Tabcorp (ASX:TAH) share price on watch on FY21 earnings

Has Tabcorp recovered from its disastrous FY20?

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The Tabcorp Holdings Limited (ASX: TAH) share price is on watch this morning following the release of the gambling entertainment group's financial year 2021 (FY21) results.

Tabcorp share price in focus on $269 million NPAT

Here are Tabcorp's reported FY21 earnings:

  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) before significant items of around $1.1 billion – up 11.3% on FY20
  • Approximately $5.6 billion of revenue – an 8.8% year-on-year increase
  • Roughly $3.2 billion of revenue from Lotteries & Keno segment, up 9.9%
  • 10.3% increase to Wagering & Media segment's revenues, it brought in around $2.2 billion
  • 7-cent final dividend, bringing FY21's total dividends to 14.5 cents per share – 31.8% more than FY20

Tabcorp's net profits after tax came to $269 million for FY21, a significant improvement on FY20's $870 million loss.

Tabcorp also reported its profits from ordinary activities after tax, before goodwill impairment, reached $391 million. That represents a 78% increase on that of FY20.

Additionally, almost 70% of Tabcorp's FY21 revenue – $4.2 billion – was returned to governments, racing industry and retail partners.

Tabcorp finished FY21 with $424 million cash in the bank.

What happened in FY21 for Tabcorp?

FY21 was a tough one for many ASX-listed companies, and Tabcorp was no different. Here's what drove the Tabcorp share price in FY21:

Tabcorp announced its plan to demerge its Lotteries & Keno segment in FY21. The demerger is expected to go ahead no later than July 2022. Tabcorp says the demerger will unlock value for its shareholders.

Additionally, it completed a $600 million capital raise. The company used the proceeds to pay down debt. Tabcorp also sold its stake in Jumbo Interactive Ltd.

Amidst COVID-19 restrictions, Tabcorp paid some of its hardest-hit venues a total of $95 million. Tabcorp received $8 million worth of JobKeeper support for its gaming services businesses.

Finally, Tabcorp received a takeover offer from BetMakers Technology Group Ltd in FY21. The takeover offer was grounded when Tabcorp announced its demerger plans.

What did management say?

Tabcorp chair Steven Gregg and managing director David Attenborough released a joint statement on the company's FY21 earnings, saying:

While Tabcorp's operations were impacted by various government-imposed lockdowns and other restrictions, our businesses proved resilient and delivered a strong operational result and earnings growth…

Our Lotteries & Keno business produced a record profit result and continued its strong growth trajectory since the TabcorpTatts combination in December 2017. Pleasingly, we saw improved performance from Wagering & Media, with growth in its TAB, Media and International businesses. Gaming Services, however, was severely impacted by the COVID-19 restrictions on hotels and clubs.

Attenborough went on to say:

Our core businesses are in a strong position to compete on a standalone basis in the future. The businesses will continue to execute their distinct growth strategies in FY22 and beyond.

What's next for Tabcorp?

Tabcorp didn't give guidance for FY22 due to the uncertainty around ongoing COVID-19 restrictions. However, we can take a look at what could drive the Tabcorp share price in FY22.

Tabcorp stated COVID-19 lockdowns in July hit the gambling and entertainment company's pocket hard, a hit we will likely see in its first-quarter results.

The company's hotels, clubs, and TAB agencies in Greater Sydney closed for the entire month. Venues in regional New South Wales, Victoria, South Australia and Queensland also faced restrictions.

The company stated the revenue impact on Wagering & Media in July was between $30 million and $40 million. The impact on Gaming Services was between $5 million and $10 million. It handed out $9 million to venues forced to shut in July.

In FY22, the company will focus on product innovation, deepened engagement across all channels and digital expansion in its Lotteries & Keno segment.

Its Wagering & Media segment's growth will be led by improved customer experiences, structural reform, and targeted international expansion.

Gaming Services is currently focusing on simplifying its business while positioning for growth and highlighting regulatory services.

Tabcorp share price snapshot

The Tabcorp share price has gained 21% year to date. It has also increased by 33% since this time last year.

Right now, shares in the gambling and entertainment company are going for $4.85 apiece.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Betmakers Technology Group Ltd and Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Betmakers Technology Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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