Australian casino operator Star Entertainment has reported a sharp decline in first-quarter revenue, revealing losses influenced by tightened regulatory requirements and shifts in consumer behavior. The company, which oversees several casinos, cited challenging market conditions and mandatory gaming restrictions as major contributors to its revenue decrease, causing further uncertainty about its financial future.

The quarterly earnings, disclosed on Tuesday, revealed a significant revenue drop of 18%, amounting to AU$351 million ($230.19 million) for the three months ending September. The group also recorded a loss before interest, tax, depreciation, and amortization (EBITDA) of AU$18 million, reflecting the growing difficulties in Australia’s gaming market. Star’s shares responded to the earnings news with a steep 15.1% plunge, marking one of the worst trading days since late September and positioning the stock as a top loser on the S&P/ASX 200 index.

According to Star, the firm’s financial performance has been weighed down by recent regulatory adjustments, including the introduction of mandatory carded play and cash limits across its properties. These changes, implemented to bolster anti-money laundering controls, have challenged the casino operator’s earnings. “The impact of a more challenging consumer environment, loss of market share and the impact of changed business practices continue to negatively impact top-line performance,” Star commented in its financial release, cited by Reuters via Market Screener.

Regional Performance: Star Sydney and Gold Coast Under Pressure

The Star Sydney, one of the company’s largest revenue generators, reported a steep year-over-year revenue fall of 16%, amounting to AU$186 million ($122.23 million) for the quarter. This decline in revenue had a direct impact on EBITDA, with the Sydney property recording a loss of AU$21 million ($13.81 million), a stark contrast to the AU$22 million EBITDA profit in the same period last year. The company attributed part of this setback to mandatory carded play and cash limits that came into effect in mid-August, which further contributed to an 11% revenue drop prior to their introduction and an additional 12% decline post-implementation.

Star Gold Coast, another key location for the operator, showed a mix of both improvement and contraction. Revenue at the property increased by 6% sequentially but was down by 9% compared to the previous year, bringing in AU$108 million ($71 million). While EBITDA at the Gold Coast property remained positive at AU$7 million ($4.6 million), it fell by one-third from the prior quarter and dropped 70% year-over-year. Unlike Sydney, Gold Coast had not yet implemented mandatory carded play during the reporting period, which allowed it to experience some seasonal uplift, though regulatory costs continued to exert pressure on profits.

Operational Developments at Star Brisbane and Financial Position

In Brisbane, Star Entertainment closed its Treasury Brisbane casino in late August as part of a staged transition to The Star Brisbane, which opened on August 29. The Treasury property contributed AU$53 million ($34.86 million) in revenue and AU$2 million ($1.32 million) in EBITDA before its closure. The new Brisbane location added another AU$4 million ($2.63 million) in revenue but posted a negative EBITDA of AU$7 million ($4.6 million). The Brisbane property operates as a joint venture under the Destination Brisbane Consortium, in which Star holds a 50% stake alongside Chow Tai Fook and Far East Consortium. During its first 33 days of operation, The Star Brisbane generated AU$45.9 million ($30.2 million) in revenue, with an EBITDA of AU$4.5 million ($2.96 million), excluding specific costs.

To stabilize its financial position, Star reported an increase in available cash to AU$149 million ($98 million) by the end of September, helped by AU$60.5 million ($39.72 million) in proceeds from the sale of the Treasury Brisbane Casino building. The company also continues discussions with lenders to finalize a new debt facility that would provide AU$200 million ($131.54 million) in liquidity, contingent on meeting certain conditions.

Additionally, Star outlined a cost-cutting target of AU$100 million ($65.77 million) annually, aiming for completion by March 2025, as it looks to streamline expenses amidst mounting regulatory and operational costs. Notably, the company’s expenses rose by 10% year-over-year to AU$287 million ($188.76 million) for the quarter, reflecting the added burden of regulatory compliance.

Star’s financial outlook remains challenging, with further hurdles in the form of an AU$15 million ($9.87 million) fine levied by the New South Wales Independent Casino Commission (NICC). The fine, imposed following regulatory scrutiny of the Sydney casino’s operations, will be paid in three equal installments, with the first due in December. Star’s Sydney property will remain under the oversight of NICC-appointed manager Nick Weeks until at least March 2025, according to the NICC’s recent statements.