SkyCity Entertainment Group Limited (SKC) Earnings Call Transcript & Summary

Thank you for standing by and welcome to SkyCity management update. [Operator Instructions] I would now like to hand the conference over to Group Chair, Mr. Bob Campbell. Please go ahead.

Thank you. Well, welcome, everybody, and thank you for your interest and time today. The purpose of this call is to give you a quick update and to take any questions that you may have in relation to the management changes that we've announced today. We have also released to the market some material regarding the financial position of the business, which we regard as positive. That will be the subject for analysts and investors, et cetera, of a number of calls over the next couple of days within the coverage of the UBS conference. So we don't intend to address any detail on that today, but I just want to say in introducing it that the Board view is that the numbers, the trading numbers reflect the positive position of the business. We have obvious challenges in our marketplaces, but we consider that the business is performing at or above expectations. So we think it's fair to say that it's positive. Our announcement today is primarily about the retirement of Graeme Stephens as Chief Executive and the appointment of Michael Ahearne as the new Chief Executive. I want to just give you a little bit of background about this. Graeme has always indicated since his appointment that he would retire from this role within -- maybe 4 to 5 years was the initial indication he had given. That was not a fixed-term contract. That was an ongoing contract, but we have always worked to that view, and quite properly during this year, we've had a number of discussions with Graeme about when he might wish to retire. And while we didn't have a -- intention, the Board and Graeme agreed that we would commit a process to assess when we had strong internal candidates or whether in the event that Graeme announced his retirement, we would search externally. So that process commenced. It was very rigorous in terms of reexamining where we were as a business and what we wanted in making our assessments of executives who are currently within the business. We took the view that we had 2 very strong candidates within the business for the role, and they have been through a process, which was again rigorous, to make our assessment as to whom we would wish to appoint in the event that Graeme did confirm his retirement. We reached the decision that the best appointee for the position, given the circumstances in the position that we saw the business as being in, was Michael Ahearne, and that had a number of impacts. We're very positive about Michael, and I'll ask him to talk in a few moments, but we think that he's an excellent successor to Graeme in terms of his personal capabilities, his leadership and his experience in the gaming business and a wide range of content centers. His operational excellence as a manager, we think [ is ] just what SkyCity needs at this point. Having reached the decision that, that was where we would land in the event of Graeme's retirement, it caused both the Board and Graeme to consider what the right timing for that was. And in really quite short order in the last couple of weeks, we reached the joint view that the best thing for the business, having reached this position, was that we made a short-term change that we didn't leave it for a long period of time. SkyCity, as some of you will remember, has been through a significant interim -- on its Chief Executive position, and it wasn't good for the business. And so having made that decision, we -- to confirm Michael's appointment and to confirm the arrangements for Graeme's retirement. Having reached that decision, obviously, we then need to make the relevant announcements and changes. So this is about why there's a quick change. From the Board's point of view, this is very much about stability. This business has been through a lot in the last couple of years. Its people and every aspect of the business has been challenged, and we're very concerned that we have a good stable transition, and doing that internally and in this way, while it seems like a short time period to external people really, reinforces that stability within the business, and we feel very strongly about that. Graeme's been a very strong CEO. He's done a good job for us in the period he's been here. We think he will do further things in the New Zealand market in business. Although he calls this a retirement, I don't think any of us will feel that Graeme won't be still present in the New Zealand market, and we welcome and support that. Having made those decisions, Rob Hamilton, again in consultation with the Board and the other senior managers, has made the decision that he would resign and he will see the business through to the period after the half year results are announced or completed and announced. We appreciate that. Rob is an extremely talented executive. He's given 6, 7 years of really strong service to this business. He has enormous potential to take on another senior executive role. And with the appointment of a new Chief Executive, I think it is entirely predictable and expectable that Rob would announce his resignation as he has. We are very appreciative of his contribution to the business, of his work in the transition ahead of us. And we're quite positive he'll have an amazing future in business in New Zealand wherever he chooses to go. We're well covered in this position. Richard Smyth is very confident and experienced in terms of the backup in this transition period. We are going to conduct an external search as well for a CFO. Expect Richard Smyth to be a part of that. But we think the responsible thing to do is also to look more widely and make that assessment. At the same time, but quite unrelated, Liza McNally had made a decision that she wished to return with her family to Adelaide for family reasons. Liza will complete her resignation period working out of Adelaide as CMO but quite clearly is an ongoing proposition that meant that we need to revisit the position of the CMO as well. And so this gives Michael the opportunity to look not only at how he will operationally replace his role as COO but look at that role as well in the longer term and make the appointment of CFO. So while I appreciate some people from outside, again, I emphasize this may seem like a sudden group announcement, in fact, from the point of view of the business, it all fits consistently within what it is that we believe the business now needs to deal with, and we see it as entirely a set of positive developments. I'm very happy to answer any questions about all this process, but I think it might be helpful if, first, I ask Michael to say a few words about how he sees taking on the new role. And I would also like to ask Rob to address how he sees these changes and, in particular, Rob, the transition period of how you see that being managed. Michael?

