Corporate Treasury in 'The Lucky Country': Q&A with Reuben Rattos, Aristocrat Leisure
(gtnews): For corporate treasurers in Europe and the US, it might appear that
their peers in Australia and New Zealand have enjoyed much less challenging
conditions over the past five years. Both countries avoided much of the property
market ‘boom to bust’ that afflicted other major economies and also maintained
their economic growth. Would this be a correct assumption?
Rattos, group treasurer and investor relations manager, Aristocrat Leisure): The
global financial crisis had a marked impact on many countries. While Europe and
the US might have dominated financial news headlines Australia and New Zealand,
like many countries around the word, felt the ructions particularly through the
Dealings between corporate treasuries and banks are much
more transparent here. From a borrowing perspective, corporates will generally
require a greater number of banks in a lending syndicate – with banks’ ability
to lender somewhat lower than what it was before the crisis. Additionally, given
the greater pressure on banks to meet capital return hurdles on lending, there
is awareness by corporate treasuries about which banks to deal with.
(gtnews): Have Australian corporate treasurers nonetheless seen an expansion in
their duties and responsibilities since the 2008 financial crisis? If so, how
has their role within the organisation developed?
A (Rattos): The crisis
has put pressure on many companies’ headcounts and cost structures: accordingly
many corporate treasurers have needed to take on additional responsibilities:
for example insurance, shared services, tax, etc. Additionally, I believe there
is a greater focus these days on cashflow visibility and liquidity and
accordingly treasury is extremely well placed to assist here. Lastly, given the
influence of economic factors on companies and how quickly information travels,
corporate treasurers have become translators for executives and boards in times
of extreme market volatility.
Q (gtnews): Is treasury as established a
profession as it is, say, in North America and Western Europe? In addition, do
Australian treasurers enjoy any advantages over their peers elsewhere, such as
newer technology support systems or better-trained staff?
A (Rattos): I
believe so. Australia has a professional peak body, the Finance & Treasury
Association [FTA], as well as corporate treasurers with strong experience. While
there might not be a significant depth of market, I believe that the world is a
much smaller place these days and that information, training and technology is
fairly uniform between regions.
Q (gtnews): Tell me a little about your
own company, its operation and its treasury department? Has your job changed
much since you first joined? Which issues are currently at the top of your
agenda and have these varied significantly over the years?
Aristocrat Leisure is a leading global provider of gaming with its headquarters
in Australia. The Aristocrat Group is licensed by over 200 regulators and its
products and services are available in over 90 countries around the world,
including Australia, North America, Japan, Macau and Sweden. I have a treasury
department consisting of three people, with a senior treasury analyst and an
accountant (shared services also).
I have been at Aristocrat for nearly
nine years and in that time operations have improved dramatically, having a
clear charter of responsibilities, systems and policies to support the business.
While traditional areas of treasury liquidity, foreign exchange (FX) and
interest rate risk reside with treasury, I have also inherited capital
management as well as insurance arrangements and, in the last few months,
managing the investor relations function at Aristocrat. Life is never dull and
we are definitely a busy team.
In terms of the items that are top of
my agenda these are managing all of the above and continuing to support the
business. In addition, we are also finalising the implementation of a new
treasury system from Reval that we are looking to get some efficiency benefits
out of – particularly through rolling it out across the many regions in which we
Q (gtnews): What policies has the company followed to improve
liquidity management? Have your investment policies differed from those of US or
European corporates as Australia’s interest rates have generally been higher? Is
the recent trend to lower Australian interest rates causing any
A (Rattos): No changes. We have well developed liquidity
policies that have served the company well through the 2008 financial crisis and
long after it has passed. We are a net borrower so we have no investments.
Q (gtnews): Are Australian corporates following their US and European
counterparts in looking beyond the banks for alternative sources of funding? If
‘yes’, which have proved to be the most popular options and are new sources
still being developed?
A (Rattos): I believe that for better-rated
corporates with BBB and above, the US private placement [USPP], 144a and
Eurobond market continue to be the most attractive markets for corporates to
Q (gtnews): Australia’s growing ties with China was reflected in
the Reserve Bank of Australia’s (RBA) recent decision to invest in Chinese government debt.
How is the closeness with China – and with other major and emerging Asian
economies – being reflected in the corporate world?
A (Rattos): Links to
China and the Asia are particularly pronounced. China is a significant investor
in the Australian economy and additionally imports many resources from
Australia. Conversely, Australia imports manufacturing and technology assets
from China. I understand that the RBA has one economist who tracks the US and
one on Europe, but employs five to track China.
Q (gtnews): The Australian
government appears to be encouraging development of the corporate bond market.
How developed is it at present and does it have the potential to become much
A (Rattos): While the corporate bond market exists for A-rated
corporates in Australia, it is definitely not as mature as the US or Europe.
Generally corporates will only access this market as a means of diversifying
their funding. Funding is basically only available out to 10 years and spreads
are at a premium to these other markets.
Q (gtnews): There have been
periods in which the Australian dollar has been subject to volatility against
other major currencies, such as the Japanese yen. What have been the main causes
and is hedging adopted by many Australian corporates?
A (Rattos): While
the Australian dollar has been volatile over the last few years, it has remained
relatively steady over the last 12 months or so. The Australian dollar-Japanese
yen [AUD/JPY] rate has appreciated rapidly despite this steadiness, driven by a
marginally stronger AUD/US dollar (USD) rate and particularly by a higher
This has been exacerbated in recent months by the Bank of Japan (BoJ) actively devaluing the yen to make Japanese exports more competitive
and improve their current account position and economic growth. In terms of
hedging – while I do not have clear visibility on what other corporates are
doing – I would expect that corporates would still be hedging. It is beneficial
for importers, but would cause issues for exporters.
Q (gtnews): How do you
see the outlook both for the Australian economy generally and for your company
over the next five years?
A (Rattos): We would see the Australian economy
continue to remain strong, supported by strong trade links to Asia as well as
the rest of globe. Similarly Aristocrat Leisure has considerable diversification
of earnings globally and should continue to benefit this portfolio approach.