Concise Annual
Report 2014
PASSION. THRILLS. ENTERTAINMENT We create entertainment
experiences where the passion,
thrills and enjoyment of the
Australian way of life comes alive.
At the same time, we put back into
our communities and take our
social responsibilities seriously.
We want you to love the game
like we do.
At the front
2 Financial performance
3 Financial benefits to stakeholders
4 Chairman’s message
6 Chief Executive Officer’s message
8 Wagering business
10 Media and International business
12 Gaming Services business
14 Keno business
16 Responsible gambling
17 People
18 Environment
19 Community
20 Board of Directors
22 Senior Executive Leadership Team
With the financials
24 Corporate governance statement
38 Directors’ report
50 Remuneration report
66 Income statement
67 Balance sheet
68 Cash flow statement
69 Statement of changes in equity
70 Notes to the concise financial statements
71 Directors’ declaration
72 Independent auditor’s report
73 Five year review
At the back
74 Shareholder information
76 Online shareholder services
77 Company directory
77 Key dates
About the Annual Report
Tabcorp’s Annual Report consists of two documents – the Concise
Annual Report (which incorporates the concise financial statements)
and the full financial report. The concise financial statements included
in the Concise Annual Report comprise extracts from the full financial
report and are derived from the full financial report. The Concise
Annual Report cannot be expected to provide as full an understanding
of Tabcorp’s performance, financial position and investing activities as
provided by the full financial report. A copy of Tabcorp’s financial
report is available, free of charge, on request and can be accessed
via the Company’s website at www.tabcorp.com.au.
Tabcorp Holdings Limited ABN 66 063 780 709
Notice of meeting
The Annual General Meeting of Tabcorp
Holdings Limited will be held at the
Grand Ballroom, Shangri-La Hotel, 176
Cumberland Street, The Rocks, Sydney,
New South Wales on Tuesday 28 October
2014 at 10am (AEDT).
Tabcorp is a leading
Australian gambling
entertainment company
> Diversified across four businesses:
Wagering, Media and International,
Gaming Services and Keno
> Holding secure long-term licences
in Australia’s most attractive markets
> Possessing a portfolio of iconic Australian
brands with market-leading positions
> Operating a unique multi-product,
multi-channel model
> A top 100 public company listed on
the Australian Securities Exchange
> Recognised as a global industry
leader in responsible gambling
Key achievements in the year
> Strengthened our portfolio of long-dated
licences by finalising the extension of
the Queensland Keno Licence to 2047
and the New South Wales retail wagering
exclusivity to 2033
> Agreed to acquire ACTTAB, subject
to regulatory approvals
> Refinanced bank facilities and repaid
debt maturities
> Established a new senior executive
leadership structure to support the
focus on the Wagering business and
the Gaming and Keno business
Tabcorp is well placed
to drive profitable growth
with a focus on
> Integrating digital offering with
the TAB retail network
> Completing the acquisition of ACTTAB
> Expanding co-mingling and the
export of Australasian racing
> Negotiating media rights
> Expanding TGS through New South Wales
> Expanding Keno products and
introducing pooling of jackpots
> Increasing target dividend payout
ratio to 90% of FY15 NPAT
> Achieving our targeted Return on
Invested Capital of 14% following
the integration of ACTTAB
1
Tabcorp Concise Annual Report 2014 Financial performance
> Statutory net profit after tax (NPAT) of $129.9 million, up 2.6%
including:
– NPAT from continuing operations of $149.4 million, up 1.2%
– Loss after tax from discontinued operations of $19.5 million1
– NPAT from continuing operations before $8.5 million of FY13
significant items was up 7.4%
> Revenues from continuing operations of $2,039.8 million, up 1.8%
> Earnings before interest, tax, depreciation and amortisation
(EBITDA) before significant items from continuing operations
of $486.1, up 4.8%
> Dividends totalled 16 cents per share fully franked representing
a payout ratio of 81% of NPAT
2
126.6129.9Net profit after tax$ million2,003.22,039.8Revenue2$ million463.9486.1EBITDA before significant items2,3$ million1916Dividends per shareCents per share (fully franked)FY13FY14FY13FY14FY13FY14FY13FY14Tabcorp Concise Annual Report 2014 Financial benefits to stakeholders
Revenue by business2,5
$ million
EBIT by business3,5
$ million
> Taxes on gambling paid $439.3 million
> Returns to the racing industry of $735.0 million:
– Victorian racing industry received $342.0 million6
– New South Wales racing industry received $246.2 million
– Race field fees of $73.3 million
– Broadcast rights and international contributions of $73.5 million
Wagering
$1,574.7m
Gaming Services
$98.1m
Wagering
$175.4m
Gaming Services
$39.7m
> Income taxes paid and payable of $66.7 million
> Voluntary contributions of $1 million to support community
not-for-profit organisations
Since formation 20 years ago, Tabcorp has
contributed $8 billion to support the Victorian
and New South Wales racing industries
Media and International
$220.4m
Keno
$203.9m
Media and International
$58.7m
Keno
$51.7m
From continuing operations
Revenue
Taxes, levies, commission and fees
Operating expenses
Depreciation and amortisation
Impairment 4
EBIT
NPAT from continuing operations
NPAT (including discontinued operations)
FY14
$million
2,039.8
(1,120.3)
(433.4)
(164.4)
-
321.7
149.4
129.9
FY13
$million
2,003.2
(1,097.2)
(414.2)
(151.1)
(18.6)
322.1
147.6
126.6
Change
%
1.8
2.1
4.6
8.8
(100)
(0.1)
1.2
2.6
Notes
1. Represents the Victorian Health Benefit Levy expense which relates to the former Tabaret Gaming business which is
reported as a discontinued operation.
2. Refers to continuing operations.
3. EBITDA is non-IFRS financial information.
4. Victorian Keno Licence impairment in FY13.
5. Business results do not aggregate to Group total due to intercompany eliminations between Wagering and Media and
International businesses, and unallocated items.
6. Excludes the impact of the Victorian racing industry’s share of the Health Benefit Levy of $8.9 million.
3
Tabcorp Concise Annual Report 2014 Chairman’s message
The Group’s performance highlights
the benefits of our diversification across
four businesses, with market-leading
brands and a unique multi-product,
multi-channel distribution model.
4
It gives me great pleasure to present
the 2014 Tabcorp Annual Report.
In August 2014, we marked the 20th
anniversary of Tabcorp. Throughout our
20 years of operation, Tabcorp has created
exciting entertainment experiences for
millions of customers. Tabcorp has also
been a substantial contributor to the
community and a reliable and trusted
operator of gambling licences.
Today, Tabcorp operates four businesses,
Wagering, Media and International, Gaming
Services and Keno, and is the leader in each
of these markets. During the year under
review our portfolio of long-dated licences
was strengthened with the extension of our
Queensland Keno Licence to 2047 and NSW
retail wagering exclusivity to 2033. These
extensions have removed some of the risk
associated with our businesses and allow us
to invest with confidence for the longer term.
In July 2014, we entered into an agreement
to acquire ACTTAB. This is a smaller
acquisition which is a natural fit for our
business and is fully funded from existing
resources. The ACTTAB acquisition provides
additional long-dated licences with low tax
and product fee regimes that complement
our existing Wagering, Keno and Trackside
businesses. This acquisition, which remains
subject to regulatory approvals, will further
strengthen Tabcorp’s position as the leader
in Australian wagering.
Financial highlights
Tabcorp reported Net Profit After Tax (NPAT)
of $129.9 million for FY14, which was up
2.6% on the prior corresponding period1.
NPAT from continuing operations before
significant items was $149.4 million,
up 7.4%. Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA)
from continuing operations before
significant items was $486.1 million,
up 4.8%.
The Group’s performance highlights the
benefits of our diversification across four
businesses, with market-leading brands
and a unique multi-product, multi-channel
distribution model. The performance
also demonstrates the resilience of
our businesses, given the subdued
trading environment over the period.
The Company announced a fully franked
final dividend of 8 cents per share, taking
the full FY14 year dividend to 16 cents per
share. This represented 81% of NPAT from
continuing operations before significant
items, and was consistent with previous
guidance to the market. We have also
announced that our target dividend payout
ratio will increase to 90% of NPAT for FY15.
Wagering is the largest of Tabcorp’s
businesses, accounting for 58% of Group
EBITDA. It was pleasing that this business
delivered a strong performance for FY14
and continues to grow in a competitive
market. The strength of our brands and
the combination of the leading digital offer
and exclusive retail channels differentiate
Tabcorp from online wagering operators.
We have repositioned our Wagering
business in recent years to capture
opportunities in fixed odds and digital
wagering. Both fixed odds and digital
delivered strong growth in the year
and we continue to lead the market
in these segments.
Tabcorp Concise Annual Report 2014
Our Media and International business
again delivered a positive earnings result,
despite incurring one-off charges for
restructuring of the business to better
position it for the future. During the year
we strengthened the business’ capability
to export Australasian racing through
the acquisition of our USA-based vision
distributor, Wyvern and the appointment
of new management in the USA.
During FY14 our Gaming Services business,
TGS, successfully entered into the NSW
market. This builds on the foundation laid
in Victoria where TGS is contracted to supply
and support approximately 8,500 electronic
gaming machines. This business provides
stable cash flows which underpin innovation
in and expansion of Gaming Services.
After many years of growth, our Keno
business had a flat revenue performance.
A new Keno leadership team is now focused
on driving the business’ performance. With
new products set for launch in FY15, Keno
is well positioned to return to growth.
Capital management
During FY14 we made good progress
on strengthening the balance sheet
and lowering our funding costs.
We refinanced the Tabcorp Bonds
with bank debt upon their maturity in
May 2014, resulting in interest savings
of approximately $10 million per annum.
Tabcorp continues to have well diversified
sources of funding. The maturity of our
debt is well phased, with the next major
refinancing activity due in June 2016.
Tabcorp and responsible gambling
Tabcorp places the highest priority on
operating its gambling licences with
integrity and accountability. A measure
of our performance in this area is the
Dow Jones Sustainability Index, which
once again assessed Tabcorp as the global
gambling industry leader in 2013. This was
the eighth time in the last nine years that
Tabcorp has received this ranking. Tabcorp
also received a 100 per cent score in the
index’s ‘Promoting Responsible Gambling’
category for the seventh successive year.
We are proud to be globally recognised
for taking a leadership position in
sustainability and responsible gambling
over the last decade. Tabcorp is committed
to the responsible delivery of our products.
This recognises our obligation to the
communities we serve and underpins
the sustainability of our business.
Returns to the community
and racing
Tabcorp paid $439.3 million in gambling
taxes in FY14. In addition, returns from
Tabcorp’s businesses to the Australian
racing industry were $735.0 million.
Tabcorp continues to be the most
substantial provider of funding to the
racing industry. The Australian model
has been the envy of many racing bodies
around the world and gives our respective
racing industries the necessary funding
to be among the world’s best. Tabcorp will
continue to fight to protect the economic
sustainability of these industries.
1. Includes a loss from discontinued operations of $19.5 million relating to the Health Benefit Levy expense.
Legal proceedings
Tabcorp has lodged an appeal with the Court
of Appeal against a judgment of the Supreme
Court of Victoria handed down on 26 June
2014. The judgment relates to Tabcorp’s claim
for a payment of $686.8 million from the State
of Victoria, which Tabcorp believes the State
was obliged to pay in August 2012, when
Tabcorp’s Gaming and Wagering licences
expired and new licences were granted.
The appeal is listed to be heard in October.
Separately, Tabcorp has applied for special
leave to appeal to the High Court of Australia
in respect of the judgment of the Court of
Appeal of the Supreme Court of Victoria,
which was handed down on 1 July 2014.
That judgement relates to the Victorian
Government’s determination in respect of
the Health Benefit levy on Tabcorp’s former
gaming machine operations. The Court of
Appeal judgment impacted Tabcorp’s FY14
earnings by $19.5 million after tax, which
has been disclosed as discontinued operations
in Tabcorp’s financial statements.
Our people and partners
I would like to acknowledge the efforts
of our 3,000-plus employees, led by our
Managing Director and Chief Executive
Officer, David Attenborough. Our Group
achieved much throughout FY14, which
would not have been possible without
the dedication and commitment of our
people. I would also like to acknowledge
our many stakeholders, including our
racing industry and venue partners,
who share a commitment to providing
our customers with the best possible
entertainment experience.
Focus on investing for the future
Tabcorp stands today as a leading Australian
gambling entertainment company, with
a deep customer base, a well-diversified
business model, market leading brands
and a high performing team.
The Company has ended the year in
a stronger position, both financially
and strategically, and we are now well
positioned to drive future performance.
Our main focus now is on improving
our customer experience. We continue
to execute our strategy of investing in
innovation in high-growth areas such as
our digital platforms and capability, the
expansion of TGS and new Keno products,
while targeting faultless execution in each
customer interaction. This will underpin
our goal to deliver sustainable, attractive
returns to shareholders.
In conclusion, I would like to thank you for
your ongoing support of Tabcorp. I invite
shareholders to join us for our Annual
General Meeting, which will be held in
Sydney on 28 October 2014. For those who
cannot attend in person but would like to
follow the proceedings, the meeting will be
webcast live through www.tabcorp.com.au.
Paula J Dwyer
Chairman
5
Tabcorp Concise Annual Report 2014 Chief Executive Officer’s message
We have been on a journey at Tabcorp
over the last few years to set the
Company up for a sustainable and
profitable future. We are seeing the
benefits of this strategy.
6
The 2014 financial year was a successful
one for Tabcorp. A strong performance by
our core Wagering business underpinned
our growth in earnings. At the same time,
we delivered key licence extensions and
expanded TGS into NSW. These outcomes,
in addition to the recent agreement to
acquire ACTTAB, have strengthened the
Group and further de-risked our businesses.
Wagering
Total Wagering business revenues
(including the Victorian Racing Industry’s
interest) grew 1.8% in FY141. Revenue
growth improved in the second half,
growing 2.4% relative to first half growth
of 1.3%. Operating expenses were
$284.0 million, up 0.6%. EBITDA was
$282.2 million, up 6.5%.
We have been on a journey at Tabcorp over
the last few years to set the Company up
for a sustainable and profitable future.
We are seeing the benefits of this strategy.
The Group is now well diversified across
four businesses, with attractive, long-dated
licences, strong brands and the broadest
range of channels.
Group performance overview
Revenues increased by 1.8% to
$2,039.8 million and operating expenses
were $433.4 million, up 2.8%. Growth of
4.8% in Earnings Before Interest Taxes
Depreciation and Amortisation (EBITDA)
from our continuing operations before
significant items delivered strong operating
cash flows. Gross debt reduced by 12.8%
to $1,094.3 million and resulted in an
improved gearing level of 2.3 times
debt to EBITDA for the Group.
The performance also benefited from
the ongoing Group-wide productivity
improvement program, called Future Fit.
This program is focused on improving our
operating processes and optimising the
allocation of resources to our growth areas.
I will now provide an overview of the
performance of each of our four businesses.
Tabcorp continues to be at the forefront
of Australian wagering market trends.
Customers are increasingly choosing
fixed odds products and digital devices
as a way of placing bets. We lead the
market in both areas.
Fixed odds growth was a standout with
revenues up 26.5% to $511.5 million.
Totalizator revenues were $1,262.9 million,
down 6.3%, impacted by the consumer
shift to fixed odds and lower premium
customer volumes.
Revenues in Tabcorp’s online bookmaking
business, Luxbet, were $47.9 million, up
22.5%, while Trackside revenues were
$89.3 million, up 1.1%.
The 2014 Soccer World Cup was one of the
highlights during the year and I am pleased
to report that Tabcorp led the Australian
wagering market. The World Cup produced
revenues across TAB and Luxbet in FY14 of
$14.9 million and in FY15 of $10.3 million.
Our consumer initiatives were driven by
the ‘Back Gold’ campaign led by former
Socceroos goalkeeper, Mark Schwarzer.
In terms of distribution channels, digital
was a driver of growth, with turnover up
18.2% to $2,900.0 million. Mobile devices
made up 54% of Tabcorp’s digital turnover,
up from 35% in FY13. As part of our digital
Tabcorp Concise Annual Report 2014 growth strategy, we have boosted the
capability of our in-house team by hiring
more digital specialists. This is giving
us greater flexibility and speed in the
innovation process and the agility to
bring new products to market faster.
An example during the year was the
development of the successful Back Gold
World Cup website, which was designed
and delivered within two months.
NSW and Victorian retail turnover was
$6,581.3 million, down 2.8%. Performance
in the NSW and Victorian retail wagering
channels improved in the second half
relative to the first half, despite continued
soft retail conditions. During the year we
doubled the number of members of our
TAB Rewards wagering loyalty program to
218,000. TAB Rewards members made up
approximately 11% of retail turnover at
the end of FY14 and expansion of this
program is ongoing.
New race fields fee regimes were put in
place by the Victorian, Queensland and
South Australian racing industries from
1 July 2014. Had these changes applied
to Tabcorp in FY14, and in the absence of
any mitigating strategies, the estimated
impact would be approximately $12 million
before tax. The new structures do start to
apportion race fields fees more equitably
across the various wagering operators.
However, the gap between what TAB pays
and what corporate bookmakers pay still
remains too large.
Media and International
Revenues grew 6.2% to $220.4 million.
Operating expenses were $123.9 million,
up 5.0%, with expense growth partly
attributable to the acquisition of Sky’s USA
vision agent, now rebranded Sky Racing
World US, and one-off restructure charges.
EBITDA was $68.5 million, up 2.2%.
The business continued to benefit from
the expanded export of Australasian racing
vision and the co-mingling of international
betting pools. As part of this, Singapore
became the first major Asian jurisdiction
to pool its betting offshore when it started
co-mingling into our NSW TAB pool.
The success of this business as a driver
of returns to the racing industry was
demonstrated once again with media
broadcast rights and contributions
from Tabcorp’s International business of
$73.5 million, up 15.6%. Media broadcast
rights for NSW and Victorian thoroughbred
racing continue to be the subject of
ongoing negotiations.
Gaming Services
The results of the Gaming Services business
reflect a full twelve months compared
to the prior year during which TGS was
operational for 10.5 months, having
commenced operations on 16 August 2012.
Revenues were $98.1 million, up 13.7%.
Operating expenses were $31.1 million, up
11.1%, resulting in EBITDA of $67.0 million,
up 14.9%.
In Victoria, we have laid a solid foundation
with a contracted base of approximately
8,500 electronic gaming machines (EGMs).
TGS has now commenced the roll-out of
an in-EGM loyalty scheme, with positive
feedback from the initial venues.
TGS also commenced its entry into
the NSW market towards the end
of the year, with the sign-up and
refurbishment of its first two venues
delivering 120 contracted EGMs.
Keno
Revenues in Keno were $203.9 million,
down 0.7%, with Queensland and NSW
revenues flat and Victorian revenues
up 3.6%. Operating expenses were
$41.2 million, up 1.0%. EBITDA was
$72.2 million, down 4.4%.
Growing Keno is a priority and FY14 saw
the successful roll out of Keno Racing
to more than 450 Queensland venues.
Initiatives planned for delivery in FY15
include the commencement of jackpot
pooling between NSW and Victoria, with
Queensland to follow later in 2015. We
know that playing for big prizes drives
player interest and having bigger prizes,
more often will make Keno more appealing.
Our people
We have more than 3,000 employees at
Tabcorp, performing a diverse range of
roles. Each employee has played their part
in our success in FY14 and I would like
to acknowledge their contribution.
We continue to drive to make Tabcorp a
great place to work and enhance employee
engagement. During the year, our Group-
wide gender diversity program delivered
early results. It was particularly pleasing
to have met the 33% target set for the
senior management levels and we are
already seeing the benefits in team
performance of a more inclusive
culture across all levels of the business.
1. After accounting for the allocation to the Victorian Racing Industry under the 50/50 Joint Venture arrangements (75/25 previously) which commenced in August 2012,
reported Wagering revenues were $1,574.7 million, up 1.1%.
Further, as part of our commitment to
the community and our employees, we
continued our Tabcare program. Tabcare
supports our employees to give back to
their communities through one day of
paid volunteer’s leave each year, as well
as a program to match the fundraising
efforts of employees.
Our priorities
We have set clear priorities for each
of our four businesses to enable us
to continue to achieve results for our
shareholders and create the best
possible experience for our customers.
In Wagering, we will continue to integrate
our retail and digital offerings, expand
our products and complete the ACTTAB
transaction. Media and International will
continue to increase co-mingling and the
export of Australasian racing. TGS will
accelerate its expansion into NSW and,
finally, our Keno business has a clear
growth agenda based on product
expansion and jackpot pooling.
We are well positioned to drive future
performance, maintain expense discipline
and, following the integration of ACTTAB,
achieve our targeted Return on Invested
Capital of 14%.
David R H Attenborough
Managing Director and
Chief Executive Officer
7
Tabcorp Concise Annual Report 2014 Wagering business
Operations
• Network of TAB agencies, hotels and clubs
and on-course totalizators in Victoria and
New South Wales
What happened during the year
• Finalised the extension of the New South
Wales Wagering Licence retail exclusivity
for a further 20 years to 2033
• Channels include retail, internet, mobile
• Soccer World Cup revenue was $14.9 million
devices, phone and pay TV
in FY14 (and $10.3 million in FY15)
Key focus for the year ahead
• Complete ACTTAB acquisition and
integrate into existing businesses
• Leverage our unique multi-product,
multi-channel model to enhance
customer experiences
• Totalizator and fixed odds betting offered
• Increased in-house digital capability
• Launch new tab.com.au website
• Enhanced digital offering to customers:
released HTML tablet website for TAB,
dedicated World Cup Soccer website, and
live AFL vision from July 2014
• Increased focus on targeted customer
relationship management and
engagement campaigns
• Fixed odds revenue growth assisted by
expanded product, risk management
and Soccer World Cup
• Continue to drive digital leadership
and innovation
• Strengthen customer relationships
through our loyalty and customer
relationship management programs
• Further integrate vision and data with
wagering products
Refer to page 40 of the Directors’ report
for further information.
