The wagering giant has struggled to best its larger overseas rivals, and its new chief executive said it was obvious it would not meet cost reduction targets.
Already a subscriber?New Tabcorp chief executive Gillon McLachlan has dumped an ambitious turnaround strategy run by former management and wiped more than $500 million from wagering assets in a reset of the business which has struggled against larger bookmakers.
The most recent write-downs – $664.5 million after tax – have wiped the value of Tabcorp’s assets by $1.4 billion this year following a similar move in February. Tabcorp said it was forced to increase the write-down because fewer people were gambling – and they were gambling smaller amounts – as regulations were tightened.Matt Williams, the head of Australian equities at Airlie Funds Management, said he had made a mistake when he had expected that the wagering market would recover.
The assets written down on Wednesday were largely in NSW and South Australia. There, Tabcorp pays about double the amount in taxes than any of its online bookmaking rivals. This is because it historically was a retail wagering monopoly and the tax arrangements were put in place at a time when bookmakers such as Sportsbet and Ladbrokes did not exist.
“It needs to get the right balance,” Mr McLachlan said. “Tabcorp is better equipped than most companies in this sector, and the best equipped with its unique assets to manage whatever it looks like. There are clearly channels and nuances that we have strong views on, and we are expressing those to government, but broadly our business will adapt.”
Investors Mutual’s Mr Conn said that he expected the market to bounce back quicker than planned, given other sectors – like retail – had seen a recovery. But he was most frustrated about costs. “I thought they were giving a pretty heavy hand to cost, so I was most disappointed to see the cost come up,” Mr Conn said. “Inflation is an issue but $20 million is a lot of cost escalation in a half. Very hard to understand.
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