Tabcorp expects Covid-19 to cut net profit in FY2020

3 August 2020

Australian gambling operator Tabcorp expects to post a year-on-year drop in net profit after tax for its 2020 financial year, primarily due to the impact of the novel coronavirus (Covid-19) pandemic on its business.

Net profit after tax, before significant items, for the 12 months to 30 June 2020 is projected to fall between AUS$267m (£145.2m/€161.3m/US$189.7m) and $273m, representing a year-on-year decline of up to 32.6% on the $396m recorded in FY2019.

Tabcorp also forecast a drop in earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items, with this expected to fall from $1.12bn to between $990m and $1.00bn.

The operator said that these expected declines were partially due to non-cash goodwill impairment charges, which it said would amount to between $1.00bn and $1.10bn for FY2020.

According to Tabcorp, the charges related to its wagering and media and gaming services businesses, which were impacted by measures to halt the spread of Covid-19, such as the shutdown of sports competitions and the closure of retail outlets.

Tabcorp also warned that retail would contract as players stayed away from shops, and admitted that it was uncertain what indirect, longer-term effects would be seen as a result of the pandemic. There could also be a decline in consumer confidence, and greater economic uncertainty, which would harm future performance, it added.

In addition, Tabcorp said the expected charges also reflected higher competitive intensity and structural changes in its wagering and media business, particularly in what it described as a digital centric market.

The operator took a number of measures in an effort to mitigate the impact of the pandemic, including furloughing staff and cancelling its FY2020 dividend. However, managing director and chief executive David Attenborough said the crisis still had a material impact on its wagering and media and gaming services businesses.

“We are facing into 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,” Attenborough said.

“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.”

Final FY20 results, including the goodwill impairment charges, are subject an external audit and board review, as well as the approval of Tabcorp’s FY20 financial statements.

The financial update comes after Tabcorp last month announced Attenborough is to retire from his roles as chief executive and managing director in the first half of 2021.

Attenborough joined Tabcorp in April 2010 as managing director for wagering, before going on to become managing director and CEO when Tabcorp completed the de-merger of its former casinos business in June 2011.

He remained in the roles following the merger of Tabcorp and Tatts Group in December 2017.