Summary financial performance of the Wagering business
For the year ended 30 June
Revenue
Taxes, levies, commission and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
FY14
$million
1,574.7
(1,008.5)
(284.0)
282.2
(106.8)
175.4
FY13
$million
1,558.0
(1,010.8)
(282.2)
265.0
(97.7)
167.3
Change
%
1.1
(0.2)
0.6
6.5
9.3
4.8
on racing and sporting events
• Luxbet offers a racing, sport and novelty
product bookmaking service by phone,
online and mobile devices
• Trackside, a computer simulated racing
product, operating in Victoria and New
South Wales, and licensed in other
Australian and overseas jurisdictions
• Wagering and pooling through Premier
Gateway International (PGI) Joint Venture
in the Isle of Man (50% interest)
• 2,800 TAB retail outlets (approx)
• 218,000 active TAB Rewards customer
loyalty members (doubled from prior year)
• Mobile devices represent 54% of digital
turnover (up 9%)
8
Tabcorp Concise Annual Report 2014 Revenues of
$1,574.7 million,
up 1.1%
(including the Victorian
Racing Industry’s interest, and
FY13 impacted by changeover
to new Victorian Wagering
and Betting Licence which
commenced 16 August 2012)
EBIT of
$175.4 million,
up 4.8%
Tabcorp Concise Annual Report 2014
9
Media and International business
What happened during the year
• Grew revenue primarily through
increased international vision and
co-mingling
• Expanded co-mingling to include
Singapore betting into Tabcorp pools
• Acquired Sky’s US vision distributor agent,
now rebranded as Sky Racing World US
• A founding member of the Asia Africa
Tote Association
Key focus for the year ahead
• Retain media rights on acceptable terms
• Pursue international growth via
co-mingling and wholesale opportunities
• Improve viewer experience – 20/7 racing
coverage
• Expand US distribution, including into
Las Vegas and through distributor TVG
Refer to page 41 of the Directors’ report
for further information.
Operations
• Three Sky Racing television channels
broadcasting thoroughbred, harness
and greyhound racing and other sports
to audiences in TAB outlets, hotels, clubs,
other licensed venues, desktop and
mobile devices, and into homes to
pay TV subscribers
• Sky Sports Radio network in New South
Wales, and advertising and sponsorship
arrangements with Radio Sport National
• Sky Racing available in 2.6 million
Australian homes (approx)
• Broadcasting to 5,400 Australian outlets
• Covering over 90,000 races per annum
• Broadcasting Australian racing to more
than 50 countries
Revenues of
$220.4 million,
up 6.2%
EBIT of $58.7 million,
up 1.7%
Summary financial performance of the Media and International business
For the year ended 30 June
Revenue
Taxes, levies, commission and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
FY14
$million
220.4
(28.0)
(123.9)
68.5
(9.8)
58.7
FY13
$million
207.6
(22.6)
(118.0)
67.0
(9.3)
57.7
Change
%
6.2
23.9
5.0
2.2
5.4
1.7
10
Tabcorp Concise Annual Report 2014 Tabcorp Concise Annual Report 2014
11
Gaming Services business
Operations
• Tabcorp Gaming Solutions (TGS)
commenced operations on 16 August
2012 under the new Victorian gaming
industry structure
What happened during the year
• Expanded into New South Wales
following receipt of a New South Wales
Gaming Machine Dealer’s Licence
• Commenced in-EGM loyalty scheme
• Supplying electronic gaming machines
in Victoria
(EGMs) and specialised services to
licensed gaming venues
• Contracts cover 8,500 EGMs in
Victoria (approx) and 120 EGMs
in New South Wales
• Over 170,000 loyalty members
Key focus for the year ahead
• Expand New South Wales business
• Grow revenues in the New South Wales
and Victorian markets
• Expand customer in-EGM loyalty scheme
Refer to page 41 of the Directors’ report
for further information.
Summary financial performance of the Gaming Services business
For the year ended 30 June
Revenue
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
FY14
$million
98.1
(31.1)
67.0
(27.3)
39.7
FY13
$million
86.3
(28.0)
58.3
(20.8)
37.5
Change
%
13.7
11.1
14.9
31.3
5.9
12
Tabcorp Concise Annual Report 2014 First full year
contribution
of TGS
Revenues of
$98.1 million,
up 13.7%
EBIT of
$39.7 million,
up 5.9%
Tabcorp Concise Annual Report 2014
13
Keno business
Operations
• Keno in licensed venues and TABs in
What happened during the year
• Finalised the extension of the Keno
Victoria and Queensland, and in licensed
venues in New South Wales
Queensland Licence for a further 25 years
to 2047
Key focus for the year ahead
• Introduce pooling of jackpots in Victoria
and New South Wales in the first half
of FY15, with Queensland to follow
• 3,600 Keno outlets in Victoria, New South
• Rolled out new Keno Racing game into
• Develop and launch new products
Wales and Queensland (approx)
450 Queensland venues
• 6,200 Keno terminals (approx)
• Revenue impacted by soft retail trading
conditions, with Queensland and New
South Wales revenues flat and Victorian
revenues up 3.6%
• Grow Keno in current and new markets
• Enhance customer experience and
engagement
Refer to page 42 of the Directors’ report
for further information.
Summary financial performance of the Keno business
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA (before impairment*)
Depreciation and amortisation
EBIT (before impairment*)
* Victorian Keno Licence impairment of $18.6 million in FY13.
FY14
$million
203.9
(90.5)
(41.2)
72.2
(20.5)
51.7
FY13
$million
205.4
(89.1)
(40.8)
75.5
(23.3)
52.2
Change
%
(0.7)
1.6
1.0
(4.4)
(12.0)
(1.0)
Revenues of $203.9 million,
down 0.7%
EBIT of $51.7 million,
down 1.0%
14
Tabcorp Concise Annual Report 2014 Tabcorp Concise Annual Report 2014
15
Responsible gambling
The Tabcorp Group is committed to
providing enjoyable gambling experiences
for our customers, where we deliver our
products and services in a responsible
manner and promote sustainable gambling
practices. At the same time as creating
engaging gambling and entertainment
experiences, we take steps to minimise
the potential harm that gambling may
cause for some individuals. We take this
obligation seriously, therefore responsible
gambling forms an integral part of our
operating philosophy, and is embodied
in our company values of Think customer;
Do the right thing; and Be accountable.
This ongoing commitment has resulted
in Tabcorp being recognised as a global
industry leader in sustainability and for
promoting responsible gambling, as
assessed by the Dow Jones Sustainability
Index and FTSE4Good Index.
Framework
The Tabcorp Group’s approach to
responsible gambling is based on
an integrated multi-layered framework
that includes codes of practice, policies,
programs and strategies specifically
targeted to promote responsible gambling
across the Tabcorp Group’s businesses
and within the community. Tabcorp has
developed responsible gambling codes
of practice for each of its key businesses
of TAB, Luxbet and Keno. These codes
are specific to the particular needs and
circumstances applicable to individual
customers within those businesses, and
are regularly reviewed to ensure they
remain relevant.
Ongoing engagement with our
stakeholders is a key element of this
framework. Tabcorp engages with
customers and the community to inform
them about Tabcorp’s products and
16
services. It is through this engagement
that Tabcorp aims to assist people to
make informed choices, minimise problem
gambling behaviours and support those
who may have developed difficulties in
managing their gambling behaviours.
Tabcorp employees and senior managers
have responsibility for delivering the
relevant strategies and programs in
support of this responsible gambling
framework. The Board is regularly informed
of these initiatives and internal audit
reports and other information is provided
to enable the Board to monitor their
effectiveness. Furthermore, audits and
compliance assessments are routinely
carried out by gambling regulators to
assess our compliance with applicable
obligations.
Employee awareness
Tabcorp employees are passionate about
our business, our brands and industry, and
many enjoy the entertainment of gambling
on racing and sports. We are conscious that
when our employees gamble, they should
gamble responsibly, so an important
element of our strategy is the promotion of
responsible gambling among employees.
Employees are provided with, and have
access to, a range of information about
Tabcorp’s gambling products and the
behaviours expected of them when they
gamble. Information about Tabcorp’s
Employee Gambling Policy, the fun
and risks of gambling, how to identify
responsible versus problem gambling
behaviours, and ways to seek further
assistance is conveyed through Tabcorps’
employee induction program, annual
refresher training for employees with
customer facing roles, Tabcorp’s intranet,
staff announcements and newsletters, and
to our agents within our retail network via
newsletters and bulletins.
Tabcorp also assesses problem gambling risk
within the workplace by surveying employees
within key businesses to identify to what
extent they are at risk of problem gambling.
The survey results for FY14 indicated that of
those of our employees who gamble they
were considered not at risk of developing
problem gambling behaviours. This supports
Tabcorp’s commitment in providing a
safe working environment by promoting
responsible gambling and having support
available to assist employees and their
families if required.
If our employees or their families have
difficulties managing their gambling,
or any other personal issues, Tabcorp’s
Employee Assistance Program is available
for them to receive confidential advice.
This service is provided by an independent
external organisation offering specialist
advice that is free to employees and
their families.
Community involvement
Tabcorp participates in government and
community initiatives to help promote
responsible gambling and raise awareness
among the communities in which we
operate. In FY14, Tabcorp again supported
the Victorian Responsible Gambling
Awareness Week (RGAW). The aim of RGAW
is to increase the community’s awareness
of responsible gambling strategies and
to highlight to gamblers that when they
gamble they should do so responsibly and
stay in control. Tabcorp support is delivered
through the provision of employee expertise,
funding, and distribution of promotional
and awareness materials within venues,
on Facebook and on TAB.com.au. This event
enables government, community
organisations and the gambling industry
working in partnership to provide
information and resources to customers
and the community to help people
make informed decisions about their
gambling choices.
Tabcorp employees are members of the
Victorian Responsible Gambling Ministerial
Advisory Council and the Queensland
Responsible Gambling Advisory Committee.
These committees bring together
community groups, government and
industry organisations to provide advice
to relevant government ministers on
initiatives, policies and codes of practice
to promote responsible gambling.
Furthermore, Tabcorp employees attend
various community and industry forums
to promote responsible gambling
awareness with customers, venue staff,
industry partners, governments, regulators
and local community organisations.
Further information is available in section
17 of the corporate governance statement
on page 32, and also in the Responsible
Gambling section of Tabcorp’s website at
www.tabcorp.com.au.
In the annual assessment for the Dow
Jones Sustainability Index, Tabcorp has
received a 100% rating for promoting
responsible gambling for seven successive
years, and has been ranked as the overall
global gambling industry leader in eight
of the last nine years.
People who have a problem managing
their gambling are encouraged to contact
the national Gambling Help number on
1800 858 858.
Tabcorp Concise Annual Report 2014 People – creating a great place to work
Every day, our approximately 3,000
employees provide the energy, inspiration
and passion which enables Tabcorp to
provide the most exciting and engaging
entertainment experiences for our
customers. In order for our employees
to excel and do their best, Tabcorp offers
an encouraging workplace environment
and culture. Tabcorp provides growth and
development opportunities which support
employees to achieve their potential, while
enabling them to work effectively and
productively. Through aligning our people
strategies with the business priorities and
goals of the organisation, together we can
create meaningful outcomes for all our
stakeholders. Below are some of the ways
in which Tabcorp is supporting employees
and creating a better place to work, and
some of the key achievements of the past
financial year.
Engagement
In creating a great place to work, Tabcorp
provides a culture and working environment
that is engaging for our employees. Each
year, Tabcorp surveys it employees and seeks
feedback to understand how to improve
the workplace and strengthen engagement
with employees. This is important, because
experience and research show that
a workforce which is highly engaged
correlates to better organisational outcomes,
such as improved customer service, health
and safety, productivity and profitability.
This year’s Engage Survey, conducted
by international consulting firm Gallup,
resulted in a third consecutive year of
sustained improvement at Tabcorp, with
employee engagement reported at 3.81
(out of a total of 5). The results over
the past three annual surveys since
commencement in FY11 indicate that
Tabcorp’s growth in engagement is in
the top quartile of Gallup’s database.
Tabcorp is focused on continuing to make
improvements in the workplace that have
a positive impact for our employees. These
include ensuring that employees have the
materials which they need to work effectively,
recognising and rewarding people for their
contributions and showcasing excellence
through the Tabcorp Legends program,
providing training and development
opportunities for employees to learn
and grow, and communicating regularly
at all levels throughout the organisation.
Diversity
Since introducing its Diversity Policy in
FY12, Tabcorp has been implementing
strategies focused on delivering greater
gender balance and embracing diversity
across its workforce. Tabcorp recognises
that a diverse workforce enables a broad
range of skills, experience, ideas, strengths
and talents to be applied to generate better
outcomes. This leads to a great workplace
culture that will help attract and retain
the best people for our business.
During FY14, Tabcorp committed to
an accelerated approach and plan to
increasing gender diversity at all levels
of the organisation. Some of the new
initiatives introduced include: a Diversity
Council (comprised of the Senior Executive
Leadership Team); diversity education for
leaders; a Women’s Mentoring Program;
and targeted acquisition of diverse
leadership talent.
The focus on diversity has enabled Tabcorp
to meet its target to have at least 33% female
representation in senior management roles
by 2015. The Board and senior management
will consider its objectives and set a revised
target to apply from FY15.
The chart below illustrates the proportion
of women at various levels within the
Tabcorp Group at the end of the financial
year. As shown, the proportion of women
at each level below the Board has increased
over the past twelve months. Further details
relating to Tabcorp’s approach to diversity
are available in section 19 of the corporate
governance statement on page 32.
a positive health and safety culture. Risk
assessments are undertaken regularly for
each Tabcorp business, and reported to
Workplace Health and Safety Committees
at our sites, the Senior Executive Leadership
Team and the Board Audit, Risk and
Compliance Committee. Tabcorp’s Health
and Safety Policy is available from the
Sustainability section of Tabcorp’s website.
Tabcorp’s 2013–14 annual public report
regarding workplace gender equality has
been submitted to the Workplace Gender
Equality Agency and is published under
the Sustainability section of Tabcorp’s
website at www.tabcorp.com.au. Tabcorp’s
Diversity Policy is also available from the
Sustainability section of Tabcorp’s website.
Health and safety
Tabcorp is committed to providing a
healthy and safe working environment for
all its employees, contractors and visitors.
Systems, processes and dedicated resources
are in place to help identify, report and
manage health and safety risks within the
workplace and enable Tabcorp to promote
A key element of our health and safety
strategy centres on engagement with
our employees and the promotion of safe
and healthy working practices. Tabcorp
encourages employees to recognise
health and safety risks, report them and
investigate to identify corrective actions
to prevent incidents occurring. Through
employee awareness campaigns and
training we have reinforced the importance
of having a culture of reporting hazards
and potential risks. This pro-active
behaviour has positively contributed to a
reduction in the number of incidents, as
demonstrated by the improved lost time
injury frequency rate of 1.5 per million
hours worked for FY14.
Lost time injury
frequency rate
Number of lost time
injuries per million
hours worked
Employee
engagement
As assessed
by Gallup
7
.
2
5
6
.
3
1
8
.
3
7
4
.
3
4
.
1
5
.
1
FY12
FY13
FY14
FY12
FY13
FY14
Non Executive
Directors
Senior Executive
Leadership Team
Senior Executive
Leadership Team &
Senior Management
Team
Whole of Tabcorp
Proportion of female employees
As at 30 June 2014 with comparison
to prior year in grey
33%
33%
35%
51%
17
Tabcorp Concise Annual Report 2014 Environment
The Tabcorp Group is committed to
operating as efficiently as possible, and
reducing the environmental impact of its
operations. The Tabcorp Group has a low
environmental footprint and considers its
operations to have a low environmental risk
profile. Despite it being a low energy user,
and low carbon emitter, the Tabcorp Group
goes beyond complying with applicable
environmental regulations, and seeks
to further reduce its impact on the
environment.
During the year, a new Sustainability
Committee was established which brought
together employees from across Tabcorp
who are passionate about the environment.
The Committee meets regularly to discuss
environmental issues within the workplace,
share ideas, promote sustainability and
champion positive change and awareness
among employees.
Reduce, Reuse, Recycle
A major initiative during the year was
the launch of the Tabcorp Office Green
Guide. The guide contains useful tips
and ideas that employees can use at
work to help the environment. The
practical guide recognises that collectively
each employee can make choices which
are more environmentally friendly, and
that cumulatively all the small actions,
such as turning off computers and lights,
can have a meaningful difference.
18
At the core of the guide are the three Rs:
• Reduce consumption of energy and
resources;
• Reuse resources wherever possible,
before considering the purchase of
new products; and
• Recycle all material (e.g. paper, plastic,
metal, glass, etc).
A range of communications and awareness
campaigns continue to be rolled out across
the organisation to promote sustainability
initiatives and keep reinforcing the message
to ‘Reduce, Reuse, Recycle’.
A good example of reusing and recycling
was a project undertaken by the Tabcorp
Technology Team. The Team rescued over
600 pieces of aged information technology
equipment that would have otherwise
been thrown away. The Team ‘repurposed’
the equipment which mostly was used in
oncourse wagering operations. Not only
was this a good result for the environment,
but there were also good outcomes for the
oncourse wagering business.
Through the Tabcare program, Tabcorp
also encourages its employees to work
with Conservation Volunteers to help
restore native vegetation and help the
environment.
Performance
The Tabcorp Group has systems and
practices in place for monitoring, reporting
and managing the environmental impact
associated with its operations. The main
measureable environmental performance
indicators applicable to the Tabcorp Group
are in relation to its office buildings and
fleet vehicles. The performance during
FY14 and comparisons to the prior years
are shown in the charts below.
Further information is available under the
Sustainability section of Tabcorp’s website
at www.tabcorp.com.au.
• Electricity* 17,622,057 kilowatt hours
(kWh), down 2.0%
• Fleet vehicles 614,904 litres of liquid fuels,
up 5.2%
• Natural gas 3,365,446 megajoules (MJ),
up 3.3%
• Water 25,220 kilolitres (kl), up 8.9%
• Paper 5.2 million A4 equivalent pages,
down 13.3%. 78.9% carbon neutral
• Greenhouse gas emissions* 21,307 tonnes
of carbon dioxide equivalent (tCO2-e),
down 6.1%, which comprised:
– 8.5% Scope 1 emissions resulting
from fleet vehicle fuels and natural
gas used for heating offices; and
– 91.5% Scope 2 emissions from
electricity used to power Tabcorp
offices and buildings.
Greenhouse
gas emissions*
tCO2-e
3
0
0
,
2
2
1
9
6
,
2
2
7
0
3
,
1
2
Electricity use*
kWh
Water use
kl
Paper consumption
Million A4 equivalent pages
9
9
6
,
7
9
3
,
8
1
,
2
4
8
4
7
9
,
7
1
7
5
0
,
2
2
6
,
7
1
9
7
1
,
5
2
0
2
2
,
5
2
1
6
1
,
3
2
9
7
9
6
.
2
3
0
6
.
1
3
2
.
5
FY12
FY13
FY14
FY12
FY13
FY14
FY12
FY13
FY14
FY12
FY13
FY14
* FY14 includes estimate for part of the financial year, subject to confirmation from electricity supplier.
Tabcorp Concise Annual Report 2014 Community
Tabcorp has strong community ties and
is proud of its enduring support for the
communities in which it operates. Tabcorp
encourages its employees and businesses
to connect with the communities in which
they live and give back to them in many
meaningful and fulfilling ways. Many
charities, not-for-profit groups and local
community organisations benefit from the
involvement of Tabcorp and its employees,
whether through employee volunteering
or the provision of direct funding, in kind
benefits, partnerships or sponsorships.
During the 2014 financial year, a total
of $1 million of voluntary funding was
contributed by Tabcorp to charitable
organisations. This was provided through
the Tabcare program, as well as in kind
support from Tabcorp’s businesses, such
as the provision of Sky Racing and Sky
Radio advertising and air time to promote
local community organisations.
Tabcare program
The Tabcorp Group’s community engagement
program, Tabcare, encourages volunteering
and fundraising by Tabcorp employees.
• The volunteering program enables
eligible employees to take one day of
paid volunteer leave each year with their
nominated non-profit organisation or
one of the community organisations
with which Tabcorp partners. Tabcorp
has established partnerships with:
OzHarvest and Conservation Volunteers
in New South Wales; FareShare and
Conservation Volunteers in Victoria; and
The Pyjama Foundation in Queensland.
• The matched fundraising program
encourages employees to raise money
in teams for registered charities. Tabcorp
matches the funds raised up to $10,000
per charitable organisation, enabling
donations to be shared among a wide
range of charities.
FY14 was the second year of the Tabcare
program. During the year, our aim was
to build upon the momentum created
in the first year and expand our reach to
more charities and involve more employees.
As a result of our continued awareness
and promotion among employee groups,
we were able to increase employee
participation to 12.7% for employee
volunteering, up from 7.6% for the
prior year. We were also able to increase
donations and fundraising, with Tabcorp
donations to eligible charities totalling
$120,000. In addition, $76,000 was raised
by employees through their participation
in Tabcare’s matched fundraising program.
Some of the charities which received the
funding during the year were The Garvan
Institute, Oxfam, Variety Club, Australian
Cancer Council, Leukemia Foundation,
RSPCA, and Kidney Health Australia.
Other contributions
In addition to the voluntary contributions
above, Tabcorp’s businesses contribute
substantial funding each year which helps
governments to deliver vital community
services and infrastructure, such as
healthcare facilities. In respect of FY14,
Tabcorp’s businesses generated:
• $439.3 million in taxes on gambling; and
• $66.7 million in income taxes paid
and payable.
Refer to the Sustainability section of
Tabcorp’s website at www.tabcorp.com.au
for further information.
