Retiring Tabcorp CEO has been getting a run in the media recently almost as charmed as his tenure in the easiest CEO’s gig in the country. We don’t reckon he deserves special praise.
The accomplishments of the Tabcorp CEO are not that impressive, we reckon.
The slightly sycophantic pieces about retiring Tabcorp boss Ross Wilson in the Herald Sun and The Australian over the past few days have been a little nauseating.
Wilson has made an outrageous $50 million from the easiest CEO’s gig in the country – running a monopoly wagering operation in Victoria and sharing a gaming duopoly with Tattersall’s whereby you merely find venues to take your poker machines and help yourself to a guaranteed slice of the misery inducing losses suffered by punters.
Wilson also paid an excessive $1.8 billion for the Sydney casino which has been fairly neutral on profits.
One of the recurring themes in Richard Gluyas’ piece in the Australian was Wilson’s abhorrence of profit forecasting by CEOs.
“But he soon fires up: the biggest change has been pressure from investors constantly clamouring for better performance. And management and boards have only themselves to blame for fanning unrealistic expectations.
So do chief executives talk up their stock prices?
“I think some do,” Wilson says. “Obviously I don’t want to mention names.”
…By contrast with management at the likes of Coles Myer and National Australia Bank, Wilson never made grand strategic announcements, profit forecasts, or commented on others’ forecasts.
“Particularly recently, there’s been this amazing attitude that you must go out and explain your plans,” he says. “How can you possibly win?
“I think CEOs are being pressured by boards, who are being pressured by the institutional investment community — and, therefore, the analysts.”
– Ends –
Never made profit forecasts?
Try this out, from Tabcorp’s 1996/97 first half results announcement:
“In commenting on the future outlook Mr Wilson said that the leisure and entertainment market has performed strongly in the period under review and that TABCORP anticipates the market, and in particular the company’s market segment, to continue to outpace the economy.
“The company will continue to satisfy this growth in demand through the expansion and enhancement of its products and distribution network. At the same time, the company continues to generate strong cash flows which will allow for investments to be made should suitable opportunities arise,” Mr Wilson said.”
Or how about this account from the Cosima Marriner in the SMH in November last year?
“Ross Wilson, the chief executive of Star City Casino owner Tabcorp, told shareholders at yesterday’s annual general meeting in Melbourne that they could expect double-digit profit growth this year, despite the uncertain economic outlook.
In the wake of September 11, any company still willing to make a concrete financial forecast has tended to err on the negative side. But gaming and wagering companies such as Tabcorp have shrugged off the economic malaise and are enjoying continued growth. Tabcorp’s revenue is up 5per cent on this time last year.
“Assuming we can hold our revenues – I don’t see why we can’t … we do confidently predict we should be able to achieve double-digit profit growth this year,” Mr Wilson said.”
So while we agree that there are execs who talk up their share price and profit expectations to unrealistic levels, it’s absurd for Wilson to suggest they shouldn’t make profit forecasts.
He’s done it himself, and the market demands it. Realistic forecasts would be preferable.
Crikey was working for Jeff Kennett at the time of Wilson’s hiring from Southcorp in May 1994 and wrote the press release announcing the “coup”.
Jeff Kennett’s line in the Saturday Herald Sun that “no one else wanted the job, because of what the Labor Party were doing publicly” is just garbage.
Just check out the then Premier’s press release at the bottom of this article which announced Wilson’s appointment. It makes for an interesting contrast with Kennett’s recent comments.
Wilson was hired on his outrageous package several weeks before then Opposition leader John Brumby announced Labor would introduce competitors to Tabcorp if it won office. The float only flopped when Kennett ran a political scare campaign around this with hysterical support from then Chanticleer Ivor Ries.
The reality was that Labor was at least two terms away from ever controlling the upper house to implement such laws so the government should have just ignored the Brumby comments.
That said, outrage over the Wilson package, which was whipped up by Terry McCrann in the Herald Sun, was almost as big a downer on the float as the Labor Party noises.
Neither the Oz nor the Hun mentioned this week that Wilson got the package because one of his best mates, former Merrill Lynch chairman Mike Tilley, was the government’s adviser on the Tabcorp float.
Government insiders at the time had to repeatedly remind Tilley that he was working for the government, not Wilson, and he never worked for the Kennett government again after this performance.
