The Star Entertainment Group
Annual Report 2022

Plain-text annual report

2022 Annual Report Acknowledgment of Country The Star Entertainment Group respectfully acknowledges the Traditional Owners of the land where our properties are situated. This includes the Turrbal and Jagera Traditional Owners of the Brisbane region, the Danggan Balun (Five Rivers) people of the Gold Coast, and the Traditional Owners of the land in Pyrmont, the Gadigal people of the Eora Nation. We also wish to pay our respects to Elders past and present. People Health and Safety Asset Protection Neighbourhood Engagement Talented Teams Diversity and Inclusion Community and Charitable Partnerships Directors’, Remuneration And Financial Report Directors’ Report Remuneration Report Financial Report Additional Information Shareholder Information Corporate Information Corporate Governance Statement Details Annual General Meeting Details About this Annual Report Key Dates For FY2023 Company Directory 24 25 26 27 30 35 38 58 80 146 149 149 149 150 150 151 Contents Introduction Executive Chairman's Message 4 Board and Executive Team Board of Directors 6 Executive Team 7 Financial Performance Key Projects Queen’s Wharf Brisbane The Star Sydney The Star Gold Coast Sustainability Responsible Business, Sustainable Destinations Strategy Our Environmental Targets Sustainability Approach Responsibility Responsible Gambling Responsible Service Of Alcohol Environment Climate Change Alignment with the Task-Force on Climate Related Financial Disclosures Net-zero 2030 and Carbon Emissions Management Corrymbia – A Carbon Offsetting Project Resource Efficiency, Waste Mangement and Sustainable Design The Global Compact Network Australia Reporting and Assurance Modern Slavery 3 8 10 12 13 14 15 15 16 19 20 20 21 21 22 23 23 23 3 Front Cover photo: The Star Gold Coast, Isoletto PoolBack Cover: Artist's concept image of The Star Gold Coast expansion4 The Star Entertainment Group 2022 Annual Report Introduction This is an era of change for The Star At The Star Gold Coast, construction Entertainment Group Limited. of a second tower commenced, and the In FY2022 and now into FY2023, we are embracing change across our organisation to address issues raised in recent reviews by our regulators. We have developed and are acting on a detailed Remediation Plan to transform our business and ensure nothing like this ever happens again. There is still much work to be done but we are already taking the steps required to make it right. We invite you to follow our progress at starentertainmentgroup.com.au/ transformation. New South Wales Government provided a development pathway for a new six-star luxury hotel, additional theatres and exciting new rooftop dining experiences at The Star Sydney. The transformative Queen’s Wharf Brisbane project also progressed, with an anticipated staged opening from the second half of calendar year 2023. As part of the Queen’s Wharf precinct development, The Star and our joint venture partners are delivering an extensive public space arts program with several Australian- based artists announced and showcased While executing our Remediation Plan, during FY2022. we also remain committed to delivering As plans to expand The Star’s offerings are memorable experiences and guest realised, we will help create thousands of service excellence across our expanding direct and indirect jobs across the tourism, portfolio of tourism, hospitality and hospitality and entertainment sectors, entertainment venues. and drive additional visitation to the In FY2022, we opened Australia’s first communities we serve. Dorsett hotel and The Star Residences in a We are continuing to embrace change at 53-storey tower at the Gold Coast, whilst every level of our business as we progress upgrading and unveiling a further 10 food into FY2023. We are working with urgency and beverage venues across our properties to address the issues identified by our in Sydney, Brisbane, and the Gold Coast. regulators, and laying the foundations for a safer, stronger, more sustainable future. Our Vision To be Australia’s leading integrated resort company by harnessing the unique opportunities provided by each of the cities, communities and locations in which we operate. Our Values Ownership Welcoming True Teamwork Do The Right Thing 5 Executive Chairman’s Message (Note: Ben Heap was appointed as Interim Chairman from 1 June 2022 and subsequently appointed as Executive Chairman on 26 September 2022.) Information contained in this message is correct as at the time of writing on 13 October 2022. This past year was an incredibly challenging one for our business. I want to address the underlying issues in detail below, but first want to extend again my unreserved apology to our approximately 73,000 shareholders and 8,000 team members. We let you down. As our most valued stakeholders, you deserved better. At the time of writing, we have received the report undertaken by Mr Adam Bell SC in connection with the review of The Star Sydney under the Casino Control Act 1992 (NSW). Released publicly on 13 September 2022, Mr Bell’s report found The Star Sydney to be unsuitable, and a show cause notice was issued by the NSW Independent Casino Commission (NICC) to which The Star Entertainment Group Limited (The Star) responded on 26 September 2022. We have submitted a response to the NICC accepting the findings of the Bell Report, including the finding of unsuitability. We acknowledged the gravity of the conduct raised and outlined how significant and urgent remedial steps have commenced as part of a comprehensive Remediation Plan. This Remediation Plan is designed to transform all aspects of the organisation’s governance, culture, and risk and compliance practices, while also focusing on accountability and the capabilities required to embed the necessary changes to satisfy the NICC that The Star Pty Limited, the licence holder in NSW, can continue to hold its licence. We submitted that the appropriate action the NICC should take is to allow The Star Pty Limited to continue to operate the licence under strict supervision while being held to account for the milestones included in the Remediation Plan. At the time of writing, we are waiting on a decision from the NICC. We have also received the findings from the independent external review of the operations of The Star’s casinos in Queensland led by eminent former judge, The Honourable Robert Gotterson AO, under section 91 of the Casino Control Act 1982 (Qld). Mr Gotterson delivered his report to the Queensland Attorney-General on 30 September 2022 and it was publicly released on 6 October 2022. The Attorney-General responded to the report saying she had considered the findings from Mr Gotterson, and the findings from the Bell Review in NSW, and had formed the view that The Star was unsuitable to hold a casino licence in Queensland. The Attorney-General asked the Office of Liquor and Gaming Regulation to begin preparing materials to issue The Star with a show cause notice. The Star is awaiting the show cause notice at the time of writing. This has been a period in the company’s history from which we must learn and will learn. We can never make the same mistakes again and we must take action to ensure a stronger, more robust, more sustainable, and better company emerges. We must transform our culture. We need more transparency, more robust governance, and greater accountability. We need to be a workplace where all team members feel empowered to raise concerns, where we have open and honest dialogue with our regulators, and where our leadership is vigilant, open to hear concerns when they are raised, and committed to taking action whenever necessary. We also need to shift to a culture that asks not only “can we”, but “should we.” Our goal is to earn back trust and confidence. I know this will not happen overnight. But I ask all of you to not judge us by our words, but by our actions. COVID-19 IMPACTS I mentioned at the outset the incredible challenges FY2022 has provided. Beyond the pressing regulatory issues, we continued to encounter COVID-19 related disruptions which materially impacted earnings. Property shutdowns, operating restrictions and border closures remained as obstacles to be negotiated responsibly, with agility, and at all times compliantly. I would like to again acknowledge the commitment of our tireless team members for their resolute and enthusiastic efforts to keep delivering world-class experiences to our guests at every opportunity. When we did emerge from shutdowns and restrictions, the underlying strength of the business enabled us to rebound strongly. NEW APPOINTMENTS Experienced, high quality, senior executives have chosen to join The Star to drive our future direction and growth. They included Robbie Cooke joining us as Managing Director and Chief Executive Officer on 17 October 2022, Scott Wharton being appointed as Chief Executive Officer of The Star Sydney and Group Head of Transformation, Scott Saunders being appointed as Group Chief Risk Officer and Nawal Silfani being 6 The Star Entertainment Group 2022 Annual Report appointed as an additional Company Secretary. Each of these appointments are subject to all necessary regulatory approvals being obtained. Robbie is a respected and highly experienced chief executive. He has been the CEO of major ASX 200 listed companies and brings extensive commercial experience in operating and driving transformation programs within highly regulated environments, overseeing large workforces and building executive teams in multi-jurisdictional locations. He is well placed to lead The Star and restore confidence in the organisation. The Star Entertainment Group Board announced it would embark on a program of Board renewal in a timely manner, acknowledging the need for accelerated change. Mr Michael Issenberg commenced as a Non- Executive Director on 11 July 2022 following receipt of all necessary regulatory approvals. Ms Anne Ward and Mr David Foster were appointed as Non-Executive Directors on 15 August 2022 subject to regulatory approvals being obtained. FINANCIALS FY2022 marks the third consecutive year where our operations were significantly affected by the ongoing impacts of COVID-19. Property closures, operating restrictions and border restrictions significantly impacted earnings in the first half and into the second half of FY2022. Restrictions began to ease in the second half, allowing for the return to more normal operating conditions by the fourth quarter of the financial year. Domestic revenue in the fourth quarter of FY2022 was above pre-COVID-19 levels (as represented by the corresponding period in 2019), driven by strong growth in slots and non- gaming revenue. Performance was also affected by The Star’s suspension of all domestic and international rebate programs and costs associated with the commencement of the Remediation Plan. Normalised EBITDA of $235.1m was down 45.3% on pcp while the normalised net loss after tax, excluding significant items, was $33.4m. The Star remains committed to maintaining a sound balance sheet. No final dividend was declared, in accordance with the conditions of the debt covenant waivers, which restrict further cash dividends from being paid until The Star’s gearing ratio is below 2.5 times (net debt to 12-month trailing statutory EBITDA). PROJECT UPDATES During the year, the Dorsett hotel and The Star Residences opened at the Gold Coast. The Dorsett hotel is performing above forecast levels given higher than expected occupancy levels and average daily rates, and in excess of 90% of the apartments have settled. Construction of Gold Coast Tower 2, a 63-storey mixed-use tower which will include a five-star hotel and residential units, is also well underway. All residential offerings have been pre- sold with construction of the tower due for completion mid-to-late calendar year (CY) 2024. Once developed, the two towers will add approximately 1,400 hotel rooms and residences, additional restaurants and bars, and substantial resort facilities and attractions. The Queensland Government-approved $2 billion- plus masterplan for Broadbeach Island also provides potential for a further three towers. As advised on 29 July 2022, Queen’s Wharf Brisbane is now expected to open during the second half of CY2023. The podium structure has been completed, while the restoration and repurposing of the heritage buildings has commenced. A multi-million-dollar arts program which will see a range of works installed across the precinct is underway, the landscaping of green spaces along the Brisbane River has occurred, and the Neville Bonner Bridge providing pedestrian access between Southbank and Queen’s Wharf continues to progress. An exciting and important project for The Star, it will add significant scale in both gaming and non-gaming amenities. In NSW, we continue to engage with the Department of Planning and progress through the various stages of the Pyrmont Peninsula Place Strategy. On 29 July 2022, the NSW Government provided a development pathway through amended planning controls that provides opportunity for The Star Sydney to deliver a new six- star luxury hotel, additional theatres – creating a genuine theatre precinct – and exciting new rooftop dining experiences. FY2023 PRIORITIES Our key priority in FY2023 will be to execute against the Remediation Plan. This is part of a larger transformation platform to create world-class experiences for our guests and members, headlined by our multi-billion-dollar developments in Brisbane and on the Gold Coast. In addition to our development plans for these properties, we are excited about the potential to progress development opportunities in Sydney. The focus on remediation does not mean our focus will slip with respect to current business operations. We operate three casinos and over 60 hospitality venues. Our leaders are acutely focused on our revenue growth in a post-COVID-19 environment and the importance of prudent cost control. Finally, we will continue to explore opportunities to unlock the underlying value of The Star’s property portfolio, including through asset sales, but only in the event that it adds value to shareholders. The fundamental earnings prospects for The Star’s business remain attractive and the past year has demonstrated how resilient our business is and how quickly customers return when the properties are allowed to open and operate without restrictions. This gives us great confidence moving forward. In closing, I wish to express my gratitude to the Board for their considerable support during FY2022 and to pay tribute to our thousands of dedicated team members without whom we cannot continue to delight our guests each and every day. BEN HEAP Executive Chairman The Star Entertainment Group 7 Board of Directors (As at 13 October 2022) BEN HEAP GERARD BRADLEY AO MICHAEL ISSENBERG KATIE LAHEY AM EXECUTIVE CHAIRMAN NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR Bachelor of Commerce (Finance); Bachelor of Science (Mathematics); Graduate of the Australian Institute of Company Directors 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 Leader; Officer of the Order of Australia BS in Hotel Administration – Cornell University USA; French Order of Merit (Ordre national du Mérite) Bachelor of Arts (First Class Honours); Master of Business Administration; Member of the Order of Australia RICHARD SHEPPARD DAVID FOSTER ANNE WARD ROBBIE COOKE NON-EXECUTIVE DIRECTOR Bachelor of Economics (First Class Honours); Fellow of the Australian Institute of Company Directors NON-EXECUTIVE DIRECTOR (Subject to regulatory approvals) NON-EXECUTIVE DIRECTOR (Subject to regulatory approvals) Master of Business Administration; Bachelor of Applied Science; Fellow of the Australian Institute of Management; Senior Fellow of the Financial Services Institute of Australasia; Member of the Australian Institute of Company Directors Barrister and Solicitor of the Supreme Court of Victoria; Fellow of the Australian Institute of Company Directors; Bachelor of Laws; Bachelor of Arts MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER (Announced on 29 June 2022 and commenced from 17 October 2022 subject to regulatory approvals) Solicitor of the Supreme Court of Queensland; Bachelor of Laws (Honours); Bachelor of Commerce; Graduate Diploma in Company Secretarial Practice; Associate of the Governance Institute of Australia; Member of the Australian Institute of Company Directors Board changes: Sally Pitkin AO (resigned as Non-Executive Director on 30 June 2022) John O’Neill AO (resigned as Executive Chairman on 20 May 2022) Matt Bekier (resigned as Managing Director and Chief Executive Officer on 28 March 2022) 8 8 The Star Entertainment Group 2022 Annual Report Executive Team (As at 13 October 2022) ROBBIE COOKE CHRISTINA KATSIBOUBA SCOTT WHARTON NEIL CARABINE MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER (Announced on 29 June 2022 and commenced from 17 October 2022 subject to regulatory approvals) INTERIM CHIEF FINANCIAL OFFICER CHIEF EXECUTIVE OFFICER, THE STAR SYDNEY AND GROUP HEAD OF TRANSFORMATION (Subject to regulatory approvals) INTERIM CHIEF LEGAL OFFICER GEORGE HUGHES CHIEF MARKETING OFFICER PETER JENKINS GROUP EXECUTIVE EXTERNAL AFFAIRS PAULA HAMMOND CHIEF PEOPLE AND PERFORMANCE OFFICER JESSICA MELLOR CHIEF OPERATING OFFICER, THE STAR GOLD COAST Executive changes: Geoff Hogg (resigned as Acting Chief Executive Officer on 26 September 2022) Kim Lee (resigned as Chief of Staff on 23 September 2022) Harry Theodore (resigned as Chief Financial Officer on 6 May 2022) Greg Hawkins (resigned as Chief Casino Officer – NSW on 6 May 2022) Paula Martin (resigned as Chief Legal & Risk Officer and Company Secretary on 6 May 2022) Matt Bekier (resigned as Managing Director and Chief Executive Officer on 28 March 2022) 9 9 Financial Performance FY2022 marks the third consecutive year where our operations were significantly affected by the ongoing impacts of COVID-19. Property closures, operating restrictions and border closures significantly impacted earnings in 1H FY2022 and into 2H FY2022. Restrictions began to ease in 2H FY2022, allowing for the return to more normal operating conditions by 4Q FY2022. Earnings were also impacted by the suspension of domestic and international rebate programs and costs associated with the commencement of the Remediation Plan. Statutory EBITDA Domestic revenue Operating expenses EBITDA margin $238m DOWN 44.3% $1.52bn DOWN 1.2% $911m DOWN 23.1% 15% VS 27% Statutory EBITDA Domestic revenue Operating expenses EBITDA margin $83m DOWN 58.3% $774m DOWN 4.8% $483m DOWN 18.2% 11% VS 24% Statutory EBITDA Domestic revenue Operating expenses EBITDA margin $89m DOWN 20.6% $422m UP 11.2% $251m DOWN 34% 21% VS 30% Statutory EBITDA Domestic revenue Operating expenses EBITDA margin $65m DOWN 43.4% $325m DOWN 6.1% $176m DOWN 22.5% 20% VS 33% 10 The Star Entertainment Group 2022 Annual Report Group Performance (vs PCP)Sydney (vs PCP)Gold Coast (vs PCP)Brisbane (vs PCP)Group Performance Gross Revenue Net Revenue1 EBITDA2 NPAT3 Sydney Gross Revenue Net Revenue EBITDA Gold Coast Gross Revenue Net Revenue EBITDA Brisbane Gross Revenue Net Revenue EBITDA $m 1,531.5 1,524.5 235.1 (33.4) $m 781.0 775.4 81.1 $m 424.4 423.3 89.3 $m 326.1 325.8 64.7 NORMALISED4 STATUTORY vs pcp5 ↓1.9% ↓1.6% ↓45.3% N.M. $m 1,534.1 1,527.1 237.5 (202.5) NORMALISED STATUTORY vs pcp ↓6.1% ↓5.5% ↓60.2% vs pcp ↑11.2% ↑11.5% ↓20.0% vs pcp5 ↓6.2% ↓6.4% ↓43.4% NORMALISED NORMALISED $m 783.5 777.9 83.4 $m 424.4 423.3 89.3 $m 326.2 325.9 64.8 STATUTORY STATUTORY vs pcp ↓1.5% ↓1.2% ↓44.3% N.M. vs pcp ↓5.4% ↓4.8% ↓58.3% vs pcp ↑11.3% ↑11.3% ↓20.6% vs pcp ↓6.2% ↓6.4% ↓43.4% Three Year Statutory Financial Results Summary6 Gross Revenue Net Revenue EBITDA EBIT Significant Items (after tax) NPAT (before significant items) Earnings Per Share (cents) Full Year Dividend (cents) FY20207 vs pcp $m FY2021 $m vs pcp $m FY2022 vs pcp 1,748.9 1,487.0 282.0 79.8 114.4 19.6 (10.3) 10.5 ↓30.4% ↓31.1% ↓49.0% ↓77.0% ↓521.7% ↓90.9% ↓147.7% ↓48.8% 1,557.1 ↓11.0% 1,545.4 ↑3.9% 1,534.1 1,527.1 426.7 216.2 51.5 109.4 6.1 - ↑51.3% ↑170.9% ↑55.0% ↑458.3% N.M. - 237.5 29.2 170.8 (31.7) (21.3) - ↓1.5% ↓1.2% ↓44.3% ↓86.5% ↓231.7% N.M. N.M. - 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. 5. Prior comparable period. 6. For further information, please refer to the financial report contained in the Annual Report for the relevant financial year. 7. FY2020 comparatives have been restated due to a change in accounting policy. 4. 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. N.M. Not meaning ful as the result moved between a profit and a loss. 11 Key Projects In FY2022, The Star and its partners continued the development of its key projects in South-East Queensland, while also expanding hospitality offerings and non-gaming assets across its properties. This includes the opening and upgrade of 10 establishments such as signature restaurant Ele by Federico & Karl (The Star Sydney), Uncle Su and Isoletto Pool Club (The Star Gold Coast). These establishments form part of a current portfolio of over 60 bars, restaurants and cafes, with over 50 food and beverage outlets to be added as part of Queen’s Wharf Brisbane. Queen’s Wharf Brisbane With an anticipated staged opening from the second half of 2023, Queen’s Wharf Brisbane (QWB) will transform the CBD and river’s edge with an iconic design that embraces Brisbane’s inviting subtropical climate. It will also celebrate the precinct’s Indigenous and European heritage with interpretive trails and experiences spanning the Brisbane River and ridgeline, covering more than 12 hectares of CBD land. 1212 The Star Entertainment Group 2022 Annual Report In FY2022, the transformational Queen’s Wharf Brisbane development reached further significant milestones. • Public artworks: Significant installations underway (including from world-renowned artist Lindy Lee whose sculpture ‘Being Swallowed by the Milky Way’ will be positioned at Atrium entrance) • Green spaces: Trees and landscaping installed on the 6,000 square metres of new public space along the Brisbane River • Neville Bonner Bridge: More than 50% of the new bridge with mast and lookout sections in place • Queen’s Wharf Tower: sales launch of apartments of the second residential tower • Maintaining heritage: commencement of restoration and repurposing of heritage buildings including The Printery Office, the former DPI building and Harris Terrace • Podium structure complete with all four international resort development towers beyond Level 20. The QWB development will continue to take shape throughout FY2023, with construction and fit out works well underway. The Star will continue to operate Treasury Brisbane until the new property opens and the transition to a new casino occurs. QWB, being delivered by Destination Brisbane Consortium, is a multi-billion-dollar joint venture development comprising The Star and its Hong Kong based partners, Chow Tai Fook Enterprises Limited and Far East Consortium International Limited. Concept image of QWB project only. © Destination Brisbane Consortium. 1313 The Star Sydney The Star Sydney continues to be one of • Mashi no Mashi: Launched by the city’s leading tourism, hospitality and WAGYUMAFIA, Mashi no Mashi is entertainment destination. In the 2022 WAGYUMAFIA’s renowned wagyu Ozaki financial year, the property delivered a beef ramen and gyoza. With flagship stores program which saw four new restaurants in Hong Kong and Japan, Mashi no Mashi and bars opened. at The Star Sydney is WAGYUMAFIA’s first In the same period, The Darling – Sydney’s location in Australia only Forbes Five Star rated luxury hotel • Rumble: Launched in The Star Sydney commenced refurbishment works with harbour facing promenade, Rumble is an the delivery of the revitalised pool deck evocative and playful collision of the sweet, already complete. Details of the key projects undertaken throughout FY2022 included: • ELE by Federico & Karl: Launched by celebrated chefs Federico Zanellato and Karl Firla, ELE by Federico & Karl offers a sensory dining experience, comprising an eight-course degustation inspired by the elements and incorporating visuals and music sour, salty and spicy world of South-East Asia, and a welcome addition to The Star Sydney’s premium dining experiences • The Darling: The refurbishment works will continue throughout the remainder of the hotel with the project due to be completed by Q4 FY2023. 14 The Star Entertainment Group 2022 Annual Report The Star Gold Coast The Star Gold Coast’s masterplan continues at pace. In FY2022, several key projects were delivered and significant milestones achieved. These included: • Tower 1: The 53-storey mixed-use tower was completed and delivered by Destination Gold Coast Consortium, a joint venture development comprising The Star and its Hong Kong based partners, Chow Tai Fook Enterprises Limited and Far East Consortium International Limited. Included among the key features of the tower was the launch of: – Australia’s first Dorsett hotel, featuring 313 rooms as part of The Star’s Gold Coast property – Isoletto Pool Club and Isoletto Privé events space, The Star Gold Coast’s new luxurious pool club and skyline party and events space located on the luxe leisure deck of the tower podium – The Star Residences, 422 apartments in the upper levels of The Star’s new hotel and apartments tower offering short-term stays, long-term rentals and permanent residency. • Tower 2: The $400 million, 63-storey mixed-use tower being delivered by Destination Gold Coast Consortium, is well underway. The tower, the second as part of the $2 billion-plus masterplan for Broadbeach Island, will include an internationally recognised five-star hotel brand and the second stage of The Star Residences. The tower will see the delivery of the fourth hotel at The Star Gold Coast, with construction due to be completed in mid-to-late 2024. As approved by the Queensland Government in November 2018, the $2 billion masterplan, along with the above-mentioned Tower 1 and Tower 2 developments, provides potential for a further three towers on Broadbeach Island, as well as additional resort facilities, dining precincts, bars and cafes, and entertainment areas. 1515 Sustainability Responsible Business, Sustainable Destinations Strategy In FY2022, The Star redeveloped its management of material and tolerance to financial crime sustainability strategy, reassessed emerging ESG issue areas, and its most material environmental, increases efforts in a number of key social and governance (ESG) issues business impact areas. and commenced the development of a new strategic roadmap, action plan and a series of targets towards 2030. The strategy, titled ‘Responsible Business, Sustainable Destinations’, is aligned to the United Nations Sustainable Development Goals The strategy’s three pillar framework reaffirms The Star’s commitments towards: (SDGs). This new sustainability • Responsibility – To lead with strategy encapsulates The Star’s integrity to ensure safer gambling, intent for the current and future sustainable growth and zero • Environment – Creating low carbon areas. An action plan detailing the places that support nature and objectives, targets and activities will conserve resources be released in FY2023 on The Star’s corporate website. • People – Foster wellbeing and enhance communities, within and beyond our precincts. Supporting each of the three pillars is a summary explanation of each of The Star’s 15 most material issue CREATE LOW CARBON PLACES THAT SUPPORT NATURE AND CONSERVE RESOURCES FOSTER WELLBEING AND ENHANCE COMMUNITIES, WITHIN AND BEYOND OUR PRECINCTS Contribute to a zero carbon future Reduce waste & improve circularity Support biodiverse ecosystems and curb nature loss Conserve water and protect waterways Ensure sustainable sourcing practices Develop environmentally and socially sustainable precincts and tourism LEAD WITH INTEGRITY TO ENSURE SAFER GAMBLING, SUSTAINABLE GROWTH, AND ZERO TOLERANCE FOR FINANCIAL CRIME Go beyond compliance to ensure safer gambling, harm minimisation and zero tolerance for financial crime Be transparent and accountable about ESG performance, tax and donations Ensure the security and privacy of guests, staff and partners Deliver value to all stakeholders through sustainable long-term growth Enhance community wellbeing, prosperity and resilience Empower a diverse and inclusive culture where everyone has the opportunity to thrive Support the physical and mental wellbeing of our people and guests Ensure ethical sourcing and protect human rights Develop leaders and grow meaningful careers 16 The Star Entertainment Group 2022 Annual Report Our Environmental Targets Net-zero carbon emissions by 2030* 100% takeaway food packaging to be compostable^ *Scope 1 and Scope 2 for wholly owned and operated assets ^(currently at 98%) **against a FY2013 baseline 90% of the portfolio to attain green ratings by FY2022 (achieved) 30% reduction in carbon intensity by 2023** 30% reduction in water intensity by 2023** The Star continues to be a constituent of the FTSE4Good Index Sustainability Approach The Star’s sustainability approach is The Star’s 2022 Sustainability Report focused on creating long term value provides detailed disclosures and in the management of its ESG risks performance reporting against each and opportunities. Each year, of The Star’s most material issues The Star sets additional measures and provides further detail on the new to increase its ESG performance ‘Responsible Business, Sustainable and reporting transparency which Destinations’ ESG Strategy. includes increasing data assurance, performance metrics and targets. To view the 2022 Sustainability Report and full details of the information provided, scan the QR code. Materiality ‘Responsible Business, Sustainable Council Framework, and considers To ensure that each of the 15 Destinations’ is underpinned by a the United Nations Sustainable most material issues identified structured materiality assessment Development Goals (SDGs). as important to The Star and its process that is conducted annually The SDGs capture global sustainable stakeholders is measured, managed and available on The Star’s corporate development priorities and and reported against, all issues have website and within the 2022 demonstrate where corporations been addressed in the new strategy Sustainability Report. can have an impact on global and action plan in addition to existing The materiality approach adheres to the requirements of the Global Reporting Initiative, AccountAbility AA1000 Principles Standard and the International Integrated Reporting environmental and social issues. controls, policies and programs. This year we have also mapped our material topics to the relevant Sustainability Accounting Standards Board (SASB) industry topics from the ‘Casino & Gaming’ industry. 17 Responsibility Responsible Gambling The Star is committed to minimising the risk of the potential harmful impact of problem gambling. Most guests who visit The Star enjoy The key elements of The Star’s to avoid offering inappropriate gambling as part of their leisure responsible gambling program include: incentives to those guests at risk and entertainment experience and do so within their financial means. We acknowledge some guests may experience difficulty in controlling • Availability of behavioural • A groupwide exclusion program which assessments by our counselling includes self-exclusion and venue- service provider Betcare initiated exclusions for guests their gambling. • Providing role specific training to • Using a range of training and The Star’s responsible gambling program aims to promote the early identification and intervention of guests who may exhibit signs of problem gambling. The program’s objective is to minimise the potential harm caused by gambling (such as financial hardship, emotional distress, and relationship breakdown), and to provide guests with the best tools and information team members – and developing technical capabilities, including appropriate conversational skills facial recognition technology, to – with a focus on those in front- support our exclusion program of-house roles who are most likely and to prevent minors from to encounter guests experiencing accessing our gaming areas. gambling harm Board oversight of our responsible • Across each property, Guest gambling program is provided by the Support Advocates and dedicated Remuneration, People, and Social Guest Support Managers provide Responsibility Committee. confidential support and advice to help guests to gamble safely that help them make informed • Access to online information decisions about managing their about where to receive and seek gambling safely. out help – in English and various The Star has set policies and standards other languages for the program at a group level. • Integrating our data and information, Each property operates under a communication, and technology ‘Responsible Gambling Code of system capabilities to identify Practice’ that sets the operational potential risks and to address risky standards for the responsible delivery behaviours of guests of gambling products and services. • Developing systems with The Star’s marketing and sales teams to promote responsible gambling and 18 The Star Entertainment Group 2022 Annual Report 19 20 The Star Entertainment Group 2022 Annual Report Responsible Service of Alcohol The Star takes its obligations in relation to the safe and responsible service of alcohol (RSA) seriously. The Star’s RSA program is supported MINIMISING HARM COMMUNITY AMENITY by policies, procedures, and mandatory training for all team members. Management and team members are committed to providing patrons with a safe and secure • The sale, supply and consumption • Reduction of noise of alcohol is not permitted by person(s) under the age of 18 years, with proof of age required entertainment environment. • Signage is provided in each Responsible service of alcohol to customers is an integral part of property related to the service of alcohol restrictions this commitment to minimise harm • Promotions that encourage rapid or caused by the misuse of alcohol excessive drinking are prohibited, as and to minimise potential impacts are activities that could potentially on the local community. lead to harassment of patrons or The Star’s RSA Manual contains team members • Safe and responsible advertising of alcohol • Supporting government and community initiatives relating to safer nights out. RSA committees in each of our properties meet monthly to manage and monitor activities and incidents related to the RSA program. Each committee works towards continuous improvement to address requirements that are specific to each • Free drinking water is available from local regulatory and community property as well as the following broad all food and beverage outlets, and requirements and the circumstances requirements across the organisation. bottled water is always available that are specific to their respective PROVIDING SAFE VENUES • Refusing entry or service to intoxicated patrons • Managing illegal or undesirable activity for purchase property and venues. • Light or mid-strength alcohol options Board oversight of the RSA are sold at cheaper prices than full program is provided by the strength drinks and are available in Remuneration, People and Social all outlets Responsibility Committee. • Drink spiking awareness is promoted • Providing role-specific training for within the properties venue managers and team members • No shot style drinks are served in • Use of safe glassware including any outlet toughened and/or tempered glass in most venues or polycarbonate plastic in higher risk areas. • Outlet Managers are empowered to identify high risk periods and manage consumption in these times by limiting the number of drinks that can be purchased at any one time (e.g. one drink per person during high-risk periods). 21 Environment Climate Change The Star is committed to supporting the The Star has long recognised the potential transition to a low carbon economy and is impacts from climate change and has working towards achieving net-zero Scope 1 adopted the Task Force on Climate Related and Scope 2 emissions from owned and Financial Disclosures (TCFD) framework. managed assets by 2030. The Star released its third TCFD aligned Climate change risks are included in the company risk register and are managed under the normal risk processes with oversight from the Board. report in FY2022 which is available on The Star's corporate website. Alignment with the Task-Force on Climate Related Financial Disclosures The Star’s TCFD aligned report focuses This includes how the framework is on the management of transitional and integrated into risk management processes, financial climate risks and provides details how capital projects are aligned to the on how The Star is managing the impacts framework’s four areas of ‘Governance,’ of these risks into the future. In line with ‘Strategy’, ‘Risk Management’ and ‘Metrics a commitment to assess the potential and Targets’ and how progress against physical risks that may be presented by the framework is reported. climate change, The Star completed its third assessment in 2021 building on previous risk assessments completed in 2017 and 2019. Further details on physical and transition risk mitigation and progress can be found in the 2022 Sustainability Report. Climate adaptation and mitigation design and operational requirements to manage resilience and potential physical climate risks continue to be updated annually in The Star’s ‘Sustainable Design and Operational Standards’, which can be The Star continues to mature in its accessed on the corporate website. approach to the TCFD. Net-zero 2030 and Carbon Emissions Management The Star is committed to long term carbon To achieve this target, The Star has emissions reduction. identified a pathway that includes: To support the transition to a low carbon • Purchasing of renewable electricity economy The Star is targeting net-zero Scope 1 and Scope 2 carbon emissions for • Onsite solar (where possible) its wholly owned and operated assets • Electrification over time by the 2030 calendar year, in line with the reductions required within the Paris Agreement. • Continuation of a group-wide energy efficiency program • Development of a carbon offsetting project and strategy that delivers environmental and social benefit. 22 The Star Entertainment Group 2022 Annual Report In FY2022 a materiality assessment was To continue to focus on immediate conducted to understand The Star’s most reductions and to drive resource efficiency material Scope 3 emissions from operations outcomes, The Star has interim carbon and in preparation for the development of water targets to achieve a 30% reduction category Scope 3 management plans. in intensity by FY2023 against a FY2013 This assessment progressed from the baseline on a square metre basis. Scope 3 emissions assessment conducted in FY2021 which assessed Scope 3 emissions from the procurement of products and services. The Star’s Scope 1, Scope 2 emissions for FY2022 were 8,761 (tCO2-e) and 88,077 (tCO2-e) respectively, while Scope 3 emissions were calculated at 114,525 At this time, Scope 3 emissions are not (tCO2-e) based on FY2021 and FY2022 data. included in The Star’s net-zero emissions targets for its properties. These plans are actively being developed, and once complete, consideration will be given to establishing Scope 3 targets. For detailed year on year Scope 1, Scope 2 and Scope 3 carbon emissions, data on energy use and progress against The Star’s targets, refer to the 2022 Sustainability Report. Corymbia – A Carbon Offsetting Project As part of The Star’s commitment and and manage the impact that planting over pathway to net-zero, a carbon offsetting 100 hectares of native forest will have on project was established to support residual local ecosystems and habitat creation. emissions offsetting that will also deliver environmental and social value. Working with its partners, The Star will continue to assess biodiversity impacts During FY2022, The Star secured 170 annually in line with managing its ACCU hectares of farmland near Gympie, obligations and work towards the property Queensland and registered its first native becoming a koala sanctuary. revegetation project under the Clean Energy Regulator’s Emissions Reduction Fund to create its own Australian Carbon Credit Units (ACCU) to support its net-zero pathway. The Star is working with partners to commence native tree planting in the next financial year that will support habitat for endangered koalas. Sustainable agriculture opportunities are being explored to provide produce streams in The Star’s restaurants and that support local farming communities. ‘Corymbia’ is providing an opportunity for a local farming couple to develop farming business models that work alongside native tree generation. Detailed information on The Star’s carbon abatement project and Initial biodiversity assessments have been sanctuary development can be found in the completed to capture data and to monitor 2022 Sustainability Report. 