KEY POINTS:
For little more than a decade, the Sky Tower has been the dominant feature of the Auckland skyline. In that relatively short period, SkyCity has developed into a mature business. The excitement and acquisitiveness associated with the company's early days have passed. So, as a consequence, has the stewardship of Evan Davies, who has stepped down after 11 years as managing director. He has fallen victim to the need for different leadership approaches and styles in a time of different corporate circumstance.
Under Mr Davies, SkyCity developed from an Auckland casino owner to a business embracing cinemas, an internet gaming company and other casino operations in Australia and New Zealand. Although he always claimed to be risk-averse, his were ideal start-up hands. Heady initial returns served only to burnish his status.
These, however, were not to last. Even the cash-cow that was the Auckland casino could not escape the impact of a smoking ban and tougher gambling regulations. If these were, to a large degree, beyond Mr Davies' control, the same could not be said for the poor profitability of some of his acquisitions, notably the Adelaide Casino, SkyCity's second-biggest asset.
The company's faltering fortunes came to a head in late May when Mr Davies announced a cost-cutting exercise that included the shedding of 230 jobs, and the possible sale of the cinema business, the Adelaide Casino, and a 40.5 per cent stake in the Christchurch Casino. This was designed to mollify investor discontent. It smacked, however, of the sort of short-term palliative typically employed by under-pressure executives. Absent were fresh ideas designed to preserve SkyCity's stature and potential for long-term growth.
It is instructive that Mr Davies' replacement will be Elmar Toime, a SkyCity director. The former NZ Post head is slated to act as chief executive until a replacement is found. Mr Toime's experience at NZ Post suggests he should recognise what is required at mature businesses.
The postal operator had to confront new technology, particularly email, during his time there. Seemingly, it had every reason to stumble from maturity into decrepitude. Yet, even if not without incident, Mr Toime successfully diversified into areas such as courier operations and international postal consultancy. A similar challenge, at least in the short term, awaits him at SkyCity. The threat posed to the company's cinemas by sophisticated home-entertainment systems is, for example, not dissimilar to the technological hurdle he faced at NZ Post.
It would also not be surprising if Mr Toime, or any future chief executive, put a hold on the plans announced by Mr Davies in May. The former managing director's belated conservatism may have little appeal for someone with a different approach. Fresh ideas and more adroit management could be a superior recipe for generating higher earnings from SkyCity's businesses.
Certainly, it would be unfortunate if the company went into its shell. The SkyCity chairman, Rod McGeoch, commenting on Mr Davies' departure, noted the company had grown to a more than $2 billion Australasian business employing more than 4000 staff. Whatever Mr Davies' mistakes on the acquisition trail, it would be a shame if this was totally unwound. Indeed, retrenchment would make SkyCity even more of a target for Australian gaming companies. If that came to pass, it would be a sad outcome for an enterprise that once set such a bright example for other New Zealand companies.