Thank you, Rob, and good morning, everyone. Probably have met many of you on the call here this morning in a number of meetings over the past 1.5 years or so. So firstly, just a little introduction to myself. I've been involved in the global gaming sector for coming on 20 years now across different parts of this. I spent a lot of time in Australia with the Star and Aristocrat and spent some time back in Europe with Paddy Power/Betfair, now Flutter. And my last 3 years have been here in SkyCity. And look, I'm really excited and delighted that the Board has the confidence in me to lead this business going forward. I think we have some challenges we have here at the time that we're managing through, but this is a great company. It's a great organization in terms of the assets we have and the future that we have. We have a strong team here operationally and you heard from Rob, you know what, we're just getting on with business, and we'll continue to do. So this has been a seamless transition. Graeme is somebody I've worked with very closely over the last 3 years and, from a traditional point of view, have worked with him closely over the last time. For me, the focus right now -- over tomorrow, you'll hear a little bit more about like the focus is on our core business and navigating through COVID, really important and that's an ongoing challenge. We're doing well through that, but it's ongoing. We'll be opening Adelaide next week, really exciting. That probably looks fantastic. And so I've been working with the team on a daily basis on that over the past 6 months, in particular, then we're really excited to get it open and running and, of course, the NZICC, that project, seeing that through and, of course, the online business, which has progressed quite nicely over the past few months. And I'll talk a little bit more about that on our investor sessions tomorrow. I'm going to hand back to Rob. Look, I'm really looking forward to working with all of you and engaging with you over the course of the next few years ahead. So thank you, Rob.

Thanks, Michael. We'll go straight to Rob Hamilton.

Thanks, Rob. I guess, as the Chair said, I've been in discussions with Graeme and the Board around my plans really since the middle of the year. I've been at SkyCity just over 6 years and realized until someone mentioned it last week, I'm actually the company's longest-serving CFO. So it caught me by surprise. As Rob said, I was contingent for the CEO role in terms of the process, internal process that the company has run. And after looking out of that, Bruce, since he just confirmed my decision to look for new challenges and opportunities outside of SkyCity. I will be here until the end of February. Until that time, from my perspective, it's very much BAU. I've told my team here this morning, and even said that the CFO will continue to get grumpy about various things. The -- until that time, Michael will have my full support as CFO, and I'll do everything to make the transition to Michael into the CEO role as seamless as possible. From my perspective, I think SkyCity is in good shape. As you see from the UBS investor presentation we put out this morning, we are performing better than what we expected a couple of months ago. So I feel as though I'm not only leaving SkyCity in good hands, but SkyCity, I think, is in very capable hands as we go forward.

Thank you, Rob. So open to questions.

[Operator Instructions] Your first question comes from Anthony Longo from CLSA.

Look, a couple of quick questions from me. First one for Rob. In terms of the retirement of Graeme, I just wanted to reconcile some of the comments that you did make. So you mentioned that he would retire but then also still remain quite active in the New Zealand market. Can you perhaps give a bit more color on what you meant by those comments? And then I've got another question for Michael.

Well, Graeme is retiring from his role as Chief Executive. He is not, as I understand -- you'll have to talk to Graeme. It's not his intention to seek another role of that kind. But he is not an old man like me. I would just be surprised if you didn't see Graeme popping up in some other kind of role, but he's not leaving to go to another role.

Okay. Understood. And so one for Michael, I mean, how should we ultimately be thinking about strategy going forward for SkyCity and perhaps what your leadership style is? And perhaps what's the one area that you think could be significantly improved? And maybe a road map as to how you think you may get there?

Look, for now, the priority is just focusing on the core business. These are challenging times we're in. We'll discuss that a little bit more on the investor call and in the half year, sort of I'll be certainly giving some more color. My own thought is the people organization and we're in the entertainment industry. What I -- the people of our organization are really important. So I would say from a customer point of view, customer-led and also dealing with our team and our people are really important for me. So I'm really looking forward to the next couple of months. I've been taking some time looking at our structure. There's been some resignations here and replacing myself. So I'm going to take a little bit of time over the next month or so to just work out what's the right structure for the business as we look forward as well. So you'll hear about that in due course.

That's great. And look, congratulations. Look forward to working with you over the next little bit and Rob as well, look forward to working with you over the transition as well. So thanks very much, and I'll open it to other guys.

Your next question comes from Marcus Curley from UBS.

Rob, just a couple for you. Can you just talk a little bit to what seems to be a very short handover? It looks like Graeme is finishing up in the business this month. You don't normally see less than weeks of handover in these sorts of circumstances, especially when Graeme is not going to another operating role. And secondly, could you also talk to Michael's contract? I don't think there's many details released, but in particular, the LTIs and what the hurdles are?

All right. So thank you, Marcus. Look, different practices occur in different situations, don't they? In this instance, we have a Chief Executive taking over, who is match fit -- match ready. He doesn't have to learn anything about the business. He doesn't have to come in and go through a transition where he has to work his way into it. He knows all the people. He knows all the processes. He knows the issues. So that's really what led to the decision that we all reached together, which was now that we know Michael is going to take over, what really is in the best interest of the business? And our view is that -- is to get on with it. There's no learning front for Michael to do, which there might be in a transition so where someone was coming in from the outside. So to us, it's just a logical expression of the business interest in the manner. And generally speaking, I think if you're retiring, and your successor is ready and in place, there's not much reason not to retire. So that's just how we see it. In relation to Michael's contract. I'm not going to comment in detail on that contract. We will obviously publish the details on the -- in the annual report when it's required. What I will say is that the contract is one which is probably more conservatively structured than previous CEO contracts have been but fully aligned with shareholder and other stakeholder interests. But we'll be putting the details in the annual report when they're required.

Could you talk anything to what sort of financial metrics are in there and over what periods? I suppose the reason for the question is, obviously, Michael takes over just before Adelaide Open. So is there anything to be read into that? Or is that just a coincidence?

No. That is a complete coincidence. It's a correct observation as to timing, but it's got no influence on the decision to move now and has no implication for Michael's contract.

[Operator Instructions] Your next question comes from Adrian Allbon from Jarden.