In preparation for its annual general meeting (AGM) today, Tabcorp Holdings Limited (ASX: TAH) has released its first quarter results, FY21. Subsequently it has revealed a continuing downward trend in company revenue. In particular, a 6.9% reduction in lotteries versus the prior corresponding period, and a 55.2% reduction in gaming services pcp. The company's wagering and media business, however, saw revenues increase by 2.9% pcp.
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What went wrong in Q1 results?
Overall group revenue was down by 5.7% pcp in Q1 results. In lotteries, this was due to a series of strong jackpot sequences. For instance, Powerball jackpots of $110 million and $150 million. In the gaming vertical, it is predominantly due to the closure of venues, in particular in Vitoria. However, in the wagering vertical, Tabcorp has seen increases due to major sports completing suspended seasons.
This is a continuation of the poor performance seen for FY20 due largely to the impacts of COVID-19. In particular the Fy20 gaming business saw revenues drop by 42.5%, and wagering fell by 19.5% after major sports cancelled seasons.
However, there were also several positive signs for the remainder of FY21. For instance, the integration of Tabcorp and Tatts is substantially complete. In addition, the company launched $5 million Saturdays from 10 October in an effort to smooth impacts from fewer large jackpots. Finally, the company is seeking to improve efficiency and productivity via a focus on digital for lotteries and wagering, a turnaround program in gaming, and a company wide optimisation program.
Undeclared in the Q1 results is the windfall in the sale of the company's 11.6% interest in Jumbo Interactive Ltd (ASX: JIN), for an approximate gross proceeds of $98 million. The company also recently undertook an equity capital raising with gross proceeds of approximately $600m.
Tabcorp share price performance
The Tabcorp share price is down 25.5% in year to date trading. After today's release of Q1 results it is trading slightly down by 0.1% at the time of writing. Nevertheless, it presently trades at a price to earnings (P/E) ratio of 24.85 and has a trailing 12-month dividend yield of 6.45%.