80,000 trees to be planted over 3 years 3 hectares re-vegetated for every hectare of property operations Annual biodiversity assessment to support native flora and fauna 23 22%* energy savings 26%* carbon savings 27%* water savings *by intensity from a FY2013 baseline Resource Efficiency, Waste Management and Sustainable Design The Star’s commitment to sustainable In this period, The Star Sydney’s The Star is committed to improving design and operations in the ‘Green Star – Performance’ rating waste diversion from landfill, development and management of its was increased to three stars reducing food waste at the point of assets is aligned to the groupwide (the equivalent to good practice), an generation and organics recycling and Environmental Management Policy, additional building was NABERS rated, increasing the number of recycling Sustainable Design and Operational new 5 Star Green Star Design and streams across its properties. Standards and its net-zero and As Built Commitments were made at The Star’s food takeaway packaging resource performance targets. The Star Gold Coast and existing is 98% compostable, targeting 100% The Star’s operational resource reduction plans focus on reducing Green Star commitments progressed as additional packaging material as part of the development pipeline. solutions become available. potable water use, reducing electricity A summary of third-party certification WASTE AND RECYCLING STRATEGY and gas use (and moving away ratings and commitments across the from fossil fuel use), reducing waste property portfolio can be found in the to landfill including food waste and 2022 Sustainability Report. In FY2022, The Star’s ‘Waste and Recycling Strategy’ was expanded to include innovative textile recycling increasing recycling. The Star continues to audit and partnerships that provide new Resource use performance for monitor building performance pathways for uniform and linens FY2022 and prior years, as well as through its building optimisation recycling. These initiatives have programs and initiatives have been and analytics systems. Further, diverted over 15 tonnes of material detailed within the 2022 Sustainability efficiency gains continue to be from landfill. Report available found on The Star’s realised as plant and equipment corporate website. SUSTAINABLE DESIGN AND OPERATIONAL STANDARDS The ‘Sustainable Design and Operational Standards’ demonstrate the company’s commitment to green building ratings and building world- class destinations. The Standards, which are aligned with ‘Green Star – Performance’ standards, provide upgrades and replacements are identified in optimisation systems and through property energy and water audit reports. In FY2022, The Star completed five upgrade projects and seven optimisation projects resulting in energy savings of 1,282MWh, carbon savings of 1,038 tonnes and expected In the next financial year, The Star will start to implement digital tracking technology to monitor waste generation levels at source with further waste auditing scheduled in FY2023. Food donation partnerships continue with OzHarvest with 2.4 tonnes of food donated during the 2022 financial year. future financial savings of $360,560. The Star’s reporting on waste suppliers, builders, contractors and ENERGY AND WATER The Star’s property operations teams PROJECT PIPELINE and recycling performance for FY2022 and prior years, as well as its related programs and initiatives with recommendations by category to ensure more sustainable design. Energy and water savings and cost have been detailed in the 2022 benefits from projects implemented Sustainability Report and can be In FY2022, The Star achieved its are monitored through The Star’s found on the corporate website. target to ensure that over 90% of ‘Energy and Water Project Pipeline’ its portfolio by floor space was third and through the building optimisation party certified with a sustainability and analytics system. rating which includes NABERS, Green Star or EarthCheck. 24 The Star Entertainment Group 2022 Annual Report over 15 tonnes of textile diverted from landfill 2.4 tonnes of food donated to OzHarvest The Global Compact Network Australia In 2022 The Star continued its commitments The Star became a signatory member of the to the UN Global Compact sustainability UN Global Compact Network Australia in 2021 corporate responsibility initiatives and we are committed to continuing to work and principles of human rights, labour, the with our team members, suppliers, and other environment and anti-corruption. stakeholders to make a positive contribution The Star submitted its communication on progress and letter of commitment as part of the Early Adopter Program on 30 June 2022, detailing progress related to the 12 months prior. to achieving the United Nations Sustainable Development Goals. Reporting and Assurance The Star has attained Limited Assurance for In FY2022, Limited Assurance was expanded environmental data including both Scope 1 and to include additional social metrics in relation Scope 2 carbon emissions, energy use, water use, to responsible gambling – The Star’s most and waste and recycling data and social metrics material ESG issue. During this period, The Star which include employee safety (Total Recordable has released its fifth Global Reporting Initiative Injury Frequency Rate), workforce diversity aligned report. These can both be found within (female representation across team member and the 2022 Sustainability Report. management cohorts) and gender pay gap data. Modern Slavery The Star is committed to working in partnership slavery risks are required to undertake with our team members, suppliers and other mandatory online modern slavery training stakeholders to understand and address the which achieved 100% completion in FY2022. issues of modern slavery so that together, we In addition, all team members and contractors can respect and support the rights of workers in have access to the online training module, and our operations and supply chain. 86% have completed the training voluntarily. Our Supplier Management Strategy is As part of our obligations under the Modern multifaceted and incorporates elements of our Slavery Act 2018 (Cth) The Star provides modern slavery approach, our Supplier Code an annual modern slavery statement that of Conduct, our supplier expectations, the way addresses reporting requirements during we classify and risk assess our suppliers, and the financial year, which is submitted to the the way we onboard suppliers into our business. Australian Border Force Modern Slavery Raising awareness and skills among team Register by 30 December each year. members is an ongoing aspect of The Star’s To read The Star’s Modern Slavery Statement modern slavery program. Our team members FY2021 (published December 2021) please involved directly in the supply chain, visit www.starentertainmentgroup.com.au/ procurement, and roles related to modern modernslavery. 25 People Health and Safety While the COVID-19 pandemic continued to impact the hospitality and tourism industry during FY2022, The Star remained committed to developing best-practice processes in how it supported and cared for its people, contractors, and guests. Despite COVID-19 related restrictions health awareness training to increase understanding of the importance impacting our operations in Sydney their confidence in supporting their of the safety management system, and Queensland, The Star continued teams. Wellness education was risk management, consultation and to deliver measures to help protect delivered via webinars to equip communication, working safely the physical health of team members team members with the tools with contractors and managing and and guests including providing on- and knowledge to make informed incident investigation. property PCR testing for its workforce health choices. and enhancing technical measures to improve air quality. INJURY PREVENTION CONTINUOUS IMPROVEMENT In FY2022, The Star continued its The last 24 months have also highlighted the importance of promoting and supporting the mental health and wellbeing of team members. The Star’s goal – for individuals systematic approach to identifying and teams to take personal psychosocial hazards in the workplace responsibility for health and safety and identifying and reviewing the – is to make processes and policies existing controls we have in place consistent across the organisation to minimise or eliminate the risk of and to improve efficiencies while psychological injury. In FY2022, The Star focused on preventing injuries. a combination of education and awareness initiatives, providing additional resources and continual communication and feedback with team members to ensure they had (and were aware of) the availability To ensure that our review and In FY2022, The Star’s total recordable recommendations have maximum injury frequency rate (TRIFR), based impact, we have consulted at all on accepted workers’ compensation levels of the organisation to identify claims was 11.8* which was lower than additional controls including enhanced our pre-COVID-19 figures. education and training opportunities of relevant support structures To empower our team members with and assistance. MENTAL HEALTH the best tools and training at their fingertips, The Star introduced key safety training via bespoke online A digital wellbeing platform, 'Unmind', videos focusing on internal processes was made available to all team and likely scenarios. members, and utilised throughout the organisation, with the most popular modules accessed including ‘managing stress’, ‘building resilience’ The Star endeavours to engage and educate team members in the health and safety decision making process. and ‘nutrition’. This has been actioned by focusing on improving both individual skills to increase resilience and leader capability to support teams and individuals. Consultation has also focused on work design, safe systems of work, training content and delivery, and incident and injury management. The Star has also committed to providing a healthier environment for its front of house team members and guests by phasing out smoking in all The Star also encouraged leaders to complete comprehensive mental providing online training focused on indoor areas by the end of the 2022 increasing their knowledge base and calendar year. * In 2020, the NSW Government amended the Workers Compensation Act 1987 to introduce a presumption that workers in prescribed employment who contracted COVID-19 were automatically presumed to have contracted it in the course of their employment. The purpose of this legislation was to make it easier for workers to receive workers compensation entitlements without delay. Given that these claims are driven from an administrative position, they have been excluded from the annual audit verification calculation for total recordable injury frequency rates. Under this legislation, in FY2022 there were 1,392 claims reported to The Star from team members with COVID-19. 26 The Star Entertainment Group 2022 Annual Report Asset Protection Across each of its three properties, The Star has 24/7 security and monitoring in addition to standard operating procedures that deal with and respond to suspected undesirable conduct. In FY2022, The Star made significant investments to update and standardise its asset protection and surveillance technology systems at The Star Gold Coast in line with operations at The Star Sydney. The Star Gold Coast invested over $3.5 million to install facial recognition technology (which is subject to regulatory approval) and integrating a new CCTV system called ‘Avigilon’ for a group-wide solution. In total, The Star now has more than 7,100 cameras installed across its three properties in Sydney, Gold Coast and Brisbane. As Queen’s Wharf Brisbane continues to be developed and readied for its staged opening in 2023, there will be further investments in security technology and asset protection across that precinct. Across our three properties, we have more than 450 team members working in the security and surveillance department. 2727 Neighbourhood Engagement In FY2022, The Star unveiled three of the National Gallery of Australia, is the gallery's proposed art installations that will be featured most expensive acquisition. across Queen’s Wharf Brisbane’s (QWB) as part of a multi-million-dollar public art program. Samuel Tupou, who is of Tongan and Polynesian heritage, has been selected to A Specialist Artistic Advisory panel, led create a supersized wall mural depicting by highly regarded art figure Philip Bacon Australian lungfish swimming into a vibrant AO alongside art curator and Director of sunrise, and called ‘Lungfish Dreamz.’ the Institute of Modern Art Liz Nowell and respected Indigenous curator and arts administrator Avril Quaill, is curating the collection of artworks. The 16 x 2 metre panoramic mural, comprising pixilated squares of blue, violet, orange and yellow mosaic glass tiles, will run adjacent to the bicentennial bike path between Queen’s Selected by the panel, these first confirmed Wharf Road and the Brisbane River. installations will be created by local Queensland artists including Chinese-Australian painter and sculptor Lindy Lee, Samuel Tupou and digital art duo Alinta Krauth and Jason Nelson. South-East Queensland duo Alinta Krauth and Jason Nelson will deliver a light installation to The Printery Office, a heritage building that was the first in Queensland to be powered by Lindy Lee’s installation, titled ‘Being Swallowed electricity and restored for public use. Named by the Milky Way’, an 8-metre, 8,000-kilogram ‘A Cottage Year’, the display will transform the bronze sculpture for the George Street building into a giant canvas for 52 different Atrium entrance to the QWB precinct will be digital light projections – one for every week the signature artwork. The stunning oblong of the year. sculpture will feature thousands of tiny holes puncturing its bronze surface. At night it will appear as a shimmering, light-filled galaxy of silver and gold stars. Ms Lee is an internationally renowned artist, whose recent $14 million commission for the There are number of Indigenous, contemporary and international artists yet to be announced. Artists impression of Lindy Lee’s eight-metre installation, titled ‘Being Swallowed by the Milky Way'. 28 The Star Entertainment Group 2022 Annual Report Talented Teams In FY2022, The Star reaffirmed its commitment to building talented teams that provide outstanding guest experiences and, as a result, generate shareholder value. The company’s learning, training and development programs focus on upskilling team members and leaders in all departments. To ensure The Star maintains a consistent pipeline of talent across its business – The Star Academy particularly in areas that require specialised skills and training such as culinary arts, hospitality management and table games (i.e. croupiers), contemporary talent management practices have been implemented to reduce attrition, and support To facilitate and deliver on its commitment to training team members, The Star Academy centres around three pillars of learning: The Skills Centre, The Foundation Centre and The Leadership Centre. the business’ growth and wider strategy. In response to business disruption caused A dedicated ‘Talent Capability’ team works with business units across the organisation to optimise these practices and contributes to the design and delivery of talent management programs. by the COVID-19 pandemic between July and October 2021, The Star Academy adjusted its approach to delivering learning and development modules efficiently. The Academy created ‘Lockdown Learn and Connect,’ an online learning and engagement In FY2022, an annual review identified key platform for participation by team members talent, skills and gaps across the organisation and leaders. for managers and senior leaders. The review identified and categorised personnel across three key areas – Achieving Leader, Future Leader and Key Achiever. Utilising relationships with external training and sponsorship partners including NSW Rugby League and Gold Coast Titans, 44 virtual learning sessions were designed High-level capability themes and to deliver a bespoke program to uplift skills development needs were also identified that support growth and capability. In total, through talent review conversations around 1,500 team members attended and feedback to The Star Academy these sessions. for integration into future leadership and management capability building development programs. The Skills Centre The Skills Centre houses The Star Culinary Institute, The Star Graduate Program and the Food and Beverage Skills Program. The Skills Centre is designed to attract the best talent to The Star’s properties and to provide them with a pathway to long-term careers in hospitality and tourism industry. 29 The Star Culinary Institute Celebrating its 10-year anniversary in FY2022, The Star Culinary Institute (SCI) continues to attract, nurture, and develop apprentices who are highly skilled in the kitchen, and passionate ambassadors for the industry. Over the last 10 years, the program has welcomed over 487 apprentices. SCI offers full-time and school-based apprenticeships across Commercial Cookery, Retail Bakery and Patisserie. In the 2022 financial year, 14 apprentices completed the program, with 100% of those finding full-time roles within The Star’s operations. In this period, enrolment numbers have increased by 66%, with male to female enrolment ratios nearing 50%. In FY2022, The Star continued to support the National Indigenous Culinary Institute, a leading organisation aimed at connecting aspiring Aboriginal and Torres Strait Islander chefs with some of Australia’s most prestigious fine dining restaurants. The Star Graduate Program Established in 2018, 43 tertiary-educated graduates have been welcomed across the Technical (IT), Hospitality and Corporate programs. In January 2022, a new cohort of 14 graduates was welcomed. The Star Graduate Program has maintained 100% employability and retention with 19 graduates who completed the program securing full-time roles. Twenty-four graduates are currently completing the 2021 and 2022 programs. 30 The Star Entertainment Group 2022 Annual Report Food and Beverage (F&B) Skills Program Discovery Suite is accessible to People Leaders within the organisation. This suite of development modules consists of seven leadership topics that encapsulates what In response to challenges posed by labour leadership at The Star looks like and will shortages in hospitality, The Star Academy elevate the capability of our leaders through developed a fast-track basic skills program continuous learning and reinforcement. with the aim of rapidly upskilling candidates to meet demand. The ‘Supernova program’ is a specialised leadership program that supports the skill The four-day on-boarding and skills training development of leaders who have been allows any vacancies throughout venues identified in the latest round of The Star’s across The Star’s three properties to be filled talent review as a future senior leader efficiently with team members who and who meet the following criteria: demonstrate a positive attitude and aptitude and who possess the necessary skills to deliver exceptional guest service. 1. Critical Skills Shortage Any leader who is from a division that is considered a skills shortage sector was To support delivery of this program, selected as a priority 2. Asian leadership All nine Asian leaders who had expressed interest were selected with consideration to the current ‘Bamboo Ceiling’ and multicultural targets at The Star 3. Female Leadership The selection panel agreed to a 2 to 1 ratio of female to male participants to emphasise the development of our female leaders 4. Potential lateral movement to skills shortage divisions Any leader who was considered to have the potential to move laterally to a senior leadership role in a skills shortage sector 5. Impact of loss and risk of loss Any leader who was identified as having a high impact and risk of loss. The Star’s ‘Supernova program’ focusses on developing the skills, knowledge, and behaviours of future senior leaders to implement the wider business strategy. It is continually measured to ensure The Star is retaining and growing its top talent. The Star Academy in Sydney invested in a purpose-built F&B Skills Academy that opened in February 2022, and which will also be replicated at The Star Gold Coast and Queen’s Wharf Brisbane. The Leadership Centre In FY2022, The Leadership Centre’s priorities for development consisted of the following: 1. Leadership Coach Support Program The Star Academy continued the ‘Leaders Coach Support Program’ which was first rolled out FY2021. It offers two internal (active/transformation) coaching engagement modules across The Star and includes a transition coaching engagement for senior leaders moving into promoted roles. 2. New People Leader Platform The Star is committed to ensure every new leader is equipped with the necessary tools to succeed in their new role. A dedicated platform was rolled out, providing a “one-stop-shop” and includes on-boarding modules for 30, 60 or 90 days. 3. Formal Leadership Development The Star has partnered with Courageous Leader, an external organisation to deliver two new groupwide leadership development offerings – ‘Discovery Suite’ and the ‘Supernova program’. 31 Diversity and Inclusion The Star's diversity, equity and inclusion proposition is represented in all areas of our business and team member experiences. Our dedication to diversity and inclusion is the foundation of our culture and sits at the heart of our vision. The Star’s diversity and inclusion the employee-led network groups – targets are supported and Balance@TheStar, Proud@TheStar, championed by the Board of Unity@TheStar and Directors, the Executive Team and Reconciliation@TheStar. Recognition for The Star’s accomplishments across workplace inclusivity Workplace Gender Equality Agency ‘Employer of Choice’ 2022 2022 Australian Workplace Equality Index ‘Gold Employer’ Status Booking.com’s ‘Travel Proud’ badge recognises The Star's properties as LGBTQI+ friendly and inclusive to all guests 32 The Star Entertainment Group 2022 Annual Report Balance@TheStar INTERNATIONAL WOMEN’S DAY In FY2022, The Star marked the Driving gender equity by targeting a importance of International Women’s 45% female, 45% male and 10% Day, the role women play across non-binary balance at leadership levels. the company and society and their achievements, by celebrating over a full week with a range of initiatives and events for team members designed to highlight this year’s theme of ‘Break the Bias.’ These included a leaders’ panel with a guest speaker, celebrations with team members, and partner sessions focused on women’s financial well-being. INCLUSIVE LEADERSHIP TRAINING In September 2021, The Star introduced mandatory training modules for leaders to equip them with an understanding of The Star’s expectations on gender equality and flexible work. In consultation with Balance@TheStar, a revised gender equality strategy was established in FY2022, with a focus on five key areas: Leadership accountability Gender pay equity Building capability of talent pipeline Cultural change and communication Flexible work and support for carers The Star proudly plays an active role in progressing gender equality as a founding member of Women in Gaming and Hospitality Australasia (WGHA). We ensure all team members, particularly women, have access to training and information that allows them to progress their careers in the industry. The Star champions gender equity in a variety of ways. WORKPLACE GENDER EQUALITY AGENCY (WGEA) – Employer of Choice for Gender Equality Citation In March 2022, The Star was one of only 12 new companies to be recognised by WGEA, an Australian Government agency, for its commitment and contribution to progressing gender equality and equity in the workplace. INTERNATIONAL MEN’S DAY Celebrated in November 2021, with a focus on inclusion for all genders, Balance@TheStar committee members shared their experiences of positive male role models across The Star’s internal communication channels. 33 Proud@TheStar PRIDE IN PRACTICE – BOOKING.COM TRAVEL SPONSORSHIP AND PANEL SESSION PROUD BADGES Creating a safe and inclusive environment by providing LGBTQI+team members with a platform of support and Pride in Practice Conference: In FY2022, The Star was awarded In November 2021, The Star was Travel Proud badges, and recognised a platinum sponsor of the Pride in as an LGBTQI+ friendly destination by Practice Conference. As part of online travel agency Booking.com. representation, to participate in the conference, our CEO provided LGBTQI+ days of significance and a keynote speech highlighting the celebrations, and become an ally need for continuing momentum of and friends of the community. workplace diversity and inclusion 2022 AUSTRALIAN WORKPLACE EQUALITY INDEX (AWEI) programs – particularly for the LGBTQI+ community, the importance of leading from the top, the power IDAHOBIT In FY2022, The Star was awarded gold of allyship, gender diversity and the Team members from The Star’s hotels and reservation teams attended specialty awareness training sessions to understand and connect with LGBTQI+ travellers. employer status and exceeded its target of a 5% year on year growth in the AWEI. The 21% increase in score equates to the top 7% of most inclusive workplaces in Australia. ALLY TRAINING Led by our Proud@TheStar employee network group members, The Star encourages all team members to join The Star’s LGBTQI+ Ally training. Our goal is not to ‘change your mind’, values or beliefs. Our goal is to educate and provide awareness. Over 300 team members and leaders have taken part in Proud@TheStar’s Ally Awareness Training. achievements of Proud@TheStar. The Star and leading brewer Lion joined forces to raise awareness of, and The Star also hosted a 30-minute support for the 2022 International panel session with representatives Day Against Homophobia, Transphobia from the leadership team. The panel and Biphobia (IDAHOBIT). shared lived experiences from the LGBTQI+ community and the importance of allyship. Welcoming around 100 employees from across both The Star and Lion, the event combined trivia, networking, INTERSEX AWARNESS DAY and a DJ set while donating all proceeds from ticket sales to Minus18 – an Australian charity dedicated to improving the lives of LGBTQIA+ youth. In October 2021, The Star partnered with Intersex Human Rights Australia to provide over 30 Proud@TheStar members with a training session to educate and bring awareness of the intersex community and the challenges that people with intersex variations may face. The training included introductions to intersex, health and human rights and intersex community and allyship. 34 The Star Entertainment Group 2022 Annual Report Unity@TheStar AMBASSADOR PROGRAM In November 2021, Unity also The Star supports cultural diversity launched the CALD Leaders Program. and inclusion for all and is driving The 6-month program will enable leadership representation and open and honest dialogue between professional development for our The Star’s Executive Team and Senior Asian team members, aiming for Leaders (Ambassadors) and leaders 20% Asian representation (senior with culturally and linguistically diverse backgrounds. It has been designed to enable Ambassadors and CALD Leaders to share information, to help the organisation develop a better understanding of what impacts professional career objectives and aspirations of CALD Leaders and to drive a more inclusive and equitable workplace for all. leadership level) by 2023. At The Star we appreciate that our workforce is made up of team members from many cultures. We proudly celebrate that diversity. In FY2022, The Star expanded its ‘Days of Significance’ calendar to include two additional culture festivals – Diwali (the festival of lights) and Ramadan. ASIAN LEADERSHIP PROJECT The Star is a corporate member of the Asian Leadership Project, which aims to build a strong network of Asian talent that feel supported via ongoing personal and professional career development opportunities. This includes participation at their mentoring events, where aspiring culturally and linguistically diverse talent from member organisations have the opportunity to connect with business leaders and learn from lived experiences to inspire them to grow professionally. LUNCH AND LISTEN Unity prioritises a need to support and encourage the development of team members from culturally and linguistically diverse (CALD) backgrounds. To help promote that development in FY2022, the network- group initiated ‘Lunch and Listen’, a new program to promote open dialogue between leaders from CALD backgrounds and senior leaders from across The Star. The networking sessions provided the groups with an opportunity to discuss career challenges, as well as sharing ideas on how to overcome them and individual success stories. 35 Reconciliation@TheStar The Star has taken significant steps to progress reconciliation activities including: • The growth of Reconciliation@TheStar, the employee network group that supports activities, initiatives and days of significance as outlined in the Reconciliation employee network group strategy • Activation of Aboriginal & Torres Strait Islander Peoples days of significance in the diversity and inclusion calendar, including National Reconciliation Week and NAIDOC Week • Updates to the Acknowledgment of Country at all meetings and events of significance across The Star • The inaugural strategy day for Reconciliation@TheStar was held on 18 January 2022. INDIGENOUS EMPLOYMENT INDEX The Star participated with 41 other large organisations in the Minderoo Indigenous Employment Index. This index aims to establish a baseline for the state of Indigenous employment parity, identify best practices, and achieve sustainable Indigenous employment for the future. As part of National Reconciliation Week, Reconciliation@TheStar committee members completed a three-hour cultural competency training run by The BlackCard (a certified organisation of Supply Nation). In celebration of NAIDOC Week, over 300 team members came together across The Star’s three properties (our meeting places) and alongside Indigenous artists to create amazing pieces that represent the traditional owners of the lands we operate on (including the Gadigal People, the Danggan Balun People, and the Turrbal and Jagera People) our communities, teams, and their respective journeys. We thank Jason Douglas and Trevor Eastwood from Dalmarri, Ambrose Killian and Matt Robert from Ngalin Ayeye, who helped our team members harness their artistic flair in workshops throughout the week to create these artworks. The Star Entertainment Group 2022 Annual Report Community and Charitable Partnerships The Star partners with a number of community organisations, charities and not-for-profits in Sydney, Brisbane and the Gold Coast to make a positive impact on the communities we call home. In FY2022, The Star continued its relationship with GIVIT – our National Community Partner, by supporting their charitable work in several ways including through their initiatives with local Indigenous organisations, their 2021 Christmas Appeal and various natural disaster drives. In the 2022 financial year, The Star partnered with GIVIT on a national ‘Spring Clean’ campaign; kickstarting the initiative by pledging $2 million worth of items to GIVIT partner charities, including brand new mattresses, designer sofas, dining tables, chairs and crockery. The Star Sydney has been part of the Pyrmont community for around three decades and continues to invest in local community groups, events, and organisations such as Pyrmont Wine and Food Festival, Pyrmont Sings, and Christmas in Pyrmont. Team members from The Star Sydney, including chefs and culinary apprentices, have donated their time and skills to help the local community raise much needed funds. As part of the 2021 Christmas In Pyrmont street fare, apprentices created gingerbread houses, casual restaurant Bar Nexus provided food, and chefs delivered a tent full of pastries and sweets. Altogether, The Star raised over $10,000 for three local charities including Ultimo Public School Music Program, Barnardos’ Response to the COVID-19 Crisis and Uniting Harris Community Centre. 37 The Star also partners with the National Our partnership with SLSQ is one that goes Indigenous Culinary Institute, by directly back almost 30 years. We play our part investing in the future of young and talented by supporting ‘Surf Woman of the Year’, indigenous chefs and helping build the promoting young women from across the capacity of the organisation to expand Gold Coast and Queensland to develop their their operations both in New South Wales skills and careers. The Star Gold Coast has and into Queensland. Treasury Brisbane continues its support of local craft brewers and winemakers through a long history with Surf Life Saving’s ‘Surf Girl’ program and its fantastic to be involved in the first two years of its rebirth. its partnership with The Royal National Currumbin Wildlife Hospital is one of Agricultural and Industrial Association of the busiest wildlife hospitals in the world Queensland’s (RNA) Royal Queensland and treats thousands of injured, sick and Beer and Wine Awards. These awards have displaced animals every year. The Star provided the opportunity to promote some Gold Coast is a proud supporter of the of Queensland’s best beer and wine as well Hospital’s important work in ensuring the as the emerging talent and craftsmanship of these breweries and wineries. conservation of local wildlife and animal care through the provision of donations, The Star also partners with one of Queensland’s newest and most prestigious as well as raising awareness within the community and visitors to the property. art prizes, the Brisbane Portrait Prize. As the Established in 2008 at The Star Gold Coast Presenting Partner of the Prize, we are and Treasury Brisbane, ‘Open Your Hearts’ directly investing in showcasing some of is The Star’s team member giving program. the most talented artists in Brisbane and beyond, as well as playing an integral role in an art prize that is quintessentially Brisbane. In FY2022, the program was expanded to all properties, with an aim to give all team members the same opportunity to make a The Star Gold Coast has two long term positive impact on the communities in community partners which it is proud to which they work and live. support – Surf Life Saving Queensland (SLSQ) and Currumbin Wildlife Hospital – both being iconic Gold Coast organisations that have a daily impact on our team members and our guests. 38 The Star Entertainment Group 2022 Annual Report Directors’, Remuneration and Financial Report For the year ended 30 June 2022 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 Directors’ Declaration Independent Auditor’s Report 01 19 20 41 41 42 43 44 45 98 99 PLEASE NOTE: The above page numbering is from the original Directors’, Remuneration and Financial Report released to the ASX on 27 September 2022 and has been included for reference. THE STAR ENTERTAINMENT GROUP LIMITED A.C.N. 149 629 023 ASX CODE: SGR AND ITS CONTROLLED ENTITIES 39 Directors’ Report For the year ended 30 June 2022 THE STAR ENTERTAINMENT GROUP LIMITED A.C.N. 149 629 023 ASX CODE: SGR AND ITS CONTROLLED ENTITIES 40 The Star Entertainment Group 2022 Annual Report Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 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 2022. 1 Directors The names and titles of the Company's Directors in office during the financial year ended 30 June 2022 and until the date of this report are set out below. Directors were in office for this entire period unless otherwise stated. Directors Ben Heap a Gerard Bradley AO Michael Issenberg b Katie Lahey AM Richard Sheppard Former John O'Neill AO c Matt Bekier d Sally Pitkin AO e a Interim Chairman and Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Chairman and Non-Executive Director Managing Director and Chief Executive Officer Non-Executive Director Commenced as Interim Chairman on 1 June 2022. b c d e Michael Issenberg commenced as a Non-Executive Director on 11 July 2022 following the receipt of all necessary regulatory approvals. For the period 17 February 2022 to 10 July 2022 he was an Observer. Ceased as Chairman and Non-Executive Director on 31 May 2022. Ceased as Managing Director and Chief Executive Officer on 28 March 2022. Ceased as Non-Executive Director on 30 June 2022. 2 Operating and Financial Review The Operating and Financial Review for the year ended 30 June 2022 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. The Group holds casino licences to operate its properties: The Star Sydney, expiring in 2093; The Star Gold Coast, perpetual licence; Treasury Brisbane, perpetual licence that expires in 2070. The Group owns Broadbeach Island on which The Star Gold Coast is located. 2.2 Business strategies Create world class integrated resorts with local spirit; The key long term strategic priorities for the Group, in pursuit of its vision to be Australia's leading integrated resort company, remain unchanged: (cid:4) (cid:4) Manage planned capital expenditure programs to deliver value and returns for shareholders; (cid:4) Improve profitability from local, domestic and international source markets through continued emphasis on loyalty, gaming and non-gaming strategies; Deliver on the Remediation and Transformation Program (see below); 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. (cid:4) (cid:4) (cid:4) 1 41 1Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Looking forward into FY2023, management’s focus will be on the following key areas: (cid:4) Remediation and transformation (cid:5) Commitment to demonstrating suitability to hold casino licences in New South Wales (NSW) and Queensland (QLD); (cid:5) Complete new senior executive and Board appointments; (cid:5) Address outcomes of the Bell and Gotterson Reviews; (cid:5) Consider and adopt the changes to the NSW Casino Control Act 1992 and the Bill to amend the Queensland Casino Control Act 1982; (cid:5) Progress investments in hospitality and tourism assets; and (cid:5) Progress the Remediation and Transformation Program: (cid:6) The program commenced in May 2022 under the oversight of external advisors Allens and Overy, with significant progress made to date. The program will provide the structure and accountability necessary to significantly overhaul our risk management governance, operating model, processes, systems and culture; (cid:6) The program will evolve to address the outcomes of the Bell and Gotterson reviews and AUSTRAC investigation; (cid:6) FY2023 initiatives underway to deliver: (cid:7) Organisation-wide culture change through board and management led reviews; (cid:7) Introduce an Enhanced Investigations and Integrity initiative, resourced and empowered to make sweeping changes; Introduce a new, more rigorous and proactive harm minimisation and Responsible Gambling strategy, called "Safer Gambling at The Star"; Upgrade AML / CTF, 'Know Your Client' and due diligence processes; and Elevate Risk and Compliance functions with increased resourcing and capabilities of respective teams. (cid:7) (cid:7) (cid:7) (cid:4) Operations (cid:5) Drive revenue growth in a post COVID-19 earnings recovery; (cid:5) Maintain cost control; and (cid:5) Manage the competitive impact of Crown Sydney. (cid:4) Major projects (cid:5) Continue to progress the construction of the Queen's Wharf Brisbane Integrated Resort in Brisbane and manage the cost overruns, whilst continuing preparations for the opening in 1H FY2024; (cid:5) Complete Tower 1 apartment settlements and continue to progress the construction of Tower 2 on the Gold Coast; and (cid:5) Progress development opportunities for the Sydney property. (cid:4) Asset sales (cid:5) Complete the sale of the Treasury Buildings and the NSW Government's compulsory acquisition of the Union (cid:5) Street Pyrmont property (owned with Far East Consortium (FEC)); In partnership with Chow Tai Fook (CTF) and FEC explore ownership options for the Sheraton Grand Mirage Resort Gold Coast; (cid:5) Explore opportunities to unlock the underlying value of the Group’s property portfolio; and (cid:5) Use proceeds to pay down debt and reduce gearing levels. 42 2 The Star Entertainment Group 2022 Annual Report2Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 2.3 Group performance The Group continued executing its growth strategy despite the extraordinary challenges and significant impacts of both COVID-19 related disruptions and ongoing regulatory reviews. The underlying strength of the business has enabled a strong rebound post COVID-19 related property shutdowns and operating restrictions. FY2022 marks the third consecutive year significantly affected by the ongoing impacts of COVID-19. Property closures, operating restrictions and domestic border closures significantly impacted earnings in 1H FY2022 and into 2H FY2022. Restrictions began to ease in 2H FY2022, allowing for the return to more normal operating conditions by 4Q FY2022. Domestic revenue for 4Q FY2022 was above pre-COVID-19 levels (represented by the corresponding period in FY2019), driven by strong growth in slots and non-gaming revenue. Performance was also affected by the Group’s suspension of all domestic and international rebate programs (in response to the Bell Review) and costs associated with the commencement of the Remediation and Transformation Program. The prior comparable period (pcp) included fluctuating spatial distancing requirements and other COVID-19 related health orders constrained domestic visitation, particularly in Sydney. International border closures substantially reduced the International VIP Rebate business (prior to its suspension in May 2022). Earnings before interest, tax, depreciation and amortisation (EBITDA) (excluding significant items) of $237.5 million was down 44.3% on the pcp. Normalised1 EBITDA of $235.1 million was down 45.3%. Statutory and normalised results for FY2022 are largely consistent given the limited International VIP Rebate business revenue (prior to its suspension in May 2022). Net revenue of $1,527.1 million was down 1.2% on the pcp. Non-gaming revenue was up 32.3%2, with growth across all three properties, driven by re-opened venues, including the Harvest Buffet, new amenities and return of the conferencing business. Domestic gaming revenue was down 5.4%2, materially affected by ongoing COVID-19 restrictions, including property closures across all three properties and health orders, and the South East Queensland floods. International VIP Rebate revenue remains immaterial given border closures (prior to its suspension in May 2022). Operating costs (before significant items) of $910.6 million were up 23.1% on the pcp. Excluding the impact of JobKeeper in the pcp, operating costs are up 13.9%, reflecting COVID-19 related impacts, the tight labour market, increased operating footprint, inflationary pressures, ongoing regulatory reviews and increased investment in regulatory and compliance functions and external consulting costs. Significant expense items ($176.0 million before tax) relate to the impairment of goodwill for The Star Sydney, Bell Review costs, one-off COVID-19 related expenditure, underpaid casino duty and interest, software-as-a-service project costs, business interruption and crown unsolicited proposal costs, partially offset by JV profit on the residential Tower 1 sale of units, disposal of jet and dispute settlement. Depreciation and amortisation expense of $208.3 million was down 1.0% on pcp. Finance costs of $50.2 million (excluding significant items) were down 7.6%, due to lower average debt balances and cancellation of the $200 million club facility in December 2020. Net loss after tax was $202.5 million. Normalised net loss after tax, excluding significant items, was $32.3 million. Basic and Diluted Earnings per Share were both a loss of (21.3) cents (both earnings of 6.1 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 and the potential for financial penalties arising from the ongoing regulatory matters. No final dividend was declared, in accordance with the conditions of debt covenant waivers which restrict further cash dividends from being paid until the Group’s gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times. Net debt3 was $1,149.0 million (30 June 2021: $1,171.4 million). Operating cash flow before interest and tax was $181.3 million (30 June 2021: $471.3 million) with an EBITDA to cash conversion ratio of 82% (30 June 2021: 123%). The Sydney property and broader casino industry is in a state of significant uncertainty. Recent regulatory changes have resulted in the cessation of the junket business, the pausing of international and domestic rebate businesses while COVID-19 restrictions continue to affect international visitation. The outcome from the Bell review and AUSTRAC investigation remain uncertain. In combination, these factors have reduced the valuation of the Sydney cash generating unit, requiring an impairment of $162.5 million to be recognised against The Star Sydney’s goodwill at 30 June 2022. 