office is Level 3, 159 William Street, Brisbane QLD 4000. The Company is of the kind specified in Australian Securities and Investments Commission (ASIC) Instrument 2016/191. In accordance with that Instrument, amounts in the Financial Report and the Directors' Report have been rounded to the nearest hundred thousand dollars, unless specifically stated to be otherwise. All amounts are in Australian dollars ($). The Company is a for profit organisation. The Financial Report was authorised for issue by the Directors on 20 August 2020. Basis of preparation The Financial Report is a general purpose Financial Report which has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other mandatory Financial Reporting requirements in Australia. The financial statements comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below and elsewhere in this report. The policies used in preparing the financial statements are consistent with those of the previous year except as indicated under 'Changes in accounting policies and disclosures'. Going concern The financial statements have been approved by the Directors on a going concern basis. In determining the appropriateness of the basis of preparation, the Directors have considered the impact of the COVID-19 pandemic on the position of the Group at 30 June 2020 and its operations in future periods. At 30 June 2020, the Group is in a net current liability position of $234.6 million (2019: net current liability of $246.6 million) and a net asset position of $3,465.0 million (2019: $3,740.9 million). For the year, the Group generated a loss after tax of $94.6 million (2019: profit after tax of $198.0 million). The net decrease in cash and cash equivalents of $48.2 million (2019: net increase $4.0 million) was driven by the payments for property, plant, equipment and intangibles and investments in associate and joint venture entities. A waiver from banks and USPP holders was obtained providing relief against restrictive loan covenants at 30 June 2020. Current Period Impact The COVID-19 outbreak was declared a pandemic by the World Health Organization in March 2020. The response of governments in dealing with the pandemic is impacting the general activity levels within the community, the economy and the operations of the Group. On 23 March 2020, following government directives, The Star’s properties in Sydney, Gold Coast and Brisbane:   ceased gaming activities closed food and beverage, banqueting and conferencing offerings with the limited exception of in-room dining services for hotel guests; and significantly reduced the capacity of its hotel accommodation services.  From June 2020, The Star’s properties commenced a staged return to operation, albeit at significantly reduced capacity. Restrictions remain in place around the number of patrons allowed onsite as well as minimum health and safety standards, the compliance to which require complete closure of the properties each day for 4 hours. It remains uncertain for how long these restrictions will remain in place. At 30 June 2020 the Group has re-assessed all significant judgements and estimates included in the 30 June 2020 financial result and position, including but not limited to, provisions against debtors, liability to future claims, impairment of non-current assets, the fair valuation of debt and associated instruments as well as other provisions and estimates. Future Impact and Going Concern COVID-19 and the resulting border closures and other restrictions imposed by governments has had a significant impact on the current year financial results and financial position. COVID-19 has created significant uncertainty in relation to the Group's cash flow forecasts. Furthermore, there is the potential that the Group may breach covenants associated with its borrowing facilities at 31 December 2020, which if not amended or waived by the lenders, may lead to those borrowings becoming due and payable. The Group would need to raise additional capital or secure new borrowing facilities to repay existing borrowings should this eventuate. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the entity not continue as a going concern. The Directors have taken the following matters into consideration in forming a view that the Group is a going concern, amongst other matters:   The Group has cash on hand and on deposit of $66.1 million at 30 June 2020; At 30 June 2020, the Group has $507 million available facility capacity, of which $307 million has a maturity beyond 12 months. Drawn debt facilities due to mature within 12 months, which comprises the $98 million USPP, can be met out of available facility capacity; The Group expects to realise $37.2 million in asset divestments related to an aircraft and a vessel, held for sale at 30 June 2020; The Group has approximately $102 million in planned and committed capital expenditure and $156 million in committed investments into associates and joint ventures. The Directors have the ability to control the cash flow of certain capital expenditure, should the need arise. The Group's $156 million in committed investments into associates and joint ventures in FY21 fulfil the Group's remaining equity contributions towards both the Queen's Wharf development and Tower 1 on the Gold Coast. Remaining construction costs will be funded by project finance, which was fully committed at 30 June 2020; Scenario modelling has been undertaken, based on events known and current expectations, to forecast Group operating cashflows for the next 12 months. All scenarios, which assess different staged recoveries of the domestic economy and availability of international patrons, support operations which will generate operating cash flows to cover committed investing activities; As announced to the market, no further cash dividends will be paid until gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times; The Group is required to test covenants at 31 December 2020, at which time it is likely additional waivers will be required from all lenders. The Group remains in contact with its lenders and is confident that as COVID-19 related restrictions continue to ease, waivers are obtainable at 31 December 2020. Historically, the Group has demonstrated an ability to successfully obtain waivers in previous periods, including most recently at 30 June 2020; and The Group has the opportunity to raise additional capital either through asset disposal or issuance of new shares, should the need arise. On 2 July 2020, 30,730,998 new shares were issued to settle the 2020 interim dividend. This equated to approximately $96.4 million in additional capital (refer note C3).       