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Tabcorp (ASX:TAH) reveals FY20 results and gears up to raise capital

The Tabcorp Holdings Limited (ASX: TAH) share price won’t be going anywhere today after the company announced a capital raising. It also delivered its full-year results. Here’s what you need to know.

Tabcorp’s FY20 report

Here are the headline figures:

  • Revenue down 5% to $5.22 billion
  • Profit before significant items down 32% to $271 million
  • Statutory net loss of $870 million
  • No final dividend, leaving full-year dividends at 11 cents per share

FY20 was a challenging year for Tabcorp as COVID-19 restrictions resulted in the closure of hotels, clubs and TAB agencies. These closures heavily impacted the company’s Wagering & Media, Gaming Services and Keno operations.

Wagering & Media revenues were $2.08 billion, down 10.1% on FY19, while EBITDA came in 19.5% lower at $371 million. The pandemic has, however, accelerated the channel shift to digital, with digital wagering turnover growing 3.8% in FY20 to $7.1 billion.

The Gaming Services division, which relies on physical venues being open, was hit even harder. Revenue fell 27.3% to $221 million and EBITDA tumbled to $84 million, down 42.5%. Along with COVID-19 impacts, gaming services revenues were also impacted in the first half by contract expirations, contract extensions at lower daily rates, and the non-renewal of a Telstra service contract.

While Wagering & Media and Gaming Services were detractors from Tabcorp’s FY20 result, the larger Lotteries & Keno division managed to grow. Revenues came in at $2.92 million, up 1.8%, while EBITDA rose 5.7% to $542 million.

This was driven by a strong performance in Lotteries. Like-for-like sales in Lotteries was up 15-30% during COVID-19 restrictions. What’s more, an extra 400,000 Australians became active registered Lotteries players during FY20, taking the total to 3.7 million.

Zooming in on Tabcorp’s bottom line, statutory net profit after tax (NPAT) was hit by a $1.09 billion goodwill impairment charge. This non-cash charge relates to Tabcorp’s Wagering & Media ($905 million) and Gaming Services ($185 million) businesses, as previously announced at the beginning of August.

Outlook

Tabcorp revealed it achieved 2.8% revenue growth in July, as Lotteries & Keno revenues climbed 4.7% and Wagering & Media revenues rose 6.8%. However, Gaming Services continues to weigh on results, with revenues down 52.2% in July compared to the prior corresponding period.

Commenting on the year ahead, chief executive David Attenborough said: “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.”

Tabcorp launches $600 million capital raising

In a separate announcement, Tabcorp revealed details of an underwritten entitlement offer to raise approximately $600 million.

The offer price has been set a $3.25 per share, representing an 11.4% discount to Tabcorp’s closing price on Tuesday.

The capital raising will involve both an institutional and retail component, with eligible retail shareholders entitled to subscribe for 1 new Tabcorp share for every 11 shares held on the record date of Monday, 24 August.

Commenting on the decision to raise capital, Mr Attenborough said:

“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.”

Proceeds from the capital raising will be used to pay down existing drawn bank debt facilities and support the move towards a reduced target gearing rate.

Tabcorp expects to announce the results of its institutional offer on Monday, 24 August, at which point the trading halt will be lifted.

In the meantime, be sure to bookmark Rask Media’s ASX reporting season page for all the latest reports throughout August.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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