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 commission on revenue share programs. Normalised results exclude significant items. 2 Revenue movements reflect the underlying performance of the business in that they consider where revenue from loyalty points were earnt, rather than redeemed. This is different to note A2, which follows the presentation requirements of AASB 15 Revenue from Contracts with Customers. 3 Net debt is shown as interest bearing liabilities (excluding lease liabilities), less cash and cash equivalents, less net position of derivative financial instruments. 3 43 3Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 2.5 Segment operations The Group comprises the following three operating segments: (cid:4) Sydney; (cid:4) Gold Coast; and (cid:4) 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 Net revenue was $777.9 million, down 4.8% on the pcp and EBITDA (excluding significant items) was $83.4 million, down 58.3% on the pcp. The property was significantly impacted by the COVID-19 enforced property closure, which lasted 102 days from July to October 2021, operating restrictions and other COVID-19 related impacts. Domestic gaming revenue was down 7.6%, partially offset by a 21.8% increase in non-gaming revenue, driven by the reopening of key venues including Harvest Buffet. International VIP Rebate revenue remained immaterial (prior to its suspension in May 2022). Gaming taxes and levies and operating expenses (before significant items) were up 1.5% and 18.2% respectively. The increase in operating expenses reflects the impact of JobKeeper payments in the pcp, staff payments for a significant shutdown period, higher non-gaming activity levels and the tight labour market. Throughout the year, domestic revenues were strong when the property was open on an unrestricted basis. 4Q FY2022 domestic revenue was in line with pre-COVID-19 levels. The property is 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 New South Wales Rugby League (NSW Blues) and Sydney FC male and female teams. The property also contributed to National Indigenous Culinary Institute and GIVIT during the reporting period. Gold Coast Net revenue was $423.3 million, up 11.3% on the pcp and EBITDA (excluding significant items) was $89.3 million, down 20.6% on the pcp. Despite the closure of the property for 11 days, domestic gaming revenue was up 1.8% while non- gaming revenue was up 49.7%, driven by new amenities and the return of the conferencing business. International VIP Rebate revenue remained immaterial (prior to its suspension in May 2022). Gaming taxes and levies and operating expenses (before significant items) were up 3.0% and 34.0% respectively. The increase in operating costs reflects the impact of JobKeeper payments in the pcp, higher activity levels, new amenities and higher staffing costs, while the pcp also benefitted from a deliberately slow ramp-up. Throughout the year, domestic revenues were strong when the property was open on an unrestricted basis. 4Q FY2022 domestic revenue was up 48% on pre-COVID-19 levels, with growth across all major categories (slots, tables and non-gaming), driven by new amenities and the return of conferencing business. The Star Gold Coast is a major sponsor of The Star Magic Millions Raceday and Carnival and is a partner of the TV Week Logie Awards, Gold Coast Titans and Gold Coast Suns. The property also contributed to various charities and not-for-profit organisations including Surf Life Saving Queensland, Currumbin Wildlife Hospital and GIVIT during the reporting period. Brisbane Net revenue was $325.9 million, down 6.4% on the pcp and EBITDA (excluding significant items) was $64.8 million, down 43.4% on the pcp. Domestic gaming revenue was down 7.3%, partially offset by an 11.4% increase in non- gaming revenue. Earnings were impacted by closure of the property for 12 days, operating restrictions, floods and other COVID-19 related impacts. International VIP Rebate revenue remained immaterial (prior to its suspension in May 2022). Gaming taxes and levies (before significant items) were down 5.8%, in line with reduced domestic gaming revenue. Operating expenses were up 23.1%, reflecting the impact of JobKeeper payments in the pcp, higher activity levels, COVID-19 related costs and investment in management capability in advance of the Queen's Wharf Brisbane opening. 4Q FY2022 domestic revenue was up 13% on pre-COVID-19 levels, primarily driven by slots. The Brisbane property is a major partner of Queensland Rugby League, platinum partner of the Brisbane Fashion Festival, Group One Sponsor of Brisbane Racing Club and has partnered with The Royal National Agricultural and Industrial Association of Queensland, Brisbane Portrait Prize and contributed to GIVIT during the reporting period. International VIP rebate business The results of the International VIP Rebate business are embedded in the segment performance overviews above. International VIP Rebate revenue remained immaterial given border closures. Following the release of the Bergin Report in February 2021, in May 2021 the Group agreed with the ILGA to terminate business with international junket operators. The Group is applying the undertaking to all of its casino operations (New South Wales and Queensland). In May 2022 the Group suspended all international rebate programs (in response to the Bell Review). 44 4 The Star Entertainment Group 2022 Annual Report4Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 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. Bell report In September 2021 the Group was notified by ILGA that Adam Bell SC would undertake the regular review of The Star Sydney's (The Star) casino operations in accordance with the Casino Control Act 1992 (NSW) (CCA) (the Review). On 19 October 2021 ILGA advised the Review would include public hearings relating to The Star’s casino operations. The public hearings ran from March to May 2022 and considered various matters concerning suitability to hold a casino licence, including the Group’s maintenance and administration of systems to counter money laundering and infiltration by organised crime. Mr Bell’s report was provided to ILGA by 31 August 2022 (the Report). On 5 September 2022, the New South Wales Independent Casino Commission (the NICC) was appointed as regulator of casinos in NSW. On 13 September 2022 the NICC published the Report. The Report found The Star unsuitable to hold a casino licence in NSW. The Report made a total of 30 recommendations to the NICC. The NICC will respond to the recommendations in due course. On 13 September 2022 the NICC issued The Star a Show Cause Notice under section 23 of the CCA (the Notice). The Star has responded to the Notice. The response outlines why disciplinary action should not be taken and includes submissions about the possible appointment of a manager. The NICC may then decide to take appropriate disciplinary action. (Refer to section 5 for more detail). Impact of COVID-19 FY2022 marks the third consecutive year significantly affected by the impacts of COVID-19. Property closures, operating restrictions and domestic border closures significantly impacted earnings in 1H FY2022 and into 2H FY2022. Restrictions began to ease in 2H FY2022, allowing for the return to more normal operating conditions by 4Q FY2022. International travel remains subdued and it is unknown for how long this will persist. While a return of COVID-19 related operating restrictions is possible, it is considered unlikely. The Group retains balance sheet flexibility, enabling it to respond operationally and financially to future operating restrictions, should they arise. External review of the Group's Queensland operations In July 2022 an independent review commenced of the Group’s Queensland casinos, The Star Gold Coast and Treasury Brisbane following a request by the Queensland Attorney-General. The review, led by the Honourable Robert Gotterson AO, will examine whether these casinos operate in a way that is consistent with achieving the objectives of the Casino Control Act 1982 and the ongoing suitability of the Group’s casino licensees. Public hearings took place from 23-29 August 2022. The review will report to the Attorney-General by 30 September 2022. Sydney The Group continues to monitor development opportunities post finalisation of the new planning controls for the Pyrmont Peninsula, including development of a six star hotel, theatres and a new rooftop dining area and event space. The Government has commenced its compulsory acquisition of the Pyrmont commercial building, acquired in October 2020 in joint venture with FEC (both 50%). The proposed new Sydney Metro West Station, to be developed on this site by the Government, will allow for greater access for patrons to The Star. Capital expenditure in the year was approximately $60.8 million across various minor projects. Gold Coast The Group remains focused on delivering the proposed $2 billion masterplan on the Gold Coast in joint venture with CTF and FEC. The Dorsett Gold Coast Hotel and The Star Residences in the first tower opened during the year. The settlement of residential unit sales commenced in May 2022, with over 90% settled to date. The second tower (Tower 2) construction continues, with all residential units pre-sold. 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. Capital expenditure in the year (excluding equity investment into the Tower 2 joint venture with partners CTF and FEC) was approximately $65.2 million across various minor projects. The Group also continues to manage the Gold Coast Convention and Exhibition Centre adjacent to the casino. 5 45 5Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 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. The Integrated Resort is expected to open in 1H FY2024. Total project costs for DBC’s development of the Integrated Resort are expected to be up approximately 10% on prior guidance of $2.6 billion. The majority of these cost overruns are to be funded via additional equity contributions in proportion with the existing joint venture interests. DBC is in ongoing discussions with the builder regarding purported claims for additional costs, extensions of time and damages, with which DBC disagrees. The contract provides for liquidated damages. $1.6 billion project level debt facilities were secured in May 2020 and run for a 5.5 year term, which includes approximately 3 years of operating performance. 2.7 Risk management The Group takes a structured approach to identifying, evaluating and managing those current and emerging 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. 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 in capital the projects. financial capital invested Human capital management The ability to attract, recruit and retain the right people for key leadership and operational roles. 46 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 improve customer service capabilities of employees. Revenue sources have also been diversified. The Group has a comprehensive project management framework and has employed appropriately skilled and experienced project managers to reduce the risk of delays in completion and/or overruns in costs of capital projects and maintain appropriate oversight of joint venture investments. 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 has moved to 'continuous listening' employee engagement surveys to monitor for emerging issues which might affect the ability to retain talented employees and enable actions in response. The Group’s diversity and inclusion programs are widely recognised as being among the best in the industry. 6 The Star Entertainment Group 2022 Annual Report6Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Risk and description Key stakeholders The ability to engage with key stakeholders proactively and fairly. Legal, regulatory and compliance The potential effect of legal or regulatory changes or decisions 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. AML Compliance The potential effect of obligations under the AML/CTF Act. the Data and systems security and reliability integrity of to protect The ability 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. Mitigation strategy 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 local community groups and charitable organisations. The Group engages with regulatory stakeholders to anticipate regulatory decisions and is active in submissions about proposed decisions. 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, safe gaming, 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 team that has been continuing to invest and enhance the Group's AML & CTF risk management capabilities, including through dedicated IT systems development. The Group also makes representations to government and industry groups to promote effective, appropriate and consistent regulatory and policy outcomes. 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. The IT function also continues to implement a cyber resilience plan. 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 injury management safety. Dedicated health and safety and specialists are employed at each resort in maintaining the safety and security of its guests and employees, each facility employs a substantial number of security and resort surveillance personnel to provide support in monitoring existential threats and managing potential incidents on a real time basis. facility. To assist 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. The Group annually establishes a financial budget and 5 year plan which underpin the setting of performance targets incorporated in employee incentive plans. Financial performance is continuously monitored for any variations from annual financial budgets and market expectations. 7 47 7Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Risk and description Corporate governance Mitigation strategy The ability to maintain a strong and effective governance structure which supports a culture of and compliance. accountability, transparency, The Star Brisbane fully operational The ability business model that delivers an integrated resort experience. to deliver a and change, sustainability Climate environmental impact The ability to identify climate related risks and reduce report opportunities, improve impacts environmental sustainability all performance operations and and across 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. This model is supported by the risk management framework. The Group has a pre-opening team to deliver a structured program to transition from Treasury Brisbane to The Star Brisbane. It operates with an integrated “3 lines of defence” model to identify and manage key risks and to provide assurance that the controls and actions underway are effective in managing those risks. Management of the joint venture provide reporting to the Board and to the joint venture board. The Group’s ESG strategy, Responsible Business, Sustainable Destinations responds to all of the company’s most material ESG issues in addition to existing policies and controls. The Group has adopted the Task Force on Climate-related Financial Disclosures’ in (TCFD) Framework Recommendations and reports annually risk alignment with assessments are conducted every two years. The Company is targeting net zero Scope 1 and Scope 2 carbon emissions for its wholly owned and operated assets by 2030, is implementing its Decarbonisation Plan and has set resource reduction targets. Climate change, sustainability and environmental impact matters report to the Board Committee Remuneration, People and Social Responsibility. the TCFD Framework. Physical climate 48 8 The Star Entertainment Group 2022 Annual Report8Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 2.8 Environmental regulation and performance In line with its Environmental Management Policy, the Company aims to minimise the adverse social and environmental effects of its operations. The Group is committed to sustainability leadership in the entertainment sector and reducing resource consumption across its operations. The Group’s Sustainability Strategy 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 is underpinned by a structured materiality assessment process that is conducted annually to ensure ESG issues remain relevant. The Group’s key activities to manage sustainability risks identified as part of the materiality assessment can be found in the Company’s Sustainability Reports in addition to existing policies and controls. The Company’s Sustainability Strategy is aligned to the United Nations Sustainable Development Goals, the Company’s material issues, priorities, commitments and future goals. The Group recognises the recommendations of the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) and the associated framework and reports its progress annually. In the 2022 reporting year, the Group released its third ‘Climate-related Disclosures Report’ which details the company’s progress in managing the expected physical and transitional risks of climate change aligned to the TCFD framework. Reports can be found on the Company's website. The Company is committed to a low carbon future and has a target in place to achieve net zero Scope 1 and Scope 2 carbon emissions for its wholly owned and operated assets by 2030. The pathway to achieve this target includes the purchasing of renewable electricity and the assessment of onsite solar, continuing the Company’s energy efficiency program and developing a carbon offsetting strategy which delivers environmental and social benefits. 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. 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. The Group has a target to achieve coverage of third party certified environmental ratings across 90% of its managed portfolio by FY2022 which has been achieved. 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 more sustainable 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. Waste diversion from landfill, increasing recycling rates and implementing more circular waste solutions remain priorities. The Group's Global Reporting Index (GRI) reports are published on the Company's website, demonstrating a ‘core’ level of compliance. 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, Climate-related Disclosures Reports 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 Remuneration People and Social Responsibility Committee regularly and can be found in the Company’s Sustainability Report. 9 49 9Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 3 Earnings per share (EPS) Basic and diluted EPS for the financial year was a loss of (21.3) cents (2021: earnings of 6.1 cents). EPS is disclosed in note F3 of the Financial Report. 4 Dividends The Group remains committed to maintaining a balance sheet that positions it for post-COVID-19 recovery. No final dividend was declared, given the continuing impacts of COVID-19 on the Group and in accordance with the conditions of debt covenant waivers which restrict further cash dividends from being paid until the Group’s gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times. 5 Significant events after the end of the financial year NSW casino regulatory framework reforms On 11 August 2022 the Casino Legislation Amendment Act 2022 (NSW) was enacted to give effect to amendments to the Casino Control Act 1992. These amendments enact reforms to the NSW casino regulatory framework, including to address all 19 recommendations of the Bergin Inquiry and certain additional measures. This included establishing the NICC as a new independent regulator. The Group is considering the impact and will implement the changes required for The Star. Bell report Mr Bell’s Report on The Star’s casino operations in accordance with the CCA was provided to ILGA by 31 August 2022. On 5 September 2022, the NICC was appointed as regulator of casinos in NSW. On 13 September 2022 the NICC published the Report. Mr Bell found The Star unsuitable to hold a casino licence in NSW. Mr Bell made a total of 30 recommendations to the NICC. The NICC will respond to the recommendations in due course. On 13 September 2022 the NICC issued The Star a Show Cause Notice under section 23 of the CCA. Under the Notice the NICC stated that it was considering taking disciplinary action against The Star for one or more grounds being: CCA and licence contraventions found in the Report; that The Star is no longer suitable to give effect to its licence because of Review’s findings and the absence of effective action, resources and capability to remedy matters identified in the Report; and that it is no longer in the public interest that the licence remain in force. The disciplinary action being considered by the NICC is one or more of the following: (cid:4) (cid:4) cancellation or suspension of the licence of The Star; imposition of a pecuniary penalty of up to $100 million (note that pecuniary penalties can be imposed on multiple grounds such that $100 million is not a cap on aggregate penalties that may be imposed on The Star); the amendment of the terms or conditions of the licence; (cid:4) (cid:4) The Star or a close associate give an enforceable undertaking to do or refrain from doing something; and (cid:4) the issue of a letter of censure to The Star. The Notice also stated that in the event the NICC decides to cancel or suspend The Star’s licence, it may consider appointing a person to manage the casino pursuant to section 28 of the CCA. In addition, a charge given by The Star in 1994 allows the regulator – on cancellation or suspension of the licence - to appoint a receiver over all assets at the Sydney premises (including the lease), allowing the whole business to be operated and prepared for sale to a new licensee. The Star has responded to the Notice. The response outlines why disciplinary action should not be taken and includes submissions about the possible appointment of a manager. The NICC may then decide to take appropriate disciplinary action. A comprehensive Remediation and Transformation Program is being updated to adopt and address the significant findings of the Report and other ongoing reviews. It will serve as the Group’s integrated roadmap for improving governance, culture and controls. The Remediation and Transformation Program will effect significant improvements in governance, people, culture, risk and compliance management, AML/CTF compliance, harm minimisation (including responsible gambling) and investigations. External review of the Group’s Queensland operations In July 2022 an independent review commenced of the Group’s Queensland casinos, The Star Gold Coast and Treasury Brisbane following a request by the Queensland Attorney-General. The review, led by the Honourable Robert Gotterson AO, will examine whether these casinos operate in a way that is consistent with achieving the objectives of the Casino Control Act 1982 and the ongoing suitability of the Group’s casino licensees. Public hearings took place from 23 to 29 August 2022. The review will report to the Attorney-General by 30 September 2022. 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 2022 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. 10 50 The Star Entertainment Group 2022 Annual Report10Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 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 Ben Heap Interim Chairman (from 1 June 2022); Non-Executive Director (from 23 May 2018) Bachelor of Commerce (Finance); Bachelor of Science (Mathematics); Graduate of the Australian Institute of Company Directors Experience: Ben Heap is an experienced company director with wide-ranging experience in asset and capital management roles in the finance sector and in technology and digital businesses. Mr Heap is a Founding Partner of H2 Ventures, a venture capital investment firm. Mr Heap is also a Non-Executive Director of Redbubble Limited and Chairman of its People, Remuneration and Nomination Committee, and a Non-Executive Director of Pendal Group Limited, and Chairman of its Governance and Nominations 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: • Interim Chairman of the Board • Chair of the Risk, Compliance and Regulatory Performance Committee • Member of the Audit Committee • Member of the People, Culture and Social Responsibility Committee (to 31 December 2021) • Member of the Remuneration, People and Social Responsibility Committee (from 1 January 2022) Directorships of other Australian listed companies held during the last 3 years: • Redbubble Limited (20 April 2020 to present) • Pendal Group Limited (1 March 2022 to present) 11 51 11Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Current Directors Gerard Bradley Michael Issenberg 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; Officer of the Order of Australia Experience: Gerard Bradley was formerly the Chairman of Queensland Treasury Corporation for 10 years (retired on 30 June 2022) 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: • Member of the Risk, Compliance and Regulatory Performance Committee • Member of the Audit Committee • Member of the Remuneration Committee (to 31 December 2021) • Member of Remuneration, People and Social Responsibility Committee (from 1 January 2022) Directorships of other Australian listed companies held during the last 3 years: • Pinnacle Investment Management Group Limited (1 September 2016 to present) Board Observer (from 17 February 2022 to 10 July 2022) Non-Executive Director (from 11 July 2022) BS in Hotel Administration – Cornell University USA; French Order of Merit (Ordre national du Mérite) Experience: Mr Issenberg is an experienced executive and director with over 40 years’ experience in the hotel industry. Mr Issenberg was formerly the Chairman of Reef Corporate Services Limited, the Responsible Entity of Reef Casino Trust. Prior to that, he held various executive roles with AccorHotels for 25 years, most recently as Chairman and Chief Executive Officer of AccorHotels Asia Pacific. He previously held the role of Chief Executive Officer of Mirvac Hotels, following a successful career at Westin Hotels and Resorts, Laventhol & Horwath, and Horwath & Horwath Services Pty Limited in San Francisco and Sydney. Mr Issenberg is currently the Chairman of Tourism Australia. He also a Lifetime Member of Tourism & Transport Forum Australia and the Cornell Hotel Society. Special Responsibilities: • Member of the Audit Committee • Member of the Risk, Compliance and Regulatory Performance Committee • Member of Remuneration, People and Social Responsibility Committee Directorships of other Australian listed companies held during the last 3 years: • Reef Corporate Services as responsible entity of Reef Casino Trust (21 January 2022 to 18 March 2022) 52 12 The Star Entertainment Group 2022 Annual Report12Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Current Directors Katie Lahey AM Richard Sheppard 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 Remuneration, People and Social Responsibility Committee (from 1 January 2022) • Chair of the People, Culture and Social Responsibility Committee (to 31 December 2021) • Member of the Remuneration Committee (to 31 December 2021) • Member of the Risk, Compliance and Regulatory Performance Committee Directorships of other Australian listed companies held during the last 3 years: Nil 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. Special Responsibilities: • Chair of the Audit Committee • Member of the Risk, Compliance and Regulatory Performance Committee Directorships of other Australian listed companies held during the last 3 years: • Dexus Property Group (1 January 2012 to present) 13 53 13Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Former Director John O'Neill AO Chairman (from 8 June 2012 to 31 May 2022) Non-Executive Director (from 28 March 2011 to 31 March 2022) Executive Chairman (from 1 April 2022 to 31 May 2022) 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 (as at date of cessation): 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. Special Responsibilities: • 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 to 28 March 2022) Master of Economics and Commerce; PhD in Finance Experience (as at date of cessation): Matt Bekier was 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 54 14 The Star Entertainment Group 2022 Annual Report14Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 Former Director Sally Pitkin AO Non-Executive Director (from 19 December 2014 to 30 June 2022) Doctor of Philosophy (Governance); Master of Laws; Bachelor of Laws; Fellow of the Australian Institute of Company Directors; Officer of the Order of Australia Experience (as at date of cessation): 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 (to 31 December 2021) • Member of the Audit Committee • Member of the People, Culture and Social Responsibility Committee (to 31 December 2021) • Member of the Remuneration, People and Social Responsibility Committee (from 1 January 2022) 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) 15 55 15Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 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 Ben Heap Gerard Bradley AO Michael Issenberg a Katie Lahey AM Richard Sheppard Ordinary Shares Performance Rights 50,000 75,000 Nil 56,907 300,000 Nil Nil Nil Nil Nil a Michael Issenberg commenced as a Non-Executive Director on 11 July 2022 following the receipt of all necessary regulatory approvals. 8 Company Secretary Jennie Yuen holds the position of Group Manager Shareholder Relations and Company Secretary (appointed on 29 July 2021). Ms Yuen has a commercial and corporate law background in private practice and over 15 years of company secretariat and corporate governance experience with ASX listed and public companies. Prior to joining The Star Entertainment Group, Ms Yuen was employed as a solicitor and company secretary at Company Matters Pty Limited and was the outsourced company secretary of various ASX listed companies, including Analytica Limited, National Leisure and Gaming Limited and Oaks Hotels & Resorts Limited. Ms Yuen holds a Bachelor of Laws and a Bachelor of Commerce. She is a member of the Queensland Law Society and a Fellow of the Governance Institute of Australia. Former Company Secretary Paula Martin held the position of Chief Legal & Risk Officer and Company Secretary until 6 May 2022. She holds a Bachelor of Business (Int. Bus.), a Bachelor of Laws and a Graduate Diploma in Applied Corporate Governance. Paula has over 16 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 practiced with King & Wood Mallesons in the telecommunications, information technology and competition law areas. 56 16 The Star Entertainment Group 2022 Annual Report16Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 9 Board and Committee meeting attendance During the financial year ended 30 June 2022, the Company held 26 meetings of the Board of Directors (including 12 unscheduled meetings). The numbers of Board and Committee meetings attended by each of the Directors during the year are set out in the table below. People, Culture & Social Responsibility Committee e A B A B A B A B A B Remuner- ation Committee e Audit Committee Board of Directors Risk Compliance & Regulatory Performance Committee 26 26 9 26 26 23 13 26 26 26 - 26 26 23 13 26 5 5 1 5 5 4 - 5 5 5 - 5 5 5 - 5 4 4 - 4 4 3 - 4 4 4 - 4 4 3 - - 2 2 - 2 - 2 - 2 2 2 - 2 - 2 - 2 2 2 - 2 1 2 - 2 2 - - 2 - 2 - 2 Remuneration, People & Social Responsibility Committee e A B 2 2 - 2 2 1 - 2 2 2 - 2 - 1 - 2 Directors Ben Heap Gerard Bradley AO Michael Issenberg a Katie Lahey AM Richard Sheppard Former John O'Neill AO b Matt Bekier c Sally Pitkin AO d A - Number of meetings attended as a Board, Committee member or Observer. B - Maximum number of meetings available for attendance as a Board or Committee member. a Meetings attended by Michael Issenberg while he was an Observer (17 February 2022 to 10 July 2022). Michael Issenberg commenced as a Non-Executive Director on 11 July 2022 following the receipt of all necessary regulatory approvals. b c d e Ceased as Chairman and Non-Executive Director on 31 May 2022. 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. Ceased as Managing Director and Chief Executive Officer on 28 March 2022. Ceased as Non-Executive Director on 30 June 2022. The Remuneration Committee was merged with the People, Culture and Social Responsibility Committee and renamed as the Remuneration, People and Social Responsibility Committee from 1 January 2022. 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. 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 2022. 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. 17 57 17Directors’ Report For the year ended 30 June 2022 Directors' Report for the year ended 30 June 2022 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 77.0 55.5 132.5 Amounts paid or payable by the Company for audit and non-audit services are disclosed in note F11 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 2022. The auditor's independence declaration forms part of this Directors’ Report. This report has been signed in accordance with a resolution of Directors. Ben Heap Interim Chairman Sydney 27 September 2022 58 18 The Star Entertainment Group 2022 Annual Report18Auditor's Independence Declaration Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Ernst & Young Auditor’s Independence Declaration to the Directors of The Star 200 George Street Sydney NSW 2000 Australia Entertainment Group Limited GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au As lead auditor for the audit of the financial report of The Star Entertainment Group for the financial year ended 30 June 2022, I declare to the best of my knowledge and belief, there have been: a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in Auditor’s Independence Declaration to the Directors of The Star Entertainment Group Limited relation to the audit; b) No contraventions of any applicable code of professional conduct in relation to the audit; and c) No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. As lead auditor for the audit of the financial report of The Star Entertainment Group for the financial year ended 30 June 2022, I declare to the best of my knowledge and belief, there have been: This declaration is in respect of The Star Entertainment Group Limited and the entities it controlled during the financial year. a) No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b) No contraventions of any applicable code of professional conduct in relation to the audit; and c) No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. Ernst & Young This declaration is in respect of The Star Entertainment Group Limited and the entities it controlled during the financial year. Megan Wilson Partner Ernst & Young 27 September 2022 Megan Wilson Partner 27 September 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 19 19 59 19Remuneration Report For the year ended 30 June 2022 THE STAR ENTERTAINMENT GROUP LIMITED A.C.N. 149 629 023 ASX CODE: SGR AND ITS CONTROLLED ENTITIES 60 The Star Entertainment Group 2022 Annual Report Introduction from the Remuneration, People and Social Responsibility Committee Chair Dear Shareholder, On behalf of the Board, I present the Remuneration Report for the year ended 30 June 2022 (FY2022). This report is prepared on a consistent basis to the previous year for ease of reference. 2021 Annual General Meeting (AGM) The FY2021 Remuneration Report received positive shareholder support at the 2021 AGM, with 98.02% of votes in favour of the resolution. Executive KMP Changes On 28 March 2022, the Company announced the resignation of its Managing Director and Chief Executive Officer (MD & CEO) Matt Bekier. Mr Bekier’s decision follows issues raised in the public hearings in connection with the review of The Star Sydney being undertaken by Mr Adam Bell SC (Bell Review). Following this, the Company announced on 1 April 2022 the appointment of John O’Neill to the position of Executive Chairman on an interim basis until a new MD & CEO is appointed. Mr O’Neill has since tendered his resignation from this position effective 31 May 2022 and Geoff Hogg, current Chief Casino Officer QLD, was appointed Acting Chief Executive Officer from 1 June 2022. In addition, on 6 May 2022 Harry Theodore resigned from his position of Chief Financial Officer and Greg Hawkins resigned from his position of Chief Casino Officer NSW. Christina Katsibouba, former Group Executive Gaming and previously Deputy Chief Financial officer has been appointed as Interim Chief Financial Officer. On 26 September 2022, the Company announced the resignation of Geoff Hogg from his role as Acting Chief Executive Officer, and from all other positions held at The Star. Mr Hogg’s termination date will be confirmed in due course. Ben Heap was subsequently appointed as Executive Chairman effective 26 September 2022. The Company announced the appointment of Robbie Cooke as MD & CEO on 29 June 2022. Mr Cooke’s start date will be confirmed in the near future. The Company has also announced the appointment of Scott Wharton to the role of CEO, The Star Sydney and Group Head of Transformation. Mr Wharton commenced in this role on 25 July 2022. Remuneration treatment for outgoing Executive KMP In line with the Company’s Employee Performance Plan rules, the outgoing Executive KMP members will not be entitled to receive any payments under either the Short Term Incentive Plan (STI) or the Long Term Incentive Plan (LTI). All performance rights under the four current LTI tranches will lapse in full upon their last day of employment with the Company. The outgoing Executive KMP will be paid their contractual fixed remuneration for the duration of their contractual notice period. NED Changes The Company announced on 13 May 2022 that the Board would undertake a remediation process as it acknowledged the need for accelerated Board change. As part of this process, John O’Neill resigned as Chairman effective 31 May 2022 with Ben Heap being appointed as Interim Chairman commencing 1 June 2022. Sally Pitkin has also stepped down from the Board effective 30 June 2022 and Gerard Bradley will depart in the coming months. It is expected that other changes will occur in due course. On 17 February 2022, the Company announced the appointment of Michael Issenberg to the Board as an observer. Mr Issenberg has since received all necessary regulatory approvals and was appointed as a Non-Executive Director from 11 July 2022. On 15 August 2022, the Company announced the appointments of Anne Ward and David Foster to the Board. Both have commenced as observers until all necessary regulatory approvals are received. Short Term Incentive Plan As detailed in the FY2021 Remuneration Report, the Company introduced a new STI design for FY2022. The new design makes payments in relation to the achievement of four Company metrics, and a portion relating to individual performance. Further details on the new STI design can be found in section 4.3. Two of the four Company metrics were achieved for FY2022. As such, the Board has issued partial STI awards to the Executive KMP. Further details regarding the Company outcomes and determination of individual awards can be found in section 5.1. For the FY2023 STI plan design, the Board has approved an increase to the weighting of the Group Regulatory Compliance and Risk Management metric from 10% to 20% in order to place greater emphasis on this critical area. As such, the Group Normalised NPAT target weighting will reduce from 50% to 40%. Long Term Incentive Plan The FY2018 LTI award was tested for vesting during the period and did not vest as the relative Total Shareholder Return (TSR), Earnings per Share (EPS), and Return on Invested Capital (ROIC) hurdles were not met. The FY2019 LTI award will be tested for vesting in October 2022. The guiding principles communicated in FY2020 will be applied to support a fair and reasonable outcome. Further updates on the outcomes will be provided ahead of the 2022 AGM. We welcome your feedback on our Remuneration Report. Yours sincerely, Katie Lahey Remuneration, People and Social Responsibility Committee Chair 61 20Remuneration Report For the year ended 30 June 2022 CONTENTS 1 QUESTIONS AND ANSWERS 2 KEY MANAGEMENT PERSONNEL 3 REMUNERATION GOVERNANCE 22 23 24 4 REMUNERATION STRATEGY AND PROGRAMS 25 26 27 29 31 4.1 REMUNERATION OVERVIEW 4.2 FIXED REMUNERATION 4.3 STI DESIGN 4.4 LTI DESIGN 4.5 MINIMUM SHAREHOLDING POLICY 5 VARIABLE REWARD OUTCOMES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2022 5.1 STI OUTCOME FOR FY2022 5.2 VESTING UNDER THE LTI 6 7 EXECUTIVE KMP CONTRACTS AND REMUNERATION STATUTORY EXECUTIVE KMP REMUNERATION 8 NED REMUNERATION 9 OTHER INFORMATION 32 34 36 38 38 9.1 LOANS AND OTHER TRANSACTIONS WITH KMP 40 The Directors of The Star Entertainment Group Limited (The Star Entertainment Group or the Company) have approved this Remuneration 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 2022. This Remuneration Report outlines the remuneration arrangements for Key Management Personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of The Star Entertainment Group Limited. This report has been prepared in accordance with the requirements of the Corporations Act 2001, (Cth) (the Corporations Act) and its regulations. The information has been audited as required by section 308(3C) of the Corporations Act where indicated. For the purposes of this report, the term ‘Executive KMP’ means the former executive director (Managing Director and Chief Executive Officer) and senior executives (the former Chief Financial Officer, Acting Chief Executive Officer, Interim Chief Financial Officer, Chief Casino Officer NSW and the Chief Casino Officer QLD) but excludes Non-Executive Directors (NEDs). THE STAR ENTERTAINMENT GROUP LIMITED A.C.N. 149 629 023 ASX CODE: SGR AND ITS CONTROLLED ENTITIES 62 The Star Entertainment Group 2022 Annual Report 21 1 QUESTIONS AND ANSWERS Were there any changes to the Remuneration arrangements of Executive KMP and NEDs in FY2022? The Board approved an increase of 15.2% to the Chief Casino Officer QLD’s fixed pay and short-term incentive for FY2022 to bring his package in line with the positioning for this role. Mr Hogg was also offered an increased fixed pay rate of $1,000,000 to assume the role of Acting Chief Executive Officer. These arrangements will cease upon Mr Hogg’s termination once this date is confirmed. In addition, Christina Katsibouba was offered a fixed pay rate of $800,000 to assume the role of Interim Chief Financial Officer. Further details on Executive KMP remuneration are provided in Table 13. Non-Executive Director fees were increased by 3.5% for both the Chairman and Board Member fees effective from 1 September 2021. In addition, upon his appointment to the role of Executive Chairman, the Board approved a fixed pay salary of $1.5 million for John O’Neill, taking his total remuneration to $2,001,458. Mr O’Neill was not invited to participate in any of the Company’s incentive plans and his additional $1.5 million salary is not included in the NED fee pool limit as it relates to executive duties. This pay arrangement ceased on 30 June 2022 once the Company had paid Mr O’Neill’s one month notice following his resignation effective 31 May 2022. There were no changes to the Committee fees or the fee pool limit of $2.5 million per annum. What was the STI outcome for FY2022? Two of the four Company metrics were achieved for the FY2022 financial year. As such, the Board has issued partial STI awards to the Executive KMP. For the purpose of the FY2022 STI award, Christina Katsibouba’s performance was assessed in her capacity as a non-KMP only. Given none of her STI award relates to her KMP role, the details of the award have not been disclosed. Further details regarding the Company outcomes and determination of individual awards can be found in section 5.1. Did any LTI awards vest during the year? Performance rights relating to the FY2018 award were tested in October 2021 with none of these rights vesting into fully paid ordinary shares. The TSR performance of the Group was -7.25% (excluding the value of franking credits), with a percentile ranking of 21.54%. As this was below the 50th percentile, none of the TSR component of the FY2018 award vested. The EPS performance hurdle of 6.4 cents per share was below the threshold of 35.9 cents per share and target of 43.8 cents per share, and accordingly none of the EPS component of the FY2018 award vested. This was the first time the ROIC performance hurdle was tested, with an outcome of 1.3% which was below the threshold of 9.5% and target of 11.5%, resulting in no vesting of performance rights for this component. The FY2019 LTI award will be tested in October 2022. What were the actual remuneration outcomes for Executive KMP in FY2022? Table 1 provides a summary of total remuneration received by Executive KMP during the 2022 financial year. This non- IFRS information differs from the Statutory Remuneration in Table 14, which presents remuneration in accordance with accounting standards. TABLE 1: FY2022 EXECUTIVE REMUNERATION Name Fixed remuneration STI Cash Total Cash STI deferred equity LTI vested actual during the year $ Total value of remuneration2 $ LTI lapsed during the year3 Current Executive KMP Geoff Hogg1 771,839 137,835 909,674 68,918 Christina Katsibouba1 118,182 Former Executive KMP4 Matt Bekier Harry Theodore Greg Hawkins 1,960,415 924,423 1,226,077 – – – – 118,182 1,960,415 924,423 1,226,077 – – – – TOTAL 5,000,936 137,835 5,138,771 68,918 – – – – – – 978,592 118,182 (230,175) - 1,960,415 (1,751,300) 924,423 (88,772) 1,226,077 (456,544) 5,207,689 (2,526,791) 1 Reflects fixed pay for acting position and STI and LTI outcomes for substantive role. As Ms Katsibouba's substantive role is not a KMP role, no STI or LTI award amount has been disclosed. 