Over its 20 year history, Tabcorp has paid
$16 billion in gambling taxes
19
Tabcorp Concise Annual Report 2014 Board of Directors
Paula Dwyer
Chairman since June 2011 and Non Executive Director since August 2005
Ms Dwyer had an executive career
Bachelor of Commerce; Fellow of the
in finance holding senior positions
Institute of Chartered Accountants in
in investment management, investment
Australia; Fellow of the Australian Institute
banking and chartered accounting
of Company Directors (AICD); Senior Fellow
with Ord Minnett (now JP Morgan)
of the Financial Services Institute of
and PricewaterhouseCoopers.
Australasia.
Paula Dwyer is Chairman of Healthscope
Limited, and a Director of Australia and
New Zealand Banking Group Limited and
Lion Pty Ltd. She is also a Member of the
ASIC External Advisory Panel and the Kirin
Holdings International Advisory Board.
Ms Dwyer is Chairman of the Victorian
Joint Venture Management Committee
and Chairman of the Tabcorp Nomination
Committee. She is a member of the Tabcorp
Audit, Risk and Compliance Committee
and Tabcorp Remuneration Committee.
Ms Dwyer was formerly a Director of
Leighton Holdings Limited, Suncorp Group
Limited, Foster’s Group Limited, David Jones
Limited, Astro Japan Property Group
Limited and is a former member of the
Victorian Casino and Gaming Authority
and of the Victorian Gaming Commission
from 1993 to 1995.
20
David Attenborough
Managing Director and Chief Executive
Officer since June 2011
Bachelor of Science (Honours); Masters of
Business Administration.
Elmer Funke Kupper
Non Executive Director since June 2012
Bachelor of Business Administration;
Master of Business Administration;
Member of the AICD.
David Attenborough joined Tabcorp in
April 2010 as Managing Director –
Wagering. He became Managing Director
and Chief Executive Officer when Tabcorp’s
demerger of Echo Entertainment Group
Limited was completed in June 2011.
Mr Attenborough was previously the
Chief Executive Officer (South Africa) of
Phumelela Gaming and Leisure Limited,
the leading wagering operator in South
Africa. His previous experience also
includes the development of casino,
bookmaking and gaming opportunities
for British bookmaking company Ladbrokes
(formerly part of the Hilton Group Plc).
Elmer Funke Kupper was Tabcorp’s
Managing Director and Chief Executive
Officer from September 2007 to June
2011, and previously he was Tabcorp’s
Chief Executive Australian Business
from February 2006.
Mr Funke Kupper is Managing Director and
Chief Executive Officer of ASX Limited. He is
a member of the Financial Sector Advisory
Council and the Australian B20 Leadership
Group and a Male Champion of Change.
Mr Funke Kupper’s career includes several
Senior Executive positions with the Australia
and New Zealand Banking Group Limited,
including Group Head of Risk Management,
Group Managing Director Asia Pacific and
Managing Director Personal Banking and
Wealth Management. Previously he was a
senior management consultant with
McKinsey & Company and AT Kearney.
Mr Funke Kupper is a member of the Tabcorp
Audit, Risk and Compliance Committee and
Tabcorp Nomination Committee.
Tabcorp Concise Annual Report 2014 Steven Gregg
Non Executive Director since
July 2012
Bachelor of Commerce.
Steven Gregg is Chairman of Goodman
Fielder Limited. He is also a Director of
thoroughbred bloodstock company William
Inglis & Son Limited and of Challenger
Limited. He is also a Consultant and Senior
Adviser to the Grant Samuel Group, Trustee
of the Australian Museum Trust and a
Director of The Lorna Hodgkinson Sunshine
Home. He is also the former Chairman of
Austock Group Limited.
Mr Gregg had an executive career in
investment banking and management
consulting, having held Senior Executive
roles with ABN Amro Bank, and Partner and
Senior Adviser to McKinsey & Company.
Mr Gregg is a member of the Tabcorp
Audit, Risk and Compliance Committee,
Tabcorp Nomination Committee and
Tabcorp Remuneration Committee.
Jane Hemstritch
Non Executive Director since
November 2008
Bachelor of Science (First Class Honours);
Fellow of the Institute of Chartered
Accountants in Australia; Fellow of the
Institute of Chartered Accountants in
England and Wales; Fellow of the AICD;
Member of Chief Executive Women Inc.
Jane Hemstritch is a Director of the
Commonwealth Bank of Australia, Lend
Lease Group and Santos Limited. She is
also Chairman of Victorian Opera Company
Limited and a Member of the Council
of the National Library of Australia.
Mrs Hemstritch was Managing Director
– Asia Pacific for Accenture Limited where
she was a member of Accenture’s global
executive leadership team and managed
its business portfolio in Asia Pacific
spanning twelve countries.
Mrs Hemstritch is Chairman of the
Tabcorp Audit, Risk and Compliance
Committee and a member of the
Tabcorp Nomination Committee.
Justin Milne
Non Executive Director since
August 2011
Bachelor of Arts; Member of the AICD.
Justin Milne is Chairman of NetComm
Wireless Limited and a Director of NBN Co
Limited and Members Equity Bank Pty Ltd.
Mr Milne had an executive career in
telecommunications, marketing and
media. From 2002 to 2010 he was Group
Managing Director of Telstra’s broadband
and media businesses, and headed up
Telstra’s BigPond New Media businesses
in China. He is also the former Chairman
of pieNETWORKS Limited, former Director
of Basketball Australia Limited and former
Chief Executive Officer of OzEmail and the
Microsoft Network.
Mr Milne is a member of the Tabcorp
Audit, Risk and Compliance Committee
and Tabcorp Nomination Committee.
Zygmunt Switkowski AO
Non Executive Director since
October 2006
Bachelor of Science (Honours);
PhD (Nuclear Physics); Fellow of the AICD.
Zygmunt Switkowski is the Chairman of
Suncorp Group Limited and Chairman of
NBN Co Limited. He is also a Director of
Oil Search Limited and Chancellor of the
Royal Melbourne Institute of Technology.
He is a former Director of Lynas Corporation
Limited and Healthscope Limited, and he
is the former Chairman of the Australian
Nuclear Science and Technology
Organisation and former Chairman
of Opera Australia.
Dr Switkowski was the Chief Executive
Officer and Managing Director of Telstra
Corporation Limited from 1999 to 2005,
and is a former Chief Executive Officer of
Optus Communications. He worked for
Kodak (Australasia) for 18 years, serving
as the Chairman and Managing Director
from 1992 to 1996.
Dr Switkowski is Chairman of the Tabcorp
Remuneration Committee. He is also a
member of the Tabcorp Audit, Risk and
Compliance Committee and Tabcorp
Nomination Committee.
21
Tabcorp Concise Annual Report 2014 Senior Executive Leadership Team
David Attenborough
Managing Director and
Chief Executive Officer
Damien Johnston
Chief Financial
Officer
Kerry Willcock
Executive General Manager –
Corporate, Legal and Regulatory
Merryl Dooley
Executive General Manager –
Human Resources
Doug Freeman
Executive General Manager –
Commercial Development
David joined Tabcorp in April 2010
as Managing Director – Wagering.
He became Managing Director
and Chief Executive Officer
following Tabcorp’s demerger
in June 2011.
He has an extensive background
in totalizator and fixed-odds
betting, racing and broadcasting.
He was previously the Chief
Executive Officer (South Africa)
of Phumelela Gaming and Leisure
Limited, the leading wagering
operator in South Africa. His
previous experience includes
the development of casino,
bookmaking and gaming
opportunities for British
bookmaking company
Ladbrokes (formerly part
of the Hilton Group Plc).
David holds a Bachelor of Science
(Honours) and a Masters of
Business Administration.
22
Damien joined Tabcorp in
September 2003. He was Tabcorp’s
Deputy Chief Financial Officer,
being responsible for Tabcorp’s
Corporate Finance function
including Treasury and Investor
Relations, and became Chief
Financial Officer upon
implementation of the Tabcorp
demerger in June 2011.
He previously had a 21 year career
with BHP Billiton with key finance
roles in both Australia and Asia.
These included both operational
finance and corporate roles.
Damien holds a Bachelor of
Commerce and is a member
of CPA Australia.
Kerry joined Tabcorp in February
2005. She has extensive
commercial, legal, litigation and
government relations experience
having worked with Allens Arthur
Robinson, Clayton Utz and the
Australian Postal Corporation,
where she held the position of
General Counsel.
Kerry holds a Bachelor of Arts
and a Bachelor of Laws, and is
a qualified mediator.
She is a member of the Australian
Corporate Lawyers Association
(ACLA) General Counsel Group
and a member of the Australian
Institute of Company Directors.
Kerry is also a Member of
the Victorian Government’s
Responsible Gambling
Advisory Committee.
Merryl commenced with Tabcorp
in October 1990 and has held
numerous positions across a
range of discipline areas including
human resources, training and
development, communications
and sales. She became Executive
General Manager – Human
Resources in June 2011 following
the implementation of the
Tabcorp demerger.
Merryl holds a Masters of
Business Administration
(Executive) and a Bachelor
of Arts.
Since joining Tabcorp in June
2005, Doug has held several senior
finance and strategy roles within
Tabcorp’s wagering and media
businesses. Most recently,
Doug was Executive General
Manager Strategy and Business
Development before commencing
his current role in July 2013.
He previously held senior finance
and general management roles
in medium to large multinational
organisations in the service
and manufacturing industries,
including George Weston Foods
Limited, Optus Group, and
Alexander & Alexander Group.
Doug holds a Bachelor of
Commerce and is a member
of Institute of Chartered
Accountants.
Tabcorp Concise Annual Report 2014 Craig Nugent
Chief Operating Officer –
Wagering
Brendan Parnell
Chief Operating Officer –
Media and International
Adam Rytenskild
Chief Operating Officer –
Keno and Gaming
Kim Wenn
Chief Information
Officer
Craig joined Tab Limited in
1999 as Manager Oncourse
Wagering and International
Sales. Throughout his time with
Tabcorp, and Tabcorp subsidiaries
Tab Limited and Luxbet, he has
held Senior Executive roles in
sportsbetting, oncourse wagering,
international sales and fixed
odds. He commenced his current
role in March 2014.
Prior to joining Tabcorp, he
held management roles in
the New South Wales racing
industry bodies – Australian
Jockey Club and Sydney
Turf Club.
Brendan commenced with Sky
Channel in 1995 and in 2003
became General Manager
Broadcasting. In 2007 he was
appointed as Chief Operating
Officer of Tabcorp’s Media
and International division
overseeing the television,
radio and international
wagering operations.
He began his broadcasting
career as a news and sports
reporter/producer in regional
television including Seven
Network Queensland where
he was Network Sports Editor.
Brendan holds a Graduate
Certificate of Management and
a Bachelor of Arts (Journalism).
He is a Graduate Member
of the Australian Institute
of Company Directors.
Adam joined Tabcorp in April
2000 as State Manager – Retail
and since then he has held
numerous senior management
roles. Following Tabcorp’s
demerger in June 2011, Adam was
appointed to the role of Executive
General Manager – Distribution,
responsible for leading Tabcorp’s
customer distribution channels
including TAB (retail, digital,
phone, oncourse), Keno (retail)
and TGS. He commenced his
current role in March 2014.
He has extensive experience
managing and leading multi-
channel businesses, including a
nine year career with Mobil Oil
prior to joining Tabcorp.
Adam holds a Masters of Business
Administration and has attended
the Senior Executive Programme
at London Business School.
Kim commenced at Tabcorp in
April 2005 and has held several
positions in Tabcorp’s wagering
technology field before being
appointed to her current role in
June 2011 following Tabcorp’s
demerger.
Previously, she has work in
research, development, logistics
and project management within
the information technology
industry at Quest Software,
Microlistics, Tech-Precision
and Amcor.
Kim holds a Masters in
Management and Technology,
and a Bachelor of Science
(Computing).
23
Tabcorp Concise Annual Report 2014 Corporate governance statement
1. Tabcorp’s approach to corporate governance
Tabcorp’s Board of Directors and management strongly support the principles of good
corporate governance, and are committed to building on the Group’s strong reputation
for integrity. This is particularly important given the highly regulated industry in which
the Tabcorp Group operates, and is essential for increasing our opportunities to win
and retain gambling licences, and for the long term sustainability of our businesses.
This corporate governance statement outlines the Tabcorp Group’s main corporate
governance practices and policies in place during the financial year and at the date
of this report. The Group’s corporate governance practices are reviewed regularly and
will continue to be developed and refined to meet the needs of the Group and taking
account of best practice. Since the start of the 2014 financial year, a key change to the
Group’s corporate governance practices was that the Board considered Elmer Funke
Kupper to be independent from 8 June 2014 (refer section 5).
In developing the appropriate corporate governance practices, the Group takes into
account all applicable legislation and recognised standards, which include, but are
not limited to:
• Corporations Act 2001 (Cth) (Corporations Act);
• Australian Securities Exchange (ASX) Listing Rules;
• ASX Corporate Governance Principles and Recommendations as referred to in section 2 below;
• Legislation governing the licences issued to the Tabcorp Group to conduct gambling
and related activities; and
• Australian Standard AS 8000 – Good Governance Principles.
W This corporate governance statement and other related information is available from
the corporate governance section of Tabcorp’s website at www.tabcorp.com.au/about-
us_corporate-governance.aspx
2. ASX Corporate Governance Principles and Recommendations
The Tabcorp Group adopts the ‘Corporate Governance Principles and Recommendations
with 2010 Amendments, 2nd edition’ published by the ASX Corporate Governance Council
(ASX CGC). The Group complies with these principles and recommendations as described
in this corporate governance statement and has processes in place to maintain ongoing
compliance. Statements in this corporate governance section have been referenced to the
applicable ASX CGC Recommendation and compliance is indicated by the symbol ✓.
With regard to the ASX’s ‘Corporate Governance Principles and Recommendations, 3rd edition’
released in March 2014, Tabcorp is not required to report against these recommendations
until next year. However, Tabcorp already has in place practices which substantially meet
the requirements of these recommendations, and this corporate governance statement
includes additional information to address these recommendations.
24
W The ASX CGC ‘Corporate Governance Principles and Recommendations with 2010
Amendments, 2nd Edition’ is available from the ASX website at www.asx.com.au/
regulation/corporate-governance-council.htm
3. Composition of the Board
At the date of this report, the Tabcorp Board consisted of six Non Executive Directors,
including the Chairman, and the Managing Director and Chief Executive Officer. Tabcorp’s
Constitution requires that the number of Directors (not including alternate Directors) shall
not exceed 12, nor be less than three. A Director, other than any Managing Director, may
not hold office for a continuous period in excess of three years or past the third Annual
General Meeting following the Director’s last election or re-election to the Board, whichever
is the longer, without submitting for re-election. The Board has the power to appoint any
person as a Director, either to fill a casual vacancy or as an addition to the Board, subject
to receiving all necessary regulatory and certain ministerial approvals, but that person
must stand for election at the following Annual General Meeting.
The appointment and removal of the Managing Director and Chief Executive Officer
is a matter for the Board as a whole, in association with the recommendations of the
Nomination Committee.
As set out in section 11, the Nomination Committee assists the Board with the recruitment of
new Directors, election or re-election of Directors, membership of each Board Committee and
Board succession. In carrying out these responsibilities, the Board considers the knowledge,
skills, experience, competencies, diversity, qualifications, behaviours, specific areas of expertise
and personal characteristics that are desirable for Directors of Tabcorp. The Board seeks to
achieve an appropriate balance of these attributes among the Board members, and to ensure
all attributes are well represented. The Board believes it has the appropriate mix of these
attributes amongst its Directors to enable the Board to operate effectively.
As part of the process in recruiting and evaluating suitable candidates for appointment
as a Director, an external independent executive recruitment firm is retained. Furthermore,
enquiries, reference checks, checks of bankruptcy and criminal records, and validation
of educational records are carried out to satisfy the Board that the person is of sound
character and has the relevant attributes desired by the Board to be a Director of Tabcorp.
Prospective new Directors are also required to submit extensive personal information as
part of probity investigations and clearances required by applicable gambling regulators
and certain ministers prior to appointment as a Director. Such information includes in
relation to any convictions, bankruptcies, business activities, employment, education,
qualifications, sources of income, taxes paid and financial position.
Details of the Directors, their qualifications and experience are included in the Directors’
report on pages 20 and 21.
Tabcorp Concise Annual Report 2014 W Tabcorp’s Constitution is available from the Corporate Governance section of Tabcorp’s
website at www.tabcorp.com.au/about-us_corporate-governance.aspx.
W The terms of reference for each of the Board Committees are available from the
Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_
corporate-governance.aspx
✓ ASX CGC’s Recommendations 1.1, 2.1, 2.2, 2.3, 2.4, 2.6, 4.2, 4.4
5. Director independence
Directors are required to be meticulous in their disclosure of any material contract
or relationship, including relevant interests of family companies and spouses and
involvement with other companies or professional firms. Directors are required to adhere
strictly to the constraints on their participation and voting in relation to matters in which
they may have an interest, in accordance with the Corporations Act and policies of the
Tabcorp Group.
4. Responsibilities and functions of the Board and management
The Board has agreed the responsibilities and functions of the Board as a whole, and
those of Directors, the Chairman and the Managing Director and Chief Executive Officer.
The Board’s role includes:
A register of Directors’ material interests is maintained and is regularly sent to every
Director. Where Directors are involved with other companies or professional firms, which
from time to time have dealings with the Tabcorp Group, all such dealings are at arm’s
length and on normal commercial terms.
• Reviewing and approving the strategies, budgets and business plans prepared by
Details of offices held by Directors with other organisations are set out on pages 20, 21 and 38.
management;
• Assuring itself of the effectiveness of arrangements for the governance of the Tabcorp
Group including:
– The quality of the executive team;
– The appropriateness of organisational arrangements and structure; and
– The adequacy of internal controls, policies, procedures and processes;
• Overseeing performance against targets and objectives; and
• Overseeing reporting to shareholders and other stakeholders on the strategic direction,
governance and performance of the Tabcorp Group.
To assist the Board with carrying out its responsibilities and functions, certain powers
have been delegated to management, including the authority to undertake transactions
and incur expenditure on behalf of the Tabcorp Group up to specified thresholds. These
are referred to in Tabcorp’s Delegated Authorities and Approval Limits (‘DAAL’) Group Policy,
which has been agreed by the Board and management. The policy includes the financial
and non-financial matters that the Board has delegated to management, the capital and
operational expenditure approval limits applicable to each level of management, and
specific key responsibilities within each division of the Tabcorp Group.
Management provides relevant information to the Board in a concise and timely manner
to enable the Board to make informed decisions and effectively discharge their duties.
The Board regularly monitors the flow of information it receives from management,
and Directors may request additional information where necessary.
W A summary of the responsibilities and functions of the Board, Directors, the Chairman
and Managing Director and Chief Executive Officer matters are available from the
Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_
corporate-governance.aspx
✓ ASX CGC’s Recommendation 1.1, 2.3
The Board periodically assesses the independence of each Director. For this purpose,
an independent Director is a Non Executive Director whom the Board considers to be
independent of management and free of any business or other relationship that could
materially interfere with the exercise of their unfettered and independent judgment.
The Board has assessed the independence of Tabcorp’s Directors as follows:
Name
Paula Dwyer
David Attenborough
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Independence assessment
Independent
Not independent. He is Tabcorp’s Managing Director
and Chief Executive Officer
Independent
Independent
Independent
Independent
Independent
The Board has determined that all of the Non Executive Directors of Tabcorp throughout
the financial year and at the date of this report are independent Directors, with the
exception of Elmer Funke Kupper who became independent on 8 June 2014 following
a period of three years after he ceased being Tabcorp’s Managing Director and Chief
Executive Officer on 8 June 2011 in connection with the demerger of Echo Entertainment
from Tabcorp.
25
Tabcorp Concise Annual Report 2014 Corporate governance statement (continued)
In reaching its determination on independence, the Board has taken into account (in
addition to the matters set out above):
• The specific disclosures made by each Director as referred to above;
• Whether a Director is, or is associated directly with, a substantial shareholder of Tabcorp;
• Whether a Director has been employed in the last three years in any other capacity by
Tabcorp or any of its subsidiaries;
• Whether a Director personally carries on any role for the Tabcorp Group other than as a
Director of Tabcorp;
• Whether there are any related party dealings referable to a Director which are material
and require disclosure under accounting standards; and
• Whether any Director is, or is associated with, a supplier, professional adviser, consultant
to or customer of the Tabcorp Group which is material for the purposes of the ASX CGC
corporate governance recommendations, given that any payments by Tabcorp to any
such associate were less than 1% of annual earnings for both Tabcorp and the respective
associate, and that any remuneration received by a Director from any such associate was
not impacted in any way by the Tabcorp payments except as follows;
Paula Dwyer is considered by the Board as independent despite $31,928 paid by
Tabcorp to Back Page Lead Pty Ltd (BackPageLead) of which Ms Dwyer’s spouse is a
Director and has an ownership interest. The amount exceeded 1% of annual earnings
for BackPageLead during the year, however any related income received by her spouse
from BackPageLead as a consequence of the payments was not material to either
Ms Dwyer or her spouse. Further, all arrangements between Tabcorp and BackPageLead
were at arm’s length and on normal commercial terms, and Ms Dwyer did not
participate in any decisions in respect of these arrangements. The Board is satisfied
that these circumstances did not affect the independence of Paula Dwyer.
Also, Paula Dwyer and Jane Hemstritch, who are Non Executive Directors of the
Australia and New Zealand Banking Group Limited (ANZ) and Commonwealth Bank
of Australia (CBA) respectively, are considered by the Board as independent despite
Tabcorp having paid to ANZ and CBA amounts during the year which exceeded the
1% threshold of Tabcorp’s annual earnings. These payments were in relation to cross
currency interest rate swaps for US debt facilities and fees associated with syndicated
bank debt facilities. All arrangements were at arm’s length and on normal commercial
terms and Ms Dwyer and Mrs Hemstritch did not participate in any decisions in
respect of the provision of these services, and any remuneration received by Ms Dwyer
from ANZ and Mrs Hemstritch from CBA was not impacted in any way by the amounts
paid by Tabcorp. The Board is satisfied that these circumstances did not affect the
independence of Paula Dwyer and Jane Hemstritch.