Based on the above, the Directors are satisfied that sufficient cashflows will be generated along with the capacity to either amend existing funding agreements or obtain new funding, such that the Group will be able to meet its liabilities, as and when they fall due, over the next twelve months. Significant accounting judgements, estimates and assumptions Preparation of the financial statements in conformity with Australian Accounting Standards and IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:  Going concern (refer note above);  Asset useful lives and residual values (refer notes A4 and B5);  Impairment of assets (refer note B6);  Valuation of derivatives and other financial instruments (refer note B3);  Impairment of trade receivables (refer note B2);  Significant items (refer note A7);  Provisions (refer note F6); and  Asset held for sale (refer note F13). 83 84 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 126 PAGE 127 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 Notes to the financial statements For the year ended 30 June 2020 Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in future periods. Changes in accounting policies and disclosures The Group has adopted the following new and amended accounting standards, which became applicable for the year ended 30 June 2020: Reference AASB 16 (i) AASB Interpretation 23 (ii) Uncertainty over Income Tax Treatments, and relevant amending standards Title Leases (i) AASB 16 Leases AASB 16 supersedes AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation 115 Operating Leases-Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model. The Group has adopted the new standard using the modified retrospective method of adoption with the date of initial application of 1 July 2019. Under this transition method, prior period comparative financial statements are not required to be restated. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value (low-value leases). The impact of the new standard is that leases whereby the Group is lessee are required to be recognised on the balance sheet as a right-of-use (ROU) asset and lease liability, except for short-term leases and low-value leases. On transition, for existing leases, the lease liability is measured at the present value of future lease payments, discounted using the incremental rate of borrowing at transition date. The Group elected to use the exemption whereby on transition, the ROU asset is recognised at an amount consistent with the lease liability, adjusted for any existing lease related assets or liabilities (prepaid lease payments and accrued lease incentives). The effect of adopting AASB 16 on the balance sheet is as follows: Balance sheet Property, plant and equipment Other assets Interest bearing liabilities Provisions 30 June 2019 $m Adoption adjustment $m 1 July 2019 $m 2,779.8 99.6 (1,162.3) (116.8) 60.3 (8.9) (58.4) 7.0 2,840.1 90.7 (1,220.7) (109.8) The impact on the income statement for the year ended 30 June 2020 are as follows: Income statement Depreciation, amortisation and impairment Net finance costs Property costs * Other expenses * 30 June 2020 AASB 117 $m Transition adjustment $m 30 June 2020 AASB 16 $m 224.2 48.2 74.6 193.1 8.1 4.0 (9.7) (1.0) 232.3 52.2 64.9 192.1 * These costs represent the operating lease expense which would have originally been recorded under AASB 117. Lessor accounting under AASB 16 is substantially unchanged from accounting under AASB 117. Lessors will continue to classify all leases using the same classification principle as in AASB 117 and distinguish between two types of leases: operating and finance leases. Adoption of the new standard has had no impact on the accounting for those contracts whereby the Group is the lessor. Leases previously accounted for as operating leases The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as at 30 June 2019: Operating lease commitments as at 30 June 2019 Less: Discounting of leases a Lease liabilities as at 1 July 2019 $m 143.1 (84.7) 58.4 a The weighted average incremental borrowing rate was 11.3% as at 1 July 2019. Summary of new accounting policies Right-of-use assets The Group recognises ROU at the commencement date of the lease (i.e. the date the underlying asset is available for use). ROU assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of ROU assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The recognised ROU assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. ROU assets are subject to impairment. Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date,the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of buildings, leasehold improvements and plant and equipment. (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e. below $10,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. The above policies replace the lease policy in place at 30 June 2019, which reads: Leases of assets where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. Leases of assets under which substantially all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. 