Hey, Mardi....

[Freda]

I see Tabcorp is experiencing significant losses on its wagering side - although lotteries and Keno are doing Ok.

Would the PoC tax have any bearing on this?  or is it, as suggested, more to do with the closures of the physical Tab outlets ?

[mardigras]

I haven't seen any reports on it - but I would expect revenues to go down due to PoC. I'll have a read, but simply taxing punters more and more isn't going to aid the industry as previously discussed.

Closing outlets would be likely to have an impact as there are still cash punters out there. 

[mardigras]

A large portion of the losses comes from a goodwill impairment charge - maybe when they acquired UBET, they had factored in a value associated with that purchase that on reassessment - isn't a fair reflection of its value. I'm only guessing. That was a $1b amendment.

As for their performance - gaming (Pokies etc) suffered heavily - and I'd say that was largely due to Covid and restrictions/closures on outlets. Some of the wagering impact would have come from less sports offerings at that time. But I do note that whilst their revenues from wagering declined, their ability to reduce their costs in alignment with that, did not occur. The makeup of those costs probably needs review as to what parts were unable to be reduced, as some costs would continue through Covid. But they did remove a number of staff, so the reason costs reduced by half the % that revenues reduced needs investigation.

To get a handle on the impacts to wagering from the PoC, we likely need to delve deep into their account - but it will be clouded this year by Covid. 

[mardigras]

This from their accounts relating to the $1b goodwill impairment charge. They are claiming a large amount of the charge relates to the impacts on consumer confidence and uncertainty. But I do note the entry relating to Queensland PoC charge below. 

(i) The impairment of goodwill relates to the Wagering and Media and Gaming Services businesses reflecting the direct impact of the government and other measures to address the COVID-19 pandemic, the possible acceleration of retail contraction, the level of competitive intensity and structural changes and the potential decline in consumer confidence and increased economic uncertainty. 

Key assumptions on which management has based its cash flow projections:

• Impact of the government and other measures on the business to address the COVID-19 pandemic.

• Fees paid to Racing Queensland (RQ) following the introduction of point of consumption tax have been calculated on the basis of the Group’s interpretation of the calculation. This is subject to a dispute with RQ (refer note E4 Contingencies).

• State tax regimes and the regulatory environment in which the Group currently operates remain largely unchanged, other than announced.

• Exclusive retail wagering licences held are assumed to be retained. The wagering business competes with bookmakers and other interstate and international wagering operators who accept bets over the phone and the internet. There is a possibility that competition from interstate and international operators may extend further to the Group’s retail wagering network in the future.

• Race fields arrangements implemented in each State and Territory of Australia remain largely unchanged.

• Growth rates used to extrapolate cash flows are either in line with or do not exceed the long term average growth rate for the industry in which the CGU operates.

• Discount rates applied are based on the post tax weighted average cost of capital applicable to the relevant CGU.

• Terminal growth rate used is in line with the forecast long term underlying growth rate in Consumer Price Index.

[mardigras]

The taxes and fees paid by Tabcorp (PoC, betting levies, race fields etc) in 2020.

Tabcorp has incurred close to an additional $100m of taxes in 2020 compared to the rate they paid these at in 2019.

No matter what they might try and do to increase betting revenue by price changes, the issue is that the revenue is hard to increase, yet the charges increase. Leaving less net revenues. More and more taxes does not generate more and more money. They simply take a bigger slice of the pie, whilst running the risk of alienating punters who are faced with price impacts due to operators who attempt to pass the charge on to their customers.

As states change their PoC rate or with NZ implementing one, that is more charges going against the betting operators with little way to increase revenue. By trying to pass the charge on, the punter is affected, losing their money likely faster. That results in less money in fees/charges as punters fall away, an increase in the rates to get more, and so on and so on.