The house loses $1 billion as COVID-19 hits Tabcorp

The economic effects of COVID-19 are expected to result in a $1 billion impairment charge for gambling giant Tabcorp (ASX: TAH) in its FY20 results.

Announced this morning, the non-cash goodwill impairment charge in the range of $1 billion to $1.1 billion will relate to the Wagering & Media and Gaming Services Businesses.

Tabcorp says they reflect an assessment which took into account the impact of COVID-19 restrictions, the acceleration of retail contraction and uncertainty regarding longer term impacts from the pandemic.

The company also says structural changes in the Wagering & Media businesses, particularly in an increasingly digital-centric market, have taken a toll on Tabcorp.

"We are facing a challenging and uncertain environment, and the current operating conditions and those expected into the future are relevant factors in assessing the value of the goodwill in those businesses at this time," says outgoing Tabcorp managing director and CEO David Attenborough.

"We remain confident in the strength and resilience of Tabcorp's diversified portfolio of assets and are pleased that integration is now substantially complete.

"We are focused on supporting our people and partners during these challenging times while ensuring that Tabcorp emerges strongly post COVID-19."

Tabcorp says the impairment charges are non-cash and will not impact the company's financial covenants with its lenders.

In addition Tabcorp says it expects FY20 EBITDA to be in the range of $990 million and $1 billion and NPAT for the period will be in the range of $267 million and $274 million, down from $369 million in FY29.

Earlier this year Tabcorp was forced to stand down 700 staff as Australian sporting competitions were put on pause, affecting licenced venues and TAB agencies where many of its clients like to take a punt.

A further 160 technology contractors were also let go, representing a cut of 40 per cent.

Because of the situation CEO Attenborough took a 20 per cent fixed remuneration pay cut until the end of FY20, and he is set to step down in the current half-year. Chairman Paula Dwyer will also retire from the board at the end of this calendar year. 

Shares in Tabcorp are down 3.37 per cent to $3.44 per share at 10:26am AEST.

Updated at 10:52pm AEST on 3 August 2020.