Tabcorp CEO rejects ‘underperformance’ claim after $870m loss

Tabcorp is seeking to strengthen its balance sheet with $600m raising as COVID hits its wagering business.

Tabcorp chief executive David Attenborough has rejected suggestions the wagering giant has underperformed this year in losing market share to online bookmaker rivals, arguing it can only be judged now given its $11bn merger with Tatts Group is fully bedded down.

Mr Attenborough, who will step down from the role early next year, acknowledged there had been criticism of Tabcorp by big shareholders in recent weeks, who have reportedly written to the company expressing disappointment over the company’s leadership and performance since the Tatts merger was completed in late 2017.

But he claimed Tabcorp’s wagering arm, which has been hit hard by pub, club and TAB outlet closures due to the COVID-19 pandemic, was set to perform better during the upcoming spring racing carnival given customers betting with Tatts’ former Ubet business were now integrated with Tabcorp’s TAB app.

“Those [complaints] are based on the level of the frustration about how long the integration has taken. I get that,” Mr Attenborough told The Australian.

“We have talked about the performance and we have always said while we were going through the integration it was very difficult for UBET as they didn’t have the products that TAB had. Judge that business now.”

He said Tabcorp had worked hard in the past 12 months to modernise its wagering brand, complete digital investments and also forecast a suite of new betting products it will release in time for and after the spring carnival.

But the performance of Tabcorp’s wagering business weighed heavily on its financial result for 2020, for which it announced a huge $870m statutory loss and confirmed its intention to not pay shareholders a final dividend.

Tabcorp also announced a $600m pro-rata accelerated renounceable entitlement offer to pay down debt and strengthen its balance sheet. The offer will be priced at $3.25 per share, an 11.4 per cent discount to its closing price of $3.67 at the end of trading on Tuesday. Tabcorp’s shares were placed in a trading halt on Wednesday morning.

Mr Attenborough said Tabcorp would also revise its capital management targets, including reducing its target gearing range to 2.5-3 times gross debt/EBITDA, from 3-3.3.5 times previously, and a reduction of its target dividend ratio to 70-80 per cent of net profit after tax when it resumes paying dividends.

“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,” he said.

The group’s wagering and media arm suffered a 37.7 per cent EBIT fall to $175m. And in a market when most wagering was done online as retail outlets shut, Tabcorp’s digital wagering turnover grew 3.8 per cent for the year, but retail turnover was down 27.9 per cent.

While it represented the first time Tabcorp took more digital bets than in its retail outlets, at $7.1bn to $5.4bn respectively, the growth in its digital wagering division would have been less than most of its corporate bookmaker competitors such as online market leader Sportsbet, which is merging with BetEasy, during COVID-19.

Earnings before interest and tax rose 3.8 per cent for the lotteries business to $442m and Tabcorp said like-for-like sales of lotteries tickets was up 15-30 per cent during COVID-19 restrictions.

Mr Attenborough said the lotteries arm was in good shape to continue to win more digital customers. “The way digital has been integrated there is working well and we’ve invested more in the retail side … and that is why we talk about the importance of having a diversified gambling business.”

Mr Attenborough will step down early in 2021 and admitted dealing with COVID-19 was one of the toughest times of his decade-long career at Tabcorp. “I would say one of the most challenging times ever. COVID-19 has been challenging for most CEOs who run a business that has an interface with retail.”