He not just a COOK(e)!, page-5

ew Star Entertainment chief executive Steve McCann says the company’s casino business might never return to the “glorious” boom times it once enjoyed, and the future was likely to be in the gaming giant’s restaurants and hotels.

In his first interview since taking the job, the former Lendlease chief executive said Star needed to realise that gaming had changed, and there was no easy transaction to sell the business or quick fix to turn around the casino group’s fortunes.

“Gaming has always been seen to be the high-margin, glorious part of the business. It’s the exciting part. Food and beverage and hotels have been a feeder,” he said. “There is a reset required there, the revenue base for gaming has been materially impacted, and will take a long time to get back to anywhere near where it was, if it gets back to that.”

Steve McCann, chief executive of Star Entertainment, wants more time to change things. Dominic Lorrimer

Star warned last month that an exodus of high-rollers, persistent cost-of-living pressures, and rising remediation costs would further dent full-year earnings. It expects normalised earnings of between $165 million and $180 million for the year, compared with $317 million in the previous corresponding period.

“Every casino imagined in the world was designed with that in mind, and with the highest proportion of revenue and profit coming from gaming,” Mr McCann said. “That hasn’t completely flipped, but it shifted dramatically, certainly in Australia.”

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Mr McCann was appointed to rival casino operator Crown Resorts in 2021 under similar circumstances, but within a year had cut a deal to sell the company to Blackstone, the New York-based private equity giant, for $8.9 billion.

This time, he said, time and patience was needed to fix Star’s culture, repair relationships with regulators and win back crucial gaming licences in NSW and Queensland.

Mr McCann said he could not afford to be “distracted” by opportunistic tyre-kickers wanting to pinch Star’s casinos on the cheap or the company as a whole.

“We don’t have a ready-made M&A transaction on the table,” he said. “No doubt there are a lot of people looking at Star and thinking ‘is there a play here?’ I don’t think we can afford to get too distracted on that at the moment.”

Fixing the culture

Mr McCann’s first test will come at the end of this month, when the NSW Independent Casino Commission receives a damning independent report into Star’s culture for the second time in two years. The report, led by Adam Bell, SC, is considering whether Star has done enough to sufficiently overhaul its culture.

“I think there is a solution, there is always a solution,” he said. “But it is not going to happen overnight.”

Mr McCann said he would start by trying to fix Star’s culture – as he did at Crown – working with staff, regulators, governments, suppliers, joint venture partners, and shareholders on what he calls a “stakeholder realignment”.

Star Entertainment’s Sydney casino licence will be critical to its future. Bloomberg

It will start with rebuilding Star’s management team, torn apart under the former regime, and putting the building blocks in place for cultural reform.

“We need the time to recruit the right people, there is no point just putting bodies there to fill seats,” Mr McCann said from Star’s head office in Sydney.

“I’m going to stick with the right mindset. The right people need the opportunity, and we need the support of stakeholders, financial support and patience to get it right.”

Morningstar analyst Angus Hewitt said Mr McCann’s relationship with the regulator was critical to the casino’s future.

The financial services firm estimates temporary closure would cost Star about $2 million per day depending on how quickly it can slash its cost base.

“He already has a good relationship with the regulator, which is key,” Mr Hewitt said. “Steve McCann set the wheels in motion for Crown to eventually return to suitability under Blackstone. We think that a Sydney licence is crucial.

“The risk of closing the doors at Sydney has risen on the back of the second Bell inquiry. Complete cancellation could be catastrophic.”

For its part, the NSW casino regulator is already backing Mr McCann.

“Steve McCann’s appointment was a positive step for The Star and could be part of the burning platform it needs to enact decisive and lasting cultural change,” a spokeswoman said on Tuesday, doubling down on comments made when Star’s board appointed Mr McCann on June 26.

Star’s board consulted the group’s biggest shareholders before appointing Mr McCann. Substantial shareholders include pubs baron Bruce Mathieson, fund manager Perpetual and Star’s joint venture partners in Brisbane, Far East Consortium and Chow Tai Fook.

Cashless gaming

Mr McCann said he would try to put Star on a secure long-term footing, rather than dress it up for sale and hope one of the circling strategic players or financial investors snapped it up, as happened at Crown. He said he had already met some of Star’s biggest shareholders who had assured him they were “there for the grind” and would not pressure the board to sell to the first acquirer that turned up.

Morningstar’s Mr Hewitt said that was where Mr McCann’s focus was needed.

“M&A is always a possibility when stock prices get beaten down so much,” he said. “I don’t think that should be the focus. The best way to secure a higher bid is to get the Sydney licence.”

Retaining the Sydney casino licence is not the only urgent matter on Mr McCann’s agenda: the Sydney casino will need to introduce cashless gaming on its poker machines before the end of next month, and Star’s newest joint at Queens Wharf in Brisbane is scheduled to open on August 29.

Star will also present its financial results to shareholders in late August.

Mr McCann said each hurdle could be met, but they would be easier with more time.

“There’s a lot to be achieved,” he said. “We’re on track, I think, in terms of the relationship reset [with regulators] and progress on remediation.

“We can realign the priorities. I think we can get some early runs on the board.”

Mr McCann took the reins to Star after its board and management team were blown apart by an independent inquiry in Sydney which revealed tension between the casino group, the NICC and the regulator-appointed special manager Nick Weeks.

It was the second time it had happened to Star in less than two years.

Star’s former chief executive, Robbie Cooke, stepped down before the inquiry, while the board ousted chairman David Foster after he tried to justify his private calls for the scrapping of the regulator and removal of the manager controlling its Sydney licence.

Other senior executives to depart this year include chief financial officer Christina Katsibouba, chief customer officer George Hughes and chief legal officer Betty Ivanoff.

Shares have fallen almost 50 per cent in the past year, while it raised emergency equity twice. Star admitted it was unsuitable to run a casino in its current form. It hired Mr McCann, who helped remediate Crown, in a last-ditch attempt to maintain its licences.

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