Steven Gregg is considered by the Board as independent despite $336,510 paid by
Tabcorp to William Inglis & Son Limited (William Inglis) of which Mr Gregg is a Director.
The amount exceeded 1% of annual earnings for William Inglis during the year,
however all arrangements between Tabcorp and William Inglis were at arm’s length
and on normal commercial terms and Mr Gregg did not participate in any decisions in
respect of these arrangements. The Board is satisfied that these circumstances did not
affect the independence of Steven Gregg.
Elmer Funke Kupper returned to the Board of Tabcorp as an Observer in January 2012
and commenced as a Non Executive Director in June 2012 following the receipt of
all necessary regulatory approvals. The Board gave due consideration to the merits
of having Mr Funke Kupper on the Board and considers that Mr Funke Kupper’s
experience, knowledge of the market and relationships with industry partners adds
considerable value to Board deliberations. Since returning to the Tabcorp Board,
Mr Funke Kupper has attended all Tabcorp Board meetings and relevant committee
meetings, and the Board is satisfied that he continues to make a valuable contribution
to Tabcorp.
Each Director has served as a Director of Tabcorp for the following periods:
Name
Paula Dwyer
Length of service
Chairman for three years since June 2011, and a Director for nine years
since August 2005
David Attenborough Three years, since June 2011
Elmer Funke Kupper Two years, since June 2012. Previously as Managing Director
and Chief Executive Officer for four years from September 2007
to June 2011
Two years, since July 2012
Steven Gregg
Six years, since November 2008
Jane Hemstritch
Justin Milne
Three years, since August 2011
Zygmunt Switkowski Eight years, since October 2006
Tabcorp does not consider that term of service on the Board should be considered as a
factor affecting a Director’s independence and the ability to act in the best interests of
the Tabcorp Group.
The Board also has procedures in place to ensure it operates independently of management.
For example, at every Board meeting, the Non Executive Directors meet together in the
absence of executive Directors and other executives of the Tabcorp Group. Where appropriate,
executives are also excluded from certain Board discussions that relate to specific issues,
such as executive remuneration and performance, and whistleblower matters.
✓ ASX CGC’s Recommendations 2.1, 2.2, 2.3, 2.6
26
Tabcorp Concise Annual Report 2014 6. Other directorships
Directors are required continually to evaluate the number of Boards on which they serve
to ensure that they can give the time and attention required to fulfil their duties and
responsibilities. Directors are required to seek approval from the Chairman prior to
accepting an invitation to become a Director of any corporation, and in the case of the
Chairman seek approval from the Chairman of the Audit, Risk and Compliance Committee.
The Board has adopted a policy that Non Executive Directors are permitted to hold a
maximum number of four directorships of ASX listed companies, other than Tabcorp, with
a chairmanship equivalent to two directorships, subject to the discretion of the Chairman
(or in the case of the Chairman, the Chairman of the Audit, Risk and Compliance Committee).
Details of the directorships for each Director are available on pages 20, 21 and 38.
✓ ASX CGC’s Recommendations 2.1, 2.2, 2.4, 2.5
7. Board and committee meetings
The Board and its committees meet regularly to discuss matters relevant to the Tabcorp
Group. Additional meetings may be scheduled to address specific matters.
Any Director with a material personal interest in a matter being considered by the Board
must not be present when the matter is being considered and may not vote on the matter,
unless all other Directors present resolve otherwise.
The Company Secretary is responsible for coordinating and distributing materials for
Board meetings, shareholder meetings and Board Committee meetings. The Company
Secretary is also responsible for Board governance matters, monitoring Board policies
and procedures, and minutes of meetings. In relation to these matters, the Company
Secretary is accountable to the Board, through the Chairman and Committee Chairmen.
The appointment and removal of the Company Secretary is a matter for discussion by
the Board as a whole, and all Directors have access to the Company Secretary.
8. Committees of the Board
To assist the Board in achieving the highest standards of corporate governance, the
Directors involve themselves with the critical areas of the Group’s activities through
Board Committees.
The Board Committees as at the date of this report were:
• Audit, Risk and Compliance (see section 9);
• Remuneration (see section 10); and
• Nomination (see section 11).
Board Committee membership is restricted to Non Executive Directors only.
All Non Executive Directors are members of the Audit, Risk and Compliance Committee
and the Nomination Committee, in addition to membership of other Board Committees
as appointed. The Board considers that all Non Executive Directors should be members
of the Audit, Risk and Compliance Committee due to the substantial amount of risk and
compliance matters which stem from operating in the highly regulated gambling industry.
Given the relatively small size of the Tabcorp Board, and the small number of meetings of
the Nomination Committee, the Board considers it is efficient to have all Non Executive
Directors as members of the Nomination Committee. In respect of the Remuneration
Committee, the Board recognises that it is efficient to have a smaller number of Non
Executive Directors who command specialist expertise and experience to focus on and
deliberate remuneration matters before recommendations are provided to the Board
for decision. Tabcorp’s Board Committee arrangements reflect similar board committee
structures in other large Australian companies.
Each Board Committee has terms of reference which set out the roles, responsibilities,
composition and processes of each Committee. These terms of reference are reviewed
regularly.
Directors are required to attend all Board meetings, shareholder meetings and Board
Committee meetings for which they are members, subject to any unusual or unforeseen
circumstances which may prevent them from attending.
W The terms of reference for Tabcorp Board Committees are available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
The number of Board and Committee meetings and the attendance of each Director
are set out on page 48.
✓ ASX CGC’s Recommendations 2.5, 2.6, 4.4, 8.1, 8.3
✓ ASX CGC’s Recommendations 1.1, 2.4, 4.1, 4.3, 8.1
27
Tabcorp Concise Annual Report 2014 Corporate governance statement (continued)
9. Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee provides additional assurance and oversight
relating to financial accounting practices, financial and operational risk management,
compliance management, internal control systems, external reporting and the internal
and external audit functions.
The key responsibilities of the Audit, Risk and Compliance Committee are as follows:
Audit:
• Oversee compliance with statutory responsibilities relating to financial disclosure,
and approval of full-year and half-year financial statements as well as the financial
statements in the Annual Report;
• Review the activities of the internal audit function and the external auditor
(Ernst & Young) and review their performance on an annual basis;
• Review the adequacy of the Group’s internal controls;
The annual internal audit plan and the scope of work to be performed are set in consultation
with the Audit, Risk and Compliance Committee. The Committee approves the annual
internal audit plan and reviews progress and reports made pursuant to that plan.
The Audit, Risk and Compliance Committee is committed to maintaining auditor
independence and limiting the engagement of the external auditor for only audit related
services, unless exceptional circumstances necessitate the involvement of the external
auditor. The Chairman of the Audit, Risk and Compliance Committee must approve all
non-audit related work to be undertaken by the external auditor (if any). Tabcorp will
maintain the rotation of the lead external audit partner every five years or less, as required
by the Corporations Act. The external auditor attends Tabcorp’s Annual General Meeting
and is available to answer shareholder questions regarding aspects of the external audit
and their report.
Refer also to section 12 for internal control framework and section 13 for management of risk.
• Monitor related party transactions and potential conflicts of interest; and
Composition of the Audit, Risk and Compliance Committee
• Review the process for management assurance to the Board (refer to section 14
of this corporate governance statement for more information).
Chairman:
Other Members: Paula Dwyer
Jane Hemstritch
Risk and Compliance:
• Reviewing and approving the Group’s risk and compliance policies and frameworks;
• Assessing the appropriateness of risk and compliance management systems, related
control processes, and reporting systems;
• Monitoring the effectiveness of systems and processes in place to ensure compliance
requirements are being satisfied and performing adequately;
• Evaluating the effectiveness of the Group’s systems and controls to monitor and manage
risks that are significant to the fulfilment of the Group’s business objectives; and
• Ensuring that sufficient resources are dedicated to managing risk and compliance.
The Chairman of the Audit, Risk and Compliance Committee is required to meet regularly
with the external auditor in the absence of management. The Chairman of the Audit, Risk
and Compliance Committee is also required to meet with Tabcorp’s General Manager Audit,
Risk and Compliance on a regular basis.
Elmer Funke Kupper
Steven Gregg
Justin Milne
Zygmunt Switkowski
W The terms of reference for the Audit, Risk and Compliance Committee are available
from the Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au/
about-us_corporate-governance.aspx
✓ ASX CGC’s Recommendations 1.1, 2.5, 4.1, 4.2, 4.3, 4.4, 6.2, 7.1, 7.3
28
Tabcorp Concise Annual Report 2014 10. Remuneration Committee
The Remuneration Committee has responsibility for, among other things:
11. Nomination Committee
The main responsibilities of the Nomination Committee are to:
• Reviewing and making recommendations to the Board on remuneration packages
• Manage a process to identify suitable candidates for appointment to the Board and
and policies applicable to the Chairman, Directors, the Managing Director and
Chief Executive Officer, and Senior Executives reporting to the Managing Director
and Chief Executive Officer;
• Reviewing and making recommendations to the Board on the Tabcorp Group’s
general remuneration practices and policies, including terms and conditions
of any employee share ownership and option schemes, incentive performance
packages, superannuation entitlements, retirement and termination entitlements;
• Reviewing and approving participation of executives in incentive plans, including
option and share plans;
• Reviewing and making recommendations to the Board regarding the Group’s
remuneration arrangements with respect to gender;
• Reviewing with reference to market benchmarks, the remuneration arrangements
for the Managing Director and Chief Executive Officer and making recommendations
to the Board; and
• Overseeing the preparation of the annual Remuneration report.
Details relating to the remuneration of the Chairman, Directors, the Managing Director
and Chief Executive Officer, the Company Secretary and other Senior Executives of the
Tabcorp Group are set out in the Remuneration report on pages 50 to 65.
Composition of the Remuneration Committee
Zygmunt Switkowski
Chairman:
Other Members: Paula Dwyer
Steven Gregg
W The terms of reference for the Remuneration Committee are available from the
Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_
corporate-governance.aspx
✓ ASX CGC’s Recommendations 1.1, 2.5, 8.1, 8.2, 8.3
Board Committees;
• Make recommendations regarding succession planning for the Board (refer to section 25
for further information);
• Make recommendations on candidates it considers appropriate for appointment to the
Board and Board Committees, including whether the Board should support the election
or re-election of any Director required to retire at a general meeting;
• Annually review the skills, experience, expertise, diversity and attributes required of
Directors to discharge the Board’s duties and the extent to which they are represented
in the composition of the Board and each Board Committee;
• Facilitate an independent three yearly assessment of the effectiveness and performance of
the Board, Board Committees and Directors (refer to section 23 for further information); and
• Ensure that an effective Board induction process is in place (refer to section 25 for more
information).
Composition of the Nomination Committee
Chairman:
Other Members: Elmer Funke Kupper
Paula Dwyer
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
W The terms of reference for the Nomination Committee are available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
✓ ASX CGC’s Recommendations 1.1, 2.4, 2.5, 2.6
29
Tabcorp Concise Annual Report 2014 Corporate governance statement (continued)
12. Internal control framework
The Group’s strategic plan (see section 27) and a detailed budget are prepared annually
and subject to the approval of the Board. Forecasts for the Tabcorp Group and each of
the operating business units are regularly updated and reported to the Board throughout
the year to enable Directors to monitor performance against the annual budget.
The Tabcorp Group utilises an enterprise wide compliance system, which provides a
consistent and uniform approach to collating and reporting relevant information from
across all business units. The system monitors whether practices and processes designed
to ensure compliance have been operating effectively, increases the visibility of potential
issues, and assists the processes for resolving issues.
The Tabcorp Group has detailed procedural guidelines for the approval of capital
expenditure including annual budgeting, review and approval of individual proposals
and specific levels of authority between the Board, the Managing Director and Chief
Executive Officer and other levels of management.
W The standards AS 3806 – Compliance Programs and AS 8000 – Good Governance
Principles are available from SAI Global’s website at www.saiglobal.com
✓ ASX CGC’s Recommendations 1.1, 3.1, 3.3, 7.1, 7.2, 7.3
Processes for the investment of surplus cash, management of debt and currency, and
interest rate risk management have been approved by the Board and are the subject of
ongoing reporting to the Board. Tabcorp enters into interest rate swaps and cross currency
swaps to hedge interest rate and foreign exchange risk on debt. The Tabcorp Group
Treasury department is responsible for managing the Tabcorp Group’s finance facilities
and interest rate, credit, liquidity and currency risks in line with policies set by the Board.
13. Recognition and management of risk
The Tabcorp Group has in place a Risk Management Framework, policies and procedures,
which set out the roles, responsibilities and guidelines for managing financial and
operational risks associated with the Group’s businesses.
During the financial year Tabcorp’s management updated and monitored the risk profiles
for each of the Group’s operating businesses and major projects. These profiles identify the:
The Tabcorp Group’s internal control structure is reviewed and approved by the Board
Audit, Risk and Compliance Committee. This includes the role performed by the Group’s
internal audit, risk management and compliance functions.
• Nature and likelihood of occurrence for specific material risks;
• Key controls that are in place to mitigate and manage the risk;
The Tabcorp Group’s internal audit function is resourced by Tabcorp employees and
supplemented by relevant industry experts, and is independent of the external auditor.
Internal audit reports are regularly submitted to the Chief Financial Officer, to the Audit,
Risk and Compliance Committee and, where appropriate, to the Board. The Audit, Risk
and Compliance Committee approves the internal audit plan annually. Tabcorp’s General
Manager Audit, Risk and Compliance reports to the Chief Financial Officer, and is
accountable to the Chairman of the Audit, Risk and Compliance Committee regarding
the Group’s risk, compliance and internal audit functions.
The Tabcorp Compliance Policy and Framework was developed to align with:
• Australian Standard AS 3806 – Compliance Programs;
• Australian Standard AS 8000 – Good Governance Principles;
• Applicable legislation;
• The Corporate Governance Principles and Recommendations published by the ASX CGC;
• The Tabcorp Group’s organisational structure and strategy; and
• The Tabcorp Group’s Risk Management Policy and Framework.
30
• Sources and levels of assurance provided on the effective operation of key controls; and
• Responsibilities for managing these risks.
The risk profiles for each key operating business are reported to the Board Audit, Risk
and Compliance Committee and are considered as part of the annual internal audit
planning process.
The design, operation and assessment of the effectiveness of controls relating to material
risks is assessed primarily through declarations by Senior Executives who are responsible
for the operation of those controls, together with assurance activities undertaken by
Tabcorp’s Internal Audit Team and assurance activities undertaken by other assurance
providers, where applicable.
The Tabcorp Group’s Risk Management Framework is based on concepts and principles
identified in the Australian/New Zealand Standard on Risk Management (AS/NZS ISO
31000:2009).
The risk framework, policies and procedures will continue to be enhanced as the
Tabcorp Group’s existing operations develop and its range of activities expands.
The implementation of these policies and procedures is monitored and reviewed
at least annually by the Board Audit, Risk and Compliance Committee.
Tabcorp Concise Annual Report 2014 W The terms of reference for the Audit, Risk and Compliance Committee are available
from the Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au/
about-us_corporate-governance.aspx
W The standard AS/NZS ISO 31000:2009 – Risk Management is available from SAI Global’s
The Code includes, among other things, references to specific Tabcorp Group policies
regarding corruption, bribery, discrimination, bullying and harassment, equal opportunity,
diversity, insider trading, whistleblowing, conflicts of interest, social media and restrictions
on the use of the Group’s gambling products.
website at www.saiglobal.com
✓ ASX CGC’s Recommendations 7.1, 7.2, 7.3
14. Management assurance
At the Board meetings to approve the Tabcorp Group’s annual and half-yearly results,
the Board received and considered statements in writing from the Managing Director
and Chief Executive Officer and the Chief Financial Officer in relation to their opinion
of the Tabcorp Group’s system of risk oversight and management and internal control.
In addition to adhering to the high ethical standards set by the Code of Conduct,
Tabcorp’s Directors and key personnel are also required to undergo extensive probity
investigation and clearance by applicable gambling regulators and certain ministers
in Australia and overseas.
W Tabcorp’s Code of Conduct is available from the Corporate Governance section of
Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-governance.aspx
✓ ASX CGC’s Recommendation 3.1, 3.3
The certificate of assurance stated that in their opinion, the financial records have been
properly maintained, and that the financial statements had been prepared in conformity
with generally accepted accounting principles and that they gave a true and fair view of
the financial position and performance of Tabcorp and of the Tabcorp Group.
16. Tabcorp Integrity Protection Service (TIPS)
TIPS is an independent, anonymous crime and misconduct reporting service delivered
by Deloitte, an international consulting and forensic investigations specialist. It is one
of Tabcorp’s processes to prevent, detect, and respond to crime and misconduct.
The certificate of assurance also stated that the risk management and internal compliance
and control systems were operating effectively, in all material respects, based on the
AS/NZS ISO 31000:2009 – Risk Management standard adopted by the Tabcorp Group.
The certificate of assurance also included statements that all information had been
made available to the external auditor, and that there were no irregularities or significant
issues identified that would have a material impact on the Tabcorp Group.
W The standard AS/NZS ISO 31000:2009 – Risk Management is available from SAI Global’s
website at www.saiglobal.com
TIPS is available 24 hours a day, seven days a week to Tabcorp’s people and stakeholders
in Australia and overseas.
The program is managed by the Tabcorp Group’s Compliance Team and has accountability
at the highest levels with the Chairman of the Board Audit, Risk and Compliance
Committee able to access reports relating to all employees and review the action taken.
TIPS was introduced to achieve Australian and international best practice, reflecting
Tabcorp’s commitment to integrity and befitting the responsibilities of a publicly
listed company.
✓ ASX CGC’s Recommendations 1.1, 4.4, 7.2, 7.3, 7.4
15. Code of Conduct
The Tabcorp Group has a Group-wide Code of Conduct. Compliance with the Code
of Conduct and associated policies, guidelines and procedures is a requirement for
all employees, Directors and contractors of the Tabcorp Group. The Code establishes
the behaviours that are expected from all Tabcorp Group employees, Directors and
contractors, including the maintenance of ethical standards, honesty, teamwork,
efficiency, fairness, courtesy and integrity.
W Tabcorp’s commitment to integrity and information regarding TIPS are available from the
integrity section of Tabcorp’s website at www.tabcorp.com.au/sustainability_integrity.aspx
W Further information on TIPS is available from its website at www.tips.deloitte.com.au
✓ ASX CGC’s Recommendation 3.1, 3.3
31
Tabcorp Concise Annual Report 2014 Corporate governance statement (continued)
17. Responsible Gambling
The Tabcorp Group takes a leadership position in the responsible delivery of its gambling
products and support for customers.
The Tabcorp Group was one of the first Australian gambling companies to launch a
voluntary Responsible Gambling Code of Practice in 2001. As individual Australian State
and Territory governments moved to mandating their own specific responsible gambling
codes, in 2008 the Tabcorp Group replaced its Group-wide Code with individual codes. This
has enabled the Tabcorp Group to maintain its compliance with the specific requirements
in each State or Territory, while being responsive to the individual circumstances of each of
its TAB, Luxbet and Keno businesses. The Tabcorp Group will continue to refine its responsible
gambling practices and its codes to strengthen its commitment to customer care.
The Tabcorp Group has an Employee Gambling Policy which is a key component of Tabcorp’s
commitment to delivering gambling products responsibly. Directors, employees and
contractors may not gamble whilst on duty, whether on Tabcorp’s gambling products or
those of another operator. Limited exemptions apply, which require written authorisation.
Gambling off duty is subject to specific restrictions which apply to Directors, executives
and direct reports to executives, and other groups according to the nature of their work.
Further details about the Tabcorp Group’s commitment to responsible gambling are
available on page 16 of this report and on Tabcorp’s website.
W Tabcorp’s Responsible Gambling Codes are available from the Responsible Gambling
section of Tabcorp’s website at www.tabcorp.com.au/responsible-gambling.aspx
✓ ASX CGC’s Recommendations 3.1, 3.3
18. Anti-money laundering/counter-terrorism financing
The Tabcorp Group has anti-money laundering and counter-terrorism financing
(AML/CTF) programs which apply to its Wagering and Gaming Services businesses.
These programs are supported by ongoing training and communications to enable
employees to understand and keep up to date with the obligations under Tabcorp’s
AML/CTF programs and relevant legislation. Tabcorp’s Regulatory Team manages these
programs, with oversight provided by the Board Audit, Risk and Compliance Committee.
During the 2014 financial year, Tabcorp commenced a project to comprehensively review the
risk assessments, AML/CTF programs, and related systems and procedures. The initial focus
of the project is on the Group’s TAB business, and will be expanded to encompass Luxbet and
then the TGS businesses. In addition, the Tabcorp Group has integrity agreements in place
with all major sports bodies and racing industries across Australia. The agreements allow
for the sharing of information between the Tabcorp Group and sports/racing industry bodies
to promote high levels of integrity among sports and racing. The Tabcorp Group also has
integrity agreements with local and federal law enforcement bodies, national intelligence
organisations, state and federal crime commissions, corrective services and other
government and regulatory bodies.
19. Diversity
Tabcorp has a Diversity Policy in relation to diversity of the Board and senior management
within the Tabcorp Group. The Board Nomination Committee is responsible for overseeing
the policy, monitoring Tabcorp’s diversity strategy and reviewing progress against
measurable objectives established to achieve Tabcorp’s diversity goals.
The Board has set an objective to have by 2015 at least 33% female representation
in senior management roles, which comprises the Senior Executive Leadership Team
(Chief Executive Officer and direct reports) and the Senior Management Team
(direct reports to the Senior Executive Leadership Team, and their direct reports).
During 2014, the Tabcorp Group committed to a focused and accelerated approach
and plan to increasing gender diversity at all levels of Tabcorp. The program is supported
by a Diversity Council (comprised of the Senior Executive Leadership Team) and has four
overarching strategic themes:
• Build an inclusive workplace;
• Source and acquire diverse leadership talent;
• Engage, grow and retain our existing women; and
• Educate our leaders.
