Tabcorp to raise $600m as COVID-19 closures spark massive loss

Tabcorp to raise $600m as COVID-19 closures spark massive loss

All bets are off for gambling giant Tabcorp (ASX: TAH) as it looks to raise capital to offset the impacts of more than $1 billion in impairment charges due to COVID-19.

The company posted a $870 million loss today, which is a far cry from the company's FY19 profit of $362.5 million.

Despite recent reopenings in most of the country CEO David Attenborough said closures form 23 March were a major challenge for the company.

"The COVID-19 pandemic has been very challenging for Tabcorp's people, partners and customers, and materially impacted our FY20 results," says Attenborough.

"COVID-19 restrictions meant that hotels, clubs and TAB agencies were closed for significant periods of time during FY20.

"We continue to support our venue partners and have waived more than $100 million in fees to date."

To mitigate the impacts of this disastrous year, Tabcorp has announced a $600 million equity raise.

Attenborough says the proceeds of the entitlement offer will be used to pay down existing drawn bank debt facilities and strengthen the company's balance sheet during uncertain times.

"The continued significant uncertainty regarding the severity and duration of the COVID-19 impact has led Tabcorp to reconsider its previous capital management targets in order to improve its credit metrics and conserve more capital over time," says Attenborough.

"We remain confident that the strength and resilience of Tabcorp's diversified portfolio of businesses will allow Tabcorp to manage current market challenges and we continue to focus on executing strategies to create value for shareholders."

The offer, at a price of $3.25 per new share, represents an 11.4 per cent discount to Tabcorp's closing price on 18 August.

While the company's wagering and gaming businesses suffered because of COVID-19 venue closures, the group's lotteries & Keno business did most of the heavy lifting in FY20.

Lotteries & Keno revenues were up 1.8 per cent to $2.9 billion, and EBITDA was up 5.7 per cent to $542 million.

Tabcorp says while distribution partners like newsagents and convenience stores buoyed the lotteries division during COVID-19 lockdown periods, it was the company's digital product that witnessed the most revenue growth, up 23.5 per cent and accounting for 28 per cent of the division's total turnover.

Wagering revenues were down 10.1 per cent to $2.08 billion in FY20, impacted by COVID-19 enforced closures and restrictions.

As a result of those closures Tabcorp says the pivot to digital has been accelerated, with digital wagering turnover growing by 3.8 per cent compared to a 27.9 per cent decline to retail turnover.

"This is the first time digital turnover has exceeded retail turnover in Tabcorp's Wagering business across a full year," says Tabcorp.

Similarly, the company's gaming division was impacted by venue closures, resulting in a 27.3 per cent revenue dive to $221 million.

The company appears to be cautiously emerging from lockdowns in Australia (except for in Victoria), with group revenues up 2.8 per cent on the pcp in July.

In terms of Tabcorp's three business units, lotteries & Keno revenues were up 4.7 per cent, wagering was up 6.8 per cent, and gaming was down 52.2 per cent.

"There continues to be uncertainty associated with COVID-19 in terms of both the severity and duration of the impact," says Attenborough.

"It remains a challenging time, especially for the Victorian community which is in the middle of a difficult Stage 4 lockdown.

"With the integration of Tatts substantially complete, we are focused in FY21 on capturing the value from the digital opportunity across Lotteries, Keno and Wagering and on unlocking the value of a more competitive TAB."

Updated at 11:27am AEST on 19 August 2020.

Get our daily business news

Sign up to our free email news updates.

 
Unpacking equity: Finding your funding fit
Partner Content
Armed with a growing business and a great opportunity, a business owner’s next challe...
Australian Business Growth Fund
Advertisement

Related Stories

Australian Ethical profit up six-fold as customer numbers rise

Australian Ethical profit up six-fold as customer numbers rise

Sydney-headquartered investment manager Australian Ethical (ASX: AE...

Hotel Property Investments CEO Don Smith passes away

Hotel Property Investments CEO Don Smith passes away

Following a successful career of almost two decades with Vicinity C...

Australian data protection authority received almost 500 breach reports in December half

Australian data protection authority received almost 500 breach reports in December half

While it’s no secret that cybersecurity attacks have posed a ...

The secret sauce of Coles’ and Woolworths’ profits: high-tech surveillance and control

The secret sauce of Coles’ and Woolworths’ profits: high-tech surveillance and control

Coles and Woolworths, the supermarket chains that together control ...