Australian racing and wagering giant Tabcorp has announced an AU$600 million (US$431 million) entitlement offer aimed at paying off bank debt and strengthening the company’s balance sheet in the midst of COVID-19.
The entitlement offer, announced on the same day as the company released its FY20 financial results, comes with certain provisos including a reduction in Tabcorp’s target dividend payout ratio to between 70% and 80% of net profit after tax. No dividend will be paid for the year ended 30 June 2020.
“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,“ said Tabcorp Managing Director and CEO, David Attenborough.
“The entitlement offer proceeds will be used to pay down existing drawn bank debt facilities and support the move towards the revised target gearing range. This is expected to strengthen Tabcorp’s balance sheet, provide greater financial flexibility in uncertain times and provide additional credit metric headroom for covenant and rating purposes.”
Tabcorp reported a 4.8% decline in group-wide revenues to AU$5.22 billion (US$3.75 billion) and 11.5% fall in EBITDA to AU$995 million (US$715 million) in FY20, falling to a loss of AU$870 million (US$625 million) on the back of goodwill impairment charges of AU$1.09 billion (US$783 million).
The results included a 1.8% increase in Lotteries and Keno revenue to AU$2.92 billion (US$2.10 billion) with 3.7 million Australians now registered lottery users – up 400,000 people versus 2019.
The Wagering and Media segment, which includes horse racing and sports betting, suffered a 10.1% decline in revenues to AU$2.08 billion (US$1.49 billion), impacted by the COVID-19 enforced closures and restrictions on retail operations across all states and territories from 23 March 2020, and the suspension of domestic and international sport.
Gaming Services revenues fell 27.3% to AU$221 million (US$159 million), also impacted by the temporary closure of hotels, pubs and clubs. Tabcorp suspended all material fees for venues during the period in which they were not trading.
“COVID-19 restrictions meant that hotels, clubs and TAB agencies were closed for significant periods of time during FY20,” said Attenborough. “This has heavily impacted our Wagering & Media, Gaming Services and Keno operations.
“We continue to support our venue partners and have waived more than AU$100 million in fees to date. We are focused on ensuring that together we emerge strongly in the post COVID-19 environment.
“Our people and partners, including the racing industry and major sports leagues, have done an extraordinary job to maintain COVIDSafe continuity of service. This has given Australians the chance to enjoy, watch and bet on racing and the games they love, from their home or, as restrictions allow, their local venue.
“We also recognize that this has been a difficult year for shareholders, with no final dividend as previously announced. We have taken action to reduce costs, preserve cash and ensure we have strength and flexibility in our balance sheet. We have also commenced a three-year, enterprise-wide optimization program designed to deliver significant cost savings and enhanced operational capability.”
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