32
Tabcorp Concise Annual Report 2014 Progress has been demonstrated across all management levels, as shown in the results
achieved below. Whilst maintaining this effort, the focus will shift to attracting women
to Tabcorp in entry-level, permanent roles.
As at 30 June 2014, the proportion of women employees, and the change since
30 June 2013 (if any), across the Tabcorp Group was:
• 33% of the Non Executive Directors;
• 33% of the Senior Executive Leadership Team (up 3%);
• 35% of the combined Senior Executive Leadership Team and Senior Management Team
(up 6%); and
• 51% of the entire Tabcorp Group (up 4%).
As the diversity objective set by the Board has now been met, the Board and senior
management will set a revised target to apply from the 2015 financial year.
W Tabcorp’s Diversity Policy is available from the corporate governance section of
Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-governance.aspx
✓ ASX CGC’s Recommendations 3.2, 3.3, 3.4 and 3.5
20. Securities trading policy
Tabcorp has a policy regarding trading in Tabcorp securities which applies to all Directors,
employees and contractors. This policy also extends to any person or entity, which may
in the circumstances be reasonably associated with the Tabcorp Group or any Director,
employee or contractor (for example a spouse, dependent children, family trust, family
company or Joint Venture partner).
Directors, executives reporting directly to the Managing Director and Chief Executive
Officer (‘Executives’), all direct reports to those Executives (‘Executive Direct Reports’),
and their associates are not permitted to trade in Tabcorp’s securities during Blackout
Periods and subject to the processes set out in the policy.
The applicable Blackout Periods:
• Commence on 1 January and end on the day Tabcorp announces its half-year results
(ASX Appendix 4D) inclusively; and
• Commence on 1 July and end on the day Tabcorp announces its preliminary final year
results (ASX Appendix 4E) inclusively.
The Tabcorp Board, Chairman, Chief Executive Officer or Company Secretary may also
decide other Blackout Periods at any time.
Approval for trading in a Blackout Period or within twelve months of acquisition will only
be granted in exceptional circumstances and where the trade is the only reasonable course
of action available. The nature of exceptional circumstances and the approval process to
be followed are set out in the policy.
Directors are required to obtain written approval from the Chairman prior to a Director
or an associate of a Director trading in Tabcorp securities. In the case of a proposed trade
by the Chairman or their associate, approval is required from the Chairman of the Audit,
Risk and Compliance Committee.
If any Executive or Executive Direct Report or any associate of an Executive or Executive
Director Report wishes to trade in Tabcorp’s securities at any time, the Executive or
Executive Direct Report must obtain the prior written approval of either the Company
Secretary or the Managing Director and Chief Executive Officer.
The policy also contains restrictions on margin lending. Directors, Executives and Executive
Direct Reports must receive prior consent from the Chairman (in the case of the Chairman,
prior consent from the Chairman of the Audit, Risk and Compliance Committee) before
entering into margin loans or similar financing arrangements.
The details of Tabcorp securities held by Directors are available in the Directors’ report
on page 47.
W Tabcorp’s Securities Trading Policy is available from the Corporate Governance section
of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-governance.aspx
✓ ASX CGC’s Recommendations 3.2, 3.3
33
Tabcorp Concise Annual Report 2014 Corporate governance statement (continued)
21. Continuous disclosure
The Tabcorp Group has a Disclosure and Investor Communications Policy and procedures
are in place to ensure that information is reported to the ASX in accordance with the
continuous disclosure requirements of its Listing Rules. The Board reviews Tabcorp’s
compliance with its continuous disclosure obligations at each of its meetings.
The Tabcorp Group’s Executive General Manager – Corporate, Legal and Regulatory, in her
capacity as Company Secretary, is responsible for coordinating disclosure of information
to the ASX, the Australian Securities and Investments Commission and shareholders.
The Company Secretary is referred to as the Disclosure Officer in this policy.
22. Independent professional advice
An individual Director may, after discussion with the Chairman, and advising the Managing
Director and Chief Executive Officer, obtain independent professional advice at the expense
of the Tabcorp Group. Such advice is to be made available to all other Directors.
Board Committees and Committee members may also obtain independent professional
advice, subject to the terms of reference for the applicable committee.
W The terms of reference for each Board Committee are available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
The Disclosure Officer must be kept informed by management of disclosure related issues,
and each Executive Committee member must notify the Disclosure Officer immediately of
any information that may require disclosure.
✓ ASX CGC’s Recommendations 1.1, 2.1, 2.6, 8.1
In addition to the Disclosure Officer, there are a limited number of authorised Tabcorp
spokespersons. Only authorised Tabcorp spokespersons may speak on the Group’s behalf
to people such as analysts, brokers, journalists and shareholders, and comments must be
limited to their expertise. If an employee of the Tabcorp Group is not an authorised Tabcorp
spokesperson, and receives an enquiry about the Group from a journalist, analyst or other
external party, they must refer the enquiry to an authorised Tabcorp spokesperson.
Authorised Tabcorp spokespersons liaise closely with the Disclosure Officer to ensure all
proposed public comments are within the bounds of information that is already in the
public domain, and/or is not material.
W Tabcorp’s Disclosure and Investor Communications Policy is available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
✓ ASX CGC’s Recommendations 5.1, 5.2
23. Performance assessment
The Board conducted an internal Board assessment and review during the financial
year ended 30 June 2014. The assessment and review evaluated the Board structure
and its role, Board meetings and processes, the Board’s relationship with management,
the effectiveness of each Board Committee, and the performance of the Chairman, the
Chairman of each Committee and each individual Director. The assessment took into
account responses from Directors, and feedback from management, with a view to
enhancing the effectiveness of the Board and individual Director contributions, and
improving Board processes, practices and governance arrangements.
The Nomination Committee is responsible for facilitating an independent review of the
performance and effectiveness of the Board, its Committees and Directors every three
years. Due to the significant changes stemming from the demerger of Tabcorp’s former
casinos business in 2011, the Board considered it would be inappropriate to undertake an
externally facilitated independent assessment until sufficient time had elapsed since the
demerger was completed. Such timing would allow any new Directors adequate time to
become acquainted with Tabcorp and its Board processes, and enable the Board to receive
the optimal benefit from undertaking such an assessment.
34
Tabcorp Concise Annual Report 2014 Formal performance and development evaluations are conducted every six months for
each employee, including executives and the Managing Director and Chief Executive
Officer. Individual performance is assessed using a balanced scorecard setting out specific
targets that are aligned to and are supportive of the Tabcorp Group’s annual objectives
and whether they have exhibited Tabcorp’s Ways of Working. Refer to pages 55 and 56
of the Remuneration report for further information. Performance assessments for Senior
Executives were undertaken in relation to the end of the financial year and half year in
accordance with the process disclosed above.
Refer to section 3 for information regarding the attributes the Board considers when
appointing new Directors and the process involved.
Directors regularly discuss succession matters at meetings of the Board and the
Nomination Committee.
W The terms of reference for the Nomination Committee are available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
W The terms of reference for the Nomination Committee are available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
✓ ASX CGC’s Recommendation 2.4, 2.6
✓ ASX CGC’s recommendation 1.2, 2.4, 2.5, 2.6
24. Succession planning
The Tabcorp Group has a succession plan for members of its Board and senior management.
This plan identifies the best candidates for leadership and management roles so that
the Board and Executive Committee comprise high calibre people with the necessary
and desirable experience and competencies that best meet the organisation’s needs.
The Nomination Committee is responsible for making recommendations to the Board to
facilitate the orderly succession of Board membership and to manage a process to identify
suitable candidates for appointment to the Board and for the optimal composition of
Board Committees.
25. Induction
The appointment of any new Director is subject to regulatory and certain ministerial
approvals. While these approvals are being sought, the person, with the approval of the
regulators, may attend Board and Committee meetings as an Observer. This assists their
transition into their role, but they may not vote on any matter.
Each Observer undertakes an induction program and is provided with access to Tabcorp’s
online Directors’ Knowledge centre, the Tabcorp Group’s strategic plan and other materials
to assist them to participate fully and actively in all Board decision making at the earliest
opportunity. In addition, upon being invited to join the Tabcorp Board, every Observer
receives a letter of appointment setting out the key information and terms and conditions
applicable to their appointment as a Director of Tabcorp.
35
Tabcorp Concise Annual Report 2014 Corporate governance statement (continued)
The induction program aims to provide the Observer with the relevant knowledge
regarding the processes of the Tabcorp Board, Board culture, the role and responsibilities
of a Tabcorp Director, the Tabcorp Group’s strategic direction, the nature of the Group’s
businesses, industry matters, the Group’s financial position, key senior management,
operational and risk management practices and the major issues facing the Tabcorp
Group. The induction program includes meetings with each Senior Executive Leadership
Team member and their leadership team, site tours, and specific matters of interest
to each Observer.
The Board Nomination Committee is responsible for ensuring that an effective induction
process is in place, and reviews its effectiveness in accordance with industry best practice
and including incorporation of feedback from newly appointed Directors. The Company
Secretary is responsible for organising and facilitating the induction program for new
Directors.
Tabcorp has a formal induction program for all employees, including executives. This
program provides information about the structure and operations of the Tabcorp Group,
Tabcorp’s Code of Conduct, key employee policies (such as the use of Tabcorp’s gambling
products, harassment and bullying), occupational health and safety, and equal opportunity.
In addition, employees receive orientation regarding their specific responsibilities, duties
and rights, meet with executives and team members and undergo familiarisation in
their workplace.
Employees have agreed position descriptions and balanced scorecards that set out their
duties, responsibilities, objectives and key performance indicators. Letters of appointment
or employment contracts set out other key terms of employment, including term of office,
rights, responsibilities, and entitlements on termination of employment.
W The terms of reference for the Nomination Committee are available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
✓ ASX CGC’s Recommendation 1.1, 3.1, 3.3
26. Directors’ continuing education
All Directors have access to continuing education to update and enhance their skills and
knowledge to enable them to continue to carry out their duties as Directors in an efficient
and knowledgeable manner.
The continuing education program includes information concerning key developments in
the Tabcorp Group and the industry and environments within which it operates, including
site visits to the Group’s properties, updates to relevant policies, discussion of relevant legal
developments, corporate governance updates and other matters of interest for Directors.
✓ ASX CGC’s Recommendation 1.1, 2.5
27. Group strategic planning
Tabcorp has a formal strategic planning process whereby a strategic plan is approved by
the Board each year. The intent of the annual review is to consider a range of strategies
and provide management with guidance on those strategies that in the Board’s opinion
will enhance shareholder value. During the 2013 financial year, the Group’s strategic plan
was assessed and validated by an independent external advisor.
✓ ASX CGC’s Recommendation 1.1
28. Sustainability
Tabcorp is committed to the long term sustainability of its operations and industry,
and aims to optimise the social, environmental, workplace and economic impact of
its operations for the benefit of all stakeholders.
A key priority for Tabcorp is promoting the responsible service of its products. Refer
to section 17 for information about how Tabcorp promotes responsible gambling.
In addition to promoting responsible gambling, Tabcorp’s other key sustainability
areas include governance, ethics and integrity, supporting the community, workplace
practices/employees, customer engagement and procurement.
Tabcorp’s commitment to responsible gambling, its employees and community well-being
is discussed on pages 16 to 19 of this report, and also under the Sustainability section of
the Tabcorp website.
36
Tabcorp Concise Annual Report 2014 Although the operations of the Tabcorp Group are considered to have minor impact on
the environment, Tabcorp is committed to protecting the environment and minimising
the impact wherever appropriate. Tabcorp’s environmental performance is set out on
page 18 and in the Directors’ report on page 47 of this report.
Tabcorp’s commitment to long term sustainability is recognised by its inclusion in several
global investment indices:
• Dow Jones Sustainability Index.
• FTSE4Good index.
In the last annual Dow Jones Sustainability Index assessment released in September
2013, Tabcorp was recognised as the leader in the global gambling sector and received
a score of 100% for promoting responsible gambling, anti-crime policy/measures and
brand management. These results are a reflection of Tabcorp’s long term commitment
to sustainability, which has seen Tabcorp recognised as the overall global leader in the
gambling industry in eight out of the last nine annual assessments and Tabcorp receiving
100% for promoting responsible gambling in the past seven successive assessments.
W Details about Tabcorp’s sustainability practices are available from the Sustainability
section of Tabcorp’s website at www.tabcorp.com.au/sustainability.aspx
✓ ASX CGC’s Recommendation 3.1
29. Engaging with shareholders
The Tabcorp Group’s Disclosure and Investor Communications Policy sets out Tabcorp’s
procedures and guidelines relating to continuous disclosure and the communication of
information to investors. Information is communicated to shareholders through Tabcorp’s
website, Annual Report, dividend mailings, email broadcasts, the ASX, and other means
where appropriate.
The Tabcorp Group’s website provides stakeholders with a range of information about the
Group, including its operations, history, strategies, values, brands, community involvement,
share price performance and shareholder reports. There is also a facility for any interested
person to receive email notifications of all major Tabcorp news releases published on the
website. Major announcements, such as the annual and half-year results and the Annual
General Meeting, are webcast live on Tabcorp’s website. Webcasts are archived and
accessible on the website for at least twelve months.
Tabcorp provides a service for its shareholders to receive all shareholder related
communications electronically, including dividend statements, notices of meeting, and the
Annual Report. This email service provides a quick and convenient means for receiving this
information while reducing costs and being environmentally friendly. Shareholders can also
use the website to lodge their proxy appointment prior to the Annual General Meeting.
Dedicated shareholder relations personnel are available to assist in responding promptly
to all shareholder enquiries. Contact details are available on page 77 of this report. Tabcorp
has a Shareholder Enquiries and Complaints Policy that sets out the way in which Tabcorp
addresses concerns and feedback from shareholders.
Tabcorp encourages its shareholders to participate fully at its Annual General Meeting.
Important issues are presented to shareholders as single resolutions and full discussion
of each item is encouraged. Explanatory memoranda, where considered appropriate, are
included with the notice of Annual General Meeting in respect of items to be voted on at
the meeting.
Other shareholder related information is available at the back of this report, on pages
74 to 76.
W Tabcorp’s website is available at www.tabcorp.com.au
W Shareholders can elect to receive all communications electronically by following the
instructions on Tabcorp’s website at www.tabcorp.com.au/investor_holder_eshare.aspx
W Sign up to receive email notification of major Tabcorp news releases through the
News section of Tabcorp’s website at www.tabcorp.com.au/news_tabcorp-enews.aspx
W Tabcorp’s Disclosure and Investor Communications Policy is available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
W Tabcorp’s Shareholder Enquiries and Complaints Policy is available from the Corporate
Governance section of Tabcorp’s website at www.tabcorp.com.au/about-us_corporate-
governance.aspx
✓ ASX CGC’s Recommendation 6.1, 6.2
37
Tabcorp Concise Annual Report 2014 Directors’ report
The Directors of the Company submit their report for the consolidated entity comprising
the Company and its controlled entities (collectively referred to as ‘the Tabcorp Group’) in
respect of the financial year ended 30 June 2014.
1. Directors
The names and details of the Company’s Directors in office during the financial year and
until the date of this report (except as otherwise stated) are set out on pages 20 and 21.
2. Directorships of other listed companies
The following table shows, for each person who served as a Director during the financial year
and up to the date of this report (unless otherwise stated), all directorships of companies
that were listed on the ASX or other financial markets operating in Australia, other than
Tabcorp, since 1 July 2011, and the period for which each directorship has been held.
Name
Paula Dwyer
Listed entity
Astro Japan Property Group (i)
Australia and New Zealand
Banking Group Limited
Foster’s Group Limited
Healthscope Limited (ii)
Leighton Holdings Limited
Suncorp Group Limited (iii)
Period directorship held
February 2005 to December 2011
April 2012 to present
May 2011 to December 2011
June 2014 to present
January 2012 to May 2014
April 2007 to February 2012
David Attenborough Nil
Elmer Funke Kupper ASX Limited
Steven Gregg
Jane Hemstritch
Justin Milne
October 2011 to present
March 2009 to May 2012
Austock Group Limited
October 2012 to present
Challenger Limited
Goodman Fielder Limited
February 2010 to present
Commonwealth Bank of Australia October 2006 to present
Lend Lease Group
Santos Limited
pieNETWORKS Limited
NetComm Wireless Limited
Quickflix Limited
September 2011 to present
February 2010 to present
March 2011 to February 2012
March 2012 to present
July 2011 to November 2012
February 2011 to August 2013
November 2010 to present
September 2005 to present
Zygmunt Switkowski Lynas Corporation Limited
Oil Search Limited
Suncorp Group Limited (iii)
(i)
Ms Dwyer was a Director of Astro Japan Property Group Limited and Astro Japan Property Management Limited which
were associated with listed stapled securities of the Astro Japan Property Group.
(ii) Healthscope Limited recommenced listing on the ASX on 28 July 2014.
(iii) Includes the period as a Director of Suncorp-Metway Limited prior to the corporate restructure of the Suncorp Group.
38
3. Company Secretaries
Kerry Willcock joined the Tabcorp Group in February 2005 as Executive General Manager,
Corporate and Legal. She holds a Bachelor of Arts and a Bachelor of Laws, and is a qualified
mediator. She has extensive commercial, legal, litigation and government relations
experience having worked with Allens Arthur Robinson, Clayton Utz and the Australian
Postal Corporation, where she held the position of General Counsel. Kerry is a Member
of the Australian Corporate Lawyers Association General Counsel Group and a Member
of the Australian Institute of Company Directors. Kerry is also a Member of the Victorian
Government’s Responsible Gambling Advisory Committee.
Michael Scott was appointed as an additional Company Secretary on 8 August 2012. He
has been assistant to the Company Secretary since joining the Tabcorp Group in September
2002. He holds a Graduate Diploma of Applied Corporate Governance and a Bachelor of
Land Information (Cartography). Michael is a Fellow of Governance Institute of Australia,
Graduate Member of the Australian Institute of Company Directors and Fellow of
Leadership Victoria’s Williamson Community Leadership Program.
4. Principal activities
The principal activities of the Tabcorp Group during the financial year comprised the provision
of gambling and entertainment services. The Tabcorp Group’s principal activities remain
unchanged from the previous financial year, except as disclosed elsewhere in this report.
5. Operating and financial review of the Tabcorp Group
The financial results of the Tabcorp Group for the financial year ended 30 June 2014 relate
to the Tabcorp Group’s operations, which comprise its four businesses of Wagering, Media
and International, Gaming Services, and Keno.
In the prior financial year ended 30 June 2013, the Tabcorp Group experienced a number
of significant changes as a result of the Victorian Government’s decision to move to a new
industry structure for gambling from 16 August 2012. These changes were as follows:
• The Tabcorp Group’s wagering operations transitioned to the new Victorian Wagering
and Betting Licence and a new Victorian Wagering Joint Venture commenced in which
the Tabcorp Group has a 50% interest (the Tabcorp Group had a 75% interest in the
previous joint venture).
• The new Tabcorp Gaming Solutions (TGS) business commenced operations.
• The Tabcorp Group’s former Victorian Tabaret Gaming business ceased operations.
Tabcorp Concise Annual Report 2014 A summary of the Tabcorp Group’s financial performance for the year ended 30 June 2014
and comparison to the prior financial year is shown in the table below.
Refer to section 6 for information about the financial and operational performance
of each business unit within the Tabcorp Group.
Summary financial performance of the Tabcorp Group
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
Depreciation and amortisation
Impairment*
EBIT
NPAT from continuing operations
NPAT (including discontinued operations)
* Victorian Keno Licence impairment in 2013
2014
$m
2,039.8
(1,120.3)
(433.4)
(164.4)
-
321.7
149.4
129.9
2013
$m
2,003.2
(1,097.2)
(414.2)
(151.1)
(18.6)
322.1
147.6
126.6
Change
%
1.8
2.1
4.6
8.8
(100)
(0.1)
1.2
2.6
Reported net profit after income tax (NPAT) of the Tabcorp Group for the financial year was
$129.9 million, which was 2.6% above the previous financial year. NPAT from continuing
operations for the financial year was $149.4 million, which was 1.2% above the previous
financial year.
The reported NPAT for the 2014 financial year was impacted by a loss of $19.5 million
comprised of the Health Benefit Levy (HBL) and associated costs. The HBL related to the
former Tabaret Victorian Gaming business and is reported as a discontinued operation
(refer to section 7.4).
Revenue was $2,039.8 million, which was 1.8% above the previous financial year.
The Tabcorp Group’s performance in the 2014 financial year demonstrates the benefits
of being diversified across four businesses, with market-leading brands and a unique
multi-product, multi-channel distribution model.
The strong performance of our Wagering business was driven by excellent growth in
fixed odds and digital wagering. Media and International again delivered a positive
earnings result, despite incurring one-off restructuring charges.
The TGS business has built on the solid foundation in Victoria by successfully entering
New South Wales. TGS is now well placed for further expansion. Revenues in our Keno
business were flat and with new products set for launch it is well positioned to grow
in the 2015 financial year.
Shareholders’ funds as at the end of the financial year totalled $1,481.4 million, which
was 4.8% above the previous financial year.
5.1. Earnings per share
In respect of continuing operations, basic earnings per share for the period were
19.8 cents, down 1.0% on the previous financial year, and diluted earnings per share
for the period were 19.7 cents, down 1.5% on the previous financial year.
Total basic earnings per share were 17.2 cents, and total diluted earnings per share
were 17.1 cents, both representing no change on the previous financial year.
Earnings per share are disclosed in note 6 to the financial report.
5.2. Dividends
A final dividend of 8 cents per share has been announced. The final dividend will be fully
franked and payable on 24 September 2014 to shareholders registered at 14 August 2014.
The ex-dividend date is 12 August 2014.
Dividends payable in respect of the full year totalled 16 cents per share fully franked, which
represents a dividend payout ratio of 81% of full year NPAT from continuing operations.
The Board intends that the target dividend payout ratio will increase to 90% of NPAT for
the 2015 financial year.
Tabcorp’s Dividend Reinvestment Plan (DRP) continues to operate in respect of this final
dividend, however no discount or underwriting is applicable.