2 Total value excludes any negative amounts from lapsed LTI grant. 3 Represents the award value (at the 30 June 2022 share price) of the FY2018 performance rights that lapsed/were foregone during the year as the minimum performance hurdles required for vesting were not met. 4 Includes payments made after resignations were tendered, including any notice period and termination payments. 63 222 KEY MANAGEMENT PERSONNEL The names and titles of the Company’s KMP for the year ended 30 June 2022 are set out below. NON-EXECUTIVE DIRECTORS Ben Heap1 Interim Chairman Chair of Risk, Compliance and Regulatory Reform Committee Gerard Bradley AO Board Member Katie Lahey AM Chair of Remuneration, People and Social Responsibility Committee Richard Sheppard Chair of Audit Committee Michael Issenberg2 Observer FORMER NON-EXECUTIVE DIRECTORS John O’Neill AO3 (Ceased 31 May 2022) Non-Executive Chairman / Executive Chairman Sally Pitkin AO4 (Ceased 30 June 2022) Board Member CURRENT EXECUTIVE KMP Geoff Hogg5 Acting Chief Executive Officer Christina Katsibouba6 Interim Chief Financial Officer FORMER EXECUTIVE KMP Matt Bekier7 Managing Director and Chief Executive Officer Harry Theodore8 Chief Financial Officer Greg Hawkins9 (Ceased 30 June 2022) Chief Casino Officer NSW 1 On 23 May 2022, the Company announced the appointment of Ben Heap as Interim Chairman, following the resignation of Chairman John O'Neill. Mr Heap commenced in this role from 1 June 2022. On 26 September 2022, the Company announced that Mr Heap would assume the role of Executive Chairman following the resignation of Acting Chief Executive Officer Geoff Hogg. 2 On 17 February 2022, the Company announced the appointment of Michael Issenberg as a Non Executive Director, subject to casino regulatory approvals being obtained. Michael Issenberg commenced as a Non-Executive Director on 11 July 2022. 3 On 20 May 2022, the Company announced the resignation of John O'Neill as Executive Chairman. His last working day was 31 May 2022 and his cessation date was 30 June 2022. 4 On 30 June 2022, the Company announced the resignation of Sally Pitkin from the Board. Ms Pitkin’s cessation date was 30 June 2022. 5 On 23 May 2022, the Company announced the appointment of Geoff Hogg to Acting Chief Executive Officer commencing 1 June 2022. Mr Hogg resigned on 26 September 2022. 6 On 9 May 2022, the Company announced the appointment of Christina Katsibouba as Interim Chief Financial Officer. 7 On 28 March 2022, the Company announced the resignation of Matt Bekier, with his cessation date to be confirmed in due course but no later than his contractual notice period of 12 months. 8 On 6 May 2022, the Company announced the resignation of Harry Theodore, with his cessation date to be confirmed in due course but no later than his contractual notice period of 9 months. 9 On 6 May 2022, the Company announced the resignation of Greg Hawkins. Mr Hawkins’ cessation date was 30 June 2022. 64 The Star Entertainment Group 2022 Annual Report 233 REMUNERATION GOVERNANCE The Remuneration, People and Social Responsibility Committee (the Committee) considers matters relating to the remuneration of KMP as well as the remuneration policies of the Group generally. This includes reviewing and recommending to the Board, the remuneration of the Chairman and NEDs, Executive KMP and other direct reports to the MD and CEO. The main responsibilities of the Committee are outlined in the Committee's Terms of Reference, available on the corporate governance page of the Company’s website at: www.starentertainmentgroup.com.au/corporate-governance/ Under the Committee’s Terms of Reference, the majority of Committee members must be independent non- executive directors and the Chair of the Committee must be an independent non-executive director. All members of the Committee (including the Chair of the Committee) are independent non-executive directors. Details of members of the Committee and their background are included in the Directors’ Report on pages 11 to 15. THE FOLLOWING DIAGRAM REPRESENTS THE STAR ENTERTAINMENT GROUP’S REMUNERATION DECISION-MAKING STRUCTURE BOARD • Reviews and approves remuneration outcomes, framework, strategy and policy • Exercises discretion in relation to targets, goals or funding pools REMUNERATION, PEOPLE AND SOCIAL RESPONSIBILITY COMMITTEE • Reviews and recommends to the Board the remuneration framework, strategy and policy • Reviews and recommends to the Board remuneration review outcomes for NEDs, Executive KMP and other direct reports to the MD and CEO SHAREHOLDERS • Feedback received through shareholder votes on the Remuneration Report at the AGM and consultation with key stakeholders MANAGEMENT • Proposals on executive remuneration outcomes • Implementing remuneration policies REMUNERATION ADVISORS • External and independent remuneration advice and information Use of remuneration advisors The Committee seeks external advice from time to time to ensure it is fully informed when making remuneration decisions. Remuneration advisors are engaged by, and report directly to, the Committee. PricewaterhouseCoopers (PwC) are the Group’s appointed independent external remuneration consultants. No remuneration recommendations as defined by the Corporations Act were provided by PwC during FY2022. Remuneration Report approval at 2021 Annual General Meeting (AGM) The FY2021 Remuneration Report received positive shareholder support at the 2021 AGM, with 98.02% of votes in favour of the resolution. Gender pay equity The Group is committed to all employees being remunerated fairly and equitably. The Group conducts annual gender pay equity reviews that are presented to the Committee and continues to address any gender pay equity issues as they arise. 65 244 REMUNERATION STRATEGY AND PROGRAMS 4.1 Remuneration overview Remuneration Principles FIGURE 1: REMUNERATION PRINCIPLES Being market competitive to attract and retain high performing individuals. Linking variable pay outcomes to both Company and individual performance. Having a transparent and leader-lead performance management system. Promoting gender pay equity. Administering consistent, easy to understand, transparent remuneration practices underpinned by a strong governance process. Remuneration Mix Variable remuneration (comprising STI and LTI at target amounts) accounts for the majority of the total remuneration mix for the incoming Managing Director and Chief Executive Officer and other Executive KMP as illustrated in Figure 2 below. FIGURE 2: REMUNERATION MIX Fixed Remuneration 38.5% 38.5% LTI Fixed Remuneration 47% STI Cash 19% 9% STI Restricted Shares Fixed At Risk 28% LTI 9% STI Restricted Shares 17% STI Cash Incoming Managing Director and Chief Executive Officer Other Executive KMP Remuneration time horizon Figure 3 provides an illustrative indication of how remuneration will be delivered to Executive KMP. FIGURE 3: REMUNERATION TIME HORIZON Fixed Remuneration STI Cash (66.66%) STI restricted shares (33.33%) LTI performance rights YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Date granted End of deferral/performance period Date payable/eligible for vesting 66 The Star Entertainment Group 2022 Annual Report 25 Table 2 below summarises the components of Executive KMP’s Total Annual Reward (TAR) and their link to the strategic objectives of the Group. TABLE 2: COMPONENTS OF EXECUTIVE KMP’S TAR OPPORTUNITY Fixed Remuneration STI LTI Rationale Structure Quantum Fixed remuneration forms an integral component of the overall employee value proposition of the Group, designed to attract and retain the talented teams required to operate the business. These teams will be critical in delivering on our business plan to achieve excellence in guest service, build and operate world class properties, and create long term shareholder value. Annual pay reviews occur in August each year with remuneration changes effective from 1 September. Base remuneration and superannuation. The STI is designed to drive the execution of the business plan in the short and long term and aligns performance outcomes to shareholder value creation. STI performance targets are underpinned by the Group’s strategic priorities that include: The LTI is designed to reward participants for their contributions towards achieving the Group’s strategic priorities orientated around delivering long term sustainable shareholder value creation. Performance is measured against three criteria: • Shareholder Value • Relative Total Shareholder • World Class Properties • Guest Service Excellence Return (TSR) • Earnings per Share (EPS) (differentiated value proposition) • Return on Invested Capital (ROIC) • Talented Teams • Risk Management and Sustainability Two thirds cash, one third equity deferred for one year. Targeted at the median of relevant external peer group. Executive KMP target 60% of fixed remuneration. Performance rights with vesting subject to performance over a four year period. Executive KMP target 60% of fixed remuneration. MD & CEO target 100% of fixed remuneration. 4.2 Fixed remuneration The fixed remuneration received by Executive KMP may include base salary, superannuation and non-monetary benefits. The amount of fixed remuneration an executive receives is based on the following: • Scope and responsibilities of the role; • Reference to the level of remuneration paid to executives of comparable ASX-listed organisations, with similar market capitalisation (range 70% to 160% of The Star Entertainment Group’s market capitalisation) and appropriate gaming and entertainment peers; and • Level of international and domestic gaming knowledge, skills and experience of the individual. Fixed remuneration is reviewed annually, and the policy is to target fixed remuneration at the median of the market. Fixed remuneration may deviate from the market median depending on the individual’s capabilities and other business factors. 67 264.3 STI Design (STI) As disclosed in last year’s Remuneration Report, the Company has redesigned its STI plan for FY2022 to ensure it remains fit for purpose. The new design incorporates the following changes: • The introduction of a holistic ‘basket of measures’ to assess Company performance The Company has assessed the funding model under the STI and specifically reviewed the function of the gateway measure in determining payments under the plan. It was determined that moving to a holistic basket of measures to assess Company performance would allow for a greater balance between financial and non- financial measures, rather than having one binary gateway as the determination for funding. Company performance now accounts for 80% of the overall STI award for Executive KMP, with the capacity to pay maintained through a higher weighting on the NPAT metric at 50% of the total award. • Three new company metrics – Group Regulatory Compliance and Risk Management, Employee Engagement and Guest Satisfaction A Group Regulatory Compliance and Risk Management metric was introduced with a weighting of 10% of the award opportunity to recognise the Company’s focus on this critical area in the business. This metric takes into account safety measures, mandatory compliance training, risk management and internal audit action items and timely reporting of incidents and breaches. Engagement was introduced as a metric to enhance the focus on people as the Company faces increasing competition for talent which also has a weighting of 10% of the total award opportunity. A Guest Satisfaction performance metric of 10% was introduced to focus on providing Guests with exceptional service. • Individual performance is now part of the funding outcome Individual performance now accounts for 20% of the overall STI award for Executive KMP, where previously it was used as a modifier to outcomes once a pool was funded. This change allows for emphasis to be placed on individual priorities for each Executive KMP to reward exceptional performance. • Guiding principles to inform the use of discretion Similar to the LTI, a set of guiding principles have been introduced to inform the use of discretion under the STI, refer to Table 3 below. The number of employees who participated in the STI for FY2022 was 682 (decreased from 724 for FY2021). Each of the Executive KMP participated in the plan. For the FY2023 STI plan design, the Board has approved an increase to the weighting of the Group Regulatory Compliance and Risk Management metric from 10% to 20% in order to place greater emphasis on this critical area. As such, the Group Normalised NPAT target weighting will reduce to 40%. Table 3 sets out the key features of the STI. TABLE 3: KEY DESIGN FEATURES OF THE STI Purpose To reward participants for execution of the Group’s strategy and achievement of operational goals during the performance period. Performance Metrics and weightings Metric Group Normalised NPAT1 Group Guest Satisfaction Weighting 50% (reduced to 40% for FY2023) 10% Group Regulatory Compliance and Risk Management 10% (increased to 20% for FY2023) Group Engagement Individual Performance 10% 20% Group Performance Metrics Payment Scale Individual Performance Payment Scale Group performance metrics are assessed by measuring each individual outcome against the Board approved targets. Outcome % <90% 90% 95% 100% 110% Payout % No payment 50% 75% 100% 150% Individual performance is determined by assessing performance against individual priorities (Table 7) to arrive at a performance rating. Performance ratings link to payment ranges as follows: Rating 1 – Did not meet 2 – Meets some 3 – Meets all 4 – Exceeds 5 – Outstanding Payout % Range No payment 0 - 50% 50 - 100% 100 - 125% 125 - 150% 68 The Star Entertainment Group 2022 Annual Report 27Payment calculation A participant’s individual STI award is based on the following calculation: Fixed Remuneration X Individual Target STI % X Performance Metrics Outcome % (0–150%) = Individual STI award (capped at 150% x target) Incentive opportunity levels Delivery of payments (including deferrals) Clawback Guiding Principles for informing discretion Opportunities are based on the participant’s incentive target in their employment contract (refer Table 13). The payment range available is 0%-150% of the participant’s incentive target. Two-thirds of payments are delivered in cash in September. One-third of all payments are held in restricted shares for a period of twelve months from the date of the award. These shares are forfeited in the event that the participant voluntarily terminates from the Group or is terminated with cause (refer Clawback below). Participants are entitled to receive dividends and have voting rights during the restriction period, however they are unable to vote on remuneration resolutions at the AGM. Incentives may be clawed back where there has been a material misrepresentation of the financial outcomes on which the payment had been assessed and/or the participant’s actions have been found to be fraudulent, dishonest or in breach of the Group’s Code of Conduct (e.g. misconduct). This provision may extend up to the prior three financial years of STI payments. 1. Nature and timing of adjustments – adjustments, both positive and negative, will only be made to the performance/reward outcome (rather than the target) at the time of vesting. 2. Transparency – the Company will provide a clear rationale and disclosure for any adjustments made (for example, providing a reconciliation to statutory results), especially in cases where, prima facie, performance has not been achieved. 3. Material or significant events – adjustments will only be made for events or items over the performance period that have a material impact on the outcome. Adjustments will also only be made where it has an impact on the result of the award. 4. Balancing short term and long term performance – adjustments will be made that balance the interests of short term performance outcomes with long term performance outcomes. For example, where a short term objective was not met because a strategic decision was taken to support a longer term objective. Adjustments will, where appropriate, be informed by the assumptions used in the business plan from which the target was set, to determine whether there has been a material deviation in the assumptions used and whether this was outside of management’s control. 5. Maintain plan integrity – adjustments will be carefully considered to ensure they maintain the plan’s integrity and purpose. 6. Assessing behavioural impacts on performance outcomes – the actions of participants will be considered in the achievement of performance metrics to assess adherence to the Company’s code of conduct. 7. Exercising discretion consistently and fairly – the use of discretion will be applied consistently both positively and negatively and information used will be sufficiently objective and free from bias to ensure decisions are arrived at fairly. 1 Normalised results reflect the underlying performance of the business as they remove the inherent volatility of the International VIP Rebate business and exclude significant items that are considered by their nature and size unusual or not in the ordinary course of business. This methodology has been consistently applied since FY2012. 69 284.4 LTI design There were no changes to the design or performance measures in place for FY2022. In FY2022, there were 32 participants invited to participate in the plan (decreased from 33 participants in FY2021). Each of the Executive KMP participates in the plan. TABLE 4: KEY DESIGN FEATURES OF THE LTI Purpose The LTI is designed to reward participants for their contributions towards achieving the Group’s strategic priorities orientated around delivering long term sustainable shareholder value creation. Type of Equity Award Performance rights (zero exercise price options) are used for the LTI. No amount is payable on the grant of the performance rights or upon vesting of performance rights. If the performance rights vest, an equivalent number of fully paid ordinary shares will be automatically delivered to the holder. Upon vesting of the performance rights and subject to the holder remaining employed with the Company, the Company will deliver to the holder fully paid ordinary shares in the Company. The holder will receive full voting and dividend rights corresponding to the rights of all other holders of ordinary shares in the Company. Determination of the number of rights The number of performance rights allocated to a participant is based on their Target LTI award, divided by the Face Value of a Performance Right as shown in the following calculation: Target LTI ($) ÷ Face Value of a performance right = Number of performance rights allocated The Face Value reflects the face value of the share at the effective Grant Date with reference to the volume weighted average price (VWAP) of the Company’s shares traded on the ASX on the 20 trading days prior to the Effective Grant Date. Details of annual grants to Executive KMP are set out in Table 11. Dividend entitlements Participants are not entitled to dividends until shares are allocated (based on meeting the relevant performance hurdles). At that time, dividends will either be paid by allocating dividend equalisation shares or by means of a cash equivalent payment, based on actual dividends paid to shareholders during the vesting period, the degree to which performance hurdles were met and the extent of vesting of the award. Test Date and Vesting date Cessation of employment, Change of Control and Clawback Vesting conditions (hurdles) Performance rights are tested on the fourth anniversary of the Effective Grant Date and are not subject to retesting. All unvested performance rights lapse immediately upon cessation of employment with the Group. However, the Board has discretion in special circumstances to determine the number of performance rights retained and the terms applicable. Special circumstances include events such as retirement, redundancy, death and permanent disability. If a Change of Control Event occurs, or the Board determines in its absolute discretion that a Change of Control Event may occur, the Board will determine in its absolute discretion appropriate treatment regarding any awards. Unvested rights may be clawed back where there has been a material misrepresentation of the financial outcomes on which the award had been assessed and/or the participant’s actions have been found to be fraudulent, dishonest or in breach of the Company’s Code of Conduct (e.g. misconduct). TSR (33.3% of the award) The Company’s TSR ranking against the peer group of companies (relative TSR) is used as a performance hurdle, as it directly aligns the interests of participants with the interests of shareholders, which is to maximise its TSR compared with the TSR for peer companies. The table below sets out the vesting scale for TSR. The Company’s TSR ranking, compared to its peer group, must be at least at the 50th percentile for any vesting to occur. TSR Percentile Ranking Below the 50th percentile At the 50th percentile Percentage of awards vesting 0% vesting 50% vesting Above the 50th and below the 75th percentile Pro-rata between 50% (at 50th percentile) and 100% (at 75th percentile) At or above the 75th percentile 100% EPS (33.3% of the award) The EPS hurdle measures statutory earnings per ordinary share adjusted for the theoretical win rate in the VIP Rebate business. It drives a line of sight between shareholder value creation and management’s financial performance. The threshold hurdle is set by the Board by reference to market consensus. The target hurdle is set by the Board by reference to the Company’s Board approved five-year business plan. While the Board may exercise certain discretions under the LTI, the Board will only consider exercising its discretion with respect to any applicable adjustments to thresholds and targets, at the time of testing for vesting purposes (refer to guiding principles on next page). 70 The Star Entertainment Group 2022 Annual Report 29Vesting conditions (hurdles) (continued) The table below sets out the percentage of the performance rights subject to the Company’s EPS performance as at the Test Date. EPS Performance Below threshold At threshold Percentage of awards vesting 0% vesting 50% vesting Between threshold and stretch Pro-rata between threshold and stretch Stretch target 100% ROIC (33.4% of the award) The ROIC hurdle measures statutory EBIT, adjusted for the theoretical win rate in the International VIP Rebate business, as a proportion of average Net Debt and average Shareholder Equity. That is: ROIC = EBIT adjusted for theoretical win rate in the International VIP Rebate business Average Net Debt + average Shareholder Equity The ROIC hurdle measures the efficiency of earnings generated from capital investments made by the Group and seeks to create alignment of incentive programs in driving the execution of the Group’s capital intensive strategy to build new assets and improve existing properties, with the aim of generating additional revenue and ultimately sustainable value for shareholders. The threshold hurdle is set by the Board based on the Group’s present ROIC levels, and the target hurdle is set with reference to the Group’s five-year business plan. While the Board may exercise certain discretions under the LTI, the Board will only consider exercising its discretion with respect to adjustments to thresholds and targets at the time of testing for vesting purposes and applying the guiding principles set out below. The table below sets out the percentage of performance rights subject to the Company’s ROIC performance as at the Test Date. ROIC Performance Below threshold At threshold Percentage of awards vesting 0% vesting 50% vesting Between threshold and stretch Pro-rata between threshold and stretch Stretch target 100% Impact of COVID-19 The impact of COVID-19 on the outcome of the FY2019 LTI will be assessed at the time of testing in October 2022. The guiding principles communicated in FY2019 and outlined below, will be applied to support a fair and reasonable outcome. Further updates on the outcomes will be provided ahead of the 2022 AGM. Disclosure of performance hurdles Guiding principles for informing discretion The Company will disclose the EPS and ROIC targets on a retrospective basis to ensure that the Company’s competitive position is not undermined. The Board has adopted a set of guiding principles when it considers adjustments to performance outcomes under the LTI. The process for adjustments and principles applied are outlined below: 1. Nature and timing of adjustments – adjustments, both positive and negative, will only be made to the performance/reward outcome (rather than the target) at the time of vesting. 2. Transparency – the Company will provide a clear rationale and disclosure, for any adjustments made (for example, providing a reconciliation to statutory results), especially in cases where, prima facie, performance has not been achieved. Where possible, advance disclosure of events that may give rise to adjustments will be disclosed to ensure early communication to shareholders. 3. Material or significant events – adjustments will only be made for events or items over the vesting period that have a material impact on the outcome. Adjustments will also only be made where it has an impact on the result of the award. Where possible, the item will be referenced back to the assumptions used in the business plan from which the target was set, to determine whether there has been a material deviation in the assumptions used and whether this was outside of management’s control. For example, if there has been a change to accounting policies resulting in the EPS and/or ROIC targets being determined in a different way to how the outcome is determined at the time of vesting. 4. Balance interests of shareholders and management – adjustments will be made to balance the interests of shareholders and management, for example, if shareholders are experiencing poor results, then management should share in the burden, and vice versa (unless there are compelling reasons for this not being the case, in which event, details will be provided). 5. Maintain plan integrity – adjustments will be carefully considered to ensure they maintain the plan’s integrity and purpose (i.e. to incentivise and reward management for undertaking transactions that deliver long-term sustainable shareholder value). 6. Exercising discretion consistently and fairly – the use of discretion will be applied consistently (both positively and negatively) and information used will be sufficiently objective and free from bias to ensure decisions are arrived at fairly. 71 304.5 Minimum shareholding policy To support the alignment of the interests of the Board and executives with the interests of shareholders, the Group has minimum shareholding policies in place. Executive KMP are required to progressively acquire shares over a five year period from the date of their appointment (for new Executive KMP). The Managing Director and Chief Executive Officer is to hold a minimum number of shares which is of equal value to 150% of one year’s salary at the time of his unconditional appointment. Other Executive KMP are to hold a minimum number of shares which is of equal value to 100% of one year’s salary at the time of their unconditional appointment. Direct and indirect holdings in shares will count towards the minimum shareholding target. Unvested performance rights do not count towards minimum shareholding requirements. All Executive KMP are currently meeting, or on track to meet, their minimum shareholding requirements in the required timeframes. Table 5 shows the number of shares and performance rights held by Executive KMP at the beginning and end of the financial year unless otherwise stated. TABLE 5: SHARES AND PERFORMANCE RIGHTS HELD BY EXECUTIVE KMP AT 30 JUNE 2022 Name Holding Balance at start of the year1 Acquired or granted as compensation Restricted shares released during the year2 Disposed or lapsed during the year Balance at the end of the year3 Current Executive KMP Geoff Hogg Performance Rights 378,409 108,019 Christina Katsibouba Ordinary Shares 264,979 Restricted Shares4 42,788 Performance Rights 195,095 Ordinary Shares Restricted Shares 277 - 42,127 1,315 - - - Former Executive KMP Matt Bekier Performance Rights 2,936,077 696,128 Ordinary Shares 1,008,905 273,903 - - (42,127) - - - - - Restricted Shares 273,903 - (273,903) Harry Theodore Performance Rights 302,363 136,825 Ordinary Shares 71,979 62,736 - - Restricted Shares 62,736 - (62,736) Greg Hawkins Performance Rights 736,250 181,473 Ordinary Shares 230,6025 79,846 - - (82,500) 403,928 - - - - - 307,106 1,976 195,095 277 - (627,706) 3,004,499 - - 1,282,808 - (31,818) 407,370 - - 134,715 - (163,636) 754,087 (37,522) 272,926 Restricted Shares 79,846 - (79,846) - - 1 For KMPs who commenced their role as KMP during the year, the balance disclosed is from the date they commenced as a KMP. 2 Restricted shares that are no longer subject to a holding lock are transferred into the ordinary shares category. 3 For KMPs who ceased their role as KMP during the year, the balance disclosed is from the date they ceased as a KMP. 4 Includes 1,315 ordinary shares acquired in FY2022 through salary sacrifice under the General Employee Share Plan. The shares are subject to a holding lock of two years from the acquisition dates. The holding lock ends in FY2023. 5 Mr Hawkins opening balance has been restated to include shares held in a separate account not previously disclosed. 72 The Star Entertainment Group 2022 Annual Report 315 VARIABLE REWARD OUTCOMES FOR THE FINANCIAL YEAR ENDED 30 JUNE 2022 5.1 STI outcome for FY2022 Group Performance: Under the Company’s new STI design, as detailed in Table 3, awards for Executive KMP are generated by performance against four Company metrics, comprising 80% of the award, and individual performance comprising 20% of the award. Details of the Company's targets and outcomes for FY2022 are noted in Table 6 below. TABLE 6: FY2022 PERFORMANCE OUTCOMES AGAINST KEY PERFORMANCE INDICATORS FOR THE STI STI Metric Weighting Target Outcome Outcome % of Target Weighted Outcome % NPAT • Deliver Budgeted Normalised NPAT 50% $0.6m -$33.4m N.M.1 0% GUEST SATISFACTION • Elevate the guest service culture and guest experience across all our properties 10% 86 106 123% 15% REGULATORY COMPLIANCE & RISK MANAGEMENT • Total Reportable Injury Frequency Rate (TRIFR) 3.33% 14.4 11.8 118% 5% • Compliance Training Completion 3.33% 90 92 102% 3.67% • Incident, breach reporting and actions completion 3.34% MET MET 100% 3.33% ENGAGEMENT • Retain talented teams through a compelling Employee Value Proposition and highly engaged Team Member environment. WEIGHTED GROUP STI OUTCOME FINAL GROUP STI OUTCOME (BOARD DISCRETION APPLIED) 10% 7.5 7.5 100% 10% 37% 25% 1 The outcome % of target for normalised NPAT is not meaningful as result was a loss. The Board reviewed the Group STI outcomes and resolved to use its discretion to zero out the Regulatory Compliance and Risk Management metric. This decision was taken with the view that the metric has not been met in its intended spirit due to the issues raised in the Bell review. Executive KMP Performance Under the STI, Executive KMP are required to complete a balanced scorecard that comprises a mixture of financial and non-financial targets and strategic priorities. Table 7 (over page) shows individual key performance indicators and the FY2022 percentage of STI target received by each eligible Executive KMP. Key performance indicators and STI outcomes for Christina Katsibouba are not included as they relate in full to her previous non-KMP role. 73 32TABLE 7: INDIVIDUAL KEY PERFORMANCE INDICATORS AND FY2022 STI PERCENTAGE OF TARGET RECEIVED Geoff Hogg – Acting Chief Executive Officer1 Individual Priorities 1. Develop QLD Leadership Team Achievements: Built depth and capability of senior leadership roles including in Hospitality. COO Brisbane appointed. 2. Drive QWB operational design decisions and pre-opening planning for a December 2022 opening Achievements: Operational design decisions have been completed. Pre-opening planning is well advanced for a delayed opening in mid-2023. 3. Improve operating conditions Achievements: Covid related restrictions were progressively removed throughout FY22. Approval granted for QLD EGM commission programs and a table games cashless trial. 4. Support Diversity & Inclusion Achievements: Employee engagement survey results on diversity exceeded targets. Company formally recognised externally as a leader in diversity and inclusion. Individual STI Outcome Weighted Individual STI Outcome (20% x individual outcome %) Total Individual STI Outcome (weighted Group STI outcome per Table 6 + weighted individual STI outcome) 1 KPIs and achievements for FY2022 reflect those agreed for the substantive role. Weighting Outcome 25% Met target 25% Below Target 25% On Target 25% Above Target 100% of target 20% $206,753 / 45% of target Table 8 details the variable remuneration of Executive KMP under the STI during the period. TABLE 8: VARIABLE REMUNERATION UNDER THE STI FOR THE YEAR ENDED 30 JUNE 2022 Executive Financial year Cash Award $ Restricted Share Grant $ As a % of total remuneration STI not achieved as a % of target1 Current Executive KMP Geoff Hogg Christina Katsibouba Former Executive KMP Matt Bekier Harry Theodore Greg Hawkins TOTAL FY2022 TOTAL FY2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 137,835 68,918 – – – – – – – – – – – – – – – – – – 137,835 68,918 – – 1 Maximum opportunity is 150% of the executives' target incentive level 20% 0% – – 0% 0% 0% 0% 0% 0% 55% 100% – – 100% 100% 100% 100% 100% 100% 74 The Star Entertainment Group 2022 Annual Report 33 Table 9 outlines the performance of the Group and shareholder returns over the last five financial years. TABLE 9: STATUTORY KEY PERFORMANCE INDICATORS Performance metric Statutory NPAT Basic EPS (statutory) Full year dividend (fully franked, cents per share) Share price at year end Increase/(decrease) in share price 5.2 Vesting under the LTI FY2018 FY2019 FY2020 FY2021 FY2022 $148.1m $198.0m $(94.6)m $57.9m $(202.5)m 17.5c 20.5c $4.93 (2%) 21.6c 20.5c $4.12 (16%) (10.3)c 10.5c $2.84 (31%) 6.1c 0.0c $3.69 +30% (21.0)c 0.0c $2.79 (24%) Since the Company’s inception in 2011, there have been eleven awards made under the LTI, with six awards tested and two vesting outcomes (FY2014 and FY2015 awards). Table 10 sets out the details of performance rights issued over the last five financial years. TABLE 10: DETAILS OF LTI AWARDS ACTIVE DURING THE YEAR Detail FY2018 Award FY2019 Award FY2020 Award FY2021 Award FY2022 Award Grant date 2 Oct 2017 3 Oct 2018 25 Sep 2019 24 Sep 2020 23 Sep 2021 Test date 2 Oct 2021 3 Oct 2022 25 Sep 2023 24 Sep 2024 23 Sep 2025 Vesting hurdle(s) TSR, EPS & ROIC TSR, EPS & ROIC TSR, EPS & ROIC TSR, EPS & ROIC TSR, EPS & ROIC Test result All rights lapsed N/A N/A N/A N/A During FY2022, the FY2018 Award was tested and did not vest as performance hurdles were not met. The next test date will be in October 2022, for performance rights granted in FY2019. Performance rights relating to the FY2018 award were tested in October 2021 with none of these rights vesting into fully paid ordinary shares. The TSR performance of the Group was -7.25% (excluding the value of franking credits), with a percentile ranking of 21.54%. As this was below the 50th percentile, none of the TSR component of the FY2018 award vested. The EPS performance hurdle of 6.4 cents per share was below the threshold of 35.9 cents per share and target of 43.8 cents per share, and accordingly none of the EPS component of the FY2018 award vested. This was the first time the ROIC performance hurdle was tested, with an outcome of 1.3% which was below the threshold of 9.5% and target of 11.5%, resulting in no vesting of performance rights for this component. The FY2019 award, due to be tested on 3 October 2022, has EPS, TSR and ROIC performance hurdles that each comprise one third of the award outcome. Details of the performance outcomes relative to target and threshold amounts will be provided to shareholders ahead of the 2022 AGM and reported in the FY2023 Remuneration Report. Table 11 summarises the unvested performance rights held by Executive KMP as at 30 June 2022. 75 34TABLE 11: PERFORMANCE RIGHTS BY AWARD HELD BY EXECUTIVE KMP AT 30 JUNE 2022 Executive KMP FY2019 Award FY2020 Award FY2021 Award FY2022 Award Total performance rights retained Current Executive KMP Geoff Hogg Christina Katsibouba1 Former Executive KMP2 74,952 20,145 93,118 127,839 108,019 403,928 30,032 73,625 71,293 195,095 Matt Bekier 668,203 691,216 948,952 696,128 3,004,499 Harry Theodore 28,908 94,386 147,251 136,825 407,370 Greg Hawkins – – – – – Total performance rights 792,208 908,752 1,297,667 1,012,265 4,010,892 1 Performance rights in FY2019, FY2020, FY2021 and FY2022 reflect those granted prior to her appointment as Interim Chief Financial Officer. 2 All performance rights under the LTI will lapse upon termination, as per the performance plan rules. The termination dates for Mr Bekier and Mr Theodore are to be confirmed in due course, and as such the rights have not formally lapsed. Mr Hawkins' rights lapsed on 30 June 2022 following his termination. Table 12 shows the variable remuneration of Executive KMP under the LTI during the period. Details of the number of performance rights granted, vested or lapsed during the period are also provided as required under the Corporations Act and its regulations, including the relevant Australian Accounting Standard principles. TABLE 12: VARIABLE REMUNERATION UNDER THE LTI FOR THE YEAR ENDED 30 JUNE 2022 Executive Financial Year Number of Performance Rights Granted Fair Value of Performance Rights Granted Fair Value at Grant Date Grant Date Test Date As a % of total remuneration1 Number of Performance Rights Vested Number of Performance Rights Lapsed2 Current Executive KMP Geoff Hogg Christina Katsibouba 2022 2021 2022 2021 108,919 408,254 3.78 23/09/2021 23/09/2025 127,839 352,836 2.76 24/09/2020 24/09/2024 71,293 269,450 3.78 23/09/2021 23/09/2025 – – – – – -2% 11% 8% – Former Executive KMP Matt Bekier 2022 2021 696,128 2,630,993 3.78 23/09/2021 23/09/2025 -104% 948,952 2,619,108 2.76 24/09/2020 24/09/2024 21% Harry Theodore 2022 136,825 517,126 3.78 23/09/2021 23/09/2025 -15% Greg Hawkins 2021 2022 2021 147,251 406,413 2.76 24/09/2020 24/09/2024 12% 181,473 685,871 3.78 23/09/2021 23/09/2025 -32% 247,382 682,774 2.76 24/09/2020 24/09/2024 11% TOTAL FY2022 1,122,445 4,424,244 TOTAL FY2021 1,471,424 4,061,131 – – – – – – – – – – 0 0 (82,500) (54,064) – – (627,706) (548,204) (31,818) (26,938) (917,723) (117,958) (1,659,747) (747,164) 1 Percentage calculation based on accounting LTI expense and total remuneration as reported in Table 14. 2 Performance rights granted in FY2018 were tested in October 2021 and resulted in no performance rights vesting. Performance rights granted in FY2019 are due for testing in October 2022. All of Mr Hawkin's rights lapsed on 30 June 2022 following his termination. 