New Tabcorp boss likely to tap the market to get betting group fit for the races

Tabcorp’s challenge has been that more punters are betting online across a wider range of sports and betting service providers rather than in person at the race track or at their local TAB. Picture: Getty Images

Wagering heavyweight Tabcorp is being added to the list of companies that is likely to see a newly appointed chief executive move to tap the market following a disappointing result on Wednesday.

The $1.3bn listed company’s share price dived more than 13 per cent when it announced the worse-than-expected earnings result, in which it sank almost $1.4bn into the red for the 12 months to June 30.

With its net debt in June at $860m, some think a raise will be inevitable, with UBS likely to be on standby for the move.

Part of the reasoning as to why an equity raising could be looming is that it can often be the first move made by a new chief executive, whereby they clear the decks and get money through the door to start their term afresh at a business that is cash-strapped.

Tabcorp last year agreed to renew the betting licence from the Victoria government for $600m and funded the transaction through debt.

The wagering group’s boss, former AFL chief executive Gillon McLachlan, was appointed in June and comes to the company with a strong reputation.

While some in the past have questioned whether Tabcorp could be a takeover target (the most likely suitor is Ladbrokes owner Entain), most think any move by a suitor such as the London-listed Entain would only come once the share price has fallen much more.

First on Mr McLachlan’s to-do list needs to be negotiating with the government amid a tight regulatory environment in which a crackdown on gambling is a focus.

Also, the new CEO will look to negotiate with industry stakeholders, so as to improve the commercial terms in which it operates.

Then he also needs to cut costs and continue the investment in Tabcorp’s technology to improve its earnings at a time when the company is only part of the way through a turnaround program.

However, Tabcorp’s challenge has been that more punters are now betting online and across a wider range of sports and betting service providers, rather than in person at the race track or at their local TAB.