- With a fresh round of government restrictions to stop the spread of COVID-19, Tabcorp (TAH) is in deep water
- The AFL has been suspended, and today licenced venues, pubs, hotels, casinos, and more have been forced to shut their doors
- However, while Tab might be best known for its sports betting service, this only accounts for four per cent of group revenue
- Meanwhile, its agencies, outlets, and licences venue account for over a quarter of total revenue
- Nevertheless, Tab said things are too uncertain right now to accurately predict just how bad it might be hit by the restrictions
- Still, Tab shares are currently down almost 14 per cent and worth $2.16 each
The AFL aired its last game yesterday, while midday today marked the moment licenced venues, pubs, hotels, cinemas, and casinos had to shut their doors to quell the spread of COVID-19.
So, how is entertainment heavyweight Tabcorp (TAH) holding up?
The company's shares have taken a beating from the spreading COVID-19 pandemic, and today Tabcorp revealed just how heavily the restrictive government measure might impact company financials.
No sports, no bets
Tabcorp is arguably most well-known as a sports betting company, with the company acting as a major bookie for most sports across Australia.
However, shareholders might be pleasantly surprised to find out sports betting only accounts for roughly four per cent of Tab's group revenues.
As such, while the temporary pause on sports will certainly impact the company's earnings, that impact may not be quite so severe as they seem.
Further, Tab said horse and greyhound racing has not yet been cancelled. Public attendance has been restricted, but the fact that the races are still going ahead at all mean eager punters have somewhere to wager their cash.
More than a quarter of Tab's revenue — roughly 28 per cent, to be more specific — comes from its licenced venues, TAB agencies, and on-course outlets.
As such, the temporary ban on such venues will likely strike a bigger blow to company financials than the sports suspension.
Importantly, the ban does not extend to convenience stores or outlets like news agencies. Many of these types of outlets distribute Tab's lottery products, and as such might play a role in offsetting the heaviest of the COVID-19 damage.
Tabcorp in survival mode
Tab CEO and Managing Director David Attenborough said the first priority for the company at this stage is the health and safety of its employees and partners.
"We are working with governments, regulators, and our venue and racing industry partners to manage the impact on them, our customers and our businesses during this unprecedented period," David said.
"We have implemented our business continuity plans and have maintained continuity of service, even with the vast majority of our employees now operating remotely," he added.
Of course, the company is also working hard to keep its business healthy enough to survive the coronavirus outbreak.
Part of this plan includes some spending reductions wherever possible, as can be expected. Further, Tab will put effort into pushing customers towards digital alternatives for its remaining available products.
With the situation still evolving, however, Tab said there is a high level of uncertainty regarding the impact of COVID-19, and as such can't yet give details about the virus' impact on earnings or previous guidance.
As for the company's cash position, Tab told shareholders it has undrawn banking facilities of roughly $600 million to keep it going. Further, while its U.S. Private Placement (USPP) debt of $171.5 million matures in December, this is its only debt maturity until April 2022.
With the suspension of such key markets for Tabcorp, shareholders were quick to offload some of their holdings today. As the market nears its close, Tab shares are down 13.75 per cent and worth $2.16 each.