76 The Star Entertainment Group 2022 Annual Report 35 6 EXECUTIVE KMP CONTRACTS AND REMUNERATION Remuneration arrangements for Executive KMP are reviewed annually by the Board. Table 13 outlines the remuneration arrangements for Executive KMP in FY2022 and their contracted employment details. TABLE 13: EXECUTIVE KMP REMUNERATION AND EMPLOYMENT CONTRACTS CURRENT EXECUTIVE KMP Contract Details Geoff Hogg3 Acting Chief Executive Officer Christina Katsibouba Interim Chief Financial Officer Geoff Hogg Chief Casino Officer QLD FY2021 FY2022 FY2021 FY2022 FY2021 FY2022 Fixed remuneration1 Short-term incentive target Long-term incentive (annual award value) Total Target Annual Reward Short-term incentive maximum value Long-term incentive maximum value Non-monetary benefits Other benefits N/A N/A N/A N/A N/A N/A N/A N/A Notice by the Executive 9 months Notice by the Group Restraint2 Non solicitation 9 months 12 months 12 months $1,000,000 N/A $800,000 $651,131 $750,000 $600,000 N/A $400,000 $390,679 $450,000 $600,000 N/A $480,000 $390,679 $450,000 $2,200,000 N/A $1,680,000 $1,432,489 $1,650,000 $900,000 N/A $600,000 $586,019 $675,000 $600,000 N/A N/A N/A 9 months 9 months 12 months 12 months $480,000 $390,679 $450,000 N/A N/A 9 months 9 months 12 months 12 months Contract duration Open ended Open ended Open ended FORMER EXECUTIVE KMP Contract Details Matt Bekier Former Managing Director and Chief Executive Officer Harry Theodore Former Chief Financial Officer Greg Hawkins Former Chief Casino Officer NSW FY2021 FY2022 FY2021 FY2022 FY2021 FY2022 Fixed remuneration1 $1,728,900 $1,875,000 $750,000 $950,000 $1,260,000 $1,260,000 $1,728,900 $1,875000 $450,000 $570,000 $756,000 $756,000 $2,900,000 $2,900,000 $450,000 $570,000 $756,000 $756,000 $6,357,800 $6,650,000 $1,650,000 $2,090,000 $2,772,000 $2,772,000 $2,593,350 $2,812,500 $675,000 $855,000 $1,134,000 $1,134,000 $2,900,000 $2,900,000 $450,000 $570,000 $756,000 $756,000 Short-term incentive target Long-term incentive (annual award value) Total Target Annual Reward Short-term incentive maximum value Long-term incentive maximum value Non-monetary benefits Other benefits N/A N/A Notice by the Executive 12 months Notice by the Group Restraint2 Non solicitation 12 months 12 months 12 months N/A N/A 9 months 9 months 12 months 12 months N/A N/A 9 months 9 months 12 months 12 months Contract duration Open ended Open ended Open ended 77 36INCOMING EXECUTIVE KMP Contract Details Robbie Cooke Incoming Managing Director and Chief Executive Officer Scott Wharton Chief Executive Officer The Star Sydney and Group Head of Transformation FY2022 FY2023 FY2022 Fixed remuneration1 Short-term incentive target Long-term incentive (annual award value) Total Target Annual Reward Short-term incentive maximum value Long-term incentive maximum value Non-monetary benefits Other benefits N/A N/A N/A N/A N/A N/A N/A N/A Notice by the Executive 12 months Notice by the Group Restraint2 Non solicitation 12 months 12 months 12 months Contract duration Open ended $1,600,000 $960,000 $1,600,000 $4,160,000 $1,440,000 $1,600,000 N/A N/A N/A N/A N/A N/A N/A N/A 9 months 9 months 12 months 12 months Open ended FY2023 $950,000 $570,000 $950,000 $2,470,000 $855,000 $950,000 1 The Star Entertainment Group deducts superannuation from the Executives’ fixed remuneration as per the Australian Taxation Office Superannuation Guarantee Cap. 2 Exclusion from being engaged in any business or activity in Australia which competes with or is substantially similar to the business of The Star Entertainment Group. 3 Mr Hogg commenced the role of Acting Chief Executive Officer on 1 June 2022. Mr Hogg tendered his resignation on 26 September 2022. 78 The Star Entertainment Group 2022 Annual Report 377 STATUTORY EXECUTIVE KMP REMUNERATION Table 14 sets out Executive KMP remuneration as required by the Corporations Act and its regulations, including the relevant Australian Accounting Standard principles. TABLE 14: STATUTORY EXECUTIVE KMP REMUNERATION Executive Financial year Short-term Long-term Post-Employment Charge for share based allocations Termination payments6 Total remuneration Performance related Salary1 Bonus $ $ Non-monetary benefits2 $ Long service leave $ Performance rights4 $ Restricted shares5 $ $ % Current Executive KMP Geoff Hogg 2022 849,664 137,835 5,364 Christina Katsibouba 2021 700,760 2022 124,043 2021 – Former Executive KMP Matt Bekier 2022 1,428,705 2021 1,988,464 Harry Theodore 2022 909,365 2021 851,943 Greg Hawkins 2022 906,023 2021 1,304,268 – – – – – – – – – 2,409 840 – 2,605 4,276 2,605 4,276 2,605 4,276 Superannuation3 $ 23,568 21,694 3,076 – 16,397 10,676 1,936 – 22,452 28,348 13,053 12,298 17,550 (19,746) 31,808 95,139 57,700 11,251 – – – – – – – – 1,044,890 888,378 141,146 – 14% 17% 8% – 2,076,886 1,736,128 -104% 17,486 (1,812,006) 26,163 633,928 383,018 – 3,064,197 33% 20,400 (222,199) – 784,371 1,507,595 -15% 21,694 128,702 87,729 – 1,106,642 20% 20,400 (454,831) – 932,580 1,424,327 -32% 20,660 26,494 186,401 111,655 – 1,653,754 18% TOTAL FY2022 4,217,800 137,835 14,019 71,388 84,930 (2,497,531) 31,808 3,793,837 5,854,086 TOTAL FY2021 4,845,435 – 15,237 71,982 96,045 1,044,170 640,102 – 6,712,971 – - 1 Comprises salary, salary sacrificed benefits (including motor vehicle novated leases) and annual leave expense. 2Comprises car parking, accommodation, airfares and travel costs where applicable. These amounts are non-contractual. 3 Comprises superannuation contributions per Superannuation Guarantee legislation and salary sacrificed superannuation. 4 Represents the fair value of share based payments expensed / (credited) by The Star Entertainment Group in relation to LTI awards. The reduction in the expense in FY2022 is due to the adjustment made under the accounting standards to reflect the probability of these rights vesting. 5 Represents the fair value of share based payments expensed by The Star Entertainment Group in relation to STI awards. The expense is recognised over a 26 month holding lock period. 6 Termination payments include salary, annual leave expense, long service leave expense and other on-costs expected to be incurred between the executives’ resignation date and termination date. The termination dates for Mr Bekier and Mr Theodore are to be confirmed in due course. Mr Hawkins terminated on 30 June 2022 and received a payment in lieu of his contractual notice period. 8 NED REMUNERATION Remuneration Policy • NEDs (excluding the Chairman) receive a Board fee and a Committee fee for their participation as Chair or member of each Committee. • The Chairman receives an all-inclusive fee as Chairman of the Board and as an ex-officio member of all Board Committees. • NEDs do not receive any performance or incentive payments and are not eligible to participate in any of the Group’s reward programs. This policy aligns with the principle that NEDs act independently and impartially. • Board fees are not paid to the Managing Director and Chief Executive Officer. Executive KMPs do not receive fees for directorships of any subsidiaries. NED Fees The aggregate fees payable to NEDs for their services as directors are limited to the maximum annual amount approved by shareholders, currently set at $2,500,000 including superannuation contributions. The Board approved a 3.5% increase to the Board and Chair fees effective from 1 September 2021. There was no change to Committee fees in FY2022 and there will be no changes to NED or Committee fees for FY2023. Table 15 sets out the annual Board and Committee fee structure for FY2022. 79 38TABLE 15: ANNUAL NED FEES (INCLUSIVE OF SUPERANNUATION) Chair Member Board $501,458 $168,912 Audit $35,000 $17,500 Risk, Compliance and Regulatory Performance Remuneration, People & Social Responsibility1 $35,000 $17,500 $35,000 $17,500 1 The Remuneration Committee was merged with the People, Culture and Social Responsibility Committee and renamed as the Remuneration, People and Social Responsibility Committee from 1 January 2022. The Star Entertainment Group Limited remunerates NEDs for the full month of fees irrespective of their commencement date. Observer fees are paid where the NED appointment is subject to casino regulatory approvals being obtained. Observer fees are equivalent to applicable Board and Committee fees. Table 16 sets out total remuneration received by each NED. TABLE 16: NED REMUNERATION NED Financial year Board and Committee Fees $ Executive Salary $ Superannuation1 Total2 $ $ Current Non-Executive Directors Ben Heap Gerard Bradley AO Katie Lahey AM Michael Issenberg3 Richard Sheppard 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Former Non-Executive Directors John O’Neill AO4 Sally Pitkin AO Zlatko Todorcevski TOTAL FY2022 TOTAL FY2021 2022 2021 2022 2021 2022 2021 2022 2021 230,590 212,968 193,795 196,986 201,219 212,968 51,185 – 193,795 194,322 458,631 462,806 201,219 212,968 – 32,831 – – – – – – – – – – 375,000 – – – – – 1,530,434 375,000 1,525,849 – 21,380 20,232 19,380 18,714 20,122 20,232 5,119 – 19,380 18,461 23,568 21,694 20,122 20,232 – 3,119 129,071 122,684 251,970 233,200 213,175 215,700 221,341 233,200 56,304 – 213,175 212,783 857,199 484,500 221,341 233,200 – 35,950 2,034,505 1,648,533 1 Comprises superannuation contributions per Superannuation Guarantee legislation and salary sacrificed superannuation. 2 During FY2022, NEDs accepted a 20% reduction in fees in August and September following the impact of COVID-19 business closures. 3 On 17 February 2022, the Company announced the appointment of Michael Issenberg as a Non Executive Director, subject to casino regulatory approvals being obtained. Michael Issenberg commenced as a Non-Executive Director on 11 July 2022. 4 In addition to his Chairman fees, John O'Neill received an annualised salary of $1.5 million to serve as Executive Chairman on an interim basis. This amount is not included in the $2.5 million annual NED fee limit as it related to his Executive Chairman duties. This arrangement ceased on 31 May 2022 with one month's notice being paid until 30 June 2022. Mr O'Neill was not invited to participate in any of the Company's incentive plans during this time. Minimum Shareholding Policy for NEDs To support the alignment of the interests of the Board and executives with the interests of shareholders, the Group has minimum shareholding policies in place. NEDs are required to progressively acquire shares over a three year period from the date of commencement of their unconditional appointment (within three years from the date of commencement of the policy (for existing directors). NEDs are to hold shares of equal value to their respective annual base fee applicable at the time of their unconditional appointment. Direct and indirect holdings will count towards the minimum shareholding target. All NEDs are currently meeting, or on track to meet, their minimum shareholding requirements in the required timeframes. 80 The Star Entertainment Group 2022 Annual Report 39 TABLE 17: SHARES HELD BY NEDS AT 30 JUNE 2022 Name Balance at start of the year Number acquired Number divested Balance at the end of the year Current Non-Executive Directors Ben Heap Gerard Bradley AO Katie Lahey AM Michael Issenberg Richard Sheppard Former Non-Executive Directors John O’Neill AO Sally Pitkin AO Total ordinary shares 40,000 75,000 56,907 – 10,000 – – – 250,000 50,000 133,800 45,900 601,607 16,200 – 76,200 – – – – – – – – 50,000 75,000 56,907 – 300,000 150,000 45,900 677,807 9 OTHER INFORMATION 9.1. LOANS AND OTHER TRANSACTIONS WITH KMP There have been no loans or other transactions with KMP during the year. 81 40Financial Report For the year ended 30 June 2022 THE STAR ENTERTAINMENT GROUP LIMITED A.C.N. 149 629 023 ASX CODE: SGR AND ITS CONTROLLED ENTITIES 82 The Star Entertainment Group 2022 Annual Report Consolidated Income Statement For the year ended 30 June 2022 Consolidated income statement For the year ended 30 June 2022 Revenue Other income Government taxes and levies Employment costs Depreciation, amortisation and impairment Cost of sales Property costs Advertising and promotions Other expenses Share of net profit/(loss) of associate and joint venture entities accounted for using the equity method (Loss)/earnings before interest and income tax (LBIT/EBIT) Net finance costs (Loss)/profit before income tax (LBT/PBT) Income tax benefit/(expense) Net (loss)/profit after tax (NLAT/NPAT) Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss Change in fair value of cash flow hedges taken to equity, net of tax Total comprehensive (loss)/income for the period Earnings per share: Basic earnings per share Diluted earnings per share Note A2 2022 $m 1,527.1 2021 $m 1,545.4 A3 A3 A3 A4 D5 A5 F2 F1 F3 F3 15.0 (387.0) (598.7) (370.8) (77.1) (60.2) (64.5) (148.8) 16.4 (148.6) (57.0) (205.6) 3.1 (202.5) 20.5 (182.0) 12.6 (378.7) (501.7) (243.8) (64.8) (56.2) (54.3) (115.7) (4.4) 138.4 (58.6) 79.8 (21.9) 57.9 (6.4) 51.5 (21.3) (21.3) 6.1 cents 6.1 cents The above consolidated income statement should be read in conjunction with the accompanying notes. 41 83 41Consolidated Balance Sheet For the year ended 30 June 2022 Consolidated balance sheet For the year ended 30 June 2022 ASSETS Cash and cash equivalents Trade and other receivables Inventories Income tax receivable Derivative financial instruments Asset held for sale Other assets Total current assets Property, plant and equipment Intangible assets Derivative financial instruments Investment in associate and joint venture entities Other assets Total non current assets TOTAL ASSETS LIABILITIES Trade and other payables Interest bearing liabilities Income tax payable Provisions Derivative financial instruments Other liabilities Total current liabilities Interest bearing liabilities Deferred tax liabilities Provisions Derivative financial instruments Other liabilities Total non current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Share capital Retained earnings Reserves TOTAL EQUITY Note B1 B2 F2 B3 F12 F4 B4 B5 B3 D5 F4 F5 B7 F2 F6 B3 F7 B7 F2 F6 B3 F7 F8 F8 The above consolidated balance sheet should be read in conjunction with the accompanying notes. * Comparatives have been restated due to wage compliance (refer to note G). 84 2022 $m 82.0 18.0 16.2 4.4 1.4 - 79.5 201.5 2,635.5 1,662.0 62.9 669.6 39.9 5,069.9 5,271.4 206.4 6.1 - 115.2 5.7 23.1 356.5 1,326.4 140.9 8.3 - 9.0 1,484.6 1,841.1 3,430.3 3,171.0 247.8 11.5 3,430.3 2021 Restated* $m 67.9 23.3 15.2 - 2.9 30.6 23.8 163.7 2,695.4 1,831.4 13.9 631.7 37.2 5,209.6 5,373.3 179.1 6.8 1.0 94.5 5.6 23.5 310.5 1,285.9 134.3 10.0 8.0 9.8 1,448.0 1,758.5 3,614.8 3,159.3 450.3 5.2 3,614.8 42 The Star Entertainment Group 2022 Annual Report42Consolidated Statement of Cash Flows For the year ended 30 June 2022 Consolidated statement of cash flows For the year ended 30 June 2022 Cash flows from operating activities Net cash receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Payment of government levies, gaming taxes and GST Income taxes paid Receipt of government grants Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant, equipment and intangibles Proceeds from sale of plant and equipment Payments for investment in associate and joint venture entities Net cash outflow from investing activities Cash flows from financing activities Proceeds from interest bearing liabilities Repayment of interest bearing liabilities Dividends paid Proceeds from issue of shares Finance costs Purchase of treasury shares Disposal of treasury shares Interest payment of lease liabilities Principal payment of lease liabilities Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Note F2 F9 E2 E2 F8 F8 E2 E2 B1 2022 $m 1,665.9 (1,072.0) (412.6) (5.1) - 176.2 (142.8) 40.8 (21.7) (123.7) 125.9 (104.0) - - (48.9) (1.9) - (3.5) (6.0) (38.4) 14.1 67.9 82.0 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 2021 $m 1,689.7 (995.9) (335.2) (6.8) 112.7 464.5 (102.1) 33.1 (118.3) (187.3) 154.0 (369.0) (75.1) 75.0 (61.3) - 11.7 (3.8) (6.9) (275.4) 1.8 66.1 67.9 43 85 43Consolidated Statement of Changes in Equity For the year ended 30 June 2022 m $ l a t o T 5 . 0 2 ) 5 . 2 0 2 ( 8 . 4 1 6 , 3 ) 9 . 1 ( 6 . 3 1 ) 2 . 4 1 ( ) 0 . 2 8 1 ( 3 . 0 3 4 , 3 - - - - - 0 . 5 2 ) 2 . 4 1 ( 8 . 0 1 ) 4 . 6 ( 9 . 7 5 5 . 1 5 2 . 8 0 1 ) 0 . 2 1 ( 7 . 1 1 6 . 0 2 . 8 8 . 4 1 6 , 3 4 4 - - - - - - - 2 . 8 0 . 5 2 6 . 6 4 4 , 3 8 . 6 1 m $ e v r e s e r t n e m y a p d e s a b e r a h S m $ f o t s o C i g n g d e h e v r e s e r m $ e v r e s e r i g n g d e H m $ i d e n a t e R i s g n n r a e m $ s e r a h s y r u s a e r T m $ s e r a h s y r a n d r O i e t o N - 6 . 1 0 . 1 0 . 1 - - - 6 . 2 - 2 . 3 ) 6 . 1 ( ) 6 . 1 ( - - - - - ) 4 . 1 2 ( - 5 . 9 1 5 . 9 1 - - - ) 9 . 1 ( - ) 8 . 4 ( ) 8 . 4 ( ) 6 . 6 1 ( - - - - - - . 3 0 5 4 . ) 5 2 0 2 ( . ) 5 2 0 2 ( - - - . 8 7 4 2 - . 9 7 5 . 4 2 9 3 . 9 7 5 - - - - - 6 . 1 ) 4 . 1 2 ( . 3 0 5 4 . ) 6 8 1 ( - - - - ) 9 1 ( . . 6 3 1 ) 9 6 ( . . ) 9 8 1 ( - - - - . ) 0 2 1 ( - 6 . 0 . 7 1 1 . ) 6 8 1 ( - - - - - - . 9 7 7 1 3 , . 9 7 7 1 3 , . 7 9 6 0 3 , - - - - - - - . 2 8 0 1 . 9 7 7 1 3 , 1 F 8 F 8 F 0 1 F 1 F 8 F 8 F 8 F 8 F 0 1 F y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o C 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F 86 * d e t a t s e R 1 2 0 2 y l u J 1 t a e c n a l a B e m o c n i i e v s n e h e r p m o c r e h t O r a e y e h t r o f s s o L 2 2 0 2 s s o l e v i s n e h e r p m o c l a t o T s e r a h s y r u s a e r t f o e s a h c r u P s m a r g o r p e r a h s e e y o p m e e l t t e s o t d e u s s l i s e r a h S s m a r g o r p e r a h s e e y o p m e e l t t e s o t d e u s s l i s e r a h S s t n e m y a p d e s a b e r a h s e e y o p m E l * 1 2 0 2 e n u J 0 3 t a e c n a l a B s t n e m y a p d e s a b e r a h s e e y o p m E l 2 2 0 2 e n u J 0 3 t a e c n a l a B * d e t a t s e R 1 2 0 2 * 0 2 0 2 y l u J 1 t a e c n a l a B r a e y e h t r o f t i f o r P s s o l i e v s n e h e r p m o c r e h t O e m o c n i e v i s n e h e r p m o c l a t o T l a t i p a c e r a h s f o e u s s I s e r a h s y r u s a e r t f o e s a h c r u P s e r a h s y r u s a e r t f o l a s o p s D i . s e t o n i g n y n a p m o c c a e h t h t i w n o i t c n u n o c j n i d a e r e b l d u o h s y t i u q e n i s e g n a h c f o t n e m e t a t s d e t a d i l o s n o c e v o b a e h T . ) G e o n t o t f r e e r ( e c n a i l p m o c e g a w o t e u d d e t a t s e r n e e b e v a h s e v i t a r a p m o C * The Star Entertainment Group 2022 Annual Report44 Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Refer to the Operating and Financial Review (OFR) within the Directors' Report for details of the key transactions during the year. Contents A Key income statement disclosures A1 Segment information...................................................................................................................................................46 A2 Revenue......................................................................................................................................................................47 A3 Other income and expenses........................................................................................................................................47 A4 Depreciation, amortisation and impairment.................................................................................................................48 A5 Net finance costs.........................................................................................................................................................48 A6 Dividends.....................................................................................................................................................................49 A7 Significant items..........................................................................................................................................................50 A8 Leases.........................................................................................................................................................................50 B Key balance sheet disclosures B1 Cash and cash equivalents.........................................................................................................................................51 B2 Trade and other receivables........................................................................................................................................51 B3 Derivative financial instruments...................................................................................................................................52 B4 Property, plant and equipment....................................................................................................................................53 B5 Intangible assets.........................................................................................................................................................55 B6 Impairment testing and goodwill..................................................................................................................................56 B7 Interest bearing liabilities.............................................................................................................................................58 C Commitments, contingencies and subsequent events C1 Commitments..............................................................................................................................................................60 C2 Contingent assets and liabilities..................................................................................................................................60 C3 Subsequent events.....................................................................................................................................................62 D Group structure D1 Related party disclosures............................................................................................................................................64 D2 Parent entity disclosures.............................................................................................................................................66 D3 Deed of cross guarantee.............................................................................................................................................68 D4 Key Management Personnel disclosures....................................................................................................................69 D5 Investment in associate and joint venture entities.......................................................................................................70 E Risk Management E1 Financial risk management objectives and policies.....................................................................................................74 E2 Additional financial instruments disclosures................................................................................................................78 F Other disclosures F1 Other comprehensive income......................................................................................................................................80 F2 Income tax...................................................................................................................................................................80 F3 Earnings per share......................................................................................................................................................83 F4 Other assets................................................................................................................................................................83 F5 Trade and other payables............................................................................................................................................83 F6 Provisions....................................................................................................................................................................84 F7 Other liabilities.............................................................................................................................................................85 F8 Share capital and reserves..........................................................................................................................................85 F9 Reconciliation of net profit after tax to net cash inflow from operations.......................................................................87 F10 Employee share plans...............................................................................................................................................88 F11 Auditor's remuneration...............................................................................................................................................89 F12 Assets held for sale...................................................................................................................................................89 G Accounting policies and corporate information......................................................................................................90 45 87 45Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 A Key income statement disclosures A1 Segment information The Group's operating segments have been determined based on the internal management reporting structure and the nature of products and services provided by the Group. They reflect the business level at which financial information is provided to those in the roles of executive decision makers, being the Acting Chief Executive Officer (prior to this, the Managing Director and Chief Executive Officer) and the Interim Chief Financial Officer (prior to this, the Chief Financial Officer), for decision making regarding resource allocation and performance assessment. The Group has three reportable segments: Sydney Comprises The Star Sydney's casino operations, including hotels, restaurants, bars and other entertainment facilities. Gold Coast Comprises The Star Gold Coast's casino operations, including hotels, theatre, restaurants, bars and other entertainment facilities. Brisbane Comprises Treasury's casino operations, including hotel, restaurants and bars. 2022 Gross revenues - VIP a Gross revenues - domestic a Segment revenue Segment earnings before tax, depreciation, amortisation and significant items interest, Depreciation significant items (refer to note A4) amortisation and before Capital expenditure 2021 Gross revenues - VIP a Gross revenues - domestic a Segment revenue Segment depreciation, amortisation and significant items earnings interest, before tax, Depreciation and amortisation before significant items (refer to note A4) Capital expenditure Sydney $m Gold Coast $m Brisbane $m 4.7 778.8 783.5 83.4 118.3 60.8 8.5 819.7 828.2 199.8 119.9 58.5 0.6 423.8 424.4 89.3 63.1 65.2 0.6 380.7 381.3 112.5 61.9 59.3 0.2 326.0 326.2 64.8 26.9 13.6 0.4 347.2 347.6 114.4 28.7 13.5 Total $m 5.5 1,528.6 1,534.1 237.5 208.3 139.6 9.5 1,547.6 1,557.1 426.7 210.5 131.3 a Total gross revenue is presented as the gross gaming win before player rebates and promotional allowances of $7.0 million (2021: $11.7 million). Reconciliation of reportable segment profit to profit before income tax Segment earnings before interest, tax, depreciation, amortisation and significant items Depreciation and amortisation a (refer to note A4) Significant items (refer to note A7) Unallocated items: - net finance costs a (refer to note A5) - share of net loss of associate and joint venture entities accounted for using the equity method a (refer to note D5) (Loss)/profit before income tax (LBT/PBT) a These items are before significant items (refer to note A7). 88 2022 $m 237.5 (208.3) (176.0) (50.2) (8.6) (205.6) 2021 $m 426.7 (210.5) (77.7) (54.3) (4.4) 79.8 46 The Star Entertainment Group 2022 Annual Report46Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 A2 Revenue Gaming Non-gaming Other Total revenue 2022 $m 1,070.7 448.1 8.3 1,527.1 2021 $m 1,150.9 385.1 9.4 1,545.4 Revenue Revenue is recognised when the Group satisfies its obligations in relation to the provision of goods and services to its customers in the ordinary course of business. Revenue is measured at an amount that reflects the consideration to which the Group expects to be entitled in exchange for performing these obligations, including any discounts, rebates, price concessions, incentives or performance bonuses. Revenue is constrained such that the significant reversal of revenue in a future period is not highly probable. Revenue comprises net gaming win, less player and gaming promoter rebates and promotional allowances, as well as other non-gaming revenue from hotels, restaurants and bars. Customer loyalty programs The Group operates customer loyalty programs enabling customers to accumulate award credits for on-property spend. A portion of the spend, equal to the fair value of the award credits earned and reduced for expected breakage, is treated as deferred revenue (refer to note F7). Revenue from the award credits is recognised in the income statement when the award is redeemed or expires. The stand alone selling price of complimentary services (including hotel room nights, food and beverage, and other services) that are provided to casino guests as incentives related to gaming play are recorded as revenues related to the respective goods or services, as they are provided to the patron. The residual amount is recorded as gaming revenue. A3 Other income and expenses (Loss)/profit before income tax is stated after charging the following expenses and significant items: Other income Gain on disposal of assets a Net foreign exchange gain Other a The gain on disposal of assets includes the disposal of Jet (2021: disposal of land). Refer to note A7. Government taxes and levies (including gaming GST): New South Wales Queensland Employment costs: Salaries, wages, bonuses, redundancies and other benefits b Defined contribution plan expense (superannuation guarantee charges) Share based payment expense (refer to note F10) 2022 $m 10.1 0.1 4.8 15.0 219.2 167.8 387.0 554.6 44.9 (0.8) 598.7 2021 $m 10.2 - 2.4 12.6 208.0 170.7 378.7 451.3 42.2 8.2 501.7 b Salaries and wages have increased due to the COVID-19 restrictions being lifted. In the prior comparable period (pcp), the amount is net of $88.2 million of financial support provided by the Federal Government under the JobKeeper wage subsidy scheme. As a result of the JobKeeper subsidy, the Group received a $58.0 million benefit towards salaries and wages expenses, for employees who had been stood up or were working reduced hours. 47 89 47Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 A4 Depreciation, amortisation and impairment Property, plant and equipment (refer to note B4) Intangible assets (refer to note B5) Other Total depreciation and amortisation Impairment - Property, plant and equipment Impairment - Goodwill (refer to note A7) Total impairment Total depreciation, amortisation and impairment 2022 $m 171.5 36.2 0.6 208.3 - 162.5 162.5 370.8 2021 $m 176.2 33.4 0.9 210.5 33.3 - 33.3 243.8 Depreciation is calculated using a straight line method. The useful lives over which the assets are depreciated are as follows (for further details of the useful lives of intangible assets refer to note B5): Freehold and leasehold buildings Leasehold improvements Plant and equipment Software Licences 10 - 95 years 4 - 75 years 5 - 20 years 3 - 10 years Until expiry Operating equipment (which includes uniforms, casino chips, kitchen utensils, crockery, cutlery and linen) is recognised as a depreciation expense based on usage. The period of usage depends on the nature of the operating equipment. Right of use assets, which includes plant, equipment and property, is depreciated on a straight line basis over the shorter of its estimated useful life and the lease term. The Group's lease portfolio includes assets with lease terms between 1 and 75 years. The residual values and useful lives are reviewed annually, and adjusted if appropriate, at each financial reporting date. A5 Net finance costs Interest paid on borrowings Borrowing costs US Private Placement premium unwind Fair value hedging adjustment Leases interest Interest on underpaid casino duty Net finance costs recognised in the income statement a 2022 $m 37.6 13.3 - (2.1) 3.5 4.7 57.0 2021 $m 46.1 13.7 (5.4) 0.4 3.8 - 58.6 a Net finance costs include $2.1 million (2021: $4.3 million) of finance costs associated with COVID-19 affected loan facilities and $4.7 million (2021: nil) of interest on underpaid casino duty (refer to note A7). Net finance costs of $57.0 million were down 2.7% on the pcp primarily due to lower average debt balances and cancellation of the $200 million club facility in December 2020, partially offset by recognition of the interest on underpaid casino duty. 90 48 The Star Entertainment Group 2022 Annual Report48Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 A6 Dividends The Group remains committed to maintaining a balance sheet that positions it for post-COVID-19 recovery. No final dividend was declared, given the continuing impacts of COVID-19 on the Group and in accordance with the conditions of debt covenant waivers which restrict further cash dividends from being paid until the Group’s gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times. Dividends declared and paid during the year on ordinary shares Final dividend paid during the year in respect of the year ended 30 June a Interim dividend paid during the year in respect of the half year ended 31 December 2019 b 2022 $m - - 2021 $m - 96.4 a b No final dividend were declared for the years ended 30 June 2022 or 30 June 2021. No interim dividends were declared for the half year ended 31 December 2021 or 31 December 2020. The FY2020 interim dividend payment was deferred from the original payment date of 1 April 2020 due to the exceptional circumstances associated with COVID-19 requiring the closure of the properties, and a revised Dividend Reinvestment Plan (DRP) which was fully underwritten by Credit Suisse Equities (Australia) Limited. On 2 July 2020, the Group issued 30,730,998 new shares to settle the interim dividend. Existing shareholders who elected to participate in the DRP received 6,849,977 new shares worth $21.3 million. 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 interim dividend cash payment. Franking credit balance Amount of franking credits available to shareholders 92.0 86.9 49 91 49Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 A7 Significant items (Loss)/profit before income tax (LBT/PBT) is stated after charging the following significant items: Goodwill impairment a Bell review costs b One-off COVID-19 related expenditure c Underpaid casino duty and interest d Software-as-a-Service project costs e Business Interruption and Crown unsolicited proposal costs f JV profit on sale of units g Disposal of Jet h Dispute settlement i Impairment j Expected credit losses k Gain on disposal of land l Net significant items Tax on significant items Significant items net of tax a Impairment of goodwill for The Star Sydney (see note B6). 2022 $m 162.5 17.4 11.9 12.7 7.7 2.7 (25.0) (9.2) (4.7) - - - 176.0 (5.2) 170.8 2021 $m - - 21.1 - 7.1 1.1 - - - 36.5 21.3 (9.4) 77.7 (26.2) 51.5 b c d e f g h i j k l Legal costs associated with the Bell review (see note C2). Incremental one-off COVID-19 related expenditure including support payments for employees impacted by property shutdowns and covenant amendment fees for COVID-19 affected loan facilities. In the pcp, restructuring and redundancy costs relating to Group reorganisation as a result of the impact of COVID-19. Liability for estimated underpaid casino duty and interest (see note C2). Software-as-a-Service (SaaS) arrangement project implementation costs. Major projects include the implementation of new SAP payroll and customer management Salesforce systems. Business Interruption insurance claim and adviser costs related to the unsolicited Crown Resorts bid. Equity accounted share of Destination Gold Coast Consortium’s profit relating to the sale of Tower 1 residential units. In September 2021, sale of the 2018 Bombardier Jet was completed. The Group settled a dispute with suppliers, resulting in recovery of $4.7 million in funds in relation to combustible cladding claims. Impairment expense for write-down of 2018 Bombardier Jet held for sale to its recoverable amount, venue closures and excess office space due to the closure of international junket operations following outcomes of Bergin Inquiry recommendations, and write-off of combustible cladding used in property upgrades. Increased expected credit loss provisioning and impairment of other receivables as a result of the ongoing COVID-19 impacts on border closures and cessation of international junket operations due to the outcomes of the Bergin Inquiry recommendations. Gain on disposal of Gold Coast land to the Destination Gold Coast Consortium joint venture for construction of the second residential, hotel and retail tower. Significant items are determined by management based on their nature and size. They are items of income or expense which are, either individually or in aggregate, material to the Group or to the relevant business segment and: (cid:4) (cid:4) not in the ordinary course of business (for example, the cost of significant reorganisations or restructuring); or part of the ordinary activities of the business but unusual due to their size and nature (for example, impairment of assets). A8 Leases The following amounts relating to AASB16 leases are recognised in the income statement: Depreciation expense of right-of-use assets (refer to note B4) Interest expense on lease liabilities (refer to note A5) Total 92 2022 $m 6.0 3.5 9.5 2021 $m 7.2 3.8 11.0 50 The Star Entertainment Group 2022 Annual Report50Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 B Key balance sheet disclosures Assets B1 Cash and cash equivalents Cash on hand and in banks Short term deposits, maturing within 30 days B2 Trade and other receivables Trade receivables Less provision for impairment Net trade receivables Other receivables (i) Provision for impairment reconciliation Balance at beginning of year Impairment of trade receivables a Less amounts written off as uncollectible Balance at end of year 2022 $m 82.0 - 82.0 44.8 (37.0) 7.8 10.2 18.0 (38.1) (1.0) 2.1 (37.0) 2021 $m 64.1 3.8 67.9 44.1 (38.1) 6.0 17.3 23.3 (103.6) (16.4) 81.9 (38.1) a These amounts are included in other expenses in the income statement. The estimates and assumptions associated with the Group's expected credit loss model were revised in FY2021 as a result of the impact of the Bergin Inquiry on international junkets and the ongoing effects of COVID-19. An additional $16.4 million provision was recognised in FY2021, to reflect the increased uncertainty around collection of outstanding junket receivables. Trade receivables are non-interest bearing and are generally on 30 day terms. (ii) Ageing of trade and other receivables Trade receivables 2022 Not yet due Past due not impaired Considered impaired 2021 Not yet due Past due not impaired Considered impaired 0 - 30 days 30 days - 1 year 1 - 3 years 3 years + $m $m $m $m 6.5 0.3 - 6.8 1.8 - - 1.8 - - 2.0 2.0 - 0.1 - 0.1 - - 26.4 26.4 - 3.8 38.1 41.9 - 1.0 8.6 9.6 - 0.3 - 0.3 Total $m 6.5 1.3 37.0 44.8 1.8 4.2 38.1 44.1 51 93 51Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Other receivables Other receivables are not past due or considered impaired. It is expected that these balances will be received as they fall due. Impairment of trade receivables The Group impairment analysis is performed at each reporting date to measure expected credit losses. The provision reflects the probability-weighted outcome of reasonable and supportable information that is available at the reporting date about past events, current conditions and forecasts of future economic conditions. Due to the unprecedented impact of the COVID-19 pandemic, impacts of the Bergin Inquiry recommendations, government imposed restrictions, international border closures and other economic impacts, debtor balances have been individually assessed based on criteria, including: patron's financial circumstances; payment history; relationship with the Group; international gambling activity; and whether a legal claim has commenced to collect the balance. B3 Derivative financial instruments Current assets Cross currency swaps Interest rate swaps Non current assets Cross currency swaps Interest rate swaps Current liabilities Cross currency swaps Interest rate swaps Non current liabilities Cross currency swaps Interest rate swaps Net financial assets 2022 $m - 1.4 1.4 59.6 3.3 62.9 5.7 - 5.7 - - - 58.6 2021 $m 2.9 - 2.9 13.7 0.2 13.9 2.9 2.7 5.6 4.3 3.7 8.0 3.2 Net derivative assets are up $55.4 million due to depreciation of the AUD:USD exchange rate and increase in AUD floating interest rates. Valuation of derivatives and other financial instruments The valuation of derivatives and financial instruments is based on market conditions at the balance sheet date. The value of the instrument fluctuates on a daily basis and the actual amounts realised may differ materially from their value at the balance sheet date. Refer to note E2 for additional financial instruments disclosure. 94 52 The Star Entertainment Group 2022 Annual Report52Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 B4 Property, plant and equipment 2022 Cost Opening balance at beginning of the year Additions Disposals / write offs Reclassification / transfer Closing balance at end of the year a Accumulated depreciation Opening balance at beginning of the year Depreciation expense Disposals / transfers Closing balance at end of the year Carrying Amount Opening balance at beginning of the year Closing balance at end of the year Freehold and leasehold buildings Freehold land Leasehold improvements Plant and equipment Right of use asset Note $m $m $m $m $m Total $m 72.5 1.6 - - 2,677.9 305.5 1,159.5 62.9 4,278.3 64.6 (10.3) (10.1) 0.5 (2.1) (2.7) 43.5 (29.5) 15.0 0.8 (4.9) - 111.0 (46.8) 2.2 74.1 2,722.1 301.2 1,188.5 58.8 4,344.7 A4 - - - - 575.7 73.6 (10.4) 638.9 134.8 8.0 (1.5) 855.8 83.9 (28.9) 16.6 1,582.9 6.0 (4.4) 171.5 (45.2) 141.3 910.8 18.2 1,709.2 72.5 74.1 2,102.2 2,083.2 170.7 159.9 303.7 277.7 46.3 40.6 2,695.4 2,635.5 2021 Cost Opening balance at beginning of the year Additions Disposals / write offs Reclassification / transfer Non-current asset held for sale F12 Closing balance at end of the year a Accumulated depreciation Opening balance at beginning of the year Depreciation expense Disposals / transfers Non-current asset held for sale Impairments Closing balance at end of the year Carrying Amount Opening balance at beginning of the year Closing balance at end of the year 77.0 2,676.6 297.7 1,193.7 64.4 4,309.4 - (4.5) - - 64.6 (37.4) (25.9) - 3.7 (0.4) 4.5 - 38.1 (33.1) 21.8 (61.0) 0.4 (1.9) - - 106.8 (77.3) 0.4 (61.0) 72.5 2,677.9 305.5 1,159.5 62.9 4,278.3 A4 F12 A4 - - - - - - 534.1 63.9 (30.1) - 7.8 123.5 12.0 (0.9) - 0.2 806.7 93.1 (36.1) (30.4) 22.5 8.1 7.2 (1.5) - 2.8 1,472.4 176.2 (68.6) (30.4) 33.3 575.7 134.8 855.8 16.6 1,582.9 77.0 72.5 2,142.5 2,102.2 174.2 170.7 387.0 303.7 56.3 46.3 2,837.0 2,695.4 53 95 53Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 a Includes capital works in progress of: Buildings - at cost Leasehold improvements - at cost Plant and equipment - at cost Total capital works in progress 2022 $m 19.6 0.3 6.7 26.6 2021 $m 22.9 1.2 2.9 27.0 For details on capital activities refer to section 2.6 of the Directors' Report. Property, plant and equipment is comprised of the following assets: (cid:4) (cid:4) (cid:4) (cid:4) (cid:4) Freehold land - Gold Coast property; Freehold and leasehold buildings - Brisbane, Gold Coast and Sydney properties; Leasehold improvements - Brisbane and Sydney properties; Plant and equipment - operational and other equipment: and Right-of-Use assets - Property and other equipment. Asset useful lives and residual values For the accounting policy on depreciation and useful lives of property, plant and equipment refer to note A4. Impairment Refer to note B6 for details of the accounting policy and key assumptions included in the impairment calculation. 