Tabcorp Holdings (TAH) 2016 AGM Voting Intentions

Company/ASX Code : Tabcorp Holdings Limited (TAH)
Registry : Link Market Services
Poll/Show of Hands : Poll on all items
Webcast : Yes
Venue :
10am Westin Sydney (Grand Ballroom)
1 Martin Place
Sydney, New South Wales
Monitor : Mr John Curry
AGM Details / NoM : Tuesday 25th October, 2016

The company monitor had a pre-AGM meeting with Chairman Paula Dwyer and the Company Secretary Fiona Mead. 

ASA Position
Not Applicable
Item 1: Consideration of accounts and reports

Financial Performance

Net profit after tax before significant items was $185.9 million, up 8.5%. The interim and final dividend for the full year will total 24 cents per share fully franked.  In the previous year dividends paid totalled 50 cents per share, including a special dividend of 30 cents per share. The special dividend, combined with a share issue that enabled significant franking credits to be passed to shareholders – a matter the ASA has pursued with the company for years.

After years of Court action the High Court dismissed Tabcorp’s appeal in relation to a claim for $686 million from the State of Victoria. 

In March 2016 the Australian Federal Police announced an investigation in relation to a payment concerning a Cambodian business opportunity in 2009. Mr Elmer Funke Kupper, a former CEO of the company, and now a non-executive director was granted leave of absence from the Board following the AFP investigation into the Cambodian business opportunity. Mr Funke Kupper is presently still on leave of absence. 

In November 2015 Tabcorp confirmed merger discussions with Tatts Group, but the companies were unable to agree mutually acceptable terms and discussions ended.

On 1 August 2016 Tabcorp announced that it had entered into an agreement under which it is proposed that Tabcorp, through a wholly owned subsidiary, will acquire 100% of ASX listed gaming technology group Intecq Limited (ITQ) under a scheme of arrangement for $128 million. The scheme meeting is scheduled for 28 October. 

On 3 August 2016 Tabcorp appointed Bruce Akhurst and Vickki McFadden to its board of directors, subject to regulatory approval. 


ASA Position
Item 2(a): Re-election of Ms Paula Dwyer as a Director

Ms Dwyer has been Chairman and a non-executive director of Tabcorp from June 2011. Prior to the demerger of the company’s former casinos business, Ms Dwyer was a non-executive director of Tabcorp from August 2005. In 2011 the business of Tabcorp materially changed and her tenure as a director of the Company is regarded as commencing from that year. She is Chairman of Healthscope and a director of ANZ. She has a background in finance, in investment management and investment banking. She holds 100,000 shares in Tabcorp.

ASA Position
Item 2(b): Re-election of Mr Justin Milne as a Director

Mr Milne has been a non-executive director since 2011. He is Chairman of MYOB Group and NetComm Wireless and a non-executive director of SMS Management and Technology Limited. He had an executive career in telecommunications, marketing and media. He holds 31,208 shares in the company.

ASA Position
Item 3: Adoption of Remuneration Report

ASA voted against adoption of the Remuneration Report last year, but it received approval from 94% of shareholders. The ASA believe the long term incentive (LTI) plan should be for 4 years, not 3 years and the only performance hurdle is Total Shareholder Return (TSR). The ASA notes that 2015 saw a decline in the use of relative TSR as a sole hurdle with only 15% of ASX 100 companies using it as their only hurdle. The company is examining the adoption of a second hurdle for the LTI next year.

The company has adopted a policy whereby executives must obtain minimum shareholdings equal to one year’s base salary and the CEO equal to 2 years base salary within 5 years from 1 July 2016. Non-executive directors (NEDs) must acquire minimum shareholdings within 3 years from 1 July 2016 equal to one year’s base NED fees whilst the Chairman must acquire shares equal to two year’s base NED fees in that time.

The 2011 LTI vested in 2014 with TSR performance at the 88th percentile and the 2012 LTI vested in the top quartile with 100% vesting. The 2013 LTI will vest 100% in September 2016 with performance in the top quartile over the three year period.

The company has now adopted the market value method when determining the LTI allocation, rather than fair value previously used. Instead of previously using a fair value of approximately 50% of Tabcorp’s share price at the date of allocation, Tabcorp has introduced an “outperformance” component equivalent to two times target at the 75th percentile. As a result, the value realised by the participant is approximately the same as under the old allocation methodology.

Should the company adopt an additional performance measure for the LTI, the ASA will review its opposition to the Remuneration Report.

ASA Position
Item 4: Approval of LTI grant to CEO/Managing Director Mr David Attenborough

Mr Attenborough has performed well and the proposed grant of performance rights is based on the formula $2,500,000, divided by the volume weighted average price of Tabcorp shares traded on the ASX over the five trading days up to but not including the date of the 2016 AGM.

The resolution to approve performance rights to Mr Attenborough in 2015 was approved by 89% of shareholders, but opposed by the ASA because of the deficiencies outlined in comments above in the Remuneration Report. TSR is still the only performance measure for the LTI and the term is only three years.

Mr Attenborough has an interest in 1,052,316 ordinary shares and 1,593,768 performance rights.

ASA Position
Item 5: Increase to non-executive director fee pool

Shareholder approval is being sought to increase the maximum aggregate annual amount available for payment as remuneration to the non-executive directors (NEDs) by $500,000 from $2,000,000 to $2,500,000 per annum. 

In 2016 the total aggregate amount of remuneration paid to NEDs was $1,426,465.

The current NED Fee pool of $2,000,000 has not increased for 11 years having been approved by shareholders in November 2005.  The size of the company has changed since then following the split off of the casinos business in 2011. Tabcorp now has a market capitalisation of just over $4 billion and the median fee cap for the NED pool for a company this size is $1.75 million.

The company announced in August 2016 the appointment (subject to regulatory approval) of two additional non executive directors which will increase NED remuneration over a full year to close to the present approved limit. The proposed limit will exceed the median market NED fee cap, but the addition of the two extra directors seems reasonable for the future.

The individual involved in the preparation of this voting intention has no shareholding in this company. 

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