McKenzie ready to pass TAB baton

[Wandering Eyes]

When Dean McKenzie completes the formal hand-over to new TAB CEO Mike Tod in the next fortnight, he isn’t quite sure exactly what he is going to do next.

For the past three and a half years McKenzie has been consumed with leading the reform process initiated by the then Minister for Racing, the Rt. Hon Winston Peters back in 2018, to remodel, reinvigorate and revitalise a Racing Industry that appeared to be headed on a downward spiral that could ultimately see its demise.

A slew of problems had emerged for racing over the past 30 years which had resulted in diminishing participation numbers, horse numbers, employment opportunities and betting turnover, which was exacerbated by massive cost increases that had many fearing for the future of racing in New Zealand.

As the nominal head of the Industry, Peters commissioned respected Australian racing administrator John Messara to report on the state of New Zealand racing and to make recommendations on how to turn the industry fortunes around.

Once the report was received, Minister Peters went about instigating a five-member Ministerial Advisory Committee (MAC) that would inform on the next steps on the Messara Review of the New Zealand Racing Industry that had been received in July 2018.

With an established background in both racing and sports administration and an unwavering passion for the Industry, McKenzie was a logical choice for the Minister to appoint as the chair of MAC, which was established in December 2018.

He quickly recognised the enormity of the task both on a professional and personal level as he began to spearhead the development of legislation and the resulting actions and activities across the Industry to manifest the change required.

With Tod due to take over as head of the TAB on March 21, McKenzie is keen to provide some insight on the actions undertaken over the past four years and to shed some light on what can be expected by Industry participants in the future.

Q & A with Dean McKenzie

1. Can you provide some background on how you came to be involved in the process and your role over the past four years?

Minister Peters’ office first approached me in late 2018 regarding taking over the chairman’s duties for the Ministerial Advisory Committee, which I was honoured to accept.

Over the next three and a half years I have had five different job titles as the transformational change process took place and different structures were put in place to progress those actions.

From MAC came the Racing Industry Transitional Agency (RITA), which came about in July 2019 to accelerate that change and when the TAB CEO at the time, John Allen, left towards the end of 2019, I took on some executive responsibilities as RITA took control of the TAB functions.

The initial plan was for the CEO replacement process to take about three months however in Mid-March 2020, the COVID pandemic struck and that forced a change in thinking with the process being undertaken to find a new CEO.

RITA was dissolved on the passing of the Racing Industry Act in mid-2020 and I became the Executive Chair of the TAB and then again in April last year I took on the role of the Chief Transitional Officer to transition the organisation from the interim TAB Board to a new TAB Board, which took shape in July 2021 and I’ve worked with the new Board until they appointed the new CEO which was announced as Mike Tod earlier this year.

2. How would you sum up your time with TAB NZ and are you pleased with the direction in which you leave it?

I would say the overwhelming thought or action to describe the last four years is that it has been a tremendous privilege to be involved in what has taken place.

I probably never thought this was how my career in racing would play out when I first started as a volunteer at the Riverton Racing Club back in the late 1980s where my job was to open and close the birdcage gate and to run the odd punters’ club and pour the owners’ drinks.

Being asked to oversee a process that has created fundamental, generational change, in an industry as important to me personally as Racing is pretty special and even in the darkest days, and there have been plenty, I still saw it all as a privilege.

I know I can look at what is happening now on so many fronts and point to things in the Racing Industry Act, for example, and know the genesis of them and feel the value that has been added by the many people involved.

The reforms that were initiated have begun to pay dividends and that can be effectively demonstrated in the financial position of the TAB and the three code governing bodies and you have to remember that most, if not all that has taken place has done so in the midst of the COVID pandemic.

The facts say we have weathered that storm to date, that our costs are down around $20 million on an annual basis and the revenue streams put in place are delivering significantly increased returns to racing and sports as a result of the reform programme reshaping our business.

I think the main thing is that you have to forget personalities and look at the facts and they show we now have the foundations in place to grow the Industry going forward.

In saying that, we are still very mindful of the economic and wagering landscape under COVID and while there have been vitally required stake increases, the TAB and the Codes have had to be circumspect in the current environment.

Once we start to emerge from that environment we will see the full benefits and to reinvest and to grow further by hopefully releasing the extra revenue that has been generated.

3. What have been the greatest challenges through the reform period?

One of the greatest strengths and also a weakness is the passion we have for our industry.

When the reform process started and the wheels were put in motion, no-one expected the greatest economic challenge in our history (COVID).

We ended up fighting a war on two fronts where the reform process had to progress and we needed the legislation put in place to get the revenue streams flowing amid economic chaos.

In those early COVID days, the worldwide racing and sporting endeavours virtually all shut down. I think at one stage when we lost domestic racing all we had was the Australian racing that was available and some E-sports and Uzbekistan table tennis.

We lost 60 percent of our revenue, which is tough on a mainly fixed cost business and there were a set of challenges in front of us that meant it was very hard to operate.

We had to take some pretty tough measures with the likes of the reduction in on-course presenters, the loss of Radio Trackside and we really had to readjust the way we operated, through initiating an organisation-wide restructure.