85 86 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 128 PAGE 129 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 Notes to the financial statements For the year ended 30 June 2020 (ii) AASB Interpretation 23 The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB 112 Income Taxes. It does not apply to taxes or levies outside the scope of AASB 112, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The adoption of this interpretation has no material impact on the financial results of the Group. Standards and amendments issued but not yet effective The Group has not applied Australian Accounting Standards and IFRS that were issued or amended but not yet effective. The key standards, shown below, are not expected to have a material impact on the financial statements: Reference Title AASB 3 AASB 101 Amendments to the definition of material AASB 7 Application date 1 January 2020 1 January 2020 1 January 2020 Interest rate benchmark reform on hedge accounting Amendments to AASB 3 Definition of a Business Basis of consolidation Controlled entities The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Controlled entities are consolidated from the date control is transferred to the Group and are no longer consolidated from the date control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Foreign currency The consolidated financial statements are presented in Australian dollars ($) which is the Group's functional and presentation currency. Transactions and balances Transactions denominated in foreign currencies are translated at the rate of exchange ruling on the transaction date. Monetary items denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Gains and losses arising from the translation are credited or charged to the income statement, with the exception of differences on foreign currency borrowings that are in an effective hedge relationship. These are taken directly to equity until the liability is extinguished, at which time they are recognised in the income statement. Government grants Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense, it is recognised net of the related expense for which it is intended to compensate. There are no unfilled conditions or other contingencies attached to the grants. Net finance costs Finance income is recognised as the interest accrues, using the effective interest method. Finance costs consist of interest and other borrowing costs incurred in connection with the borrowing of funds. Finance costs directly associated with qualifying assets are capitalised, all other finance costs are expensed, in the period in which they occur. Taxation Income tax Income tax comprises current and deferred income tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for:  goodwill; and  the initial recognition of an asset or liability in a transaction which is not a business combination and that affect neither accounting nor taxable profit at the time of the transaction. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Goods and Services Tax (GST) Revenues, expenses, assets and liabilities are recognised net of the amount of GST except:  when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable;  casino revenues, due to the GST being offset against government taxes; and  receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at face value. Cash and cash equivalents include cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash for the purpose of the statement of cash flows. Trade and other receivables Trade receivables are recognised and carried at original settlement amount less a provision for expected credit loss impaired, where applicable. Bad debts are written off when they are known to be uncollectible. Subsequent recoveries of amounts previously written off are credited to the income statement. Other receivables are carried at amortised cost less impairment. Inventories Inventories include consumable stores, food and beverage and are carried at the lower of cost and net realisable value. Inventories are costed on a weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business. Property, plant and equipment Refer to notes A4 and B4 for further details of the accounting policy, including useful lives of property, plant and equipment. Freehold land is included at cost and is not depreciated. All other items of property, plant and equipment are stated at historical cost net of depreciation, amortisation and impairment, and depreciated over periods deemed appropriate to reduce carrying values to estimated residual values over their useful lives. Historical cost includes expenditure that is directly attributable to the acquisition of these items. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement. When the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Costs arising subsequent to the acquisition of an asset are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial year in which they are incurred. Costs relating to development projects are recognised as an asset when it is:  probable that any future economic benefit associated with the item will flow to the entity; and  it can be measured reliably. If it becomes apparent that the development will not occur, the amount is expensed to the income statement. Intangible assets Goodwill Goodwill represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed. Goodwill is assessed for impairment on an annual basis and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to benefit from the business combination in which the goodwill arose. 87 88 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 130 PAGE 131 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Notes to the financial statements For the year ended 30 June 2020 Notes to the financial statements For the year ended 30 June 2020 Other intangible assets Indefinite life intangible assets are not amortised and are assessed annually for impairment. Expenditure on gaming licences acquired, casino concessions acquired, computer software and other intangibles are capitalised and amortised using the straight line method as described in note B5. Software Costs associated with developing or maintaining computer software programs are recognised as expenses as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the Group and which have probable economic benefits exceeding the costs beyond one year are recognised as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion of the relevant overheads. Expenditure meeting the definition of an asset is recognised as a capital improvement and added to the original cost of the asset. These costs are amortised using the straight line method, as described in note B5. Casino licences and concessions Refer to note B5 for details and accounting policy. Impairment of assets Assets that have an indefinite useful life are not subject to depreciation or amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units). Refer to note B6 for further details of key assumptions included in the impairment calculation. Assets held for sale Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction, rather than through continuing use, and a sale is considered highly probable. They are measured at the lower of their carrying value and fair value less costs to sell. