Tabcorp continues Covid-19 recovery despite revenue decline in H1

Total revenue for the six months to 31 December 2020 amounted to AUS$2.87bn (£1.06bn/€1.85bn/US$2.23bn), down 1.5% from $2.91bn in the same period in 2019.

Lotteries and keno remained Tabcorp’s primary source of income, with revenue here reaching $1.61bn, which was 1.6% higher than in the first half of the 2019-20 financial year, despite the impact of Covid-19.

Tabcorp noted an increase in sales across all base lottery and keno games in H1, helped by the refresh of both the Set for Life and Saturday Lotto games. The share of turnover attributed to digital increased to 32.1% for lottery and 17.1% for keno.

Elsewhere, wagering and media revenue edged up 0.8% from $1.18bn in 2019-20 to $1.19bn in the most recent period, with digital growth helping to offset declines in retail.

Tabcorp said this modest increase was due to a 34.0% increase in digital revenue and 43% rise in digital turnover, with retail having been hampered by closures due to Covid-19.

However, despite growth within these two core business areas, Tabcorp noted a major decline in gaming service revenue, which more than halved from $149.0m to $73.0m. Again, Tabcorp put this down to the impact of Covid-19, with some states having been forced to close venues in line with restrictions.

Tabcorp noted the impact of closures in Victoria in particular, with the state accounting for 30% of all gaming services revenue. Greater Melbourne venues were not able to reopen until November, whereas facilities in other states began to reopen from June.

“We are experiencing a strong recovery following the recent market challenges,” Tabcorp chief executive and managing director David Attenborough said. “The Covid-19 pandemic continued to impact Tabcorp’s group earnings in 1H21, with the retail closures and restrictions, especially in Victoria, having a material impact.

“However, we are pleased with the way our teams and partners responded to the substantial operational challenges the pandemic presented. Covid-19 has clearly demonstrated the importance of serving customers with a seamless, multi-channel experience. Investments made to modernise our digital offering in recent years drove significant benefits.”

Variable contribution – revenue minus variable costs – was down 7.1% year-on-year to $957.0m, but operating expenses were reduced by 8.3% to $397.0m, mainly due to the suspension of certain activities.

Earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items fell 6.2% to $560.0m, while after accounting for depreciation and amortisation, earnings before interest, tax and significant items declined 7.9% to $372.0m.

Tabcorp accumulated $82.0m in interest during the first half and paid $83.0m in income tax, leaving a net profit before significant items of $207.0m, down 3.3% from 2019-20.

The operator also noted $22.0m in significant items, comprising amended tax treatment of the MAX CMS licence ($69.0m), Racing Queensland arrangements

($11.0m), Tatts Group combination implementation costs ($8.0m) and restructure costs ($3.0m), with these partly offset by the profit on sale of Jumbo  ($69.0m).

As such, Tabcorp ended H1 with $185.0m in statutory net profit after tax and significant items, down 7.0% from $199.0m in the first half of 2019-20.

“After taking actions to reduce costs, preserve cash and strengthen the balance sheet over the past 12 months, Tabcorp is emerging from Covid-19 challenges in a stronger financial position,” Attenborough said.

Attenborough also noted that as a result of these actions, Tabcorp has been able to resume paying dividends to shareholders. Eligible shareholders will receive an interim dividend of 7.5 cents per share fully franked, which is in line with the previously announced revised dividend payout policy.

Publication of the first half results comes after Tabcorp earlier this month said it had received “a number of unsolicited approaches and proposals” to acquire its wagering and media arm, with Entain among those to have put forward an offer.

Tabcorp said it had not received a firm bid for the business, but noted that any sale would leave it to focus only on its lotteries and gaming services divisions.

In its 2019-20 financial year, Tabcorp’s wagering and media business brought in AUD$2.08bn and EBITDA of $371m.