The fact remains that Tabcorp was massively undersold before the market knew the first thing about it and before the new industry arrangements had been fully implemented. It was a major rush job because Stockdale failed to get the TAC privatisation away and wanted to notch one up – but they ran the business down only a few months earlier announcing $96 million in write-offs.
In return for supporting the float, racing industry distributions were increased from $120 million a year to more than $200 million a year now, funded by a wagering tax cut which TABs across the country were forced to copy. Australia has the best funded and most powerful racing lobby in the world which even gets 25 per cent of Tabcorp’s pokies profits.
Wilson was just lucky that Tilley and the government decided to rush the float of a cash generating machine at prices between $2.25 and $2.70 a share. Wilson just had to turn up to work and the money poured in. It took just 5 years for the company to pay back its float price in dividends – fully franked of course.
Crikey reckons Wilson’s $50 million is the least deserved riches that an Australian CEO has ever collected. He was on the way out of Southcorp at the time after the Morflow water heater disaster in the US (well advised Mike Tilley) and just fell into the Tabcorp job on an outrageous package because no-one else understood anything about the business or wanted to be associated with an operation that preyed on problem gamblers for large chunks of its profits.
Kennett told me at the time he’d kept a copy of the Wilson contract as the basis of what he’d like to negotiate when he went into the private sector.
Unfortunately, Ross has walked with $50 million and Kennett has a series of dot com carcasses hanging around like a bad smell.
Kennett and Stockdale should have rejected Tilley’s push for a “big name” CEO of such as small fry management challenge and just stuck with interim CEO Clive Hooke who these days is finance director of National Foods and did a fine job running Tabcorp for a few months after the 1993 write-offs.
And here’s the press release from Jeff…
From the Office of the Premier of Victoria.
Monday, April 2, 1994
MAJOR COUP FOR VICTORIA WITH NEW TABCORP CEO
The Premier, Jeff Kennett, today announced a major coup for Victoria with the appointment of Mr Ross Wilson as the new Chief Executive Officer and Managing Director of TABCORP Holdings Ltd.
Mr Kennett also announced that prominent Melbourne lawyer Michael Robinson has been appointed Chairman of TABCORP Holdings and Tony Hodgson has been appointed Deputy Chairman.
“I am delighted with the first three appointments to the new TABCORP board and look forward to these three outstanding individuals providing strong leadership for the company’s new shareholders as TABCORP enters an exciting new era,” Mr Kennett said.
“Mr Wilson has been Chief Executive Officer and Managing Director of Southcorp Holdings (formerly SA Brewing Holdings) since August 1987 and in his seven years at the helm has overseen rapid growth that lifted the company into Australia’s top 40.
“The Government is delighted that Mr Wilson has accepted this appointment to lead what will be Australia’s leading leisure and entertainment company and the world’s largest publicly listed gaming machine company.
“TABCORP is a growth company and the Government was looking for someone like Ross Wilson who has a proven track record in delivering growth.
“Mr Wilson is the man who transformed SouthCorp from a company with annual net profit of $22 million on turnover of $571 million to one of Australia’s largest packaging, wine and appliance companies with net profit of $122 million on turnover of $2.3 billion.”
Mr Wilson, 46, will return to his home of Melbourne to take up his appointment shortly.
Mr Kennett said Michael Robinson, 55, is a strongly credentialled senior partner with legal firm Arthur Robinson & Hedderwicks and was its managing partner from 1980 to 1988. He is also a director of Seven Network Ltd, Bank of Singapore (Australia), Gandel Retail Trust, the Australian Bionic Ear and Hearing Research Institute and CEDA.
Tony Hodgson is Senior Partner, Melbourne of the chartered accounting firm Ferrier Hodgson. He is a fellow of the Institute of Chartered Accountants and an Official Liquidator of the Supreme Court of Victoria.
He was appointed to the TAB board in May 1993 and has been Acting Chairman since December 24, 1993. Mr Hodgson was elected to the Committee of the Moonee Valley Racing Club in March 1991 and appointed to the Committee of the Victoria Racing Club in December 1993.
“The Government will announce the appointment of the remainder of the new TABCORP Board before the prospectus for the company is lodged in June,” Mr Kennett said.
“This is an excellent announcement to make on the same day the Government’s TABCORP advertising campaign begins running.”
Media inquiries: Stephen Mayne: 651 5675 or (018) 313 466 [Don’t call either of those numbers, please!]