96 54 The Star Entertainment Group 2022 Annual Report54Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 B5 Intangible assets Sydney and Brisbane casino licences Sydney casino concessions Goodwill Software a Note $m $m $m $m Other $m Total $m 2022 Cost Opening balance at beginning of the year Additions Disposals / write offs Reclassification / transfer Closing balance at end of the year a Accumulated amortisation Opening balance at beginning of the year Amortisation expense Disposals Impairments A4 A4 Closing balance at end of the year Carrying Amount Opening balance at beginning of the year Closing balance at end of the year 2021 Cost Opening balance at beginning of the year Additions Disposals Reclassification / transfer Closing balance at end of the year a Accumulated amortisation Opening balance at beginning of the year Amortisation expense A4 Disposals Closing balance at end of the year 1,442.2 294.7 100.0 - - - - - - - - - 292.9 29.4 (0.9) (2.2) 20.1 2,149.9 - - - 29.4 (0.9) (2.2) 1,442.2 294.7 100.0 319.2 20.1 2,176.2 - - - 162.5 162.5 1,442.2 1,279.7 78.6 3.2 - - 81.8 216.1 212.9 31.4 0.9 - - 201.8 31.7 (3.0) - 32.3 230.5 6.7 0.4 - - 7.1 318.5 36.2 (3.0) 162.5 514.2 68.6 67.7 91.1 88.7 13.4 13.0 1,831.4 1,662.0 1,442.2 294.7 100.0 - - - - - - - - - 268.6 24.9 (0.2) (0.4) 20.1 2,125.6 - - - 24.9 (0.2) (0.4) 1,442.2 294.7 100.0 292.9 20.1 2,149.9 - - - - 75.5 3.1 - 78.6 219.2 216.1 30.4 1.0 - 31.4 69.6 68.6 173.6 28.9 (0.7) 201.8 95.0 91.1 6.3 0.4 - 6.7 285.8 33.4 (0.7) 318.5 13.8 13.4 1,839.8 1,831.4 Carrying Amount Opening balance at beginning of the year Closing balance at end of the year 1,442.2 1,442.2 a Includes capital works in progress of $17.3 million (2021: $11.2 million). Intangible asset additions relate predominantly to software as the Group progresses its strategic priority to maximise value from technology, including further enhancing gaming and loyalty experience and delivering new integrated IT platforms. Asset useful lives and residual values Intangible assets are amortised using the straight line method as follows: (cid:4) (cid:4) The Sydney casino licence is amortised from its date of issue until expiry in 2093. The Sydney casino concessions granted by the New South Wales government include product concessions in New South Wales which are amortised over the period of expected benefits. 55 97 55Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (cid:4) The Brisbane casino licence is amortised over the remaining life of the lease to which the licence is linked, which expires in 2070. The Group will continue to amortise the casino licence over its current term up until it is surrendered, following the expected opening of the Integrated Resort at Queen's Wharf Brisbane (QWB) in 1H FY2024. Software is amortised over useful lives of 3 to 10 years. (cid:4) (cid:4) Other assets include the contribution to the construction costs of the state government owned Gold Coast Convention and Exhibition Centre. The Group's Gold Coast casino is deriving future benefits from the contribution, which is being amortised over a period of 50 years. Goodwill and impairment testing Goodwill is assessed for impairment on an annual basis and is carried at cost less accumulated impairment losses. Refer to note B6 for the accounting policy on asset impairment and details of key assumptions included in the impairment testing calculation. B6 Impairment testing and goodwill Goodwill acquired through business combinations has been allocated to the applicable cash generating unit for impairment testing. Each cash generating unit represents a business operation of the Group. Carrying amount of goodwill allocated to each cash generating unit Cash generating unit (Reportable segment) 2022 2021 Sydney $m Gold Coast $m Brisbane $m 851.0 1,013.5 165.5 165.5 263.2 263.2 Total carrying amount $m 1,279.7 1,442.2 The recoverable amount of each of the three cash generating units at year end (Sydney, Gold Coast and Brisbane) is determined based on 'fair value less costs of disposal', which is calculated using the discounted cash flow approach. This approach utilises cash flow forecasts that represent a market participant's view of the future cash flows that would arise from operating and developing the Group's assets. These cash flows are principally based upon Board approved business plans for a five-year period, together with longer term projections and approved capital investment plans, extrapolated using an implied terminal growth rate of 2.5% (2021: 2.5%). These cash flows are then discounted using a relevant long term post-tax discount rate specific to each cash generating unit, ranging between 8.9% to 9.3% (2021: 7.9% to 8.4%). The pre-tax discount rates range between 11.4% to 11.8% (2021: 10.0% to 10.4%). An impairment of $162.5 million was recognised in the Sydney cash generating unit at 30 June 2022 (2021: nil). No other impairments were recognised (2021: nil). Key assumptions The fair value measurement is valued using level 3 valuation techniques (refer to note E2(i) for details of the levels). The key assumptions on which management based its cash flow projections when determining 'fair value less costs of disposal' are as follows: i. Cash flow forecasts The cash flow forecasts are based upon Board approved business plans for a five-year period, together with longer term projections, growth rates and approved capital investment plans for each cash generating unit. ii. Terminal value The terminal growth rate used is in line with the forecast long term underlying growth rate in the Consumer Price Index (CPI). iii. Discount rates Discount rates applied are based on the post tax weighted average cost of capital applicable to the relevant cash generating unit. The FY2022 discount rate for Sydney includes a risk premium for the uncertainty associated with ongoing regulatory and other matters. iv. Regulatory changes Bergin Inquiry Following the release of the Bergin Report in February 2021, in May 2021 the Group agreed with the Independent Liquor and Gaming Authority (ILGA) in New South Wales (NSW) to terminate business with international junket operators. The Group is applying the undertaking to all of its casino operations (New South Wales and Queensland). This has been reflected in the cash flow forecasts. 56 98 The Star Entertainment Group 2022 Annual Report56Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Bell review The Group has taken several additional remedial steps, including suspending all domestic and international rebate programs in May 2022. This has been reflected in the cash flow forecasts. Brisbane Upon opening of the Integrated Resort in 1H FY2024, the existing Brisbane casino will cease to operate and the Group will act as the operator of the QWB casino. The Group currently holds a perpetual casino licence in Brisbane that is attached to the lease of the current Brisbane site that expires in 2070. Upon opening of the QWB casino, the Group's casino licence will be surrendered and Destination Brisbane Consortium (DBC) will be granted a casino licence for 99 years including an exclusivity period of 25 years. The Group will surrender the Brisbane casino licence and some operational assets in exchange for the right to operate the new QWB casino. The Group's assessment of the Brisbane cash generating unit's recoverable amount considered the remaining year of existing operations and a terminal value based on either the exchange of assets for management rights over the new QWB casino or applying a terminal growth to the final year of operations. Neither model resulted in an impairment. Gold Coast The Group continues to focus on delivery of its major investment projects in Queensland in joint venture with CTF and FEC. Sydney As announced on 1 June 2020, The Star Sydney and the NSW Government entered into an agreement which gave The Star Sydney regulatory certainty in the Sydney market for a 20 year period. This included preserving The Star Sydney’s exclusivity over electronic gaming machines in the Sydney casino market and flat rates of gaming tax (from FY2022) as a percentage of revenue until the end of FY2041. Reforms to the NSW regulatory framework (see note C3) purport to override compensation arrangements for specific regulatory actions taken by the NSW Government. The NSW Government has stated that there are various commercial arrangements, including restrictions or exclusivities applying to each of the licences, that should be honoured. The Group is considering the reforms and the potential implications for The Star Sydney. In June 2022, ILGA granted a conditional licence for Crown Resorts Limited (Crown) to operate its Sydney Casino. The casino opened to the public on 8 August 2022. The expected impact of Crown Sydney has been taken into consideration in determining the recoverable amount of Sydney's cash generating unit at 30 June 2022. Management will continue to monitor actual impacts against the assumptions taken to determine the impact, if any, that this may have on the cash generating unit's carrying value. v. Impairment The Sydney property and broader casino industry is in a state of significant uncertainty. Recent regulatory changes have resulted in the cessation of the junket business, the pausing of international and domestic rebate businesses while COVID-19 restrictions continue to affect international visitation. The outcome from the Bell review and AUSTRAC investigation remain uncertain. In combination, these factors have reduced the valuation of the Sydney cash generating unit, requiring an impairment of $162.5 million to be recognised at 30 June 2022. The impairment is recognised in the line ‘Depreciation, amortisation and impairment expense’ in the Consolidated Income Statement and has been applied wholly to the cash generating units goodwill balance. vi. Sensitivities The key estimates and assumptions used to determine the 'fair value less costs of disposal' of a cash generating unit are based on management's current expectations after considering past experience, future investment plans and external information. They are considered to be reasonably achievable, however, significant changes in any of these key estimates, assumptions or regulatory environments may result in a cash generating unit's carrying value exceeding its recoverable value, requiring an impairment charge to be recognised. An increase or decrease of 0.5% in the Sydney discount rate (9.3%) would result in either a further impairment of $176.1 million or no impairment. For Gold Coast, the recoverable amount is sensitive to changes in the compound average growth rate and discount rate. A 1.6% decline to compound average growth rate or a 0.4% increase in discount rate are reasonably possible changes that individually could give rise to a potential impairment. For the Brisbane property, a reasonably possible change in any of the assumptions used does not result in an impairment charge. Management will continue to monitor the assumptions on the respective carrying values. Impairment of assets Goodwill and indefinite life intangible assets are tested for impairment at least annually. Property, plant and equipment, other intangible assets and other non-financial assets are considered for impairment if there is a reason to believe that impairment may be necessary. Factors taken into consideration in reaching such a decision include the economic viability of the asset itself and where it is a component of a larger economic entity, the viability of the unit itself. 57 99 57Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Liabilities B7 Interest bearing liabilities Current Lease liabilities Non current Bank loans - unsecured (net of unamortised borrowing costs) Private placement - US dollar - amortised cost Lease liabilities 2022 $m 6.1 6.1 705.7 583.9 36.8 2021 $m 6.8 6.8 776.5 466.0 43.4 1,326.4 1,285.9 The bank facilities have maturities between one and five years, with an average weighted maturity of 2.9 years (2021: 3.7 years). On 14 May 2021, the Group extended $250 million of its bilateral facilities for up to 2 years. The $200 million club facility, executed in FY2020 to provide additional liquidity during the COVID-19 pandemic, was cancelled early on 9 December 2020. The $98.1 million USPP matured on 15 June 2021 and was repaid utilising available bank facilities. Net debt was $1,149.0 million, down 1.9% on the pcp. Adjusted gearing levels, calculated as agreed with the financiers on an annualised 2H FY2022 run rate, were 2.8x (2021: 2.7x unadjusted). Refer to note F8 (iii) for Capital management disclosures and the calculation of the gearing ratio. 2022 Type Bank loans Bank loans Bank loans Bank loans Bank loans Total bank loans USPP USPP USPP Total USPP Total Facility amount $m USD - - - - - - 50.0 288.4 70.0 408.4 408.4 Facility amount $m AUD a 75.0 150.0 765.0 175.0 40.0 1,205.0 64.0 369.4 93.9 527.3 1,732.3 Unutilised at 30 June $m Maturity date July 2022 July 2023 July 2024 July 2025 July 2026 August 2025 August 2027 September 2028 75.0 56.0 225.0 100.0 40.0 496.0 - - - - 496.0 100 58 The Star Entertainment Group 2022 Annual Report58Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 2021 Type Bank loans Bank loans Bank loans Bank loans Bank loans Total bank loans USPP USPP Total USPP Total Facility amount Facility amount Unutilised at 30 June $m USD - - - - - - 50.0 288.4 338.4 338.4 $m AUD a 75.0 150.0 765.0 175.0 40.0 1,205.0 64.0 369.4 433.4 1,638.4 $m Maturity date July 2022 July 2023 July 2024 July 2025 July 2026 August 2025 August 2027 31.0 5.0 257.0 100.0 31.0 424.0 - - - 424.0 a USPP Notes are issued in USD and converted to AUD for presentation purposes. Bank loans - unsecured (net of unamortised borrowing costs) & US Private Placement (USPP) Bank loans and working capital facility Interest on bank facilities is variable, linked to Bank Bill Swap Bid Rate, plus a margin. The Group has entered into interest rate swap agreements to hedge underlying debt obligations and allow $250 million of floating rate bank loans to be swapped to fixed rate borrowings. Further details about the Group's exposure to interest rate movements are provided in notes E1 and E2. USPP The $583.9 million (2021: $466.0 million) USPP comprises the US$408.4 million (2021: US$338.4 million) USPP converted to $591.6 million AUD at 30 June rates (2021: $450.2 million AUD) and the fair value movement of future interest payments subject to fair value hedges, being an asset of $7.7 million (2021: liability of $15.8 million). The $527.3 million (2021: $433.4 million) USPP facilities are stated in the table above at the AUD amount repayable under cross currency swaps at maturity. Interest is a combination of fixed and variable, linked to Bank Bill Swap Rate, and a defined gearing ratio at the end of certain test dates. Fair value disclosures Details of the fair value of the Group's interest bearing liabilities are set out in note E2. Financial Risk Management As a result of the USPP borrowings, the Group is exposed to foreign currency risk through the movements in USD/AUD exchange rate. The Group has entered into cross currency swaps in order to hedge this exposure. As at 30 June 2022, 100% of the USPP borrowings balance of US$408.4 million (2021: US$338.4 million) is hedged. The Group is also exposed to the interest rate risk as a result of bank loans and the USPP borrowings. To hedge against this risk, the Group has entered into interest rate swaps. As at 30 June 2022, after taking into account the effect of interest rate swaps, approximately 46.0% (2021: 39.0%) of the Group's borrowings are hedged at a fixed rate of interest. Further details about the Group's exposure to interest rate and foreign currency movements are provided in notes E1 and E2. 59 101 59Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 C Commitments, contingencies and subsequent events C1 Commitments (i) Other commitments a Not later than one year Later than one year but not later than five years Later than five years 2022 $m 44.6 0.3 - 44.9 2021 $m 13.8 3.7 - 17.5 a Other commitments as at 30 June 2022 have increased in line with the resumption of capital projects which were delayed due to COVID-19 disruptions. Total project costs for Destination Brisbane Consortium's development of the Integrated Resort are expected to be up ~10% on prior guidance of $2.6 billion. The majority of these cost over-runs are to be funded via additional equity contributions in proportion with the existing joint venture interests. The Group's expected contribution is approximately $100 million. Remaining construction costs are to be funded out of committed project financing. For Destination Gold Coast Consortium, construction is underway on Tower 2 at 30 June 2022 (2021: Towers 1 and 2). Equity contributions towards Tower 1 are complete. The Group has $15 million of committed equity contributions towards Tower 2. Project financing for the remaining build costs is currently under negotiation. Refer to note D5 for commitments in respect of investment in associate and joint venture entities. C2 Contingent assets and liabilities AUSTRAC enforcement investigation As announced on 7 June 2021, the Company was informed by AUSTRAC’s Regulatory Operations Team that it has identified potential serious non-compliance by The Star Pty Limited (The Star) with the Australian Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and the Anti-Money Laundering and Counter- Terrorism Financing Rules Instrument 2007 (No.1) (AML/CTF Rules). The potential non-compliance includes concerns regarding ongoing customer due diligence, adopting and maintaining an AML/CTF Program and compliance with Part A of that Program. These concerns have been identified in the course of a compliance assessment which was commenced by AUSTRAC in September 2019. The compliance assessment focused on The Star’s management of customers identified as high risk and politically exposed persons. The matter was referred to AUSTRAC’s Enforcement Team to conduct an enforcement investigation. In January 2022, AUSTRAC expanded the scope of its investigation to other entities within the Group and has served notices requiring the production of information and documents to AUSTRAC. AUSTRAC has advised that it has not made a decision regarding the appropriate regulatory response that it may apply to the Group, including the extent to which enforcement action will be taken. While AUSTRAC may take enforcement action, the type of that enforcement action and quantum of financial penalty imposed by the Federal Court is not known. Bell report In September 2021 the Group was notified by ILGA that Adam Bell SC will undertake the next regular review of The Star’s casino operations in accordance with the Casino Control Act 1992 (NSW). On 19 October 2021 ILGA advised the review would include public hearings relating to The Star’s casino operations. The public hearings ran from March to May 2022 and considered various matters concerning suitability to hold a casino licence, including the Group’s maintenance and administration of systems to counter money laundering and infiltration by organised crime. Mr Bell’s report was provided to ILGA by 31 August 2022 (the Report). On 5 September 2022, the New South Wales Independent Casino Commission (the NICC) was appointed as regulator of casinos in NSW. On 13 September 2022 the NICC published the Report. Mr Bell found The Star unsuitable to hold a casino licence in NSW. Mr Bell made a total of 30 recommendations to the NICC. The NICC will respond to the recommendations in due course. 102 60 The Star Entertainment Group 2022 Annual Report60Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 On 13 September 2022 the NICC issued The Star a Show Cause Notice under section 23 of the CCA (the Notice). Under the Notice the NICC stated that it was considering taking disciplinary action against The Star for one or more grounds being: CCA and licence contraventions found in the Report; that The Star is no longer suitable to give effect to its licence because of Review’s findings and the absence of effective action, resources and capability to remedy matters identified in the Report; and that it is no longer in the public interest that the licence remain in force. The disciplinary action being considered by the NICC is one or more of the following: (cid:4) cancellation or suspension of the licence of The Star; (cid:4) (cid:4) imposition of a pecuniary penalty of up to $100 million (note that pecuniary penalties can be imposed on multiple grounds such that $100 million is not a cap on aggregate penalties that may be imposed on The Star); the amendment of the terms or conditions of the licence; (cid:4) The Star or a close associate give an enforceable undertaking to do or refrain from doing something; and (cid:4) the issue of a letter of censure to The Star. The Notice also stated that in the event the NICC decides to cancel or suspend The Star’s licence, it may consider appointing a person to manage the casino pursuant to section 28 of the CCA. In addition, a charge given by The Star in 1994 allows the regulator – on cancellation or suspension of the licence - to appoint a receiver over all assets at the Sydney premises (including the lease), allowing the whole business to be operated and prepared for sale to a new licensee. The Star has responded to the Notice. The response outlines why disciplinary action should not be taken and includes submissions about the possible appointment of a manager. The NICC may then decide to take appropriate disciplinary action. In FY2020 the Group ceased the use of China Union Pay for gaming purposes and in FY2021 ceased business with international junket operators. In FY2022 the Group suspended all rebate programs. A comprehensive Remediation and Transformation Program is being developed. The program will adopt and address the significant findings of the Report and other ongoing reviews. It will serve as the Group’s integrated roadmap for improving governance, culture and controls. The Remediation and Transformation Program will effect significant improvements in governance, people, culture, risk and compliance management, AML/CTF compliance, harm minimisation (including responsible gambling) and investigations. The outcome of the NICC’s disciplinary action is unknown, and the extent of a financial impact is uncertain. Underpaid casino duty The Group has commenced an independent assessment of residency status and consequential rebate gaming activity for a number of patrons that had changed their residency status, as identified in the Bell review. To date, the review has identified some instances where the eligibility for rebate play was not properly supported. A liability for underpaid casino duty and interest has been recognised in the balance sheet at 30 June 2022. The Bell report has recommended the NICC engage an independent expert to perform their own audit of all patrons that engaged in rebate play at The Star since 28 November 2016. There is no way to reliably measure the impact for the FY2022 financial statements. The final quantum of casino duty and interest cannot be reliably estimated and may be material as it is subject to further analysis, including audit by and discussions with the NICC. Class action In March 2022 the Company was served by Slater & Gordon with a statement of claim for a securities class action in the Supreme Court of Victoria. The claim alleges the Group failed to comply with continuous disclosure requirements and engaged in misleading or deceptive conduct between 29 March 2016 and 16 March 2022 through various alleged disclosures or non-disclosures about its systems, controls, operations and regulatory risks. The allegations reference the Bell review and previous media reporting. The matter is listed for a case management conference to be held before the end of 2022. The Group intends to defend the proceedings. The outcome and any potential financial impacts are unknown. 61 103 61Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 GST amended assessments On 11 August 2021 the Group received amended assessments from the Australian Taxation Office (ATO) in respect of a dispute for the period October 2013 to August 2017 (inclusive) in relation to the GST treatment of rebates paid to junket operators for The Star Pty Limited. The amount in dispute for this period is approximately $138.8 million (primary tax of $81.9 million and interest of $56.9 million). During 1H FY2022 the Group paid $40.9 million as a deposit to the ATO on a no-admissions basis. The deposit is held as a current asset on the balance sheet. On 6 September 2021 the Group filed an application for judicial review with the Federal Court in relation to the interest assessment and on 5 October 2021 lodged an objection against the primary assessments with the ATO. The outcome of the objection is unknown. The Group considers that it has paid the correct amount of tax and will pursue all available avenues of objection. Withholding tax penalty The ATO has issued a penalty for $6.4 million in relation to a dispute over the appropriate method for calculating withholding tax on Junket rebates for the 2015 to 2020 income tax years. The Group has objected to the ATO’s decision to issue the penalty, consequently the ATO is conducting an internal review of this matter. The Group considers that it has paid the correct amount of tax and will pursue all available avenues of objection. Legal challenges There are outstanding legal actions between the Company and its controlled entities and third parties as at 30 June 2022. The Group has notified its insurance carrier of all relevant litigation and believes that any damages (other than exemplary damages) that may be awarded against the Group, in addition to its costs incurred in connection with the action, will be covered by its insurance policies where such policies are in place. Where there are no policies in place, provisions are made for known obligations where the existence of a liability is probable and can be reasonably quantified. As the outcomes of these actions remain uncertain, contingent liabilities exist for possible amounts eventually payable that are in excess of the amounts covered for by the insurance policies in place or of the amounts provided for. The Group has no other contingent liabilities at 30 June 2022. Financial guarantees Refer to note E1 for details of financial guarantees provided by the Group at the reporting date. C3 Subsequent events Bell report Mr Bell’s Report on The Star’s casino operations in accordance with the CCA was provided to ILGA by 31 August 2022. On 5 September 2022, the NICC was appointed as regulator of casinos in NSW. On 13 September 2022 the NICC published the Report. Mr Bell found The Star unsuitable to hold a casino licence in NSW. Mr Bell made a total of 30 recommendations to the NICC. The NICC will respond to the recommendations in due course. On 13 September 2022 the NICC issued The Star a show cause Notice under section 23 of the CCA. Under the Notice the NICC stated that it was considering taking disciplinary action against The Star for one or more grounds being: CCA and licence contraventions found in the Report; that The Star is no longer suitable to give effect to its licence because of Review’s findings and the absence of effective action, resources and capability to remedy matters identified in the Report; and that it is no longer in the public interest that the licence remain in force. The disciplinary action being considered by the NICC is one or more of the following: (cid:4) cancellation or suspension of the licence of The Star; (cid:4) (cid:4) imposition of a pecuniary penalty of up to $100 million (note that pecuniary penalties can be imposed on multiple grounds such that $100 million is not a cap on aggregate penalties that may be imposed on The Star); the amendment of the terms or conditions of the licence; (cid:4) The Star or a close associate give an enforceable undertaking to do or refrain from doing something; and (cid:4) the issue of a letter of censure to The Star. The Notice also stated that in the event the NICC decides to cancel or suspend The Star’s licence, it may consider appointing a person to manage the casino pursuant to section 28 of the CCA. In addition, a charge given by The Star in 1994 allows the regulator – on cancellation or suspension of the licence - to appoint a receiver over all assets at the Sydney premises (including the lease), allowing the whole business to be operated and prepared for sale to a new licensee. 104 62 The Star Entertainment Group 2022 Annual Report62Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 The Star has responded to the Notice. The response outlines why disciplinary action should not be taken and includes submissions about the possible appointment of a manager. The NICC may then decide to take appropriate disciplinary action. The Group understands the gravity of the matters set out in the Report and acknowledge its findings and recommendations. It is clear from the Report that fundamental cultural reform is required. There needs to be more transparency, more robust governance and greater accountability. The Group is reflecting on the existing programs in place, changes made to date and planned initiatives in order to develop a response to earn the trust and confidence of regulators, government, public, patrons and employees. A comprehensive Remediation and Transformation Program is being developed. The program will adopt and address the significant findings of the Report and other ongoing reviews. It will serve as the Group’s integrated roadmap for improving governance, culture and controls. The Remediation and Transformation Program will effect significant improvements in governance, people, culture, risk and compliance management, AML/CTF compliance, harm minimisation (including responsible gambling) and investigations. NSW casino regulatory framework reforms On 11 August 2022 the Casino Legislation Amendment Act 2022 (NSW) was enacted to give effect to amendments to the Casino Control Act 1992. These amendments enact reforms to the NSW casino regulatory framework, including to address all 19 recommendations of the Bergin Inquiry and certain additional measures. This included establishing the NICC as a new independent regulator. The Group is considering the impact and will implement the changes required for The Star. External review of the Group’s Queensland operations In July 2022 an independent review commenced of the Group’s Queensland casinos, The Star Gold Coast and Treasury Brisbane following a request by the Queensland Attorney-General. The review, led by the Honourable Robert Gotterson AO, will examine whether these casinos operate in a way that is consistent with achieving the objectives of the Casino Control Act 1982 and the ongoing suitability of the Group’s casino licensees. Public hearings took place from 23 to 29 August 2022. The review will report to the Attorney-General by 30 September 2022. Other than those events disclosed in the Directors' Report or elsewhere in these financial statements, there have been no other significant events occurring after the balance sheet date and up to the date of this report, which may materially affect either the Group's operations or results of those operations or the Group's state of affairs. 63 105 63Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 D D Group structure D1 Related party disclosures (i) Parent entity The ultimate parent entity within the Group is The Star Entertainment Group Limited. (ii) Investments in controlled entities The consolidated financial statements incorporate the assets, liabilities and results of the following controlled entities in accordance with the accounting policy described in note G. The financial years of all controlled entities are the same as that of the Company (unless stated otherwise below). Note Country of incorporation Equity type Australia ordinary shares Equity interest at 30 June 2022 % Equity interest at 30 June 2021 % Name of controlled entity Parent entity The Star Entertainment Group Limited Controlled entities The Star Entertainment Sydney Holdings Limited The Star Pty Limited The Star Entertainment Pty Ltd The Star Entertainment Sydney Properties Pty Ltd The Star Entertainment Sydney Apartments Pty Ltd Star City Investments Pty Limited Star City Share Plan Company Pty Ltd The Star Entertainment QLD Limited The Star Entertainment QLD Custodian Pty Ltd The Star Entertainment Gold Coast Trust The Star Entertainment International No.1 Pty Ltd The Star Entertainment International No.2 Pty Ltd a b a b a a b a a The Star Entertainment (Macau) Limited c The Star Entertainment International No.3 Pty Ltd EEI Services (Hong Kong) Holdings Limited EEI Services (Hong Kong) Limited EEI C&C Services Pte Ltd The Star Entertainment RTO Pty Ltd The Star Entertainment Finance Limited Destination Cairns Consortium Pty Limited The Star Entertainment Technology Services Pty Ltd The Star Entertainment Training Company Pty Ltd PPIT Pty Ltd The Star Entertainment Letting Pty Ltd The Star Entertainment Online Holdings Pty Ltd The Star Entertainment Online Pty Ltd The Star Entertainment Brisbane Holdings Pty Ltd The Star Entertainment Brisbane Operations Pty Ltd The Star Entertainment DBC Holdings Pty Ltd The Star Brisbane Car Park Holdings Pty Ltd The Star Entertainment Gold Coast Holdings Pty Ltd The Star Entertainment GC Investments Pty Ltd The Star Entertainment GC Investments No.1 Pty Ltd The Star Entertainment International No.5 Pty Ltd EEI Services Holdings No.1 Pty Ltd EEI Services Holdings No.2 Pty Ltd EEI Services (Macau) Limited The Star Entertainment International Tourism Pty Ltd 106 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Macau Australia Hong Kong Hong Kong Singapore Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Macau Australia ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares units ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares ordinary shares 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 64 The Star Entertainment Group 2022 Annual Report64Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Name of controlled entity Destination Sydney Consortium Pty Limited The Star Entertainment Pyrmont Investments No.1 Pty Ltd The Star Entertainment GC No.1 Pty Ltd The Star Entertainment GC No.2 Pty Ltd The Star Entertainment Group Limited Employee Share Trust Note Country of incorporation Equity type Equity interest at 30 June 2022 % Equity interest at 30 June 2021 % Australia Australia Australia Australia Australia ordinary shares ordinary shares ordinary shares ordinary shares units 100.0 100.0 100.0 100.0 0.0 100.0 100.0 100.0 100.0 0.0 a These companies entered into a deed of cross guarantee with The Star Entertainment Sydney Holdings Limited on 31 May 2011, and as such are members of the closed group as defined in Australian Securities and Investments Commission Instrument 2016/785 (refer to note D3). b These companies have provided a charge over their assets and undertakings as explained in note E1. c This company's financial year end is 31 December. (iii) Transactions with controlled entities The Star Entertainment Group Limited During the period, the Company entered into the following transactions with controlled entities: (cid:4) (cid:4) loans of $49.5 million were repaid by controlled entities (2021: $55.0 million); and income tax and GST paid on behalf of controlled entities was $133.7 million (2021: $94.9 million). The amount receivable by the Company from controlled entities at year end is $707.5 million (2021: $757.0 million). All the transactions were undertaken on normal commercial terms and conditions. (iv) Transactions with other related parties Other transactions During the period, in addition to equity contributions (refer to note D5), the Group entered into the following transactions with related parties: (cid:4) Amount recharged to Destination Gold Coast Consortium Pty Ltd was $0.1 million (2021: $0.1 million). There was no outstanding balance at 30 June 2022 (2021: nil); and Amount paid to Destination Gold Coast Consortium Pty Ltd was $10.7 million (2021: $17.7 million) relating to capital works. (cid:4) 65 107 65Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 D2 Parent entity disclosures The Star Entertainment Group Limited, the parent entity of the Group, was incorporated on 2 March 2011. Result of the parent entity Loss for the year Total comprehensive loss for the year a 2022 $m (0.2) (0.2) 2021 $m (0.2) (0.2) a The Group remains committed to maintaining a balance sheet that positions it for post-COVID-19 recovery. No final dividend was declared, given the continuing impacts of COVID-19 on the Group and in accordance with the conditions of debt covenant waivers which restrict further cash dividends from being paid until the Group’s gearing, which represents the ratio of net debt to 12 month trailing statutory EBITDA, is below 2.5 times (refer to note A6). Financial position of the parent entity Current assets Non current assets Total assets Current liabilities Non current liabilities Total liabilities Net assets Total equity of the parent entity Issued capital Retained earnings Shared based payments benefits reserve Total equity 1,783.0 2,593.5 4,376.5 45.6 1,032.2 1,077.8 3,298.7 3,177.8 110.6 10.3 3,298.7 1,785.5 2,592.6 4,378.1 36.9 1,033.4 1,070.3 3,307.8 3,178.1 114.6 15.1 3,307.8 Contingent liabilities Class Action In March 2022 the Company was served by Slater & Gordon with a statement of claim for a securities class action in the Supreme Court of Victoria. The claim alleges the Group failed to comply with continuous disclosure requirements and engaged in misleading or deceptive conduct between 29 March 2016 and 16 March 2022 through various alleged disclosures or non-disclosures about its systems, controls, operations and regulatory risks. The allegations reference the Bell review and previous media reporting. The matter is listed for a case management conference to be held before the end of 2022. The Group intends to defend the proceedings. The outcome and any potential financial impacts are unknown. GST Amended Assessments On 11 August 2021 the Group received amended assessments from the Australian Taxation Office (ATO) in respect of a dispute for the period October 2013 to August 2017 (inclusive) in relation to the GST treatment of rebates paid to junket operators for The Star Pty Limited. The amount in dispute for this period is approximately $138.8 million (primary tax of $81.9 million and interest of $56.9 million). During 1H FY2022 the Group paid $40.9 million as a deposit to the ATO on a no-admissions basis. The deposit is held as a current asset on the balance sheet. On 6 September 2021 the Group filed an application for judicial review with the Federal Court in relation to the interest assessment and on 5 October 2021 lodged an objection against the primary assessments with the ATO. The outcome of the objection is unknown. The Group considers that it has paid the correct amount of tax and will pursue all available avenues of objection. The Parent has no other contingent liabilities at 30 June 2022. 108 66 The Star Entertainment Group 2022 Annual Report66Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Capital expenditure The parent entity does not have any capital expenditure commitments for the acquisition of property, plant and equipment contracted but not provided for at 30 June 2022 (2021: nil). Guarantees The Star Entertainment Group Limited has guaranteed the liabilities of The Star Entertainment Finance Limited, The Star Entertainment International No.3 Pty Ltd and the customer loans for EEI Services (Hong Kong) Limited1. As at 30 June 2022, the carrying amount included in current liabilities at 30 June 2022 of $12.0 million (2021: $12.0 million), and the maximum amount of these guarantees was $68.1 million (2021: $67.2 million) (refer to note E1). The Company has also undertaken to support its controlled entities when necessary to enable them to pay their debts as and when they fall due. 1 The EEI Services (Hong Kong) Limited office has been closed. The guarantee amount will remain until the process for dealing with outstanding customer loans has completed. Accounting policy for investments in controlled entities All investments are initially recognised at cost, being the fair value of the consideration given. Subsequently, investments are carried at cost less any impairment losses. 67 109 67Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 D3 Deed of cross guarantee The Star Entertainment Sydney Holdings Limited, The Star Pty Limited, The Star Entertainment Pty Ltd, The Star Entertainment Sydney Properties Pty Ltd, The Star Entertainment Sydney Apartments Pty Ltd and Star City Investments Pty Limited are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirements to prepare a Financial Report and Directors' Report under Instrument 2016/785 issued by the Australian Securities and Investments Commission. Consolidated income statement and summary of movements in consolidated earnings The above companies represent a 'closed group' for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by The Star Entertainment Sydney Holdings Limited, they also represent the 'extended closed group'. Set out below is a consolidated income statement and a summary of movements in consolidated retained earnings for the year ended 30 June 2022 of the closed group. Consolidated income statement Revenue Other income Government taxes and levies Employment costs Depreciation, amortisation and impairment Cost of sales Property costs Advertising and promotions Other expenses (Loss)/Earnings before interest and tax (LBIT/EBIT) Net finance costs (Loss)/profit before income tax (LBT/PBT) Income tax benefit/(expense) Net (loss)/profit after tax (NLAT/NPAT) Total comprehensive (loss)/income for the period Summary of movements in consolidated retained earnings Accumulated profit at the beginning of the financial year (Loss)/profit for the year Accumulated profit at the end of the financial year 2022 $m 775.8 0.2 (219.2) (223.9) (91.2) (33.4) (32.0) (30.3) (228.3) (82.3) (5.1) (87.4) 25.1 (62.3) (62.3) 111.4 (62.3) 49.1 2021 $m 815.1 2.3 (208.0) (204.6) (123.3) (29.8) (32.0) (28.3) (183.6) 7.8 (0.5) 7.3 (6.0) 1.3 1.3 110.1 1.3 111.4 Consolidated balance sheet Set out below is a consolidated balance sheet as at 30 June 2022 of the closed group consisting of The Star Entertainment Sydney Holdings Limited, The Star Pty Limited, The Star Entertainment Pty Ltd, The Star Entertainment Sydney Properties Pty Limited, The Star Entertainment Sydney Apartments Pty Limited, and Star City Investments Pty Limited. 