As any punter will tell you, racing is a visual medium and having pictures available is crucial, as without them not many people are going to bet.

I know at one stage we had operational and technical staff operating out of their bedrooms and lounges at home and we were effectively running an international broadcast out of a lounge in Mt. Roskill.

I am immensely proud of how the TAB staff pulled together and just made it happen across the entire network, as these changes are still there through this Omicron stage of the pandemic.

Kudos have to go to the people in our broadcasting teams, the trading room managing markets from home, customer service working from their lounges – the team have never missed a beat and while there has been the odd hiccup, they have performed outstandingly.

In reality, the whole industry has done a magnificent job and there are significant bouquets that so many people deserve, while we also need to sincerely thank the Government and current Minster for their significant support of the whole industry through this period.

4. Did you consider applying for the permanent CEO role?

It was never an option or something I considered as my thoughts were specifically that I took on executive responsibilities as the best option at the time to get through what was needed.

I know that Mike Tod is now the right person to lead and that he has the right people around him to achieve success.

5. In looking to the future, the Messara Report outlined that outsourcing of New Zealand’s TAB was the only way forward given the lack of scale in New Zealand. Have any of the outsourcing steps been pursued? Is there a mandate to pursue outsourcing? Do you foresee this happening any time soon?

It was an essential plank of the report and through the MAC work, I think the biggest challenge was getting everyone to understand that it wasn’t MAC of RITA’s job to do it (seek partnering options), the job was to ensure it was able to be done if that was the best course of action.

There was clarity needed on what steps would be taken if we went down that path.

RITA believed that our focus was ensuring the steps were quite clear and as a result there is a section in the new Racing Industry Act that partnering would need full approval from the TAB and then be presented to the Minister for final approval.

Our thoughts were that if the Industry is to make that decision then a robust process must be established. When you can only do something effectively once, you need to make sure the boxes are ticked so the next board/wave of administrators are not saddled with an even bigger issue.

In our Statement of Intent last year there is mention of a work stream for the new Board to further examine the key partnering opportunities.

While it has been on the table, the environment has changed massively in the last three years and we are now in a substantially different position to what we were then.

We haven’t lost any ground by being circumspect, with the TAB now being far more profitable and our leverage position so much stronger because of it.

6. Wagering has been strong through the COVID period so do you believe there is sustainable upside? 

The first thing I would say when you start to discuss the financials is that you should never lose an argument through a lack of facts.

When you look at the journey we have been on the latest numbers show that on an annual basis we have seen significant growth in the balance sheet strength and net equity of the TAB and Codes which now has us in a position to launch the Industry forward.

TAB Financials  2021                       2020                       2019

Turnover*           $3.1B                     $2.63B                   $2.77B

OpEX                     $120m                   $135m                   $142m

Net Profit            $178m                   $162m                   $136m

Industry Equity 2021                       2020                       2019

TAB                        $93.211m             $53.174m             $24.863m

NZTR                     $17.877m             $7.306m               $6.173m

HR                          $9.464m               $3.111m               $2.750m

GR                          $9.756m               $4.458m               $4.726m

TOTAL**              $130.308m          $68.049m             $38.512m

*Includes sport and racing

** Our recently released FY22 half-year trading results will actually see these numbers improve further

What we are seeing is the benefits accruing of the Betting Levy repeal, BIUC (Betting Information Use Charges) and POC (Point of Consumption) streams from the reforms which will realise somewhere around $40 million next year, which is a lot of money to be putting into the pot annually.

These reforms help insulate the Industry, as beneficial owners of the TAB, from the peaks and troughs as revenue streams are now far more diversified.

What the data is also telling us is that there is more upside for growth.

Some of our other key numbers include active weekly customer account numbers which are up ten percent from a year ago, which means more people are engaging with us on a weekly basis.

That tells me we are gaining ground, but we do know there is plenty more work to be done in this area.

Fundamentally we also have to keep asking ourselves – are we best practice? i.e. are we doing what is regarded as first in class and if not, how can we fix it with the resources we have

One of the tangible measures is what happens on our platforms on our biggest days. The last three Melbourne Cup days have been uninterrupted and that is credit to our technology team, who work for months to try to be prepared and ensure that day is uninterrupted.

All of these factors impact on wagering and I’m pleased to say I believe we are on the right track, but acknowledging significant work remains as success is a journey and not a destination.

7. While Mike Tod has been appointed as your replacement, some racing insiders are critical of his lack of wagering and racing credentials. Is that expertise around him and do you believe he is the right fit?

To be frank these same racing insiders would likely have been critical of my appointment for non-racing reasons.

His resume’ speaks for itself, while I know he has significant internal expertise to support him including senior staff, and people at Board and Ministerial level.

I’ve worked with him over the past 4-6 weeks and I’m really excited by what he brings to the table.

I firmly believe he is the right person for the job and together with new Chair Mark Stewart, they will make a formidable team.

8. What’s next for Dean McKenzie?

Quite frankly I just don’t know, as my focus has been on completing this transition.

There could well be a game of golf in there somewhere and with my interests in racing and breeding I’m sure there will be time for racetrack and stable visits, but I think I’m going to sit back a little, take a few deep breaths and then maybe go from there.

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