The following dividends have been paid, declared or recommended by the Company since
the end of the preceding financial year:
2014 final dividend
Final fully franked dividend for 2014 of 8 cents per share on ordinary shares as
announced on 7 August 2014 with a record date of 14 August 2014 and payable
on 24 September 2014.
2014 interim dividend
Interim fully franked dividend for 2014 of 8 cents per share on ordinary shares as
announced on 6 February 2014 with a record date of 17 February 2014 and payable
on 24 March 2014.
2013 final dividend
Final fully franked dividend for 2013 of 8 cents per share on ordinary shares as
announced on 9 August 2013 with a record date of 20 August 2013 and payable
on 24 September 2013.
$m
61.0
60.3
59.6
Further information regarding dividends may be found in note 5 to the financial report.
39
Tabcorp Concise Annual Report 2014 Directors’ report (continued)
6. Operating and financial review of each business
The Tabcorp Group’s structure comprises the following four businesses:
• Wagering;
• Media and International;
• Gaming Services; and
• Keno.
The activities and results for these continuing businesses during the financial year are
discussed below.
6.1. Wagering business
The Tabcorp Group conducts wagering activities under the TAB brand in Victoria and
New South Wales through a network of agencies, hotels and clubs; provides on-course
totalizators at thoroughbred, harness and greyhound metropolitan and country race
meetings; and via the internet, mobile devices, phone and pay TV. TAB customers can
wager on a wide range of totalizator and fixed odds betting products offered on racing
and sporting events. In Victoria, the business operates under a 50/50 Joint Venture with
the Victorian Racing Industry which commenced in August 2012 (previously Tabcorp had
a 75% interest in the former Victorian Joint Venture). The Victorian Wagering and Betting
Licence expires in August 2024, but the licence may be extended for a further period of up
to two years at the discretion of the responsible minister. The New South Wales Wagering
Licence expires in March 2097 with the retail exclusivity period expiring in June 2033. Refer
to section 7.1 regarding the New South Wales Wagering Licence retail exclusivity extension.
Tabcorp’s Wagering business operates Luxbet, offering a racing, sport and novelty product
bookmaking service to Australian customers by phone, internet and mobile devices based
in the Northern Territory. Luxbet operates under a licence to conduct a racing and sports
bookmaker business in the Northern Territory. This licence expires in June 2015 and Tabcorp
intends to apply to renew this licence.
The business operates Trackside, a computer simulated racing product, in Victoria and
New South Wales, and also licenses the product for use in other domestic and overseas
jurisdictions.
In addition, the Tabcorp Group has a 50% interest in the Premier Gateway International
(PGI) joint venture in the Isle of Man, which provides wagering services for PGI customers
and pooling services to the Tabcorp Group and other international wagering operators in
various jurisdictions outside Australia.
40
Summary financial performance of the Wagering business
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA*
Depreciation and amortisation
EBIT
* EBITDA is non-IFRS financial information
2014
$m
1,574.7
(1,008.5)
(284.0)
282.2
(106.8)
175.4
2013
$m
1,558.0
(1,010.8)
(282.2)
265.0
(97.7)
167.3
Change
%
1.1
(0.2)
0.6
6.5
9.3
4.8
Total Wagering business revenues (including the Victorian Racing Industry’s interest) grew
1.8% in the 2014 financial year. After accounting for the allocation to the Victorian Racing
Industry under the 50/50 Joint Venture arrangements (75/25 previously) which commenced
in August 2012, reported Wagering revenues were $1,574.7 million, up 1.1%. Wagering
revenue growth of 2.4% in the second half improved relative to first half growth of 1.3%.
Operating expenses were $284.0 million, up 0.6%. EBITDA was $282.2 million, up 6.5%.
Fixed odds growth was again the highlight with revenues up 26.5% to $511.5 million.
This was made up of:
• Fixed odds racing revenues of $322.9 million, up 37.0%, primarily driven by an expansion
in the number of markets offered and ongoing shifts in customer preferences towards
fixed odds products.
• Fixed odds sports revenues of $188.6 million, up 12.7%.
Totalizator revenues were $1,262.9 million, down 6.3%, impacted by the shift to fixed
odds and lower premium customer volumes. Luxbet revenues were $47.9 million,
up 22.5%. Trackside revenues were $89.3 million, up 1.1%.
Tabcorp led the market in the Soccer World Cup, which produced revenues across
TAB and Luxbet in the 2014 financial year of $14.9 million and in the 2015 financial
year of $10.3 million. TAB’s successful marketing initiatives were driven by the
‘Back Gold’ campaign led by former Socceroos goalkeeper, Mark Schwarzer.
Tabcorp’s combination of a leading digital offer and exclusive retail channels gives
customers a superior service and differentiates it from online-only wagering operators.
Tabcorp Concise Annual Report 2014 The digital channel was a driver of Tabcorp’s Wagering growth, with turnover up 18.2%
to $2,900.0 million. Mobile devices made up 54% of Tabcorp’s digital turnover, up from
35% in the 2013 financial year. New South Wales retail turnover was $3,819.1 million,
down 1.2%, and Victorian retail turnover was $2,762.2 million, down 4.9%. Performance in
the New South Wales and Victorian retail wagering channels improved in the second half
of the 2014 financial year relative to the first half, despite continued soft retail conditions.
Broadcast rights and racing industry contributions from Tabcorp’s International business
were $73.5 million, up 15.6%.
Tabcorp continues to work towards concluding media rights negotiations for New South
Wales and Victorian thoroughbred racing content and achieving a fair commercial
outcome for all parties.
6.2. Media and International business
The Tabcorp Group has specialist television and radio operations focused on the racing
industry and other associated content. The business operates three Sky Racing television
channels and broadcasts thoroughbred, harness and greyhound racing and other sports
to audiences in TAB outlets, hotels, clubs, other licensed venues, and into homes to pay TV
subscribers. The business manages the export of Australian racing to 52 other countries
(as at 31 December 2013) which includes vision, form guides and wagering data, and also
the import of racing content to Australian customers. The business also operates the Sky
Sports Radio network which broadcasts throughout New South Wales, and has advertising
and sponsorship arrangements with Radio Sport National. This business supports the
wagering and betting operations of the Tabcorp Group by engaging customers through
the provision of television and radio broadcasts of racing product into licensed venues,
racetracks and homes.
Summary financial performance of the Media and International business
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
2014
$m
220.4
(28.0)
(123.9)
68.5
(9.8)
58.7
2013
$m
207.6
(22.6)
(118.0)
67.0
(9.3)
57.7
Change
%
6.2
23.9
5.0
2.2
5.4
1.7
Tabcorp’s Media and International business continued to benefit from the expanded export
of vision and co-mingling. Revenues grew 6.2% to $220.4 million. Operating expenses were
$123.9 million, up 5.0%, with expense growth partly attributable to the acquisition of Sky’s
US vision agent, now rebranded Sky Racing World US, and one-off restructure charges.
EBITDA was $68.5 million, up 2.2%.
6.3. Gaming Services business
The Tabcorp Group operates Tabcorp Gaming Solutions (TGS), which provides services to
licensed gaming venues in areas including marketing, compliance, responsible gambling,
venue refurbishment and machine procurement. The business commenced in August 2012
in Victoria, and has expanded into New South Wales following the receipt of a New South
Wales Gaming Machine Dealer’s Licence in September 2013.
Summary financial performance of the Gaming Services business
For the year ended 30 June
Revenue
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
2014
$m
98.1
(31.1)
67.0
(27.3)
39.7
2013
$m
86.3
(28.0)
58.3
(20.8)
37.5
Change
%
13.7
11.1
14.9
31.3
5.9
The results of the Gaming Services business reflect a full year contribution compared
to the prior financial year during which TGS was operational for 10.5 months.
TGS revenues were $98.1 million, up 13.7%. Operating expenses were $31.1 million, up
11.1%, resulting in EBITDA of $67.0 million, up 14.9%.
TGS made a successful entry into the New South Wales market during the financial year,
signing up two New South Wales venues, Kogarah RSL and Auburn Tennis Club. TGS has now
established capability to grow the business in New South Wales in the 2015 financial year.
A second half highlight in Victoria, where TGS covers approximately 8,500 electronic
gaming machines (EGMs), was the commencement of the in-EGM loyalty scheme.
41
Tabcorp Concise Annual Report 2014 Directors’ report (continued)
6.4. Keno business
The Tabcorp Group operates Keno in licensed venues and TABs in Victoria and Queensland,
and in licensed venues in New South Wales. The Victorian Keno Licence expires in April
2022, the New South Wales Keno Licence expires in July 2022, and the Queensland Keno
Licence expires in June 2047. Refer to section 7.2 regarding the extension of the Queensland
Keno Licence.
7.1. New South Wales Wagering Licence retail exclusivity extension
In September 2013 the Tabcorp Group announced it had finalised its agreement with
the New South Wales Government to extend the retail exclusivity period of its New South
Wales Wagering Licence for 20 years to June 2033, and that the necessary legislative
amendments had occurred.
Summary financial performance of the Keno business
For the year ended 30 June
Revenue
Taxes, levies, commissions and fees
Operating expenses
EBITDA (before impairment*)
Depreciation and amortisation
EBIT (before impairment*)
* Victorian Keno Licence impairment of $18.6 million in 2013
2014
$m
203.9
(90.5)
(41.2)
72.2
(20.5)
51.7
2013
$m
205.4
(89.1)
(40.8)
75.5
(23.3)
52.2
Change
%
(0.7)
1.6
1.0
(4.4)
(12.0)
(1.0)
Keno revenues were $203.9 million, down 0.7%, with Queensland and New South Wales
revenues flat and Victorian revenues up 3.6%. Operating expenses were $41.2 million,
up 1.0%. EBITDA was $72.2 million, down 4.4%.
An operational highlight was the roll out of Keno Racing to more than 450 Queensland
venues.
Growing the Keno business is a priority for Tabcorp in the 2015 financial year. New initiatives
planned for delivery include the commencement of jackpot pooling between New South
Wales and Victoria in the first half of the 2015 financial year, with Queensland to follow.
7. Significant changes in the state of affairs
The following events, which may be considered to be significant changes in the state
of affairs of the Tabcorp Group, have occurred since the commencement of the financial
year on 1 July 2013.
The exclusivity extension entitles Tabcorp’s subsidiary, Tab Limited (TAB), to continue
operating as the sole provider of totalizator and fixed odds betting in a retail environment
until June 2033. While TAB’s New South Wales Wagering Licence does not expire until 2097,
its exclusivity would otherwise have expired on 22 June 2013.
During the 2014 financial year TAB made an initial payment of $50 million to the New
South Wales Government to extend the exclusivity period and a further $25 million
is payable over a 10 year period from 2024 subject to the terms and conditions of an
agreement between the parties.
7.2. Queensland Keno Licence extension
In September 2013 Tabcorp made a $20 million payment to the State of Queensland to
extend Tabcorp’s Queensland Keno Licence for a further 25 years to 2047. The extension
adds further longevity to Tabcorp’s licence structure and allows Tabcorp to continue to
invest in the Keno lottery game in Queensland.
7.3. Victorian licence payment Supreme Court proceedings
In August 2012 Tabcorp commenced proceedings in the Supreme Court of Victoria seeking
a payment from the State of Victoria of an estimated $686.8 million. Tabcorp had claimed
that the State of Victoria was obliged to make the payment to Tabcorp in August 2012,
when Tabcorp’s Gaming and Wagering Licences expired and new licences were granted.
The claim was based on a statutory provision included in legislation from 1994 when the
State privatised the Victorian TAB and listed Tabcorp on the Australian Securities Exchange.
Tabcorp’s initial public offering was underpinned by this statutory entitlement, the terms
of which were clearly set out in the prospectus.
However, in its judgment handed down on 26 June 2014 the Supreme Court held that the
State of Victoria was not obliged to make the payment to Tabcorp. The Court accepted the
State’s argument that amendments to the legislation made by the State in 2008 and 2009
impliedly repealed the statutory provision which gave rise to the payment entitlement.
Tabcorp has lodged an appeal with the Court of Appeal of the Supreme Court of Victoria
against this judgment.
42
Tabcorp Concise Annual Report 2014 7.4. Victorian Health Benefit Levy on gaming machines
The Victorian Government applied a Health Benefit Levy on the Tabcorp Group’s former
Tabaret Gaming business for the financial year ended 30 June 2013. The levy was not
applied pro rata and it does not reflect that Tabcorp ceased to operate gaming machines
on 15 August 2012 when its Victorian Gaming Licence expired. Tabcorp commenced legal
proceedings in the Supreme Court of Victoria to challenge the Victorian Government’s
determination in respect of the levy. On 24 June 2013 the Supreme Court of Victoria ruled
in favour of Tabcorp, deciding that the Victorian Government has a discretion under the
Gambling Regulation Act 2003 (Vic) to calculate the levy on a pro rata basis rather than
on the full financial year. The Victorian Government appealed the judgment, and on 1 July
2014 the Court of Appeal of the Supreme Court of Victoria ruled in favour of the Victorian
Government. This impacted Tabcorp’s earnings for the 2014 financial year by $19.5 million
after tax, which is disclosed under discontinued operations in Tabcorp’s financial report.
Tabcorp has applied for special leave to appeal to the High Court of Australia in respect
of the judgment of the Court of Appeal. If special leave is granted, Tabcorp will seek to
have the Supreme Court of Victoria’s earlier decision reinstated.
7.5. Debt refinancing
Pursuant to a Prospectus dated 1 April 2009 Tabcorp redeemed the Tabcorp Bonds upon
maturity on 1 May 2014. Tabcorp paid a redemption payment of $100 per Tabcorp Bond,
which totalled $284 million. The Tabcorp Bonds were listed on the ASX and provided
investors with an average 8.18% per annum return over the five years of issue, including
the bonus 0.25% interest for eligible holders.
Tabcorp also repaid its Medium Term Notes totalling $150 million upon their maturity
in May 2014.
In preparation for these debt maturities, Tabcorp’s bank facilities were extended and
increased during the 2014 financial year. These bank facilities were used to fund the
repayment of the Tabcorp Bonds and Medium Term Notes, which results in interest
savings of approximately $10 million per annum. Tabcorp maintains a diversified
debt structure and profile, with the next maturity scheduled for June 2016.
7.6. Other significant changes in the state of affairs
There were no significant changes in the state of affairs of the Tabcorp Group that
occurred during the financial year other than as set out in this Directors’ report.
8. Business strategies
The Tabcorp Group is one of Australia’s leading gambling entertainment companies
and seeks to deliver sustainable superior returns to its shareholders through the delivery
of financial, operational and leadership excellence.
To achieve these outcomes, the Tabcorp Group continues to focus on the following key
business priorities:
• Group
– Provide superior returns to shareholders and key stakeholders
– Target a disciplined investment and expenditure profile
– Maintain investment grade credit rating
– Deliver customer service excellence
– Secure and extend licence duration while improving regulatory
arrangements and managing key risks
– Maximise employee engagement
– Be recognised as a leader in responsible gambling
• Wagering
– Lead wagering industry transformation by leveraging our
unique multi-product, multi-channel model
– Continue to drive digital leadership and innovation
– Strengthen customer relationships through our loyalty and
customer relationship management programs
– Further integrate vision and data with wagering products
• Media and International
– Pursue international growth via co-mingling and wholesale opportunities
– Retain media rights on acceptable terms
• Gaming services
– Expand New South Wales business
– Grow revenues in the New South Wales and Victorian markets
– Expand customer loyalty program
• Keno
– Grow Keno in current and new markets
– Introduce new product offerings
– Expand distribution and self service
43
Tabcorp Concise Annual Report 2014 Directors’ report (continued)
9. Likely developments and expected results
Each year the Board undertakes a formal strategic planning process to provide guidance
to management about the Tabcorp Group’s strategic direction. The Tabcorp Group plans
to continue with its business strategies, as set out in this report. The execution of these
strategies is expected to result in improved financial performance over the coming
financial years.
The achievement of the expected results in future financial years is dependent on a
range of factors, and may be adversely affected by any number of events, and are subject
to, among other things, the key risks and uncertainties described in section 10 below.
The Directors have excluded from this report any further information on the likely
developments in the operations of the Tabcorp Group and the expected results of those
operations in future financial years, as the Directors have reasonable grounds to believe
that to include such information will be likely to result in unreasonable prejudice to the
Tabcorp Group.
10.1. Increased competition from wagering and betting operators
The Tabcorp Group’s wagering business currently competes with bookmakers in Victoria
and New South Wales, and other interstate and international wagering operators
who accept bets over the phone or internet (such as corporate bookmakers based
in the Northern Territory and betting exchanges). The internet and other new forms
of distribution have allowed new competitors to enter the Tabcorp Group’s traditional
markets of Victoria and New South Wales without those competitors being licensed
in those states. In addition, the use of digital wagering solutions by competitors,
the significant relaxation of advertising laws (or the way in which they have been
administered) and the increasing application of competition policy have allowed other
wagering operators to gain greater freedom to compete against the Tabcorp Group’s
wagering business which operates under sole exclusive retail wagering licences in Victoria
and New South Wales. The Tabcorp Group adopts a range of strategies to maintain its
position as Australia’s leading wagering operator, including leveraging its exclusive retail
network, expanding its TAB customer loyalty program, enhancing its customer service and
relationship management, and driving digital excellence across its multi-channel network.
10. Key risks and uncertainties
The Tabcorp Group has a structured and proactive approach to understanding and
managing risk. The key focus of the risk management approach is to ensure alignment
of strategy, processes, people, technology and knowledge, and evaluate and manage the
uncertainties and opportunities faced by the Tabcorp Group. Overviews of the Tabcorp
Group’s risk management processes and internal control framework are disclosed in the
corporate governance statement of the Concise Annual Report and available on Tabcorp’s
website.
Set out below are summaries of the key risks which may materially impact the execution
and achievement of the business strategies and prospects for the Tabcorp Group in future
financial years. These key risks should not be taken to be a complete or exhaustive list
of the risks and uncertainties associated with the Tabcorp Group. Many of the risks are
outside the control of the Directors. There can be no guarantee that Tabcorp will achieve
its stated objectives, that it will meet trading performance or financial results guidance
that it may provide to the market, or that any forward looking statements contained in
this report will be realised or otherwise eventuate.
10.2. Broadcast media rights
The Tabcorp Group has arrangements with thoroughbred racing broadcaster ThoroughVisioN
(TVN) for matters including reciprocal broadcast rights relating to Sky Channel and TVN
racing coverage within Australia. TVN, which manages the thoroughbred horse racing
broadcast rights of Victorian and New South Wales racetracks, and the Tabcorp Group
have been in negotiations with a view to entering into new broadcast rights arrangements.
If, for any reason, the Tabcorp Group is unable to renegotiate the TVN broadcast
arrangements or is unable to renegotiate such broadcast arrangements on satisfactory
terms, then this may adversely impact the operational and financial performance of the
Tabcorp Group. The Tabcorp Group has alternative business plans to mitigate potential
adverse impacts should they arise. In addition, the Tabcorp Group continues to expand the
export of Australian racing vision to more countries around the world and import racing
content to Australian customers.
44
Tabcorp Concise Annual Report 2014 10.3. Regulatory environment
The activities of the Tabcorp Group are conducted in highly regulated industries where
the gambling activities and the level of competition within the industry depend to a
significant extent on:
• the licences granted to the Tabcorp Group and to third parties; and
• government policy and the manner in which the relevant governments exercise their
broad powers in relation to the manner in which the relevant businesses are conducted.
Changes in legislation, regulation, government policy, or court decisions concerning the
constitutionality or interpretation of such legislation, regulations or government policy
may have an adverse effect on the operational and financial performance of the Tabcorp
Group. Some of the potential changes, which could potentially negatively affect the value
of the licences granted to members of the Tabcorp Group, and potentially the Tabcorp
Group’s financial performance, include government taxes, fees to sporting bodies,
advertising restrictions, pooling arrangements, product approvals, licence conditions and
deregulation of the online gambling environment. Also, the issue of additional gambling
or wagering licences to third parties could adversely impact the Tabcorp Group’s financial
performance and financial position.
As a leader in the Australian gambling industry, the Tabcorp Group takes a proactive
approach to engaging with relevant regulators and governments, and lodges submissions
in respect of changes to the industry which may impact the Tabcorp Group and its
stakeholders.
The Tabcorp Group operates a diverse portfolio of businesses spread across a number of
jurisdictions, business segments and customer categories which reduces the reliance on
any one specific business or jurisdiction. The Tabcorp Group maintains long term gambling
licences, and in September 2013 finalised the extension of the retail exclusivity period of
its New South Wales Wagering Licence for 20 years to June 2033 (refer to section 7.1) and
concluded the extension of its Queensland Keno Licence for a further 25 years to 2047
(refer to section 7.2).
10.4. Race fields fees
Each State or Territory of Australia (except for the Northern Territory) has implemented
race fields arrangements, under which the State or Territory or its racing industry charges
wagering operators race fields fees for use of that industry’s race fields information (or
otherwise charges fees in respect of the operator’s race betting operations in that State
or Territory). Increases in race fields fees charged by racing industry bodies may adversely
impact the financial performance of the Tabcorp Group. However, the Tabcorp Group has
mitigation strategies to partly ameliorate such impacts, including that members of the
Tabcorp Group currently have contracts that the Tabcorp Group considers will allow them
to offset some of the fees or obtain damages under contract. Members of the Tabcorp
Group may in the future disagree with various racing industry bodies regarding the
application of certain aspects of the race fields regimes or contracts that govern product
fees. Such disagreements may lead to litigation or other dispute resolution processes,
including negotiated settlement.
Changes to race fields fees may increase the expenses incurred by the Tabcorp Group
or alter the competitive landscape in which the Tabcorp Group operates and therefore
impact the Tabcorp Group’s financial performance and financial position.