110 68 The Star Entertainment Group 2022 Annual Report68Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Consolidated balance sheet ASSETS Cash assets Trade and other receivables Inventories Other Total current assets Property, plant and equipment Intangible assets Other assets Total non current assets TOTAL ASSETS LIABILITIES Trade and other payables Interest bearing liabilities Provisions Other liabilities Total current liabilities Deferred tax liabilities Interest bearing liabilities Provisions Total non current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued Capital Retained Earnings TOTAL EQUITY D4 Key Management Personnel disclosures Compensation of Key Management Personnel Short term Long term Share based payments Termination benefits Total compensation 2022 $m 39.5 14.8 7.0 12.4 73.7 1,470.0 262.6 4.2 1,736.8 1,810.5 508.6 0.9 52.3 11.5 573.3 42.4 3.0 2.8 48.2 621.5 1,189.0 1,139.9 49.1 1,189.0 2022 $000 6,275 285 (2,466) 3,794 7,888 2021 $m 26.8 22.7 7.3 - 56.8 1,516.5 269.6 2.7 1,788.8 1,845.6 491.5 1.4 35.7 12.2 540.8 44.8 4.9 3.8 53.5 594.3 1,251.3 1,139.9 111.4 1,251.3 2021 $000 6,387 291 1,044 - 7,722 The above reflects the compensation for individuals who are Key Management Personnel of the Group. The note should be read in conjunction with the Remuneration Report. 69 111 69Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 D5 Investment in associate and joint venture entities Set out below are the investments of the Group as at 30 June 2022. The entities listed below have share capital consisting solely of ordinary shares, which are held by the Group. The country of incorporation is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held. All investments listed below are measured using the equity accounting method. 2022 Name of entity Material Destination Brisbane Consortium Integrated Resort Holdings Pty Ltd (i) Destination Gold Coast Investments Pty Ltd (ii) Destination Gold Coast Consortium Pty Ltd (iii) Non material Festival Car Park Pty Ltd Destination Sydney Consortium Investments Pty Ltd * Total equity accounted investments Country of incorporation % of ownership Nature of ownership Share of (loss)/profit Carrying amount $m $m Australia Australia Australia Australia Australia 50 50 33.3 50 50 Associate Joint venture Joint venture Joint venture Joint venture (5.3) 538.6 0.2 23.6 0.4 (2.5) 36.1 73.6 14.3 7.0 16.4 669.6 * On 2 September 2022, the NSW Government notified the joint venture that it had compulsorily acquired the Pyrmont Tower for use by Sydney Metro. The final purchase price is not yet known, however will exceed the carrying value of the joint venture's assets. The Group will work with Government to finalise the acquisition. Total share of profit is up $20.8 million on the pcp primarily due to Destination Gold Coast Consortium Pty Ltd, which is the joint venture responsible for development of residential and hotel towers on the Gold Coast. In 2H2022 a significant portion of the Tower 1 residential unit sales settled resulting in a gain of $25.0 million (refer to note A7). For those investments considered material to the Group, further information is provided below: (i) Destination Brisbane Consortium Integrated Resort Holdings Pty Ltd The Group has partnered with Hong Kong-based organisations Chow Tai Fook Enterprises Limited (CTF) and Far East Consortium International Limited (FEC) to form Destination Brisbane Consortium (DBC) for the Queen’s Wharf Brisbane Project. The parties have formed two vehicles (the Integrated Resort Joint Venture and the Residential Joint Venture), which together are responsible for completing the Queen’s Wharf Brisbane project. Consistent with the ownership structure, the Group will contribute 50% of the capital to the development of the Integrated Resort and act as the casino operator under a long dated casino management agreement. CTF and FEC will each contribute 25% of the capital to the development of the Integrated Resort. The Group's interest is accounted for using the equity method. 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.30 June 2022 The Integrated Resort is anticipated to open from 1H FY2024. Total project costs for DBC's development of the Integrated Resort are expected to be up ~10% on prior guidance of $2.6 billion. The majority of these cost over-runs are to be funded via additional equity contributions in proportion with the existing joint venture interests. DBC is in ongoing discussions with the builder regarding purported claims for additional costs, extensions of time and damages, with which DBC disagrees. The contract provides for liquidated damages. Commitments and contingent liabilities DBC has current capital commitments of approximately $0.9 billion (2021: $1.4 billion) to fund the construction of the Integrated Resort, which is expected to open in 1H FY2024 (subject to various approvals). On 14 February 2018, Destination Brisbane Consortium Integrated Resort Operations Pty Ltd as trustee for the Destination Brisbane Consortium Integrated Resort Operating Trust (‘Operating Trust’) entered into a $200 million performance guarantee facility with Australia and New Zealand Banking Group Limited as Lender. This facility guarantee is in favour of the State of Queensland and provided to secure due performance as developer under the Development Agreement – Queen’s Wharf Brisbane. The parent entities of the unitholders of the Operating Trust guarantee on a several basis the Trust’s performance under the facility. On 8 July 2020 $125 million of the $200 million performance guarantee was returned from the State of Queensland and subsequently cancelled by Australia and New Zealand Banking Group Limited. 70 112 The Star Entertainment Group 2022 Annual Report70Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 In 1H FY2022, the Trust was advised by the builder of expected delays to its construction program. An anticipated progressive opening is currently expected in 1H FY2024, previously 1H FY2023. The construction contract has provision for liquidated damages payable on key milestones (as adjusted in accordance with the contract). Following correspondence received from the builder in January 2022, the builder has purported that it has a claim against the Trust for additional costs, extensions of time and damages, which the Trust disputes, and hence no provision for additional costs has been recognised as at 30 June 2022. The Trust are holding discussions with the builder on an ongoing basis. The outcome of these discussions is unknown at the date of this report. Summarised financial information The financial statements of the associate is prepared for the same reporting period as the Group and follow the same accounting policies of the Group. Balance sheet Cash and cash equivalents Total current assets excluding cash and cash equivalents Total non current assets Total current liabilities Total non current liabilities Net assets Reconciliation to investment carrying amount: Carrying amount at the beginning of the year Share of loss for the period Share of equity contributions for the Group Carrying amount at the end of the year Income statement Interest revenue Depreciation and amortisation expense Operating expenses Loss before tax Income tax benefit Loss for the year (continuing operations) Total comprehensive loss for the year (continuing operations) Group's share of loss for the year 2022 $m 2021 $m 156.7 19.3 1,946.9 (107.8) (846.3) 1,168.8 543.9 (5.3) - 538.6 0.2 (2.2) (8.6) (10.6) - (10.6) (10.6) (5.3) 80.0 8.0 1,230.5 (95.8) (149.4) 1,073.3 443.0 (2.7) 103.6 543.9 0.1 (2.4) (3.2) (5.5) - (5.5) (5.5) (2.7) 71 113 71Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (ii) Destination Gold Coast Investments Pty Ltd On 20 October 2016, a 50% interest was acquired in Destination Gold Coast Investments Pty Ltd (DGCI). DGCI is a joint venture with CTF and FEC involved in the operation of the Sheraton Grand Mirage Resort, Gold Coast. The Group's interest is accounted for using the equity method. The Securityholders’ Deed for Destination Gold Coast Investments Pty Ltd requires unanimous consent for each Board resolution. Due to the unanimous requirement for decisions, each party has joint control of the entity. The entity is designed to exist on its own and the Deed does not grant the rights to assets and liabilities directly to the Group. The investment has therefore been classified as a joint venture. Commitments and contingent liabilities The joint venture had no capital commitments as at 30 June 2022 (2021: nil). There were no other contingent liabilities. Summarised financial information The financial statements of the joint venture are prepared for the same reporting period as the Group and follow the same accounting policies of the Group. Balance sheet Cash and cash equivalents Total current assets excluding cash and cash equivalents Total non current assets Total current liabilities Total non current liabilities - financial liabilities Other non current liabilities Net assets Reconciliation to investment carrying amount: Carrying amount at the beginning of the year Share of profit/(loss) for the period Share of equity contributions for the Group Carrying amount at the end of the year Income statement Revenue Interest expense Depreciation and impairment expense Operating expenses Profit/(loss) before tax Income tax expense Profit/(loss) for the year (continuing operations) Total comprehensive loss for the year (continuing operations) Group's share of profit/(loss) for the year 114 2022 $m 13.7 1.7 148.0 (10.3) (67.5) (13.5) 72.1 35.9 0.2 - 36.1 44.2 (1.4) (3.6) (38.7) 0.5 (0.1) 0.4 0.4 0.2 2021 $m 11.5 1.8 147.9 (9.2) (67.8) (12.4) 71.8 35.2 (0.2) 0.9 35.9 35.4 (1.4) (3.6) (30.7) (0.3) (0.1) (0.4) (0.4) (0.2) 72 The Star Entertainment Group 2022 Annual Report72Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (iii) Destination Gold Coast Consortium Pty Ltd On 22 November 2016, a 33.3% interest was acquired in Destination Gold Coast Consortium Pty Ltd (DGCC). DGCC is a joint venture with CTF and FEC for the purpose of constructing a new residential and hotel tower in Gold Coast. The Group's interest is accounted for using the equity method. Commitments and contingent liabilities DGCC has current capital commitments of $0.1 billion (2021: $0.5 billion) in relation to Tower 2 (2021: Towers 1 and 2). Committed spend is to be funded out of a combination of project level debt facilities and equity. There were no other contingent liabilities. Summarised financial information The financial statements of the joint venture are prepared for the same reporting period as the Group and follow the same accounting polices of the Group. Balance sheet Cash and cash equivalents Total current assets excluding cash and cash equivalents Total non current assets Total current liabilities Total non current liabilities Net assets Reconciliation to investment carrying amounts: Carrying amount at the beginning of the year Share of profit/(loss) for the period Share of equity contributions for the Group Other Elimination of gain on sale of land Carrying amount at the end of the year Income statement Revenue Depreciation and amortisation expense Operating expenses Profit/(loss) before tax Income tax expense Profit/(loss) for the year (continuing operations) Total comprehensive profit/(loss) operations) for the year (continuing Group's share of profit/(loss) for the year 2022 $m 30.2 164.3 94.6 (39.2) (77.0) 172.9 30.4 19.5 19.7 4.0 - 73.6 274.4 (0.1) (213.1) 61.2 - 61.2 61.2 23.6 2021 $m 7.6 1.3 320.7 (19.3) (232.4) 77.9 33.4 (0.2) 4.5 - (7.3) 30.4 75.7 (0.1) (75.1) (0.5) - (0.5) (0.5) (0.2) Significant accounting policies The following accounting policy is unique to DGCC's accounting within the Group. Apartment sales revenue Revenue in respect of the development project is recognised upon fulfillment of all performance obligations on a contract. The revenue is measured at the transaction price agreed under the contract. Payment is received on actual settlement of individual units when risk and benefits of ownership are transferred to the customer. 73 115 73Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 E Risk Management E1 Financial risk management objectives and policies The Group's principal financial instruments, other than derivatives, comprise cash, short term deposits, Australian denominated bank loans, and foreign currency denominated notes. The main purpose of these financial instruments is to provide funding for the Group's operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations. Derivative transactions are also entered into by the Group, being interest rate swaps, cross currency swaps and forward currency contracts, the purpose being to manage interest rate and currency risks arising from the Group's operations and sources of finance. The Group's risk management policy is carried out by the Group Treasury function under the Group Treasury Policy approved by the Board. Group Treasury reports regularly to the Board on the Group's risk management activities and policies. It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. Details of significant accounting policies and methods adopted, including criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument, are disclosed in note G. Interest rate risk The Group manages interest rate risk by using a floating versus fixed rate debt framework. The relative mix of fixed and floating interest rate funding is managed by using interest rate swap contracts. The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swap contracts. Foreign currency risk As a result of issuing private notes denominated in US Dollars (USD), the Group's balance sheet can be affected by movements in the USD/AUD exchange rate. In order to manage this exposure, the Group has entered into cross currency swaps to fix the exchange rate on the notes until maturity. The Group agrees to exchange a fixed USD amount for an agreed Australian Dollar (AUD) amount with swap counterparties, and re-exchange this again at maturity. These swaps are designated to hedge the principal and interest obligations under the private notes. Credit risk Credit risk on financial assets which have been recognised on the balance sheet, is the carrying amount less any allowance for non recovery. The Group minimises credit risk via adherence to a strict credit risk management policy. Collateral is not held as security. Customer credit risk Credit risk in trade receivables is managed in the following ways: (cid:4) The provision of cheque cashing facilities for casino gaming patrons is subject to detailed policies and procedures designed to minimise any potential loss, including the use of a central credit agency which collates information from the major casinos around the world; and (cid:4) The provision of non gaming credit is covered by a risk assessment process for customers using the Credit Reference Association of Australia, bank opinions and trade references. Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is carefully managed and controlled. Financial institution credit risk Credit risk arising from other financial assets of the Group, which comprise cash, cash equivalents and derivative contracts, is reduced by transacting with relationship banks that have acceptable credit ratings, as determined by a recognised ratings agency. Cash investments, derivative financial instruments, bank guarantees, and other contingent instruments create credit risk in relation to the relevant counterparties, which are principally large relationship banks. As such, there is a low level of credit risk. The maximum counterparty credit exposure on forward currency and cross currency swaps is the fair value amount that the Group receives when settlement occurs, should the counterparty fail to pay the amount which it has committed to pay the Group. The credit risk on interest rate hedges is limited to the positive mark to market amount to be received from counterparties over the life of contracts that are favourable to the Group. The Group's maximum credit risk exposure in respect of interest rate swap contracts, cross currency swap contracts and forward currency contracts is detailed in note E2. 116 74 The Star Entertainment Group 2022 Annual Report74Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Credit risk includes liabilities under financial guarantees For financial guarantee contract liabilities, the fair value at initial recognition is determined using a probability weighted discounted cash flow approach. The fair value of financial guarantee contract liabilities has been assessed as nil (2021: nil), as the possibility of an outflow occurring is considered remote. Details of the financial guarantee contracts in the balance sheet are outlined below. Fixed and floating charges The controlled entities denoted (b) in note D1 have provided ILGA with a fixed and floating charge over all of the assets and undertakings of each company to secure payment of all monies and the performance of all obligations which they have to ILGA. Guarantees and indemnities The controlled entities denoted (b) in note D1 have entered into a guarantee and indemnity agreement in favour of ILGA whereby all parties to the agreement are jointly and severally liable for the performance of the obligations and liabilities of each company participating in the agreement with respect to agreements entered into and guarantees given. The Star Entertainment Group Limited has guaranteed the liabilities of The Star Entertainment Finance Limited, The Star Entertainment International No.3 Pty Ltd and the customer loans for EEI Services (Hong Kong) Limited. As at 30 June 2022, the carrying amount included in current liabilities was $12.0 million (2021: $12.0 million), and the maximum amount of these guarantees was $68.1 million (2021: $67.2 million). Liquidity risk Liquidity risk arises from the financial liabilities of the Group and the Group's subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due. The Group manages liquidity risk through maintaining sufficient cash and adequate amount of committed credit facilities to be held above the forecast requirements of the business. The Group manages liquidity risk centrally by monitoring cash flow forecasts and maintaining adequate cash reserves and debt facilities. The debt portfolio is periodically reviewed to ensure there is funding flexibility across an appropriate maturity profile. Refer to notes B7 and E2 for maturity of financial liabilities. The contractual timing of cash flows on derivatives and non-derivative financial assets and liabilities at the reporting date, including drawn borrowings and estimated interest, are set out in the tables below: (i) Non-derivative financial instruments Financial assets Cash assets Short term deposits Trade and other receivables Financial liabilities Trade and other payables* Bank loans - unsecured Lease liabilities Private placement - US dollar 2022 2021 < 1 year $m 1 - 5 years > 5 years < 1 year 1 - 5 years > 5 years $m $m $m $m $m 82.0 - 18.0 100.0 202.9 28.6 9.3 24.8 265.6 - - - - - 738.7 33.2 157.4 929.3 - - - - - - 74.4 469.8 544.2 64.1 3.8 23.3 91.2 176.6 17.2 10.2 19.8 223.8 - - - - - 805.7 35.0 140.7 981.4 - - - - - 9.0 82.5 388.8 480.3 Net outflow (165.6) (929.3) (544.2) (132.6) (981.4) (480.3) * Comparatives have been restated due to wage compliance (refer to note G). 75 117 75Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (ii) Derivative financial instruments 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 2022 2021 < 1 year 1 - 5 years > 5 years < 1 year 1 - 5 years > 5 years $m $m $m $m $m $m 2.8 24.8 27.6 2.6 11.5 19.0 33.1 2.5 157.4 159.9 2.5 103.3 76.1 181.9 - 469.8 469.8 - 146.3 324.7 471.0 0.2 19.8 20.0 3.7 6.4 13.6 23.7 0.2 140.7 140.9 5.1 87.9 54.2 147.2 - 388.8 388.8 - 150.2 239.7 389.9 Net outflow (5.5) (22.0) (1.2) (3.7) (6.3) (1.1) 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: Net profit after tax Other comprehensive income higher/(lower) higher/(lower) 2022 AUD + 0.5% (50 basis points) - 0.5% (50 basis points) USD + 0.5% (50 basis points) - 0.5% (50 basis points) 2021 AUD + 0.5% (50 basis points) - 0.5% (50 basis points) USD + 0.5% (50 basis points) - 0.5% (50 basis points) 118 $m (2.5) 2.5 - - (1.7) 1.7 - - $m 21.0 1.8 25.9 (2.5) 10.9 (11.2) (14.0) 14.4 76 The Star Entertainment Group 2022 Annual Report76Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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: (cid:4) 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. (cid:4) (cid:4) 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 Other comprehensive income Net profit after tax Other comprehensive income higher/(lower) higher/(lower) higher/(lower) higher/(lower) 2022 $m (0.3) 0.4 2022 $m 7.8 16.5 2021 $m - - 2021 $m (10.0) 13.1 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: (cid:4) 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. (cid:4) (cid:4) (cid:4) 77 119 77Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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 Level 3 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. 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: Less than one year One to five years More than five years Notional Principal 2022 $m - 250.0 - 250.0 2021 $m - 250.0 - 250.0 Fixed interest rate range p.a. 0.4% - 2.6% 0.4% - 2.6% 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. 120 78 The Star Entertainment Group 2022 Annual Report78Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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 increase in fair value of the cross currency swaps of $22.4 million (2021: $13.0 million) has been recognised in finance costs and offsetting loss on the USPP borrowings. The ineffectiveness recognised in FY2022 was immaterial (2021: 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 2022 2021 AUD $m USD $m AUD $m USD $m - 433.4 93.9 527.3 - 338.4 70.0 408.4 - 64.0 369.4 433.4 - 50.0 288.4 338.4 Fixed interest rate range p.a. 3.2% - 4.4% 4.3% - 4.4% 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 Opening $m Cash flows $m Changes in fair values Foreign exchange movement Option premium Borrowing costs Matured Closing $m $m $m $m $m $m (1,242.5) (21.9) 22.4 (46.5) 3.2 - 55.4 - (1,567.8) 215.0 13.0 51.1 119.0 - (73.8) - - - 5.5 - (1.1) - - - (1,289.6) 58.6 42.0 (1.3) (1,242.5) (42.0) - 3.2 Opening $m Cash flows $m Interest Additions Disposals $m $m $m Other costs $m Closing $m (50.2) 9.5 (3.5) - 1.7 (0.4) (42.9) (57.2) 10.7 (3.8) 0.4 (0.4) 0.1 (50.2) 2022 Interest liabilities bearing (excluding lease liabilities) (refer to note B7) Net derivative assets (refer to note B3) 2021 Interest liabilities bearing (excluding significant items) (refer to note B7) Net derivative assets (refer to note B3) 2022 Lease liabilities (refer to note B7) 2021 Lease liabilities (refer to note B7) 79 121 79Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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 expense/(benefit) The major components of income tax (expense)/benefit is: Current tax expense Adjustments in respect of current income tax of previous years Deferred income tax benefit 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 deductible goodwill impairment - Non assessable gain on sale - Recognition of temporary differences - Over provision in prior years - Other items Aggregate income tax benefit/(expense) Effective income tax rate 122 2022 $m 29.3 (8.8) 20.5 2022 $m (1.2) 1.7 2.6 3.1 0.5 (8.8) (8.3) (205.6) 61.7 (48.8) (9.7) 0.1 - (0.2) 3.1 %1.5 2021 $m (9.1) 2.7 (6.4) 2021 Restated* $m (23.7) 0.7 1.1 (21.9) - 2.7 2.7 79.8 (23.9) - 2.8 0.2 0.7 (1.7) (21.9) %27.4 80 The Star Entertainment Group 2022 Annual Report80Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (ii) Deferred tax balances The balance comprises temporary differences attributable to: 2022 Employee provisions Other provisions and accruals Impairment of trade receivables Unrealised financial liabilities Finance leases Other Deferred tax assets set off Intangible assets Property, plant and equipment Unrealised financial assets Other Net deferred tax liabilities 2021 Restated* Employee provisions Other provisions and accruals Impairment of trade receivables Unrealised financial liabilities Finance leases Other Tax losses Deferred tax assets set off Intangible assets Property, plant and equipment Unrealised financial assets Other Net deferred tax (liabilities)/assets Balance 1 July 2021* Recognised in the income statement Recognised directly in equity Balance Other 30 June 2022 $m 23.9 14.6 11.5 14.0 15.0 8.4 87.4 (59.6) (145.1) (5.1) (11.9) (221.7) (134.3) $m 6.2 3.2 (0.3) (0.9) (1.7) (0.5) 6.0 4.9 0.6 - (8.9) (3.4) 2.6 $m - - - 5.5 - - 5.5 - - (14.2) - (14.2) (8.7) $m - (0.5) - - - - (0.5) - - - - - (0.5) $m 30.1 17.3 11.2 18.6 13.3 7.9 98.4 (54.7) (144.5) (19.3) (20.8) (239.3) (140.9) Balance 1 July 2020* Recognised in the income statement Recognised directly in equity Balance Other 30 June 2021* $m 21.8 21.6 31.2 47.3 17.2 7.2 7.8 154.1 (81.4) (126.7) (39.9) (36.7) (284.7) (130.6) $m 2.1 (7.0) (19.7) (13.6) (2.2) 1.2 - (39.2) 21.8 (18.4) 12.4 24.8 40.6 1.4 $m - - - (19.7) - - - (19.7) - - 22.4 - 22.4 2.7 $m - - - - - - (7.8) (7.8) - - - - - (7.8) * Comparatives have been restated due to wage compliance (refer to note G). $m 23.9 14.6 11.5 14.0 15.0 8.4 - 87.4 (59.6) (145.1) (5.1) (11.9) (221.7) (134.3) 81 123 81Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (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: No instalments were paid. The receivable balance relates to depreciation for capital projects. (Payable)/ receivable 1 July 2021 Increase in tax payable Tax instalment paid Over provision of tax $m - (6.2) 4.8 (1.4) 0.4 (1.0) $m (1.7) - - (1.7) - (1.7) $m $m - 5.1 - 5.1 - 5.1 - 1.1 0.9 2.0 (0.3) 1.7 Receivable 1 July 2020 $m (Increase) / decrease in tax payable $m Tax instalment paid $m Over provision of tax $m - 0.3 6.9 7.2 0.3 7.5 (23.8) 1.8 (1.7) (23.7) - (23.7) 9.8 - (3.1) 6.7 0.1 6.8 - 0.7 - 0.7 - 0.7 Other $m - - 0.3 0.3 - 0.3 Other $m 7.8 (0.1) - 7.7 - 7.7 (Payable) / receivable 30 June 2022 $m (1.7) - 6.0 4.3 0.1 4.4 (Payable)/ receivable 30 June 2021 $m (6.2) 2.7 2.1 (1.4) 0.4 (1.0) 82 2022 Tax consolidated group - year ended 30 June 2022 a Tax consolidated group - year ended 30 June 2021 Prior years b Total Australia Overseas subsidiaries Tax consolidated group - year ended 30 June 2021 a Tax consolidated group - year ended 30 June 2020 a Prior years b Total Australia Overseas subsidiaries Total a b 2021 Total a b 124 The 2020 tax loss was recognised as a deferred tax asset and utilised in 2021 to decrease tax payable. The receivable relates to depreciation for capital projects. The Star Entertainment Group 2022 Annual Report82Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 F3 Earnings per share Net profit after tax attributable to ordinary shareholders Basic (loss)/earnings per share (cents per share) Diluted (loss)/earnings per share (cents per share) Weighted average number of shares used as the denominator Number of ordinary shares issued at the beginning of the year Adjustment for issue of new share capital on 2 July 2020 Movement in treasury shares 2022 $m (202.5) (21.3) (21.3) 2022 2021 $m 57.9 6.1 6.1 2021 Number Number 946,489,027 912,004,595 - 30,646,803 2,754,899 2,865,392 Weighted average number of shares used as the denominator 949,243,926 945,516,790 Adjustment for calculation of diluted earnings per share: Adjustment for Performance Rights 1,300,488 6,355,397 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 950,544,414 951,872,187 F4 Other assets Current Prepayments Other assets Non current Rental paid in advance Other assets F5 Trade and other payables Trade creditors and accrued expenses * Interest payable * Comparatives have been restated due to wage compliance (refer to note G). 2022 $m 35.9 43.6 79.5 0.8 39.1 39.9 202.9 3.5 206.4 2021 $m 21.2 2.6 23.8 - 37.2 37.2 176.6 2.5 179.1 83 125 83Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 F6 Provisions Current Employee benefits * Workers' compensation Underpaid casino duty and interest (refer note A7) Non-current Employee benefits Other 2022 $m 96.1 6.4 12.7 115.2 6.9 1.4 8.3 2021 $m 88.2 6.3 - 94.5 8.6 1.4 10.0 * Comparatives have been restated due to wage compliance (refer to note G). 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 2022 Carrying amount at beginning of the year Provisions made during the year Provisions utilised during the year Carrying amount at end of the year 2021 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 6.3 2.6 (2.5) 6.4 7.7 0.9 (2.3) 6.3 1.4 - - 1.4 1.3 0.1 - 1.4 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. 126 84 The Star Entertainment Group 2022 Annual Report84Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 F7 Other liabilities Current Customer loyalty deferred revenue a Other deferred revenue Non current Other 2022 $m 19.1 4.0 23.1 9.0 9.0 2021 $m 19.1 4.4 23.5 9.8 9.8 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 Share capital and reserves (i) Share capital 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. Opening balance 1 July 2021 Shares purchased for future employee share programs Shares programs to settle employee share issued Share capital Treasury shares Net outstanding Shares $m Shares $m Shares $m 952,014,210 3,177.9 (5,525,183) (18.6) 946,489,027 3,159.3 - - - - (464,958) (1.9) (464,958) 4,094,698 13.6 4,094,698 (1.9) 13.6 Closing balance 30 June 2022 952,014,210 3,177.9 (1,895,443) (6.9) 950,118,767 3,171.0 Opening balance 1 July 2020 Issue of share capital - 2 July 2020 a Issue of share capital - 16 September 2020 b Value of treasury shares disposed Shares programs issued to settle employee share 917,322,730 3,069.7 (5,318,135) (18.9) 912,004,595 3,050.8 30,730,998 3,960,482 - - 96.2 12.0 - - - - 30,730,998 (3,960,482) 3,717,053 (12.0) 11.7 - 3,717,053 36,381 0.6 36,381 96.2 - 11.7 0.6 Closing balance 30 June 2021 952,014,210 3,177.9 (5,525,183) (18.6) 946,489,027 3,159.3 a On 2 July 2020, the Group issued 30,730,998 new shares to settle the FY2020 interim dividend. 23,881,021 shares were purchased by the underwriter in accordance with the dividend underwriting agreement and the balance went to existing shareholders participating in the DRP (see Note A6). b On 16 September 2020, the Company issued 3,960,482 shares for allocation to short term incentive plan participants subject to a holding lock that ends on 15 September 2021. The shares were purchased by Pacific Custodians Pty Limited as trustee for The Star Entertainment Group Limited Employee Share Trust, a wholly controlled entity of the Company. 85 127 85Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 (ii) Reserves (net of tax) Hedging reserve a Cost of hedging reserve b Share based payments reserve c 2022 $m (1.7) 2.6 10.6 11.5 2021 $m (21.3) 1.6 24.9 5.2 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 c 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. 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 F10 for further details on these plans. (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 2022 USD/AUD spot rate of 1.4518 (2021: 1.3334), 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 Group obtained an amendment for the 30 June 2022 testing date, allowing for both gearing and interest cover ratio to have enhanced headroom and to be calculated on an annualised 2H FY2022 run rate (2021: an amendment was obtained resulting in enhanced gearing and interest cover ratio headroom). Gross Debt Net Debt a EBITDA (before significant items) b Gearing ratio (times) 2022 $m 1,332.5 1,149.0 413.6 2.8 x 2021 $m 1,292.7 1,171.4 426.7 2.7 x a b Net debt is shown as interest bearing liabilities (excluding lease liabilities), less cash and cash equivalents, less net position of derivative financial instruments. EBITDA (before significant items) is a non-IFRS disclosure and stands for earnings before interest, tax, depreciation, amortisation, impairment, significant items and share of profits / losses from joint ventures. For FY2022, EBITDA (before significant items) was calculated on an annualised 2H FY2022 run rate, as agreed with the financiers. 128 86 The Star Entertainment Group 2022 Annual Report86Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 F9 Reconciliation of net profit after tax to net cash inflow from operations Note A4 F10 A5 D5 Net (loss)/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 (profit)/loss of associate and joint venture entities - Gain on disposal of Gold coast land - Gain on disposal of aircraft Working capital changes - (Increase)/decrease in trade and other receivables and other assets - (Increase)/decrease in inventories - Increase/(decrease) in trade and other payables, accruals and provisions - (Decrease)/increase in tax provisions Net cash inflow from operating activities 2022 $m (202.5) 370.8 (0.8) (0.9) 57.0 (16.4) - (10.1) (49.4) (1.0) 36.5 (7.0) 176.2 2021 $m 57.9 243.8 8.2 (0.8) 58.6 4.4 (9.4) - 112.9 1.1 (27.4) 15.2 464.5 Operating cash flow before interest and tax was $181.3 million, down 61.5% on the pcp. The EBITDA to cash conversion ratio was 82%. 87 129 87Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 F10 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 credit of $3.0 million (2021: expense of $1.8 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. 2022 Grant Date 2 October 2017 3 October 2018 25 September 2019 24 September 2020 23 September 2021 2021 Grant Date 5 October 2016 2 October 2017 5 October 2018 25 September 2019 24 September 2020 Balance at start of year Granted during the year Forfeited during the year Lapsed during the year a Vested during the year Balance at end of year - 1,436,841 1,436,841 1,432,040 1,762,404 2,728,230 - - - - 982,384 1,150,900 1,626,965 - 2,213,247 1,231,742 - - - - 7,359,515 2,213,247 4,991,991 1,436,841 - - - - - - - 449,656 611,504 1,101,265 981,505 3,143,930 Balance at start of year Granted during the year Forfeited during the year b Lapsed during the year Vested during the year Balance at end of year 1,061,699 1,460,425 1,467,297 1,874,038 - - - - - 2,728,230 - 1,061,699 23,584 35,257 111,634 - - - - - 5,863,459 2,728,230 170,475 1,061,699 - - - - - - - 1,436,841 1,432,040 1,762,404 2,728,230 7,359,515 Grants from 5 October 2016 include a market based hurdle (relative total shareholder return (rTSR)) and an earnings per share (EPS) component. Grants from 2 October 2017 include a market based hurdle (rTSR), an EPS component and a return on investment capital (ROIC) component. The Performance Rights have been independently valued. For the rTSR 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 b Performance rights granted on 2 October 2017 were tested on 28 October 2021 and did not vest. The TSR percentile rank for the Company was 21.54%, below the 50th percentile rank. The EPS was 6.4c, below the 35.9c threshold. The ROIC was 1.3%, below the 9.5% threshold. As a result, these Performance Rights lapsed and no shares were issued to participants. The number of performance rights granted on 5 October 2016 were tested on 5 October 2020 and did not vest. The TSR percentile rank for the Company was 11.43%, below the 50th percentile rank. The EPS was 5.1c, below the 37.7c 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: Effective grant date 2 October 2017 3 October 2018 25 September 2019 24 September 2020 23 September 2021 Test and vesting date 2 October 2021 3 October 2022 25 September 2023 24 September 2024 23 September 2025 Share price at date of grant Expected volatility in share price Expected dividend yield Risk free interest rate Average Fair Value per Performance Right $ 5.17 5.21 4.20 3.15 4.35 % 24.40 % 22.76 % 22.00 % 29.00 % 31.00 % % %2.98 %4.66 %- %- %- % %2.28 %2.14 %0.72 %0.26 %0.41 $ 4.02 3.77 3.66 2.76 3.78 88 130 The Star Entertainment Group 2022 Annual Report88Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Equity retention plan The Company has granted restricted shares under the equity retention plan to eligible employees. The share based payment expense of $0.7 million (2021: $1.0 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. 2022 Grant Date 1 July 2021 2021 Grant Date 1 July 2020 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 1,189,159 219,337 258,857 - - 1,149,639 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 1,317,619 40,067 168,527 - - 1,189,159 The awards are granted 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. Short term incentive plan The Board has approved the award of the FY2022 short term incentive plan. Certain executives receive one third of their eligible award as shares, subject to a holding lock of one year from the date of issue. In respect of the FY2020 short term incentive plan, the Board resolved to exercise its discretion to make a significantly reduced equity award due to the exceptional circumstances associated with COVID-19. The award was delivered as a share based payment, subject to a holding lock of one year from the date of issue. The share based payment expense of $1.5 million (2021: $5.4 million) in respect of the short term incentives has been recognised in the income statement. F11 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 2022 $ 2021 $ 1,209,128 1,338,635 77,025 55,500 79,163 38,776 1,341,653 1,456,574 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. F12 Assets held for sale Aircraft 2022 $m - - 2021 $m 30.6 30.6 In May 2021 the Group tendered for sale a Bombardier aircraft. The sale completed in September 2021. At 30 June 2021 the aircraft was classified as 'held for sale' and measured at the lower of its carrying value and fair value less costs to sell at the time of reclassification. The asset's fair value was 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). This resulted in a gain of $9.2 million in FY2022 as the final sale price and currency translation impact were more favourable than initially valued (2021: impairment expense of $17.9 million). Refer to note A7. 89 131 89Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 G Accounting policies and corporate information Significant accounting policies are contained within the financial statement notes to which they relate and are not detailed in this section. Corporate Information The Star Entertainment Group Limited (the Company) is a company incorporated and domiciled in Australia. The Financial Report of the Company for the year ended 30 June 2022 comprises the Company and its controlled entities (collectively referred to as the Group). The Company's registered office is Level 3, 159 William Street, Brisbane QLD 4000. The Company is of the kind specified in Australian Securities and Investments Commission (ASIC) Instrument 2016/191. In accordance with that Instrument, amounts in the Financial Report and the Directors' Report have been rounded to the nearest hundred thousand dollars, unless specifically stated to be otherwise. All amounts are in Australian dollars ($). The Company is a for profit organisation. The Financial Report was authorised for issue by the Directors on 27 September 2022. 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 Directors have taken the following matters into consideration in forming a view that the going concern basis of accounting is appropriate, in that the Group has: (cid:4) (cid:4) A net asset position at 30 June 2022 of $3,430.3 million (2021: $3,614.8 million); Cash on hand and on deposit at 30 June 2022 of $82.0 million and $365.0 million in available facility capacity, all of which has maturities beyond 12 months; A strong rebound of operating cashflows post COVID-19 affected periods; Experience gained in operating throughout FY2021 and FY2022 under significant Government imposed restrictions; and (cid:4) (cid:4) (cid:4) Other sources of liquidity such as the Treasury buildings asset sale expected to contribute $248.0 million in cash. As detailed in note C2, there is a variety of disciplinary actions which could be taken by the NICC against the Group following their finding that the Group was unsuitable to hold a casino licence in New South Wales. At the date of this report it is uncertain as to what actions may be taken, which could include significant pecuniary penalties, licence suspension or cancellation or increased regulatory oversight. Note C2 also sets out material uncertainties related to other regulatory matters. The Group is expected to continue as a going concern provided that these outcomes as a whole are not sufficiently onerous as to prevent the Company from settling its obligations and the Group is able to meet its debt covenants. A breach in bank covenants, if not amended or waived by the lenders, may lead to those borrowings becoming due and payable. In the Directors' opinion, whilst the breadth of disciplinary action that can be taken by the NICC and other regulatory matters (outlined in note C2) create material uncertainty as to the Group's ability to remain a going concern, the Group is likely to be able to meet its liabilities as and when they fall due over the next twelve months and continues to remain a going concern given: (cid:4) The Group has taken significant actions to manage the risk of further wrongdoing in the short-term including refreshing the Board and Senior Executive teams, the cessation of high-risk activities and implementing the Remediation and Transformation Program to effect significant improvement in the governance, culture and controls of the Group; The Group expects to be able to generate sufficient cashflows from its current operations, access other sources of liquidity or amend existing funding agreements or obtain new funding to fund ongoing operations and any pecuniary penalties; and The Group remains in contact with its lenders and would seek additional waivers or amendments if required. Successful negotiation of waivers and amendments were obtained during the severe impact of COVID-19. (cid:4) (cid:4) 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. 90 132 The Star Entertainment Group 2022 Annual Report90Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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: (cid:4) Going concern (refer note above); (cid:4) (cid:4) (cid:4) (cid:4) (cid:4) (cid:4) (cid:4) 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); and Provisions (refer note F6). Asset held for sale (refer note F12). 