Tabcorp (ASX:TAH) share price slides after trading, demerger update

Tabcorp shares have left the gates behind the rest of the pack today.

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The Tabcorp Holdings Limited (ASX: TAH) share price is sliding in morning trade and is currently changing hands at $5.14, down 1.82%.

Shares in the gaming and wagering giant are on the move today as the company released a key update regarding its Q122 business activity and planned demerger.

Here are the details.

Demerger details emerge

Tabcorp released the addresses and presentation delivered by key executives at its AGM in the note today.

The presentation covers a number of the salient points regarding its first quarter performance as well as its proposed demerger.

Recall that back in July, Tabcorp first announced its intention to pursue a demerger and create two ASX-listed entities known as Lotteries & KenoCo (LK) and Wagering & GamingCo.

The company is putting forward the LK segment as a potential demerger to its shareholders next year, as part of its strategic review.

If completed, shareholders will receive LK shares in proportion with their existing shareholding in Tabcorp, plus get to keep their Tabcorp shares as well.

The company has a deadline of June 2022 pencilled in to complete the transaction, depending on regulatory approvals sought by the court approved scheme of arrangement.

One-off cash costs of around $225 million to $275 million are expected to accompany the transaction, with the bolus of this spend allocated to “technology separation costs”.

Aside from this, ongoing incremental costs for the move are estimated to be between $40 million to $45 million on an annual basis, per the release.

Tabcorp is adamant these cost estimates are robust, having “undertaken a comprehensive process in estimating (them), including third party reviews, external benchmarking and detailed due diligence”.

Tabcorp group revenue down this quarter

The release also notes Tabcorp’s unaudited financial performance for the three months ended 30 September 2021.

According to the company, pandemic-induced lockdowns had a meaningful impact on the company’s earnings during the quarter.

Group revenue came in 7% lower than the prior quarter, with Keno revenue, in particular, taking a 19% hit due to statewide venue closures.

Aside from this, both wagering & media and gaming services sales were down 17.2% and 14.6% respectively from venue closures as well.

It wasn’t all downhill however, as the company’s lotteries revenue was 1.4% up on the quarter, underscored by growth in Saturday Lotto and Powerball sales, per the release.

Management also sees additional tailwinds on the horizon, as previously, demand for entertainment “has been strong when lockdown restrictions have been lifted”, a potential plus for the Tabcorp share price.

This language coincides with the lifting of various pandemic-related lockdown measures in NSW, QLD and Victoria that are progressing at this very minute.

In addition to its quarterly update, the company also reiterated its FY21 performance that was previously heard in August.

Tabcorp shares are around 0.9% in the red at last check, after rallying 6.5% in the last month and over 52% this past year.

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