The Star Entertainment Group Ltd (ASX: SGR) share price is collapsing after the casino operator revealed "a significant and rapid deterioration in operating conditions".
In response, it's cutting 500 jobs, freezing salaries, scrapping bonuses, and has downgraded its earnings outlook for this financial year.
Additionally, a strategic review of The Star Sydney, conducted with Barrenjoey Capital Partners, has been launched in a bid to maximise shareholder value.
The Star Entertainment share price is plummeting 7.99% to trade at $1.265 at the time of writing.
Let's take a closer look at the news driving the Star Casino operator's stock lower on Wednesday.
Star stock crashes as casinos struggle
The Star Entertainment share price is tumbling on Wednesday. Its fall comes as the company revealed its casinos – particularly its Sydney and Gold Coast operations – are suffering under the weight of regulatory restrictions and weak consumer spending.
As a result, its earnings performance is at unprecedented low levels, excluding the COVID-19 period.
If that continues without reprieve, its full-year underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) will likely be between $280 million and $310 million.
That's down from previous guidance of between $330 million and $360 million. It compares against the $200 million EBITDA the company posted for the first half.
Today's downgraded guidance includes the impact borne by employees. However, it excludes provisions for fines, costs from ongoing regulatory reviews, and expenses from its cost initiatives.
The casino operator was hit with two $100 million fines from Queensland and NSW last year. Its casino licence was suspended in both states and a manager was appointed to operate the casinos while it remediates its businesses.
Star Entertainment said job cuts and a freeze on salaries and bonuses, along with $40 million of operational initiatives, should reduce its operating expenditure by $100 million annually.
The steps are "independent of any potential impact from the proposed casino duty rate increases in NSW," the company said.
And that's not all.
The ASX 200 casino operator is also progressing with the sale of the Sheraton Grand Mirage Resort Gold Coast. Bids from interested parties are expected to be received shortly.
On top of that, it's working to refinance its debt.
Finally, it plans to discuss casino duty taxes and flexible payment terms for penalties with state governments in NSW and QLD, as well as AUSTRAC.
Star Entertainment underperforms ASX 200
Today's tumble is just the latest to dint the Star Entertainment share price.
It's dumped 25% so far this year. It's also currently 57% lower than it was this time last year.
For comparison, the ASX 200 has risen 6% year to date and has fallen 3% over the last 12 months.
