Star Entertainment Group Ltd (ASX: SGR) shares are under pressure on Wednesday morning.
At the time of writing, the struggling casino and resorts operator's shares are down 4% to 25.5 cents.
Why are Star Entertainment shares falling?
The catalyst for today's decline has been the release of the company's quarterly update after the market close on Tuesday.
According to the release, the company has continued to experience a deterioration in its performance due to a challenging operating environment and the continued implementation of mandatory carded play and cash limits.
For the three months ended 30 September, Star Entertainment posted an 18% decline in revenue to $351 million.
This reflects a 16% reduction in The Star Sydney revenue to $186 million, a 9% fall in the Star Gold Coast revenue to $108 million, a 40% decline in revenue from (the now closed) Treasury Brisbane business, and a small contribution from the new The Star Brisbane business.
In respect to the key Star Sydney business, management notes that revenue continues to trend downward, with the challenging consumer environment and changes in business practices weighing heavily on gaming, particularly in the premium segment. There was also a $4.4 million impact from system outages in July.
Commenting on the Sydney business, management said:
In the 50 days prior to the introduction of mandatory carded play and cash limits on 19 August 2024, revenue was down 11% compared to the FY24 average, and 6% below the 4Q24 average. Since 19 August 2024, revenue declined a further 12%. Electronic gaming machines have also faced significant pressure from competitive venues, evidenced through revenue losses and limiting market share recovery.
Operating at a loss
Also heading in the wrong direction during the quarter were the company's operating expenses. They came in 10% higher year on year at $287 million. Though, it is worth noting that they were run-rating at $249 million a quarter during September. This could mean that the second quarter shows a big improvement in this metric.
In the meantime, though, Star Entertainment is operating at a loss. Its recorded earnings before interest, tax, depreciation, and amortisation (EBITDA) of negative $18 million.
This ultimately led to the company posting an operating cash flow outflow of $27 million for the period, which meant that it finished the period with available cash of $149 million.
Star Entertainment shares are down more than 50% over the past 12 months.
