Heavy Writedown Leads Tabcorp’s Unwanted Trifecta

By Glenn Dyer | More Articles by Glenn Dyer

Tabcorp yesterday revealed an unwanted trifecta of big write-downs, falling profits, and a miserable outlook thanks to COVID-19 and the renewed lockdowns, especially in Victoria.

Tabcorp told the ASX it write down its wagering and media business by at least $1 billion – or a third of the division’s book value – after being hit by COVID-19 shutdown and in reflection of it losing ground to online bookmakers.

The gambling giant said on Monday morning that it expects to report a 30% plus fall in net profit, excluding the non-cash goodwill impairment charges, for the 12 months to June 30 of $267 million to $273 million.

The shares though ‘only’ fell 1.6% to $3.50 in what confirmed why the chair, Paula Dwyer, and CEO David Attenborough were departing the company, as revealed last month.

That will be a decline of at least 31% compared to last year’s net profit of $396 million. “COVID-19 has materially impacted our Wagering & Media and Gaming Services businesses,” Mr. Attenborough said in Monday’s statement.

“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”.

Tabcorp’s reasoning behind the write-downs are going to become commonplace in this reporting season – in sort the COVID-19 crisis and its impact on the economy has crunched demand for a wide range of goods and services.

The company said the “non-cash goodwill impairment charges relate to the Wagering & Media and Gaming Services businesses. They reflect an assessment based on underlying assumptions which take into account, among other matters:

“The direct impact of the Government and other measures to address the COVID-19 pandemic on these business’ operations; the possible acceleration of retail contraction and uncertainty regarding any longer-term impacts as an indirect result of the pandemic; the level of competitive intensity and structural changes in the Wagering & Media business particularly in a digital-centric market; and the potential decline in consumer confidence and increased economic uncertainty.

“The goodwill impairment charges are non-cash and do not impact the Company’s financial covenants with its lenders. The book value of goodwill for these segments at 30 June 2019 was $2,945 million.

No mention of whether a final dividend will be paid.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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