10.5. Racing product
The Tabcorp Group’s wagering business is reliant on the Victorian, New South Wales
and other interstate racing industries providing a program of events for the purposes
of wagering. A significant decline in the quality or number of horses or greyhounds, or
number of events, or the occurrence of an event which adversely impacts on the Australian
racing industry or any State or Territory racing industry, or which otherwise disrupts
the scheduled racing program (such as an outbreak of equine influenza or other equine
pandemic), would have a significant adverse effect on wagering revenue and may have
an adverse effect on the operational and financial performance of the Tabcorp Group.
The Tabcorp Group engages and works closely with racing bodies and industry stakeholders
to optimise racing schedules and broadcasts to provide the best racing product available
to customers and ameliorate the potential for adverse impacts which may result from
a decline in racing product. In addition, the Tabcorp Group has business continuity plans
to help manage and respond to significant events which may impact upon the supply
of racing product.
45
Tabcorp Concise Annual Report 2014 Directors’ report (continued)
10.6. Minimum financial performance arrangements under the Victorian Joint Venture
Pursuant to arrangements entered into by the Tabcorp Group in connection with
the Victorian Wagering and Betting Licence, certain minimum financial performance
arrangements apply in favour of the Victorian Racing Industry in respect of the financial
years ending 30 June 2013, 30 June 2014 and 30 June 2015. The minimum financial
performance was achieved for the 2013 and 2014 financial years. The minimum performance
obligation for the 2015 financial year is $321 million, which is lower than the financial
performance achieved in each of the two preceding financial years. Circumstances may
arise where Tabcorp may be required to make a payment to the Victorian Racing Industry
under these arrangements in respect of the financial year ending 30 June 2015.
10.7. Victorian licence payment Supreme Court proceedings
As referred to in section 7.3, Tabcorp is seeking a payment from the State of Victoria of
$686.8 million and has lodged an appeal against the decision of the Supreme Court of
Victoria which held that the State of Victoria was not obliged to make the payment to
Tabcorp. The financial impact to the Tabcorp Group resulting from the write down of the
receivable in respect of the Victorian Gaming and Wagering Licences has been dealt with
in previous financial years. Due to the nature of adversarial litigation, the outcome cannot
be predicted with any certainty. Tabcorp may ultimately not succeed in recovering the
payment from the State of Victoria. If Tabcorp is unsuccessful in its claim, there should
be no further adverse financial effect on the Company other than arising from the
payment of legal costs in relation to pursuing the claim.
Notwithstanding the appeal lodged, Tabcorp is in the process of seeking confirmation
from the Australian Taxation Office as to the tax characterisation of certain aspects of
the arrangements the subject of the legal proceedings, including the amount of any
deduction to which Tabcorp may be entitled if Tabcorp is unsuccessful in its appeal.
10.8. Victorian Health Benefit Levy on gaming machines
As set out in section 7.4, the Victorian Government applied a Health Benefit Levy on the
Tabcorp Group’s former Tabaret Gaming business for the financial year ended 30 June 2013.
The levy has not been applied pro rata and it does not reflect that the Group ceased to
operate gaming machines on 15 August 2012. Tabcorp was successful in challenging the
Victorian Government’s determination in respect of the levy, with the Supreme Court of
Victoria ruling that the Victorian Government has a discretion to calculate the levy on a
pro rata basis. The Victorian Government appealed that decision and the Court of Appeal of
the Supreme Court of Victoria ruled in favour of the Victorian Government. This impacted
Tabcorp’s earnings for the 2014 financial year by $19.5 million after tax. Tabcorp has applied
for special leave to appeal to the High Court of Australia. If Tabcorp is unsuccessful in its
appeal to have the Supreme Court of Victoria’s earlier decision reinstated, there should be
no further adverse financial effect on the Company other than arising from the payment
of legal costs.
11. Significant events after the end of the financial year
On 30 July 2014, the Tabcorp Group announced that it had agreed with the Australian
Capital Territory Government to acquire ACTTAB for $105.5 million, subject to regulatory
approvals, including ACCC clearance. ACTTAB is a Territory-owned provider of totalizator
and fixed odds wagering, Keno and Trackside products. The business offers its services and
products through a distribution network comprised of retail outlets located throughout
the ACT as well as telephone and internet platforms. As part of the acquisition, the ACT
Government will issue to a member of the Tabcorp Group a 50 year exclusive totalizator
licence, a sports bookmaking licence for an initial term of 15 years with further rolling
extensions to a total term of 50 years, and ongoing approvals to offer Keno and Trackside
products for 50 years. This acquisition further strengthens the Tabcorp Group’s diversified
business portfolio and provides new and attractive long term licences. The financial effects
of this transaction have not been brought to account in the financial statements for the
year ended 30 June 2014.
No other matters or circumstances have arisen since the end of the financial year, which
are not otherwise dealt with in this report or in the financial report, that have significantly
affected or may significantly affect the operations of the Tabcorp Group, the results of those
operations or the state of affairs of the Tabcorp Group in subsequent financial years.
Refer also to note 25 to the financial report.
46
Tabcorp Concise Annual Report 2014 12. Auditors
The Tabcorp Group’s external auditor is Ernst & Young.
The Tabcorp Group’s internal audit function is fully resourced by Tabcorp, with specialist
independent external support where necessary.
More information relating to the audit functions can be found in the corporate governance
statement of the Concise Annual Report.
13. Directors’ interests in contracts
Some Directors of the Company, or related entities of the Directors, conduct transactions
with entities within the Tabcorp Group that occur within a normal employee, customer
or supplier relationship on terms and conditions no more favourable than those with
which it is reasonable to expect the entity would have adopted if dealing with the
Director or Director-related entity on normal commercial terms and conditions.
14. Environmental regulation and performance
The Tabcorp Group’s environmental obligations and waste discharge quotas are regulated
under both state and federal laws. The Tabcorp Group has a record of complying with,
and in most cases exceeding, its environmental performance obligations.
No environmental breaches have been notified to the Tabcorp Group by any government
agency.
15. Directors’ interests in Tabcorp securities
At the date of this report, the Directors had the following relevant interests in the
securities of the Company, as notified to the ASX in accordance with section 205G(1)
of the Corporations Act 2001:
Name
Paula Dwyer
David Attenborough
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Number of securities
Ordinary
Shares
50,000
58,609
40,000
10,000
23,181
8,500
84,876
Performance
Rights
-
1,465,409
-
-
-
-
-
Tabcorp
Subordinated
Notes
-
-
-
-
-
-
-
47
Tabcorp Concise Annual Report 2014 Directors’ report (continued)
16. Board and Committee meeting attendance
During the financial year ended 30 June 2014 the Company held twelve meetings of the
Board of Directors.
The attendance of the Directors at meetings of the Board and its Committees during the
year in review were:
17. Indemnification and insurance of Directors and Officers
The Directors and Officers of the Tabcorp Group are indemnified against liabilities
pursuant to agreements with the Tabcorp Group. Tabcorp has entered into insurance
contracts with third party insurance providers, and in accordance with normal commercial
practices, under the terms of the insurance contracts, the nature of the liabilities insured
against and the amount of premiums paid are confidential.
Board of
Directors
B
A
12
12
12
12
12
12
12
12
12
12
12
12
12
12
Audit, Risk and
Compliance
Committee
B
A
6
6
6
6
6
6
6
6
6
6
6
6
6
6
Nomination
Committee
B
A
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Remuneration
Committee
B
A
4
4
4
4
-
-
4
4
-
-
-
-
4
4
Name
Paula Dwyer
David Attenborough (i)
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
A Number of meetings attended.
B Maximum number of possible meetings available for attendance.
(i)
The Managing Director and Chief Executive Officer attends Board Committee meetings, but is not a member of any
Board Committee. Only Non Executive Directors are members of Board Committees.
18. Non-statutory audit and other services
Ernst & Young, the external auditor to the Company and the Tabcorp Group, provided
non-statutory audit services to the Company during the financial year ended 30 June 2014.
The Directors are satisfied that the provision of non-statutory audit services during this
period was compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The nature and scope of each type of non-statutory audit
service provided means that auditor independence was not compromised.
The Company’s Board Audit, Risk and Compliance Committee reviews the activities of
the independent external auditor and reviews the auditor’s performance on an annual
basis. The Chairman of the Board Audit, Risk and Compliance Committee must approve all
non-statutory audit and other work to be undertaken by the auditor (if any). Further details
relating to the Board Audit, Risk and Compliance Committee and the engagement of
auditors are available in the corporate governance statement of the Concise Annual Report.
The details of the functions and memberships of the Committees of the Board are set out
in the corporate governance statement of the Concise Annual Report and on Tabcorp’s
website. The terms of reference for each Board Committee are available from the corporate
governance section of the Company’s website.
Ernst & Young, acting as the Company’s external auditor, received or are due to receive
$272,000 in relation to the provision of non-statutory audit services to the Company.
Amounts paid or payable by the Company for audit and non-statutory audit services
are disclosed in note 3 to the financial report.
48
Tabcorp Concise Annual Report 2014 19. Corporate governance
The Directors of the Company support and adhere to the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations, 2nd Edition, recognising
the need for maintaining high standards of corporate behaviour and accountability.
The Company’s corporate governance statement is contained in the Concise Annual
Report and under the corporate governance section of the Company’s website at
www.tabcorp.com.au/about_governance.aspx.
20. Rounding of amounts
Tabcorp Holdings Limited is a company of the kind specified in Australian Securities and
Investments Commission Class Order 98/0100. In accordance with that Class Order, dollar
amounts in the financial report and the Directors’ report have been rounded to the nearest
hundred thousand unless specifically stated to be otherwise.
21. Auditor’s independence declaration
Attached is a copy of the auditor’s independence declaration provided under section
307C of the Corporations Act 2001 in relation to the audit for the financial year ended
30 June 2014. This auditor’s independence declaration forms part of this Directors’ report.
This report has been signed in accordance with a resolution of Directors.
Paula J Dwyer
Chairman
Melbourne
7 August 2014
49
Tabcorp Concise Annual Report 2014 Remuneration report (audited)
Introduction
This Remuneration report outlines the remuneration policy and arrangements for
Tabcorp’s Directors, executives and senior management in accordance with the
requirements of the Corporations Act 2001 and its Regulations. The information provided
in this Remuneration report has been audited as required by section 308(3C) of the
Corporations Act.
The Remuneration report relates to the key management personnel (KMP) of the
consolidated entity comprising the Company and its consolidated entities for the financial
year ended 30 June 2014. KMP are those persons having authority and responsibility
for planning, directing and controlling the activities of the Group, and comprises all
the Directors of Tabcorp and certain members of the Senior Executive Leadership Team.
The same group of individuals is regarded as KMP for both the Company and the Group.
As detailed in this Remuneration report, the annual reward structure for the most senior
managers comprises three components: a fixed remuneration package; a short term
incentive; and a long term incentive in the form of Performance Rights. For KMP who are
executives, at least 45% of their Total Annual Reward (TAR) is ‘at risk’ in the form of short
term and long term incentives tied to the achievement of specific Group, business unit
and individual performance objectives and targets.
During the year ended 30 June 2014, the Board Remuneration Committee reviewed the
remuneration packages of the Senior Executive Leadership Team. The details of senior
manager remuneration are included in section 6.
For the year ended 30 June 2014, short term incentives were awarded to senior managers
and will be paid in August 2014.
With regard to long term incentives, during the year, an allocation of Performance Rights
was made to nine senior managers. In addition, an allocation of Performance Rights under
the long term incentive plan was also made to the Managing Director and Chief Executive
Officer following shareholder approval at the 2013 Tabcorp Annual General Meeting.
Whether the allocated Performance Rights generate value for the senior managers will
depend on the Company’s Relative Total Shareholder Return over a three year period.
If, at the end of the three year period, the minimum performance hurdle is not met,
all Performance Rights will lapse. The maximum number of Performance Rights will
vest only if the highest performance threshold is met at the end of the three year period.
The Board reviewed Non Executive Director fee levels during the year ended 30 June 2014.
The details of Non Executive Director remuneration are included in section 5.
1. Significant changes since 30 June 2013 and proposed changes
from 1 July 2014
1.1 Managing Director and Chief Executive Officer – target reward mix and
remuneration
As communicated in the 2013 Remuneration report, a review of the Managing Director
and Chief Executive Officer’s remuneration in 2013 resulted in a greater proportion of
the target reward mix to be placed ‘at risk’, and delivered under the long term incentive
plan for the year ended 30 June 2014. This change was implemented to strengthen the
alignment of the Managing Director and Chief Executive Officer’s remuneration with
the interests of shareholders in delivering long term value to the Company.
To further improve alignment of the Managing Director and Chief Executive Officer’s
remuneration with comparable roles in the market, an increase in fixed remuneration
and target short term incentive is to be implemented in the year commencing 1 July 2014.
Further detail is provided in section 6.5.
50
Tabcorp Concise Annual Report 2014 1.2 Short term incentive (STI) – deferral and claw back
For offers made for the year ended 30 June 2014 onwards, and as disclosed in the 2013
Remuneration report, any senior manager with a target STI of 30% or greater of Total
Annual Reward will have a portion of STI delivered in Restricted Shares which will be
subject to claw back provisions. In addition, this deferral component has now been
extended to include the Senior Executive Leadership Team. These changes have been
implemented for STI awards made based upon performance in the 2014 financial year.
Further information is provided in section 6.4.1.
1.3 STI Divisional Multiplier
An organisational realignment was implemented during the year ended 30 June 2014
to drive clearer accountability for the overall performance of each of Tabcorp’s business
units. From 1 July 2014, Divisional Multipliers will be introduced to the STI to enhance the
link between individual STI awards and business outcomes. Further detail is provided in
section 6.4.1.2.
1.4 Non Executive Director fees
Following a review of the Non Executive Director fee levels during the year, the base
fee for Non Executive Directors (excluding the Chairman) and the fees for members of
the Remuneration Committee were increased. Further detail is provided in section 5.3.
2. Governance
The main responsibilities of the Board Remuneration Committee are:
• Establishing and maintaining fair and reasonable remuneration policies
and practices that apply to the Group;
• Reviewing and recommending to the Board the remuneration of KMP
and the terms and conditions of any incentive plans; and
• Agreeing benchmarks against which annual salary reviews are evaluated.
In exercising its responsibilities, the Board Remuneration Committee assesses the
appropriateness of the nature and amount of remuneration of Directors and executives
every year by reference to relevant employment market conditions with the overall
objective of ensuring maximum stakeholder benefit from the retention of a high quality
and high performing Board and executive team.
To assist in exercising its responsibilities, the Board Remuneration Committee receives
independent advice on matters such as remuneration strategies, mix and structure,
as appropriate. During the year ended 30 June 2014 and to the date of this report, no
remuneration consultant provided a remuneration recommendation in respect of
any KMP.
The Board Remuneration Committee is governed by its Terms of Reference, which are
available on Tabcorp’s website at www.tabcorp.com.au under the About Us – Corporate
Governance section.
Details regarding the composition of the Board Remuneration Committee, including
biographies of each member are set out in the Directors’ report.
3. Remuneration philosophy
The key objective of Tabcorp’s remuneration philosophy is to enable Tabcorp to attract,
motivate and retain high calibre individuals at both Board and senior management level. To
achieve this, Tabcorp’s remuneration framework is based upon the following key principles:
• Creating shareholder value relative to our peer group;
• Maintaining market competitiveness;
• Measuring and rewarding individual, business unit and Group performance; and
• Fostering the values of Tabcorp.
51
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
5. Non Executive Director remuneration
5.1 Remuneration framework
The Board Remuneration Committee has responsibility for reviewing and recommending
to the Board appropriate remuneration arrangements for Non Executive Directors, taking
into consideration factors including:
• The Group’s remuneration philosophy;
• The level of fees paid to Board members of other publicly listed Australian companies;
• Operational and regulatory complexity;
• The responsibilities and workload requirements of each Board member; and
• Advice from independent remuneration consultants.
Non Executive Directors’ fees are reviewed yearly and the current aggregate annual limit
(including superannuation contributions) is set at $2 million, as approved by shareholders
at the Annual General Meeting on 28 November 2005.
Non Executive Directors do not receive any performance or incentive payments and are
not eligible to participate in any of Tabcorp’s incentive plans. This policy aligns with the
principle that Non Executive Directors act independently and impartially. Elmer Funke
Kupper retained some Performance Rights in relation to his former position of Managing
Director and Chief Executive Officer, as outlined in section 6.4.2.9. These Performance Rights
did not deliver any value to Mr Funke Kupper because the applicable performance hurdles
were not met at the relevant test dates, and all Performance Rights have now lapsed.
For executive and senior management remuneration, this involves aligning the reward
components with the individual’s ability to influence results and to increase the focus
on variable reward that is leveraged for superior performance.
There has been no significant change in the remuneration strategy since the previous
financial year.
4. Key management personnel (KMP)
Name
Non Executive Directors
Current
Paula Dwyer
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Executives
Current Executive Director
David Attenborough
Current Executives
Damien Johnston
Craig Nugent (i)
Adam Rytenskild (i)
Kerry Willcock
Position held
Period in position
if less than full year
Chairman and Director
(Non Executive)
Director (Non Executive)
Director (Non Executive)
Director (Non Executive)
Director (Non Executive)
Director (Non Executive)
Managing Director and
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer, Wagering
Chief Operating Officer,
Keno and Gaming
Executive General Manager,
Corporate, Legal and Regulatory
From 28 March 2014
From 28 March 2014
(i) A business realignment was implemented during the year and consequently Mr Nugent and Mr Rytenskild are disclosed
as KMP from the date of business realignment.
Details of Director qualifications, experience and other responsibilities are set out on
pages 20, 21 and 38 of the Directors’ report.
52
Tabcorp Concise Annual Report 2014 5.2 Structure
Non Executive Directors’ remuneration comprises the following components:
• Board fee;
• Board Committee fees (excluding the Chairman); and
• Superannuation Guarantee Contribution (9.25% of total fees for the year ended
30 June 2014, uncapped).
The Chairman receives a fixed fee which is inclusive of services on all Board Committees.
Some Directors may receive additional remuneration and associated superannuation
(where applicable) for:
• Chairmanship of the Victorian Joint Venture Management Committee, receiving a
fee equivalent to Chairman of the Board Remuneration Committee – Paula Dwyer
was Chairman of this Committee throughout the year;
• Observer fees, equivalent to the applicable Board and Committee fees (for attending
Board and Committee meetings and induction whilst awaiting regulatory approval)
– no Observer fees were paid during the year; or
• Membership of other Committees, which may be required from time to time – there
were no other Committees during the year.
Board fees are structured by having regard to the responsibilities of each position within
the Board. Board Committee fees are structured to recognise the differing responsibilities
and workload associated with each Committee, and the additional responsibilities of each
Committee Chairman.
Board fees are not paid to the Managing Director and Chief Executive Officer, or to
executives for directorships of any subsidiaries.
5.3 Current annual fees
The Board Remuneration Committee reviews Non Executive Director fees annually, having
regard to both the remuneration framework and structure described in sections 5.1 and 5.2
and contemporary market practice, and submits recommendations to the Board for review
and approval. Following the review in the year ended 30 June 2014, the Non Executive
Director Board fee was increased from $125,000 to $135,000, the Remuneration Committee
Chairman fee was increased from $25,000 to $30,000, and the Remuneration Committee
Member fee was increased from $10,000 to $15,000. All other fees remained unchanged.
The annual fees are detailed in Figure 1 for Non Executive Directors and Board Committee
memberships.
Figure 1: Non Executive Director and Board Committee fixed annual fees effective from
1 September 2013
Position
Chairman(ii)
Non Executive Director
Committee Chairman
Committee Member
Board fees (i)
$
400,000
135,000
Board Committee fees(i)
Audit, Risk &
Compliance Remuneration
$
$
Nomination
$
40,000
20,000
30,000
15,000
7,500
7,500
(i) Fees exclude superannuation contributions.
(ii) The Chairman’s fee is inclusive of service on all Tabcorp Board Committees.
53
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
6. Senior management remuneration (including Managing Director
and Chief Executive Officer)
The Board Remuneration Committee has responsibility for reviewing the remuneration
framework of the Group and recommending to the Board the appropriate remuneration
arrangements. The Board Remuneration Committee approves the remuneration
and incentives for members of the Senior Executive Leadership Team and makes
recommendations to the Board in relation to the Managing Director and Chief
Executive Officer.
6.1 Remuneration framework
The remuneration framework for senior management comprises a mix of both fixed and
variable remuneration components. The level of fixed remuneration an individual receives
reflects the scope and responsibilities of their role, their knowledge, skills and experience
as well as benchmark market data. Variable remuneration depends on the achievement of
Group, business unit and individual performance targets, and shareholder value hurdles.
Variable remuneration may be delivered in the form of cash or a mix of cash and Restricted
Shares for achievement of short term performance targets, and Performance Rights subject
to the achievement of long term performance targets.
The objective of structuring a remuneration framework comprising both fixed and
variable components is to ensure remuneration is market competitive and aligned to:
• Shareholder and Company interests through:
– The use of financial measures, such as net profit after tax before non-recurring items
as the primary reward measure for short term performance outcomes;
– Rewarding long term company performance measured by reference to a comparable
group of companies in the S&P/ASX 100 Index, which over the long term should lead
to attractive value creation for shareholders;
– Aligning Group, business unit and individual performance targets to the performance
objectives in Tabcorp’s annual and long term strategic plans;
– Attracting, motivating and retaining individuals of the highest calibre; and
– Fostering a culture of high performance in a team based environment including
rewarding those individuals excelling under the Tabcorp ways of working.
• Senior management’s interests through:
– Differentiating reward outcomes based upon individual performance and capability;
– Linking the form of reward delivery with the ability to influence results; and
– Providing upside opportunity for superior Group performance and increased
shareholder value.
The reward structure is outlined in Figure 2.
