- »Tabcorp Follows FY20 Results with Revenue Down in Q1
Tabcorp Follows FY20 Results with Revenue Down in Q1
Most businesses experienced economic pain in 2020. For Tabcorp, that pain began in March and hit the end of the company’s 2019-2020 financials. And with the coronavirus pandemic still causing havoc as the world awaits a vaccine, Tabcorp absorbed some losses in its new fiscal year already, too.
The 5.7% revenue decline in its 2020-2021 first quarter was not wholly unexpected, but it hurt nonetheless. There is a plan in place moving forward, and that move toward a digital focus is already in the works.
Tabcorp Full-Year Finals
At the October Tabcorp annual general meeting, Chairman Paula Dwyer and CEO David Attenborough presented an overview of the 2019-2020 full-year results.
Overall, the year’s net profit after tax (but before significant items) was down 31.6% year-on-year to $271 million. And the statutory net loss after tax was $870 million.
Full-year revenue was down 4.8% to $5.224 million. EBITDA hit $995 million, down 11.5% before significant items. Specifically, EBITDA for wagering and media was down 19.5% to $371 million. And unsurprisingly, EBIDTA for gaming services was down by a serious 42.5% to $84 million.
However, lotteries and keno were up a combined $542 million. That 5.7% increase was due to the strength of the game, the trust of customers, and the ongoing shift to digitally-focused services. This allowed the sector to grow despite the closure of land-based retailers and other locations during the pandemic.
For the record, the referenced significant items included a $1.09 billion “non-cash goodwill impairment charge” due to a reassessment after the pandemic hit.
New Year First-Quarter Preview
The preview of the 2020-2021 fiscal year, prior to the audit and official release, showed group revenue down 5.7% in the first quarter that ended September 30.
Specifically, gaming services hurt the most due to venue closures, some of which remain at least partially in place. Revenue for gaming services was down 55.2%.
Lotteries and keno showed a 6.9% dip due to several factors. Tabcorp attributed that to strong jackpot sequences (including two large Powerball jackpots totaling $260 million) in Q4 of 2018-2019 and Q1 of 2019-2020.
Wagering and media revenue was up 2.9% in the first quarter, with wagering account revenue up a solid 47%. Retail declines dragged that down, however, due to two main factors: retail closures in Victoria and reduced net yields because of less-than-favourable sports results.
Precautions from Mid-2020
Tabcorp knew that it was in for a bumpy year as soon as the scope of the pandemic became clear. The company began standing down staff, more than 700 people by the beginning of April and more that followed.
Those workers did find assistance from Tabcorp and the JobKeeper wage subsidy program from the Australian government. The efforts provided up to $1,500 per employee per fortnight, taking some of the burden off Tabcorp.
Tabcorp received help with a six-month deferment of its payroll, keno, and lottery taxes, alleviating approximately $40 million per month from the company’s immediate duties. Executives took pay cuts, and Tabcorp reduced its capital expenditure program by $40 million.
In August 2020, Tabcorp revealed that it would write down its wagering and media business by at least $1 billion due to the pandemic. The review of assets did produce a write-down for the recently-closed fiscal year.
The company also launched an accelerated entitlement offer to raise $600 million or so in new equity. Tabcorp launched that offer on August 24 on ASX with a price of $3.25 per new share. By the time it closed on September 10, Tabcorp revealed that approximately 35,000 retail shareholders partook in the offer for approximately 31.4 million new shares.
They raised $102 million, which was far below the goal. However, a subsequent retail shortfall bookbuild issued another 71 million new shares for about $230 million. Combined with the institutional component of the offer, Tabcorp reached its $600 million goal.
Tabcorp also formalized a long-term extension of its reseller agreement with Jumbo Interactive. The deal involved Jumbo paying $15 million to Tabcorp for the 10-year renewal that took it out to August 2030. Jumbo also agreed to a 4.65% service fee of 4.65% of all subscription revenue.
Looking to the Future
The October general meeting needed to reassure everyone from shareholders to customers, all wondering about the future of Tabcorp amidst a health crisis that could affect the business well into 2021.
Dwyer noted that Tabcorp’s priority to take care of its employees and business partners during the toughest of months paid off. The recent years of transition to a more flexible workplace environment made for an easier transition for employees to work from home.
Tabcorp worked with its retail partners to reopen safely. The same procedures applied to racing and sporting partners across the country. Tabcorp also waived more than $130 million in contract fees with many venues with regard to equipment and subscriptions.
Attenborough then spoke about the company’s diversification and investments in digital transformation that helped Tabcorp roll with the new challenges easier than most. But the plan moving forward is to push that digital realm even harder and help other sectors like wagering and media to adapt to the new pandemic realities.
In the end, Attenborough reassured interested parties: “Tabcorp remains well-placed with our resilient, diversified earnings base and strengthened balance sheet.”