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In the wake of the second Bell Inquiry and with stricter regulatory conditions in NSW, embattled casino and resorts group The Star Entertainment Group (ASX: SGR) has copped a resounding 'first strike' at today's annual general meeting (AGM) with 43 per cent of votes cast against its remuneration report.
The two-strikes rule for ASX-listed companies means that if 25 per cent of votes from shareholders are against remuneration reports for two consecutive years, a board spill vote must occur to decide the fates of all all non-executive directors with a company.
In the case of The Star, the majority of its executive team including CEO Steve McCann have been appointed to their roles fairly recently in 2024, but all of its five directors have been on the board since 2023 or earlier and had to face down interrogations from the Bell inquiry.
This includes Anne Ward who became chair in April after David Foster resigned from the role along with numerous other key figures.
Ward told the AGM that the group was embarking on a program of orderly board renewal that will likely see at least two new directors join in the coming months.
"We are particularly seeking candidates with experience in casino and gaming operations, as well as technology transformation, to supplement the skillsets of existing directors and assist us in guiding the company through the next phase," she said.
"I would also like to thank all of The Star staff members. Thank you for your professionalism, your loyalty and your resilience as you have coped with massive amounts of process and policy change, constant deadlines and scrutiny at a time when things are tough and for many there have been no pay increases."
New CEO Steve McCann said the team had worked tirelessly over the past four-and-a-half months to address remediation matters and recover, but noted a difficult road ahead with the company remaining in an "extremely challenging position".
"We have made progress on a range of important issues, have reset our remediation plan and improved our transparency and relationship with regulators," he said.
"However, revenue has continued to decline significantly while the costs of our transformation and the cost of the external advice and assistance we have required have continued to be at inflated levels."
He said the unaudited EBITDA loss for October before significant items was $8.5 million, which takes the loss for the first four months of the financial year to $27 million.
The group introduced carded play in select areas of The Star Sydney on 19 August, and that has since expanded to the entire gaming floor at the venue as of 19 October with $5,000 cash limits now fully implemented.
Since the implementation of mandatory carded play and cash limits at The Star Sydney, daily average revenue has fallen by 15.5 per cent compared to revenue in the four weeks prior to implementation.
"The Star team is working hard to improve our technology and systems to ensure regulatory compliance while improving the impact of this transition on our customer experience," McCann said.
"Pleasingly, the Group has now finalised the long-form documentation with lenders to access the new debt facilities which we announced on 25 September 2024, which comprises two tranches of $100 million each.
"The first tranche is expected to be available to be drawn shortly. Under the terms of the agreement, we are required to put in escrow the proceeds of the Treasury Casino sale resulting in a net increase in cash of approximately $35 million after fees."
He explained that the organisational structure of The Star will shift from a centralised operating model to one led by executives at each individual property in Sydney, Brisbane and the Gold Coast.
"Under this model, the key strategic, financial, risk and operational decisions will be owned by the properties, reporting into the three property CEOs, who will lead the restructure," he said.
"Each CEO will have their own senior leadership team across key functions reporting into them directly, focussing on what they need to run a safe, compliant and profitable business.
"Each property will also be overseen by an independent State-based Board with its own governance structure and processes.
"It’s empowering our Property CEOs with greater control and accountability over their operations and the team supporting them."
Despite some of the positive progress highlighted by both McCann and Ward, investors responded negatively to the mounting losses and lower revenues in the stricter regulatory environment at The Star Sydney, with shares down 7.14 per cent at $0.195 at the market close. This compares to $0.50 in early July and more than $1.60 at the start of 2023.
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