Tatts Group (TTS) 2015 AGM Report

Company/ASX Code : Tatts Group Limited (TTS)
Venue :
2pm Ithaca Auditorium
Level 2, Brisbane City Hall
Brisbane, Queensland
Monitor : Mr Malcolm Badgery
AGM Details / NoM : Friday 30th October, 2015
# of Attendees : 150 shareholders plus 100 visitors
# Holdings represented by ASA : 219
Value of Proxies : $7.3 million
# Shares Represented by ASA : 1.9 million
Market Capitalisation : $5.7 billion

Engage? No thanks

The meeting was well attended, with perhaps 250 people present.  142 voting handsets were issued.

Those present were introduced to members of the board and the senior executive management team.  The Chairman’s address was just him reading the Chairman’s letter from the annual report.

Shareholders questions provided in advance were met with the following responses from the Chairman:

  • Pokies compensation appeal will be held on 11 November 2015, although the outcome may not be known until much later. The  Board intends that if successful, the after-tax amount of the compensation will be distributed to shareholders in the most efficient manner
  • Consolidation of international wagering companies – the company is monitoring situation and will position the company to maximise value
  • Remuneration; the overriding objective in remuneration is to ensure appropriate and transparent alignment between shareholder and employees and be competitive in the market for people.  TSR outperforms ASX200 whereas remuneration is one of the lowest in its peer group

Managing Director/CEO’s report

Mr Cooke gave an informative analysis of the initiatives the company is taking in developing digital channels for lotteries and wagering, as well as the launch of the new wagering brand “UBET”, a new next generation retail format, and several new lottery offerings.  The company has put in place the key elements to provide a “world class omni-channel customer experience”

In his comments on outlook, he noted that Lotteries is up slightly year on year, but with a lower jackpot run.  Wagering is up 3.6%.  Interestingly, South East Qld is up 3.1%, but the regions are down 4.1%

Financial statements and reports

The ASA posed three questions: clarification of the implications for the company of consolidation of the global wagering industry; as the company’s EBIT performance was flat, was it really “another great year”? and a question about the threat of disruptive technologies, particularly as regards lotteries.  It was an opportunity for the Chairman to open up about the company’s strategic thinking and a frank assessment of its results, but the answers were largely predictable and perfunctory.

Resolution 1: Approval of Remuneration Report

The ASA voted undirected proxies for adoption of the remuneration report, but when the screen showing proxies received was uploaded, we noticed that some 100 million shares voted against it (11.4%), with a further ten million abstaining.  We asked the Chairman if he had any idea why there was what we would consider to be a high vote against.  Firstly he said that as a percentage of total shares, it wasn’t that high, and that one of the proxy advisors (CGI Glass Lewis) was unhappy with the new package for the CEO (which was not even part of the report).  After the meeting we also learned that there had been some negative feedback about a lack of detail in explaining performance criteria.  We also asked why the total incentives as a percentage of net profit was at a record high.  This gave the Chairman of the Remuneration Committee to expand on the operation of the scheme, in which he noted 1,455 employees’ participated, and not just senior executives.

Resolutions 2(a) and (b): Re-election of directors

The ASA voted undirected proxies for the re-election of Chairman Harry Boon (98.76% in favour) and Lyndsey Cattermole (98.68% in favour)

As Mr Boon and\ Ms Cattermole have served ten years, the ASA asked about board renewal plans, and whether in the event of Mr Boon’s retirement, a Chairman would come from within the existing board members.  The acting Chairman, Brian Jamieson, opined that notwithstanding his length of service, Boon was independent of management.  He did not address the other questions, or take the opportunity to reflect on the broad principles underlying decisions such as board renewal and selection and appointment of a Chairman.

Resolution 3: Grant of rights to CEO

The ASA voted undirected proxies in favour (Carried with 92.82%)

The audio of the meeting is available on the company’s website. Since the AGM the company announced that it was successful in re-tendering for the NT wagering licence.

At the time of writing this report, “The Australian” has a story about a possible merger between Tabcorp and Tatts Group.