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its fair value less costs to sell. Provisions A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Investment in associate and joint venture entities Associates are all entities over which the Group has significant influence but not control or joint control. Joint control is the contractually agreed sharing of the joint arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. A joint venture is a type of arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. The Group's investments in associate and joint venture entities are accounted for using the equity method of accounting, after initially being recognised at cost. Under the equity method of accounting, the investments are initially recognised at cost and are subsequently adjusted to recognise the Group's share of the post-acquisition profits or losses of the investee in the income statement, and the Group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received are recognised as a reduction in the carrying amount of the investment. The carrying amount of equity-accounted investments is tested for impairment in accordance with the Group's policy. Interest bearing liabilities Interest bearing liabilities are recognised initially at fair value and include transaction costs. Subsequent to initial recognition, interest bearing liabilities are recognised at amortised cost using the effective interest rate method. Any difference between proceeds and the redemption value is recognised in the income statement over the period of the borrowing using the effective interest rate method. Interest bearing liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Employee benefits Post-employment benefits The Group's commitment to defined contribution plans is limited to making the contributions in accordance with the minimum statutory requirements. There is no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees relating to current and past employee services. Superannuation guarantee charges are recognised as expenses in the income statement as the contributions become payable. A liability is recognised when the Group is required to make future payments as a result of employees' services provided. Long service leave The Group's net obligation in respect of long term service benefits, other than pension plans, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using rates attached to bonds with sufficiently long maturities at the balance sheet date, which have maturity dates approximating to the terms of the Group's obligations. Annual leave Liabilities for annual leave are calculated at discounted amounts based on remuneration rates the Group expects to pay, including related on-costs when the liability is expected to be settled. Annual leave is another long term benefit and is measured using the projected credit unit method. Share based payment transactions The Company operates a long term incentive plan (LTI), which is available to employees at the most senior executive levels. Under the LTI, employees may become entitled to Performance Rights which may potentially convert to ordinary shares in the Company. The fair value of Performance Rights is measured at grant date and is recognised as an employee expense (with a corresponding increase in the share based payment reserve) over four years from the grant date irrespective of whether the Performance Rights vest to the holder. A reversal of the expense is only recognised in the event the instruments lapse due to cessation of employment within the vesting period. The fair value of the Performance Rights is determined by an external valuer and takes into account the terms and conditions upon which the Performance Rights were granted. The Company operates an Equity Retention Plan, whereby eligible employees may receive up to 100% of their fixed annual remuneration amount in value as fully paid ordinary shares after five years. The awards are issued at no cost to participants and are subject to a service condition of five years. Participants are entitled to dividends and may benefit from share price growth over the vesting period. Under the Company's short term incentive plan (STI), eligible employees receive two thirds of their annual STI entitlement in cash and one third in the form of restricted shares which are subject to a holding lock for a period of twelve months. These shares are forfeited in the event that the employee voluntarily terminates from the Company. Due to the exceptional circumstances associated with COVID-19, the Board resolved to exercise its discretion to make a significantly reduced equity award under the FY2020 STI. The award will be delivered as a share based payment, subject to a holding lock of one year from the date of issue. The cost is recognised in employment costs, together with a corresponding increase in equity (share based payment reserve) over the service period. No expense is recognised for awards that do not ultimately vest. A liability is recognised for the fair value of cash settled transactions. The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in fair value recognised in employment costs. Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its Treasury Policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognised initially at fair value at the date the derivative contract is entered into and are subsequently remeasured to fair value at the end of each reporting period. The resulting gain or loss is recognised immediately in the income statement. However, where derivatives qualify for cash flow hedge accounting, the effective portion of the gain or loss is deferred in equity while the ineffective portion is recognised in the income statement. The fair value of interest rate swap, cross currency swap and forward currency contracts is determined by reference to market values for similar instruments. Refer to note E2 for details of fair value determination. Derivative assets and liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if:  there is a currently enforceable legal right to offset the recognised amount; and  there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. 89 90 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 132 PAGE 133 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 DIRECTORS' DECLARATION Notes to the financial statements For the year ended 30 June 2020 Directors' Declaration In the opinion of the Directors of The Star Entertainment Group Limited (the Company): (a) the financial statements and notes of the Group are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's consolidated financial position as at 30 June 2020 and of its performance for the year ended on that date; and (ii) complying with the Accounting Standards and the Corporations Regulations 2001; (b) the Financial Report also complies with International Financial Reporting Standards as disclosed in note G; and (c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors. John O'Neill AO Chairman Sydney 20 August 2020 Hedging Cash flow hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in cash flows that are attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. When the forecast transaction subsequently results in the recognition of a non financial asset or liability, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non financial asset or liability. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, then the associated gains and losses that were recognised directly in equity are reclassified into the income statement in the same period or periods during which the asset acquired or liability assumed affects the income statement (i.e. when interest income or expense is recognised). For cash flow hedges, the effective part of any gain or loss on the derivative financial instrument is removed from equity and recognised in the income statement in the same period or periods during which the hedged forecast transaction affects the income statement. The ineffective part of any gain or loss is recognised immediately in the income statement. When a hedging instrument expires or is sold, terminated or exercised, or the designation of the hedge relationship is revoked but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above when the transaction occurs. If the hedged transaction is no longer expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement. Fair value hedges Where a derivative financial instrument is designated as a hedge of the exposure to variability in the fair value of a recognised asset or liability, any change in the fair value of the hedge is recognised in the income statement as a finance cost. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognised in the income statement as a finance cost. Issued capital Issued and paid up capital is recognised at the fair value of the consideration received. Issued capital comprises ordinary shares. Any transaction costs directly attributable to the issue of ordinary shares are recognised directly in equity, net of tax, as a reduction of the share proceeds received. Operating segment An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results are regularly reviewed by the entity's executive decision makers to allocate resources and assess its performance. The Group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each of the following respects:  nature of the products and services;  type or class of customer for the products and services;  methods used to distribute the products or provide the services; and  nature of the regulatory environment. Segment results include revenue and expenses directly attributable to a segment and exclude significant items. Capital expenditure represents the total costs incurred during the period to acquire segment assets, including capitalised interest. Dividend distributions Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are declared. Basic earnings per share Basic earnings per share is calculated by dividing the net earnings after tax for the period by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share Diluted earnings per share is calculated by dividing the net earnings attributable to ordinary equity holders adjusted by the after tax effect of:  any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders;  any interest recognised in the period related to dilutive potential ordinary shares; and  any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; by the weighted average number of issued ordinary shares plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. 91 92 ANNUAL REPORT 2020ANNUAL REPORT 2020PAGE 134 INDEPENDENT AUDITOR'S REPORT INDEPENDENT AUDITOR'S REPORT PAGE 135 (UQVW afYf[aYd Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Hjg^]kkagfYdYf\=l`a[YdKlYf\Yj\k:gYj\Ìk9H=K))(Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter: COVID19 Material uncertainty in relation to going concern We draw attention to Note G of the financial report which notes the impact of the COVID19 pandemic on l`]afYf[aYdJ]hgjlYf\9m\algjÌkJ]hgjlL`]j]gf The directors are responsible for the other information. The other information comprises the information included in the GroupÌk*(20 9ffmYdJ]hgjlgl`]jl`Yfl`]^afYf[aYdj]hgjlYf\gmjYm\algjÌkj]hgjl thereon. We obtained l`] BNP PARIBAS NOMS PTY LTD CITICORP NOMINEES PTY LIMITED CS THIRD NOMINEES PTY LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ARGO INVESTMENTS LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 BELIKE NOMINEES PTY LIMITED