Australia’s Tabcorp said impairment charges related to certain wagering assets in New South Wales (NSW) and South Australia led to an AU$641.7m (PS333.1m/EUR389.6m/US$421.7m) net loss in H1.
Tabcorp’s revenue for the half-year period ending 31 December was just slightly less at $1.21bn. This is a 5.1% decline. The operator’s loss was primarily due to increased operating expenses and impairment charges during H1.
In the same period, impairment charges totaled $852.0m. The $639.2m is a writedown on certain NSW and South Australia assets, while the remaining $212.8m is goodwill.
Total impairment charges on the NSW and South Australia betting assets came to $731.9m, after taxes. Tabcorp claims that these charges reflect the softening of the Australian betting market, higher interest rates impacting discount rates as well as higher taxes in NSW.
Tabcorp has stated that the charges listed above do not represent potential upsides from a licence reform occurring in NSW or South Australia in accordance with TAB25’s TAB25 Strategy in these two states.
Victoria license extension and tax refund
Tabcorp had some good news during the first half of this year, despite its net loss. Tabcorp’s H1 results were not all negative.
This case is about the income tax treatment for payments made to various licenses and authorities. Tabcorp claims it has paid all tax and interest liabilities in dispute.
Tabcorp also received exclusive betting and wagering rights in Victoria in H1 for 20 years. Tabcorp will be paying Victoria over $1.00 billion in the next 20 years.
Tabcorp had some issues with regulation in H1. Tabcorp was fined a record-breaking $1.0m in Victoria for its actions during the major system failure in 2020.
Tabcorp CEO says transformation is “on track”.
Adam Rytenskild, the managing director and chief executive officer of H1, was optimistic about this despite both. Tabcorp is on track with its transformation, he said. The steps that have been taken will help it grow in the future.
Rytenskild stated that “we continue to concentrate on the three main pillars” of its strategy. Rytenskild said, “We continue to focus on the three pillars of our strategy.”
The total market share as well as the digital market share increased compared with the previous half. It is a positive sign that the downward trend has been stopped. As we begin to use the power of our integrated media and wagering network across the country, we are seeing signs of progress.
We have transformed into a digital-first business thanks to recent investments made in AI, new platforms and data. We see an omnichannel business opportunity with the TAB brand, which is embedded in more than 4,000 locations.
Core business segment revenue down
Tabcorp’s revenue declined across its core businesses in H1 according to the company.
The overall betting market declined by 4.2% to reach $1.12bn in wagering revenue. Cash wagering revenue and turnover in retail fell by 3.8%. Digital wagering revenue and turnover both fell 4.0%.
The Media and International segment also saw a decline of 5.4% in revenue. Tabcorp attributed this to the effect of betting market conditions on digital distribution revenue.
In gaming services revenue fell 14.5%, to $93,0m. Tabcorp stated that this reflects the effect of the sale Max Performance Solutions and eBet.
This was partially offset by the introduction of a Tasmanian Monitoring Licence in July 2023. The NSW Max Regulatory Services’ business also saw a CPI-linked increase in prices, and the increased number of electronic gaming machines monitored.
Costs and loss increase in H1
In terms of net operating expenses, H1 saw a 16.5% increase at 354.3m. Tabcorp also reported impairment charges.
The operator did manage to save some money. Taxes and levies were down 5.9% at $723.6m, while amortisation and depreciation expenses dropped 2.9%, to $119.8m. Tabcorp reported an extra $25.2m of financial costs.
After taking all expenditures into consideration, the pre-tax losses were $856.1m compared with a profit of $64.1m in 2022. Tabcorp received $219.3m of tax benefits, but discounted $4.9m on net fair value for cash flow hedges on equity and exchange difference on translation.
It ended the first half of this year with a net loss of $641,7m, compared to a net profit last year ($53,2m). EBITDA also declined by 34.7%, to $131.7m.
Rytenskild stated that the results were solid, given current market conditions. They also show that Rytenskild is well on its way to a significant improvement in performance.
The Australian betting market is in good health. Tabcorp will have a much more powerful position when the market returns to growth.
