What was the board of Ardent Leisure (AAD) thinking when it replaced veteran CEO Greg Shaw with relative newcomer and non executive director, Deborah Thomas?
Was the veteran CEO pushed, or did he go willingly? Whatever the circumstances, it has cost shareholders millions of dollars in lost value.
The news broke late on Tuesday evening and when trading started yesterday, the shares were smashed, plunging 28% at one stage, before rising and falling during the day and in doing so hitting a 52 week low of $1.75.
The close of trading the shares were down 19.1% at $1.965.
That represented a loss in market value of $205 million, which won’t be taken well by shareholders.
AAD 1Y – Ardent shares crash on CEO change
Mr Shaw leaves at the end of the financial year after 13 years as CEO.
Thomas has been a non executive director for 15 months. Still, the more than $120 million loss in value will be a millstone for her to wear so far as investors are concerned.
So I wonder what a publishing exec like Ms Thomas really knows about ten pin bowling, marinas, health clubs and tourism based attractions such as Gold Coast theme parks?
For a company with a market value of more than $1 billion, it is an odd way to run a CEO succession, announce it and then try and justify it to nervy investors.
Investors don’t like surprises, do they, as yesterday’s sell-off showed.
In a statement, Ardent chairman Neil Balnaves thanked Mr Shaw for his “exceptional leadership” and said “we have also been fortunate to have an executive of Deborah’s calibre available to follow on from Greg in the role of chief executive officer”.
Ms Thomas, who was editor of The Women’s Weekly for a decade, was until recently the director of media and brand development at the magazine’s publisher, Bauer Media.
Mr Balnaves indicated that these skills were crucial to her appointment.
"The Group’s future will be increasingly focused on positioning our business to deliver world class customer entertainment and leisure experiences, to maximise organic revenue and profit growth opportunities."
But the sharp fall in the share price brought a query from the ASX, and Ardent was forced to confirm to the ASX that no additional information had been discussed on a conference call with investors and analysts, other than the change of CEO.
“The group continues to comply with its disclosure obligations," it said.
Brokers Morgans told clients in a note yesterday that "13 years for the departing CEO is hard to replace” as it questioned the change of CEO.
"The unexpected ‘retirement’ of Ardent’s highly respected CEO has come as a major surprise," it told clients.
"While Greg {Shaw’s] replacement [Deborah Thomas] comes with an impressive bio and a wealth of experience in adjacent fields, a lack of operational leisure experience leaves us cautious.
"This, in addition to a questionable new health club strategy and an elevated PE, sees us downgrade to ‘reduce’.
“We would be prepared to revisit our view closer to $2.00 and/or on new management delivery,” Morgans added.