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 2022: Reference AASB 7 Title Amendments to AASB 7: Interest Rate Benchmark Reform - Phase 2 Amendments to AASB 7: Interest Rate Benchmark Reform - Phase 2 The amendments to AASB 7 Financial Instruments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients: (cid:4) A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest; (cid:4) (cid:4) Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued; and Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component. These amendments had no impact on the financial statements of the Group as it does not have any interest rate hedge relationships affected by the interest rate benchmark reforms. Impact of prior year restatement Wage compliance The Group announced to the ASX it had identified the underpayment of wages to certain current and former salaried team members. The underpayment was identified through a six-year retrospective wage review of salaried team members underpinned by modern awards. In some cases, team members were found to not be ‘better off overall’ as the annual salary was not sufficient to compensate the team member for their equivalent award entitlements such as overtime and penalty rates. While this review is ongoing, based on preliminary analysis, the Group determined a liability of $13.2 million was required at 30 June 2020. The liability includes estimated back payments, interest, and superannuation contributions, where applicable. The impact of the restatement on the profit before income tax for the year ended 30 June 2022 and 30 June 2021 is ‘nil’ with the remaining amount recorded in retained earnings as a prior period restatement in accordance with Australian Accounting Standard AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The impact of the restatement on the balance sheet is an increase in provisions of $15.9 million and a decrease in trade and other payables of $2.7 million, deferred tax liabilities and retained earnings of $4.0 million and $9.2 million retrospectively at 30 June 2021. 91 133 91Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Standards and amendments issued but not yet effective The Group has not applied Australian Accounting Standards and IFRS that were issued or amended but not yet effective. The key standards, shown below, are not expected to have a material impact on the financial statements: Reference AASB 3 AASB 16 AASB 37 AASB 2020-1 Amendments to Australian Accounting Standards - Classification of Liabilities as Title Amendments to AASB 3 Business Combinations Amendments to AASB 37 Provisions, Contingent Liabilities & Contingent Assets Application date 1 January 2022 Amendments to AASB 16 Leases 1 January 2023 1 January 2022 1 January 2022 Current or Non-current AASB 2015-2 Amendments to Australian Accounting Standards - Disclosure of Accounting Policies and Definition of Accounting Estimates AASB 2021-5 Amendments to Australian Accounting Standards - Deferred Tax related to Assets and Liabilities arising from a Single Transaction 1 January 2023 1 January 2023 Basis of consolidation Controlled entities The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Controlled entities are consolidated from the date control is transferred to the Group and are no longer consolidated from the date control ceases. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Foreign currency The consolidated financial statements are presented in Australian dollars ($) 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: (cid:4) (cid:4) 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. 92 134 The Star Entertainment Group 2022 Annual Report92Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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: (cid:4) 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. (cid:4) (cid:4) 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: (cid:4) (cid:4) 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. 93 135 93Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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. 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 (excluding SaaS arrangements) 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. 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. Distributions 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. 136 94 The Star Entertainment Group 2022 Annual Report94Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 Leases Right-of-use assets The Group recognises right-of-use (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. 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. 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. 95 137 95Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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 was 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: (cid:4) (cid:4) 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. 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. 96 138 The Star Entertainment Group 2022 Annual Report96Notes to The Financial Statements For the year ended 30 June 2022 Notes to the financial statements For the year ended 30 June 2022 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: (cid:4) (cid:4) (cid:4) methods used to distribute the products or provide the services; and (cid:4) 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. nature of the products and services; type or class of customer for the products and services; nature of the regulatory environment. 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: (cid:4) 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; (cid:4) (cid:4) 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. 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. 97 139 97Directors' Declaration 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 2022 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. Ben Heap Interim Chairman Sydney 27 September 2022 140 98 The Star Entertainment Group 2022 Annual Report98Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited Report on the Audit of the Financial Report Independent Auditor's Report to the Members of The Star Opinion Entertainment Group Limited We have audited the financial report of The Star Entertainment Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June Report on the Audit of the Financial Report 2022, the consolidated income statement, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, Opinion including a summary of significant accounting policies, and the directors' declaration. We have audited the financial report of The Star Entertainment Group Limited (the Company) and its In our opinion, the accompanying financial report of the Group is in accordance with the Corporations subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June Act 2001, including: 2022, the consolidated income statement, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, a) including a summary of significant accounting policies, and the directors' declaration. giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and In our opinion, the accompanying financial report of the Group is in accordance with the Corporations complying with Australian Accounting Standards and the Corporations Regulations 2001. b) Act 2001, including: Basis for Opinion a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under b) those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor Basis for Opinion independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Accountants (including Independence Standards) (the Code) that are relevant to our audit of the those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with Report section of our report. We are independent of the Group in accordance with the auditor the Code. independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis Accountants (including Independence Standards) (the Code) that are relevant to our audit of the for our opinion. 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. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 99 99 141 99Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited Material Uncertainties Relating to Going Concern Report on the Audit of the Financial Report We draw attention to Notes G and C2 of the financial report which note the uncertainties associated with the range of potential disciplinary actions that may be taken by the NSW Independent Casino Opinion Commission against the Group following their finding that the Group was unsuitable to hold a casino license in New South Wales, other significant regulatory matters, the Directors’ assessment of the We have audited the financial report of The Star Entertainment Group Limited (the Company) and its ability of the Group to continue as a going concern, and the Group’s associated contingent liabilities subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June and their inherent uncertainties. These matters indicate that material uncertainties exist that may 2022, the consolidated income statement, consolidated statement of changes in equity and cast significant doubt on the Company’s ability to continue as a going concern. Significant adverse consolidated statement of cash flows for the year then ended, notes to the financial statements, outcomes in relation to these matters may result in the Group not being able to continue as a going including a summary of significant accounting policies, and the directors' declaration. concern unless the Group continues to have the support of its lenders. Note G describes the basis for the Directors’ assessment that the Group has the ability to continue as a going concern. Note C2 outlines the Group’s contingent liabilities and the uncertainties as to the ultimate outcome of these In our opinion, the accompanying financial report of the Group is in accordance with the Corporations matters. Our opinion is not modified in respect of this matter. Act 2001, including: a) Key Audit Matters giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and Key audit matters are those matters that, in our professional judgement, were of most significance in complying with Australian Accounting Standards and the Corporations Regulations 2001. b) our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide Basis for Opinion a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. In addition to the matter described in the Material We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Uncertainties Relating to Going Concern section, we have determined the matters described below to those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial be the key audit matters to be communicated in our report 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 We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of Accountants (including Independence Standards) (the Code) that are relevant to our audit of the material misstatement of the financial report. The results of our audit procedures, including the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with procedures performed to address the matters below, provide the basis for our audit opinion on the the Code. accompanying financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited 142 Liability limited by a scheme approved under Professional Standards Legislation 99 100 The Star Entertainment Group 2022 Annual Report100Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited Impairment Testing of Goodwill - - - Our audit procedures included the following: How our audit addressed the key audit matter complying with Australian Accounting Standards and the Corporations Regulations 2001. giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and Report on the Audit of the Financial Report Why significant to the audit Opinion The Group has goodwill of $1,279.7 million at 30 June Evaluated the cash flow forecasts, which 2022. The Group performs an impairment assessment We have audited the financial report of The Star Entertainment Group Limited (the Company) and its supported the recoverable value of the on an annual basis to assess the carrying value of subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June goodwill and impairment recognised. goodwill. In addition, an impairment assessment is 2022, the consolidated income statement, consolidated statement of changes in equity and Compared these forecasts to the Board performed when there is an impairment indicator consolidated statement of cash flows for the year then ended, notes to the financial statements, approved budgets and five-year financial present. including a summary of significant accounting policies, and the directors' declaration. plan. We also considered the historical The impairment assessment is complex and accuracy of the Group’s cash flow judgemental, as it includes assumptions and estimates In our opinion, the accompanying financial report of the Group is in accordance with the Corporations forecasting and budgeting processes. that are affected by expected future performance and Act 2001, including: Involved our valuation specialists to assess market conditions such as cash flow forecasts, growth whether the impairment testing rates, discount rates and terminal value assumptions. a) methodology applied was in accordance An impairment expense of $162.5 million was with Australian Accounting Standards and recognised for the year ended 30 June 2022. to evaluate the key assumptions applied in b) Key assumptions, judgements and estimates used in the impairment models which included the Group’s assessment of impairment of intangibles growth rates, terminal value assumptions, Basis for Opinion assets are set out in Note B6 of the financial report. and discount rates which included the Given the conditions at balance date, reasonable uncertainty relating to the ongoing legal We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under possible changes in the assumptions around the and regulatory matters. those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Group’s expected cash flows have been considered. Tested whether the models used were Report section of our report. We are independent of the Group in accordance with the auditor mathematically accurate. As at 30 June 2022, there was significantly higher independence requirements of the Corporations Act 2001 and the ethical requirements of the Performed sensitivity analysis around the estimation uncertainty in relation to impairment Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional key assumptions to ascertain the extent to testing due to the impact of ongoing legal and Accountants (including Independence Standards) (the Code) that are relevant to our audit of the which changes in those assumptions could regulatory matters. The impact of potential outcomes financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with result in impairment or further from the ongoing legal and regulatory matters set out the Code. impairment. in Note C2, on cash flows increases the risk of Assessed the adequacy of the disclosures inaccurate forecasts and results in a significantly wider We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis included in Notes B5 and B6 of the range of possible outcomes to consider. for our opinion. financial report, and in particular those Accordingly, we considered this a key audit matter. For relating to the cash flow forecasts. the same reasons we consider it important that attention is drawn to the information in Notes B5 and B6 of the financial report on management’s assessment of the impairment testing of goodwill at 30 June 2022. - - - A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 99 101 143 101Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited Our audit procedures included the following: How our audit addressed the key audit matter Regulatory Matters, Provisions and Contingent Liabilities Report on the Audit of the Financial Report Why significant to the audit Opinion As disclosed in Note C2, the Group is subject to a number of significant pending and ongoing We have audited the financial report of The Star Entertainment Group Limited (the Company) and its regulatory and legal matters. These include subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June casino license suitability reviews, and other 2022, the consolidated income statement, consolidated statement of changes in equity and regulatory investigations including gaming tax consolidated statement of cash flows for the year then ended, notes to the financial statements, related matters, an AUSTRAC enforcement including a summary of significant accounting policies, and the directors' declaration. investigation, and a shareholder class action. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations There is complexity in relation to the Act 2001, including: assessment of these matters and uncertainty as to the outcome and quantification of any a) future economic outflow associated with each of these matters. Held discussions with management, reviewed Board of Directors and Board Committee minutes, reviewed correspondence with regulators (where applicable) and attended Audit Committee and Risk Committee meetings to understand key complying with Australian Accounting Standards and the Corporations Regulations 2001. regulatory, compliance, and legal matters. Evaluated the Group’s assessment as to whether a present obligation exists arising from past events based on the available facts and circumstances. In order to assess the facts and circumstances, we considered the underlying documentation prepared by the Group’s internal and external specialists and other relevant documents. giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and - - Australian Accounting Standards (accounting b) standards) provide criteria for the recognition of liabilities and disclosure of contingent Basis for Opinion liabilities for such matters. - Inspected legal correspondence and legal opinions and considered their content together with the information we obtained from our other procedures. Where required we held inquiries with the Group’s internal and external legal counsel. The application of these standards required We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under significant judgement in determining whether those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial present obligations existed at balance date, Report section of our report. We are independent of the Group in accordance with the auditor whether they could be reliably measured and independence requirements of the Corporations Act 2001 and the ethical requirements of the - Where the Group determined that a present the extent of required contingent liability Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional obligation existed, we assessed the basis for disclosures where these conditions were Accountants (including Independence Standards) (the Code) that are relevant to our audit of the reliable measurement of the provision in considered not to be met. financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with accordance with accounting standards, including the Code. matters such as probability of outflow, amounts Accordingly, we considered this to be a key and timing, and our understanding of the matter audit matter. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis from our procedures. for our opinion. - Where the Group determined a present obligation existed, however given the nature and status of the matter, the timing and amount of any outflow could not be reliably estimated, we challenged the Group’s conclusions against the criteria in the accounting standards, evaluation of precedents, underlying information and from our other procedures. - We considered the disclosures within the financial report related to these provisions and contingent liability disclosures. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Our forensic specialists were involved in the performance of certain procedures where considered appropriate. 99 102 144 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation The Star Entertainment Group 2022 Annual Report102Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited Information Other than the Financial Report and Auditor’s Report Thereon Report on the Audit of the Financial Report The directors are responsible for the other information. The other information comprises the information included in the Group’s 2022 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Opinion Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. We have audited the financial report of The Star Entertainment Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June Our opinion on the financial report does not cover the other information and we do not and will not 2022, the consolidated income statement, consolidated statement of changes in equity and express any form of assurance conclusion thereon, with the exception of the Remuneration Report consolidated statement of cash flows for the year then ended, notes to the financial statements, and our related assurance opinion. including a summary of significant accounting policies, and the directors' declaration. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial In our opinion, the accompanying financial report of the Group is in accordance with the Corporations report or our knowledge obtained in the audit or otherwise appears to be materially misstated. Act 2001, including: If, based on the work we have performed on the other information obtained prior to the date of this giving a true and fair view of the consolidated financial position of the Group as at 30 June a) auditor’s report, we conclude that there is a material misstatement of this other information, we are 2022 and of its consolidated financial performance for the year ended on that date; and required to report that fact. We have nothing to report in this regard. b) Responsibilities of the Directors for the Financial Report complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under and for such internal control as the directors determine is necessary to enable the preparation of the those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial financial report that gives a true and fair view and is free from material misstatement, whether due to Report section of our report. We are independent of the Group in accordance with the auditor fraud or error. independence requirements of the Corporations Act 2001 and the ethical requirements of the In preparing the financial report, the directors are responsible for assessing the Group’s ability to Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional continue as a going concern, disclosing, as applicable, matters relating to going concern and using the Accountants (including Independence Standards) (the Code) that are relevant to our audit of the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with operations, or have no realistic alternative but to do so. the Code. Auditor's Responsibilities for the Audit of the Financial Report We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 99 103 145 103Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited (cid:120) Report on the Audit of the Financial Report Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Opinion (cid:120) Obtain an understanding of internal control relevant to the audit in order to design audit We have audited the financial report of The Star Entertainment Group Limited (the Company) and its procedures that are appropriate in the circumstances, but not for the purpose of expressing an subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June opinion on the effectiveness of the Group’s internal control. 2022, the consolidated income statement, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, (cid:120) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting including a summary of significant accounting policies, and the directors' declaration. estimates and related disclosures made by the directors. a) In our opinion, the accompanying financial report of the Group is in accordance with the Corporations (cid:120) Conclude on the appropriateness of the directors’ use of the going concern basis of accounting Act 2001, including: and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going giving a true and fair view of the consolidated financial position of the Group as at 30 June concern. If we conclude that a material uncertainty exists, we are required to draw attention in 2022 and of its consolidated financial performance for the year ended on that date; and our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up complying with Australian Accounting Standards and the Corporations Regulations 2001. to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. b) Basis for Opinion (cid:120) Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under in a manner that achieves fair presentation. those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor (cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the entities independence requirements of the Corporations Act 2001 and the ethical requirements of the or business activities within the Group to express an opinion on the financial report. We are Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional responsible for the direction, supervision and performance of the Group audit. We remain solely Accountants (including Independence Standards) (the Code) that are relevant to our audit of the responsible for our audit opinion. financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We communicate with the directors regarding, among other matters, the planned scope and timing of We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis the audit and significant audit findings, including any significant deficiencies in internal control that we for our opinion. identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 146 99 104 The Star Entertainment Group 2022 Annual Report104Independent Auditor's Report Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent Auditor's Report to the Members of The Star Entertainment Group Limited Report on the Audit of the Remuneration Report on the Audit of the Financial Report Opinion on the Remuneration Report Opinion We have audited the Remuneration Report included in pages 20 to 40 of the Directors' Report for the year ended 30 June 2022. We have audited the financial report of The Star Entertainment Group Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated balance sheet as at 30 June In our opinion, the Remuneration Report of The Star Entertainment Group Limited for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. 2022, the consolidated income statement, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, Responsibilities including a summary of significant accounting policies, and the directors' declaration. The directors of the Company are responsible for the preparation and presentation of the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our Act 2001, including: responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion Ernst & Young We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial 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 Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Megan Wilson Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Partner financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with Sydney the Code. 27 September 2022 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 99 105 147 105Shareholder Information As at 27 September 2022 ORDINARY SHARE CAPITAL The Star Entertainment Group Limited has 952,014,210 fully paid ordinary shares on issue. SHAREHOLDING RESTRICTIONS The Star Entertainment Group’s Constitution, as well as certain agreements entered into with the New South Wales Independent Liquor and Gaming Authority and the Queensland Office of Liquor and Gaming Regulation, contain certain restrictions prohibiting an individual from having a voting power of more than 10% in The Star Entertainment Group without the written consent of the New South Wales Independent Liquor and Gaming Authority and of the Queensland Minister. The Star Entertainment Group may refuse to register any transfer of shares which would contravene these shareholding restrictions or require divestiture of the shares that cause an individual to exceed the shareholding restrictions. In July 2012, written consent was granted by the New South Wales Independent Liquor and Gaming Authority and the relevant Queensland Minister for Perpetual Investment Management Limited to increase its shareholding in The Star Entertainment Group from 10% up to a maximum of 15% of issued shares. VOTING RIGHTS All ordinary shares issued by The Star Entertainment Group carry one vote per share. Performance rights do not carry any voting rights. Gambling legislation in New South Wales and Queensland and The Star Entertainment Group’s Constitution contain provisions regulating the exercise of voting rights by persons with prohibited shareholding interests, as well as the regulation of shareholding interests. The relevant Minister has the power to request information to determine whether a person has a prohibited shareholding interest. If a person fails to furnish these details within the time specified or, in the opinion of the Minister, the information is false or misleading, then the Minister can declare the voting rights of those shares suspended. Failure to comply with gambling legislation in New South Wales and Queensland or The Star Entertainment Group’s Constitution, including the shareholder restrictions mentioned above, may result in suspension of voting rights. EQUITY PLACEMENT On 29 March 2018, The Star Entertainment Group announced that: (a) it had entered into a subscription agreement dated 28 March 2018 with its joint venture partners, Chow Tai Fook Enterprises Limited (CTF) and Far East Consortium International Limited (FEC) (Subscription Agreement) under which the respective nominated entities of each of CTF and FEC separately acquire 45,825,000 new fully paid ordinary shares in The Star Entertainment Group (equivalent to a 4.99% stake each) at $5.35 per share, for a total consideration of $245,163,750 each; and (b) in addition to existing agreements, The Star Entertainment Group had entered into a Strategic Alliance Agreement with CTF and FEC which provides a framework for the three parties to work together further to grow The Star Entertainment Group’s properties and businesses, collaborate on potentially mutually beneficial development opportunities and establish a marketing alliance (Strategic Alliance). In accordance with the terms of the Subscription Agreement, 45,825,000 new fully paid ordinary shares were issued to each of the respective nominated entities of CTF and FEC on 16 April 2018. TOP-UP RIGHT The Subscription Agreement grants to CTF and FEC certain top-up rights that entitles each of them to participate in future equity raisings undertaken by The Star Entertainment Group during the term of the Strategic Alliance in order to maintain their pre-equity raising ownership interests (Top-Up Right). The ASX has granted The Star Entertainment Group a waiver from Listing Rule 6.18 which prohibits an entity from granting an option exercisable over a percentage of the entity’s capital. The waiver granted by ASX permits CTF and FEC (and their nominees) to maintain, by way of a right to participate in any issue of shares or to subscribe for shares, their percentage relevant interest in the issued share capital of The Star Entertainment Group in respect of a diluting event. The waiver from Listing Rule 6.18 is subject to the terms and conditions imposed by ASX which are set out in The Star Entertainment Group’s ASX Announcement dated 21 May 2018, including a requirement that a summary of the Top-Up Right be included in each Annual Report. 148 The Star Entertainment Group 2022 Annual Report Shareholder Information As at 27 September 2022 In accordance with the Top-Up Right, if The Star Entertainment Group undertakes an equity raising during the term of the Strategic Alliance which would result in The Star Entertainment Group issuing 1% or more of its share capital (or would have such an effect in the case of an issue of convertible securities) (Equity Raising), then The Star Entertainment Group must give each of CTF and FEC (or their respective nominees) an opportunity to participate in the Equity Raising on a basis that allows them to maintain their pre-Equity Raising shareholding percentage. CTF and FEC (or their respective nominees) will be entitled to participate in the Equity Raising on the same terms and conditions (including price) as all other participants in the Equity Raising. The Top-Up Right does not operate in respect of issues of securities: • under a dividend or distribution plan; • under an employee incentive scheme (including on the conversion of any convertible securities issued under any such scheme); • pursuant to any takeover bid or scheme of arrangement; or • as consideration for the acquisition of an asset by The Star Entertainment Group or any of its related bodies corporate. The Top-Up Right will automatically terminate in circumstances where: • CTF or FEC or their respective nominees and affiliates (as applicable) cease to hold the shares issued under the Subscription Agreement; or • the waiver of ASX Listing Rule 6.18 ceases to apply (either as a result of the lapse of time or CTF or FEC no longer complying with the terms and conditions of the waiver), whichever occurs first. If the Top-Up Right ceases or terminates, and The Star Entertainment Group undertakes an Equity Raising then (subject to any applicable laws, rules or regulations) it must consider making (but is not obliged to make) an offer to CTF and FEC (or their respective nominees) to participate in the Equity Raising on a basis that allows them to maintain their pre-Equity Raising shareholding percentage. SUBSTANTIAL SHAREHOLDERS The following is a summary of the substantial shareholders as at 27 September 2022 pursuant to notices lodged with ASX in accordance with section 671B of the Corporations Act 2001 (Cth): Name Date of interest Number of ordinary shares(i) % of issued capital (ii) Firmament Investment Pte. Ltd and its associated entities 2 July 2020 47,377,137 4.9973% Far East Consortium International Limited, its controlled entities and its associated entities(iii) 2 July 2020 47,377,137 4.9973% State Street Corporation and its subsidiaries 30 March 2022 51,237,485 L1 Capital Pty Ltd and its associated entities 17 May 2022 69,901,669 5.38% 7.34% (i) As disclosed in the last notice lodged with the ASX by the substantial shareholder. (ii) The percentage set out in the notice lodged with the ASX is based on the total issued share capital of The Star Entertainment Group Limited at the date of interest. LESS THAN MARKETABLE PARCELS There were 19,730 shareholders holding less than a marketable parcel of 188 ordinary shares (valued at $500 or less, based on a market price of $2.66) at the close of trading on 27 September 2022 and they hold a total of 2,173,823 ordinary shares. SECURITIES PURCHASED ON-MARKET The following securities were purchased on-market during the financial year for the purposes of The Star Entertainment Group’s employee share plans, namely, the General Employee Share Plan (GESP) and the Tax Exempt Plan (TEP). Ordinary Shares Ordinary Shares Number of shares purchased Average price paid per share 230,550 15,071 $4.185 $4.19 149 Shareholder Information As at 27 September 2022 TWENTY LARGEST REGISTERED SHAREHOLDERS – ORDINARY SHARES* Rank Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - GSCO ECA BNP PARIBAS NOMS PTY LTD ARGO INVESTMENTS LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - GSI EDA HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - Number of Shares Held 307,049,064 198,469,263 92,721,733 51,298,009 30,223,485 21,999,347 15,500,000 12,228,307 11,614,036 7,876,842 BNP PARIBAS NOMINEES PTY LTD 6,652,921 MUTUAL TRUST PTY LTD PACIFIC CUSTODIANS PTY LIMITED GLENN HARGRAVES INVESTMENTS PTY LTD PACIFIC CUSTODIANS PTY LIMITED 4,690,488 4,087,207 3,725,000 3,594,042 CITICORP NOMINEES PTY LIMITED 3,426,797 WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED BOND STREET CUSTODIANS LIMITED MR JOHN ARMOUR UBS NOMINEES PTY LTD Total of top 20 registered shareholders 3,398,000 3,234,678 2,250,000 1,888,213 785,927,432 % of Issued Capital 32.25% 20.85% 9.74% 5.39% 3.17% 2.31% 1.63% 1.28% 1.22% 0.83% 0.70% 0.49% 0.43% 0.39% 0.38% 0.36% 0.36% 0.34% 0.24% 0.20% 82.56% *on a grouped basis DISTRIBUTION OF SECURITIES HELD ORDINARY SHARES PERFORMANCE RIGHTS1 Range of Holding No. of Holders % of total ordinary shares No. of Holders No. of Securities % of total performance rights No. of Securities 15,778,904 45,534,201 25,694,997 51,355,639 46,168 20,681 3,552 2,298 1.66% 4.78% 2.70% 5.39% 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total 72,818 952,014,210 100.00% 119 813,650,469 85.47% 0 3 4 18 12 37 – 8,969 30,862 912,988 5,602,980 0.0% 0.14% 0.47% 13.93% 85.46% 6,555,799 100.00% 1 Performance Rights were issued under the Long Term Incentive Plan (refer to the Remuneration Report for more information). VOLUNTARY ESCROW There are no securities under voluntary escrow. SHARE BUY-BACKS There is no current or planned buy-back of The Star Entertainment Group’s shares. 150 The Star Entertainment Group 2022 Annual Report Corporate Information ANNUAL REPORT This Annual Report is available on-line from The Star Entertainment Group’s website at www.starentertainmentgroup. com.au/annual-reports/. Annual Reports will only be sent to those shareholders who have requested to receive a copy. Shareholders who no longer wish to receive a hard copy of the Annual Report or wish to receive the Annual Report electronically are encouraged to contact the share registry. This will assist with reducing the costs of production of the hard copy of the Annual Report. WEBSITE The Star Entertainment Group’s website at www.starentertainmentgroup.com.au offers investors a wide range of information regarding its activities and performance, including Annual Reports, interim and full year financial results, webcasts of results and Annual General Meeting presentations, major news releases and other company statements. SHAREHOLDER RELATIONS Investors seeking more information about the Company are invited to contact The Star Entertainment Group’s Shareholder Relations Team: Address: GPO Box 13348 George Street Post Shop Brisbane QLD 4003 Telephone: +61 7 3228 0000 Facsimile: +61 7 3228 0099 Email: investor@star.com.au SHAREHOLDER ENQUIRIES Investors seeking information about their shares in The Star Entertainment Group should contact The Star Entertainment Group’s share registry. Investors should have their Shareholder Reference Number (SRN) or Holder Identification Number (HIN) available to assist the share registry in responding to their enquiries. SHARE REGISTRY Link Market Services Limited Address: Level 12, 680 George Street Sydney NSW 2000 Postal address: The Star Entertainment Group Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia Telephone: +61 1300 880 923 (toll free within Australia) Facsimile: +61 2 9287 0303 E-mail: starentertainment@linkmarketservices.com.au Website: www.linkmarketservices.com.au GENERAL ENQUIRIES Investor information is available on The Star Entertainment Group’s website at www.starentertainmentgroup.com.au including major announcements, Annual Reports, and general company information. 2022 CORPORATE GOVERNANCE STATEMENT The 2022 Corporate Governance Statement can be found on The Star Entertainment Group’s website at www.starentertainmentgroup.com.au/corporate-governance. 2022 ANNUAL GENERAL MEETING The Annual General Meeting of The Star Entertainment Group Limited will be held on Tuesday 22 November 2022 in the Theatre at The Star Gold Coast, Broadbeach Island, Broadbeach, Queensland. The Notice of Meeting is available on The Star Entertainment Group’s website at www.starentertainmentgroup.com.au/annual-general-meetings. 151 About this Annual Report CURRENCY References to currency in this Annual Report are in Australian Dollars unless otherwise stated. COPYRIGHT Information in this report has been prepared by The Star Entertainment Group Limited, unless otherwise indicated. Information may be reproduced provided it is reproduced accurately and not in a misleading context. Where the material is being published or issued to others, the sources and copyright status should be acknowledged. INVESTMENT WARNING This Annual Report may include forward looking statements and references which, by their very nature, involve inherent risks and uncertainties. These risks and uncertainties may be matters beyond The Star Entertainment Group’s control and could cause actual results to vary (including materially) from those predicted. Forward looking statements are not guarantees of future performance. Past performance of shares is not indicative of future performance and should not be relied upon as such. The value of investments and any income from them is not guaranteed and can fall as well as rise. The Star Entertainment Group recommends that investors make their own assessments and seek independent professional advice before making investment decisions. PRIVACY The Star Entertainment Group respects the privacy of its stakeholders. The Star Entertainment Group’s Privacy Policy Statement is available on The Star Entertainment Group’s website at www.starentertainmentgroup.com.au. INDICATIVE KEY DATES FOR FY2023* FY2023 HALF YEAR RESULTS ANNOUNCEMENT: 23 February 2023 2023 FINANCIAL YEAR END: 30 June 2023 FY2023 FULL YEAR RESULTS ANNOUNCEMENT: 24 August 2023 2023 ANNUAL GENERAL MEETING: 2 November 2023 *Dates are subject to change 152 The Star Entertainment Group 2022 Annual Report Company Directory REGISTERED OFFICE The Star Entertainment Group Limited Level 3, 159 William Street Brisbane QLD 4000 Telephone: + 61 7 3228 0000 Facsimile: + 61 7 3228 0099 Email: investor@star.com.au WEBSITE www.starentertainmentgroup.com.au NEW SOUTH WALES OFFICE Level 3, 60 Union Street Pyrmont NSW 2009 Telephone: + 61 2 9657 7600 QUEENSLAND OFFICE Level 3, 159 William Street Brisbane QLD 4000 Telephone: + 61 7 3228 0000 STOCK EXCHANGE LISTING The Star Entertainment Group’s securities are quoted on the Australian Securities Exchange (ASX) under the share code “SGR.” THE STAR SYDNEY 80 Pyrmont Street Pyrmont NSW 2009 Reservations: 1800 700 700 Telephone: + 61 2 9777 9000 www.thestarsydney.com.au THE STAR GOLD COAST Broadbeach Island Broadbeach QLD 4218 Reservations: 1800 074 344 Telephone: + 61 7 5592 8100 www.thestargoldcoast.com.au TREASURY CASINO AND HOTEL BRISBANE George Street Brisbane QLD 4000 Reservations: 1800 506 889 Telephone: + 61 7 3306 8888 www.treasurybrisbane.com.au QUEEN’S WHARF BRISBANE General Enquiries Telephone: 1800 104 535 Email: qwbenquiries@destinationbrisbane.com.au www.queenswharfbrisbane.com.au AUDITOR Ernst & Young 153 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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