Poker-faced Steve McCann faces steep climb out of casino pit
The Star casino boss knows the odds are stacked against the company but can see a way back once regulators and lenders give it breathing space.
Poker-playing Star Entertainment incoming chief executive Steve McCann doesn’t like the hand that he has been dealt.
The former Crown Resorts boss, who has been billed as the man to dig the embattled casino operator out of its regulatory quagmire and dire trading position, was anything but happy with the position which it faces when addressing investors on Thursday.
While he is on a $10m salary package that includes a $2.5m sign-on bonus and $5m worth of performance rights, McCann is dealing with multiple (hostile) regulators whose demands he has yet to fully meet.
He started his first public call with investors by noting that he is (still) only an observer as he is yet to win probity approval to take the helm. Let alone start the task of truly turning around the embattled casino group.
On McCann’s own account the road ahead won’t be easy. His initial focus will just be keeping the company solvent. And while this is a better prospect after a recent debt deal, it will not be easy and he flagged that short-term liquidity was his key focus.
The first hurdle was striking a debt deal to give the company a “short term liquidity runway” even to get to where it is now.
Star believes it can reset its business and that it has enough liquidity to get through until late 2025 when it faces a hefty refinancing call on the troubled Queen’s Wharf project.
McCann appeared to bat away suggestions of a larger equity raising but flagged the prospect of its planned $150m debt raising including an equity component.
Star still faces a complex regulatory remediation progress and resolving issues with Austrac. Getting through these issues would position it to start work on how it funds its share of the Brisbane mega-project.
But he is starting behind the eight-ball as Star has cut the value of key assets with Brisbane written down by $819m and $337m slashed from its ageing Sydney complex.
McCann blamed the hit on the tough trading conditions combined with the hit from upcoming regulatory changes, including the switch to mandatory carded play and reduced cash limits – which could have a deeper impact than expected.
There has been few bright spots in the recent months with group earnings down as its old Brisbane casino closed and the cost-of-living bit into spending. Star also lost market share as rivals feasted on its distress.
The battles on this front would stretch even the most skilled executives – and McCann signalled that he would begin by culling staff. A cost cutting exercise will get underway with about 350 jobs to go. He also wants to address some “low hanging fruit” like better marketing, saying the casino’s loyalty program was not “fit for purpose”.
It is moving ahead of solving its regulatory problems. But satisfying state regulators won’t be an easy task – particularly in NSW – and McCann said the company was working on getting a revised plan to be endorsed by its manager. But the key will be turning the business around and getting back to a profitable operating.
In a move from the property playbook, the former Lendlease boss will first tackle bloated corporate costs, which had jumped by about 40 per cent. Star has identified over $100m of annualised cost savings and will be a different company by next March when this kicks off.
And some capital expenditure will be pushed back. But the big kicker will be a larger asset sales program.
Star has identified about $300m to put on the block, and is already in talks to sell the remaining two buildings at Treasury, and there is more to come. Other hotel assets appear to be headed for the sales block.
McCann called out approaches on The Star’s valuable The Darling Hotel. But it is a harbinger of what’s to come with other assets likely to go including car parks and other properties.
The real prizes to come will be if there is a true carve-up of the casino empire with the prize Gold Coast asset and even beaten down Sydney likely to attract suitors if they became available. Before Star can even get to that point McCann will need to focus on clearing a runway for the company to find a way back to winning investor confidence.
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