54
Figure 2: Senior management reward structure
Component
Delivery
Performance
alignment
Strategic objective
Cash(i)
Superannuation
Cash(i) or mix of cash
& Restricted Shares (ii)
Performance
Rights(iii)
>
>
>
>
>
>
Fixed
+
)
k
s
i
r
t
a
(
e
l
b
a
i
r
a
V
Short term
incentive
+
Long term
incentive
=
Total Annual Reward
(TAR)
Market
median
Group performance
Division performance
Individual performance
>
Short term targets
(12 month period)
Total shareholder
return
>
Shareholder value
creation (3 year period)
(i)
May voluntarily elect to salary sacrifice for additional superannuation contributions and motor vehicle novated leases
(for fixed component only).
(ii) Applicable to all members of the Senior Executive Leadership Team and certain other senior management,
issued under the Tabcorp Employee Deferred Share Plan and will be subject to a two year service condition.
(iii) May vest on the third anniversary after the grant, subject to meeting relevant performance based hurdles.
6.2 Target reward mix
The target reward mix aims to position Total Annual Reward at the market median
when all performances have been achieved at target. It is set after benchmarking against
a wide range of organisations to ensure that the incentive and Total Annual Reward are
competitive, fair and reasonable.
As outlined in last year’s Remuneration report, Tabcorp introduced a number of changes
to the target reward mix which commenced at 1 July 2013. The short term incentive
component of reward for executive KMP (including the Managing Director & Chief
Executive Officer) is now delivered as a combination of cash and Restricted Shares which
will be deferred for two years, as outlined 6.4.1.3. In addition to this, the Managing Director
and Chief Executive Officer has a greater proportion of target reward at risk as a result
of an increase in the target long term incentive. The target reward mix for the executive
KMP (including the Managing Director & Chief Executive Officer) is outlined in Figure 3.
Tabcorp Concise Annual Report 2014
Figure 3: KMP target reward mix
MD and CEO
37.4%
18.9%
6.3%
37.4%
6.4 Variable (at risk) remuneration
6.4.1 Short term incentive (STI)
6.4.1.1 Overview
CFO/EGM Corporate,
Legal and Regulatory
COO Wagering/COO
Keno and Gaming
50%
55%
19%
6%
25%
The STI is designed to reward employees for the achievement of Group, business unit and
individual performance goals over the relevant twelve month performance period, which
are aligned to and supportive of the Group’s annual objectives for each financial year.
20.6%
6.9%
17.5%
6.4.1.2 Determining factors
0%
20%
40%
60%
80%
100%
An individual’s short term incentive is calculated by taking the following three key factors
into account:
Fixed remuneration
Short term incentive cash
Short term incentive deferred
Long term incentive
Figure 4: STI calculation
6.3 Fixed remuneration
Senior managers receive a fixed remuneration package comprising cash salary, statutory
superannuation contributions and other benefits they may elect to receive on a salary sacrifice
basis (i.e. additional superannuation contributions and motor vehicle novated leases).
An individual’s fixed remuneration is set taking into consideration the scope and
responsibilities of their role, their knowledge, skills and experience as well as benchmark
market data for similar roles from similar sized companies based on market capitalisation,
or business group revenue, where appropriate.
Fixed remuneration is reviewed annually taking into consideration an individual’s
performance (as assessed through the Group’s performance management process) and
relativity with the external market data. The Board Remuneration Committee approves the
fixed remuneration for the Senior Executive leadership team and makes recommendations
to the Board in relation to the Managing Director and Chief Executive Officer.
During the year ended 30 June 2014, the fixed remuneration packages of executive
KMP, excluding the Managing Director and Chief Executive Officer (refer to section 6.5.1.1),
increased by 2.6% on average.
Target STI ($)
x
Group Funding
Multiplier or Divisional
Multiplier
x
Individual
Performance
Multiplier
=
Short Term
Incentive ($)
• Target STI
This amount is based on a percentage of the individual’s Total Annual Reward
(refer to Figure 3 above).
• Group Funding Multiplier (GFM)
The GFM is linked to the achievement of Tabcorp’s target net profit after tax before
non-recurring items (NPAT) as approved by the Board. The Board considers NPAT to be an
appropriate performance measure as it aligns the Group’s remuneration philosophy with
creating value, and is within the scope of influence of participants. The GFM determines
the overall STI pool available for distribution. If the financial performance target is not
met, individual awards may be funded at a reduced level, at the discretion of the Board.
• Divisional Multiplier (DM)
During the year ended 30 June 2014, an organisational realignment was implemented
to drive clearer role accountability for the overall performance of each of Tabcorp’s business
units. To enhance the link between individual STI awards and business outcomes, a
DM will be introduced for the determination of STI awards from the 2015 financial year
onwards. If the Group financial target is met, a DM will be established to differentiate
the contributions of the each of the operating businesses towards the Group’s overall
performance and better align individual STI awards with performance. The DMs may be
higher or lower than the GFM but the overall incentive pool for divisions and individuals
may not exceed the overall available incentive pool. Senior management employed within
Group or corporate functions generally receive the GFM.
55
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
• Individual Performance Multiplier (IPM)
6.4.1.4 Claw back
Individual performance is assessed using a balanced scorecard of individual measures
that align to and are reflective of the Group’s annual objectives. The balanced scorecard
assesses four performance areas – financial, customers & growth, people & leadership, and
organisation. Specific key performance objectives, including the achievement of business
unit financial and non-financial targets and strategic objectives are agreed upon for each
performance area at the start of the financial year against which the individual is assessed.
In the pursuit of superior shareholder returns and value creation, such metrics include
the achievement of profit measures and cost management targets; providing the best
gambling and entertainment experience for customers; providing operational excellence,
regulatory compliance and positive company image; ensuring Tabcorp is a great place to
work; and delivering strategic value/opportunities.
Further details of specific key performance targets for the Senior Executive leadership
team during the financial year are provided in section 6.4.1.6.
To be eligible to receive a STI, participants need to demonstrate required levels of
behaviours in line with Group values and must not have any significant controllable
compliance breaches.
6.4.1.3 Delivery
The STI is delivered in cash, or a mix of cash and Restricted Shares. For STI awards
made for the year ended 30 June 2014 onwards, it is mandatory for all participants
at a senior management level to defer 25% of their total STI into Restricted Shares.
Senior management, for the purposes of STI deferral, is defined as all members of the
Senior Executive Leadership Team and any senior manager where the STI component
of their TAR is 30% or greater at target. Restricted Shares are subject to a two year
service condition during which time the Restricted Shares may not be traded,
however participants have full entitlement to dividends and voting rights.
The objectives of the deferral element of STI are to ensure that senior managers
build share ownership in Tabcorp which further aligns their interests with shareholders,
to reduce long term risk, and to assist with the retention of key senior managers
providing increased continuity for the business.
Restricted Shares are subject to claw back if the Board considers this to be appropriate
having regard to any information which has come to light after the delivery of the
Restricted Shares to participants, including but not limited to fraud, misconduct or any
material misstatement or omission in Tabcorp’s prior financial statements. The Board
has the capacity to introduce further terms and conditions which may specify additional
circumstances in which a participant’s Restricted Shares may be subject to claw back.
6.4.1.5 Accounting treatment
The financial impact of the STI (excluding any Restricted Shares) is expensed in the relevant
financial year and is reflected in the remuneration disclosures for executive KMP. Restricted
Shares are expensed on a straight line basis over a two year period, commencing from the
time the Restricted Shares are granted to the participant, which occurs after the end of the
financial year.
6.4.1.6 STI performance
For the year ended 30 June 2014, short term incentive targets were derived from the Board
approved business plan which comprised financial and non-financial objectives. These
objectives were subsequently included in the balanced scorecards for the Senior Executive
leadership team. Examples of these objectives are summarised below:
Objective
Financial
Customers & growth
People & leadership
Organisation
Scorecard target area
Revenue
Profit
Balance sheet
Return metrics (e.g. return on invested capital (ROIC))
Customer activity and loyalty
Delivery of new products and digital initiatives
Business expansion opportunities
Employee engagement
Gender diversity
Health & safety (e.g. lost time injury frequency rate (LTIFR))
Regulatory & licensing compliance
Stakeholder management
Operational effectiveness
The Board awarded short term incentives to senior management that reflected the
assessed performance of the Group as above target for the year ended 30 June 2014.
56
Tabcorp Concise Annual Report 2014 6.4.2 Long term incentive (LTI)
6.4.2.1 Overview
The LTI is principally designed to reward senior management for contributions to
long term shareholder value creation, measured on the third anniversary after the
date of grant. Ultimate value from the LTI is only delivered to senior management
if certain shareholder returns are achieved on the test date, resulting in the equity
instruments vesting.
6.4.2.3 Vesting conditions
The vesting of Performance Rights issued under the LTI is dependent on meeting the
minimum performance hurdle at the test date (third anniversary of the date of grant),
as discussed below.
The performance hurdle for Performance Rights issued under the LTI is relative Total
Shareholder Return (relative TSR).
The LTI is delivered through Performance Rights that provide the senior manager with
the opportunity to acquire shares, subject to meeting the market based performance
condition, at no cost to the senior manager. Performance Rights are considered an
effective instrument for delivering incentives to senior management which is aligned
to achieving shareholder value over the three year period.
Performance Rights issued under the LTI plan have the following features:
• Tested against the relevant performance hurdle at the third anniversary of the date of grant;
• May vest at the third anniversary of the date of grant, with any unvested Performance
Rights lapsing immediately;
• Upon vesting, the Company will issue or transfer ordinary shares to the senior manager; and
• The fair value will be expensed over a three year period from the grant date in accordance
with Accounting Standards.
6.4.2.2 Allocation
The Performance Rights under the LTI are generally allocated annually in September.
The number of Performance Rights allocated is calculated as outlined in Figure 5.
Figure 5: Allocation calculation
Target LTI ($)
÷
Fair Value of
Performance Right
=
Number of Performance
Rights allocated
• Target LTI
This amount is based on a percentage of the individual’s Total Annual Reward (refer to
Figure 3 on page 55).
• Fair Value of Performance Right
The fair market value of a Performance Right is independently determined by an external
consultant using a modified Monte-Carlo simulation-based model. The Monte-Carlo model
has been modified to incorporate an estimate of the probability of achieving the TSR hurdle
and the number of associated Rights vesting.
6.4.2.4 Total Shareholder Return
TSR measures the return received by shareholders (capital returns, dividends and share
price movement) over a specific period relative to a peer group of companies. If there is
any change in the dividend payment timetable of a company in the peer group (including
Tabcorp), then the TSR performance of that company is adjusted to remove any artificial
distortion in the outcome. Tabcorp engages an external consultant to calculate Tabcorp’s
TSR relative to the peer group of companies.
The Board considers relative TSR to be an appropriate performance measure as it
reflects the Group’s remuneration philosophy of creating shareholder value relative
to our peer group.
The peer group used for assessing Tabcorp’s relative TSR is based upon the following
companies.
Basis
S&P/ASX 100 Index
Exclusions
• Property trusts;
• Infrastructure groups; and
• Mining companies.
Represented by the S&P Global Industry Classification
Standards of Metals & Mining, Oil and Gas, Transportation
Infrastructure, Utilities and Real Estate Investment Trusts.
The composition of the peer group may change as a result of specific external events,
such as mergers and acquisitions, capital returns, delistings and capital reconstruction.
The Board Remuneration Committee has agreed guidelines for adjusting the peer group
following such events, and has the discretion to determine any adjustment to the peer
group of companies.
57
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
The table below sets out the percentage of Performance Rights that will vest depending
on Tabcorp’s relative TSR ranking as at the applicable test date:
Tabcorp’s relative TSR ranking
Below 50th percentile
At 50th percentile
Above 50th and below 75th percentile
At or above 75th percentile
Percentage of Performance Rights that will vest
0%
50%
Pro-rata between 50% (at 50th percentile)
and 100% (at 75th percentile)
100%
This testing schedule and vesting criteria are common practice adopted by the companies
in the S&P/ASX100 Index, which is consistent with Tabcorp’s remuneration philosophy
(refer to section 3) and senior management remuneration framework (refer to section 6.1).
For Performance Rights which have vested, the Company will issue or transfer ordinary
shares to the senior manager, with full voting and dividend rights corresponding to the
rights of all other holders of ordinary shares.
6.4.2.8 LTI performance
Other than Performance Rights granted to the former Managing Director and Chief
Executive Officer (see section 6.4.2.9 below), there have been no other LTI test dates
during the year.
6.4.2.9 LTI granted to the former Managing Director and Chief Executive Officer
Following the demerger in 2011, 232,136 Performance Rights previously granted to the
former Managing Director and Chief Executive Officer were left on foot (as referred to
in section 5.1) and continued to be tested at the respective test dates. The performance
hurdles applying in respect of those Performance Rights that remained on foot were
not adjusted to reflect the fact that following the demerger, the TSR on Tabcorp shares
exclude (at least in part) the value of Echo shares and distributions on such shares during
the testing period.
The final test date occurred in the 2014 financial year and at the relevant test dates the
applicable performance hurdles were not met. All of the grants that remained on foot
have now lapsed.
6.4.2.5 Lapsing conditions
Performance Rights that have not vested after testing will lapse.
6.4.3 Appointment/retention incentives
6.4.3.1 Criteria for issue
6.4.2.6 Cessation of employment
All unvested Performance Rights will lapse immediately upon cessation of employment.
However, the Board Remuneration Committee has discretion in special circumstances to
determine the number of Performance Rights retained and the terms applicable. Special
circumstances include events such as retirement, redundancy, death and permanent
disability.
6.4.2.7 Accounting treatment
Performance Rights issued under the LTI are expensed on a straight line basis over a three
year period, commencing from the grant date. Under Accounting Standards, Tabcorp is
required to recognise an expense irrespective of whether the Performance Right ultimately
vests to the senior manager. A reversal of the expense is only recognised in the event the
Performance Rights lapse due to cessation of employment within the three year period.
The ‘Remuneration of KMP’ tables at section 7.1 (Figures 11C & 11D) reflect the accounting
expense recognised in the relevant financial year, not the total fair value of Performance
Rights allocated to the executive during the year, which is disclosed in Figure 12D.
Restricted Shares may be issued to senior managers as an incentive upon appointment
(either on joining Tabcorp or transfer to a new position internally) or for retention. These
are ordinary shares in the Company, and in order to act as a retention mechanism are
subject to time based restrictions of up to three years.
Additionally, senior managers may also be issued Performance Rights upon appointment.
These instruments are issued under the LTI and are subject to the same performance
hurdles and vesting conditions (refer section 6.4.2).
No new appointment or retention incentives were provided to executive KMP during the
year ended 30 June 2014.
6.4.3.2 Accounting treatment
The fair value of Restricted Shares is expensed as remuneration over the relevant restriction
period. At the date disposal restrictions and forfeiture provisions are waived, the fair value
of the Restricted Shares is fully expensed.
As Performance Rights are issued under the LTI, they are expensed in the same manner as
described in section 6.4.2.7.
58
Tabcorp Concise Annual Report 2014 6.4.4 Policy prohibiting hedging
Participants in the incentive plans (STI and LTI) are restricted from hedging the value of
Restricted Shares and unvested Performance Rights, and must not enter into a derivative
arrangement in respect of the equity instruments granted under these plans. Breaches
of the restriction will result in equity instruments being forfeited by the senior manager.
These prohibitions are included in Tabcorp’s Securities Trading Policy, available from the
Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au, and in the
terms and conditions of the incentive plans.
Equity instruments granted under the incentive plans can only be registered in the name
of the participant, are identified as non tradable on the share register, and cannot be traded
or transferred to another party until vested or until any trading restriction period has
expired (where applicable).
The Board at its discretion can request a senior manager to provide a statutory declaration
that the senior manager has complied with this policy. During the year, the Board did not
require any such declarations.
6.5 Managing Director and Chief Executive Officer contract
6.5.1 Current contract
David Attenborough is Managing Director and Chief Executive Officer. In accordance
with his employment contract, Mr Attenborough receives fixed remuneration and the
opportunity to receive variable remuneration through short term and long term incentive
arrangements. Mr Attenborough’s contract is for a continuing term capable of being
terminated on six months’ notice by Mr Attenborough and twelve months’ notice by
Tabcorp. The contract does not require any termination payments, other than payment
in lieu of notice (if applicable). As communicated in the 2013 Remuneration report,
changes implemented in the current financial year have resulted in the target long
term incentive award being equivalent to 100% of fixed remuneration, or $950,000.
This increase strengthens the alignment of Mr Attenborough’s remuneration with
the interests of shareholders in delivering long term value to the Company and will
ensure that the total aggregate reward is competitive with the market.
6.5.1.1 Fixed remuneration
For the year ended 30 June 2014, Mr Attenborough’s fixed remuneration (inclusive
of statutory superannuation contributions) was $950,000 per annum. This was an
increase of 2.15% from the previous financial year.
6.5.1.2 Short term incentive
For the year ended 30 June 2014, Mr Attenborough was eligible to receive a short term
performance award based on his individual performance and the Group’s performance
over the annual performance review period. Mr Attenborough’s short term performance
award was equivalent to $640,000 at target and is delivered in cash and Restricted Shares
as outlined in section 6.4.1.3, with the opportunity for Mr Attenborough to voluntarily
sacrifice part of the cash component into additional superannuation contributions.
6.5.1.3 Long term incentive
The Company intends that the long term incentive component of Mr Attenborough’s
remuneration package will involve annual grants of Performance Rights, which would be
subject to a performance hurdle, with the grant of such Performance Rights being subject
to obtaining any necessary shareholder approvals at the relevant time. For the year ended
30 June 2014, Mr Attenborough’s long term incentive award was equivalent to $950,000
at target. This long term incentive is similar to that which applies to the LTI applicable to
other senior managers in section 6.4.2, other than as set out in this section. Since being
appointed as Managing Director and Chief Executive Officer, Mr Attenborough has received
three grants of Performance Rights under the Tabcorp Long Term Performance Plan, which
were approved by shareholders at the Company’s 2011, 2012 and 2013 Annual General
Meetings. The details follow:
Effective date
23 September 2011
20 September 2012
18 September 2013
Number
447,761
427,586
590,062
Test date
23 September 2014
20 September 2015
18 September 2016
Expiry date
23 September 2014
20 September 2015
18 September 2016
Upon termination of employment (other than at the discretion of the Board in special
circumstances such as, but not limited to, death or permanent disablement), all unvested
Performance Rights will lapse immediately. In all circumstances of termination of
employment (other than for serious misconduct, in which case all Performance Rights
will lapse immediately), a pro rata number of Performance Rights based on the time
served from Effective date to Test date will be tested. In addition, partial lapse of unvested
Performance Rights may occur in circumstances where Mr Attenborough takes parental
leave or extended unpaid leave. In the event of a takeover offer for the Company or any
other transaction resulting in a change of control of the Company, the Board is required
to determine, in its absolute discretion, the appropriate treatment regarding any unvested
Performance Rights.
Further information relating to these Performance Rights is available in the notice
of meeting for the Company’s 2011, 2012 and 2013 Annual General Meetings.
59
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
6.5.1.4 Other benefits
Mr Attenborough’s contract included benefits, which ceased on 9 April 2014, comprising of:
Living away from home expenses – Mr Attenborough received reimbursement of up
to $3,500 per week for living away from home expenses (such as accommodation).
Home leave – Mr Attenborough received four return business class tickets for travel
between Australia and South Africa each year.
FBT – Tabcorp bore the cost of any fringe benefits tax payable in respect of housing
and location assistance.
6.5.1.5 Changes for the 2015 financial year
Mr Attenborough will receive fixed remuneration (inclusive of statutory superannuation
contributions) of $1,100,000 per annum from 1 September 2014, an increase of 15.8%.
The short term performance award is equivalent to $750,000 at target and will be delivered
in cash and Restricted Shares as outlined in section 6.4.1.3. The target long term incentive
award is to remain unchanged at $950,000. This overall increase in remuneration
recognises Mr Attenborough’s success in leading the transformation of Tabcorp to
drive sustained performance, and better aligns with comparable roles in the market.
6.6 Executive contracts – KMP
The table below contains details of the contracts of the current executive KMP, excluding
the Managing Director and Chief Executive Officer. The current contracts do not provide
for any termination payments, other than payment in lieu of notice.
Minimum notice
period (months)
Executive Tabcorp
6
6
6
6
9
9
9
12
Contract
duration
Open ended
Open ended
Open ended
Open ended
Position
Name
Damien Johnston Chief Financial Officer
Craig Nugent
Adam Rytenskild Chief Operating Officer,
Chief Operating Officer, Wagering
Kerry Willcock
Keno and Gaming
Executive General Manager,
Corporate, Legal and Regulatory
60
6.7 Performance of Tabcorp and shareholder wealth
Tabcorp’s annual financial performance and indicators of shareholder wealth over the
five year period ended 30 June 2014 are highlighted in the graphs below. For periods up
to and including the year ended 30 June 2011, the financial performance included Echo
Entertainment Group, as indicated by the grey bars. The financial performance of Tabcorp
post the demerger of Echo Entertainment Group is indicated by the blue bars.
Figure 6: Net profit after tax
Figure 7: EPS (basic)
600
500
400
300
200
)
m
$
(
x
a
t
r
e
t
f
a
t
i
f
o
r
p
t
e
N
100
0
.
8
4
3
5
5
.
9
6
4
.
0
0
4
3
.
6
6
2
1
.
9
9
2
1
09/10
10/11
11/12
12/13
13/14
)
s
t
n
e
c
(
e
r
a
h
s
r
e
p
s
g
n
n
r
a
E
i
100
90
80
70
60
50
40
30
20
10
0
1
.
7
7
7
.
0
8
6
.
7
4
2
.
7
1
2
.
7
1
09/10
10/11
11/12
12/13
13/14
Figure 8: Full year dividend in respect
of each financial year (includes interim,
final and special dividends)(i)
Figure 9: Company share price at
the end of each financial year(i)
0
.
5
5
0
.
3
4
d
e
k
n
a
r
f
y
l
l
u
f
e
r
a
h
s
r
e
p
s
t
n
e
C
70
60
50
40
30
20
10
0
.
0
4
2
.
0
9
1
.
0
6
1
3
3
.
6
)
$
(
e
c
i
r
p
e
r
a
h
S
7
6
5
4
3
2
1
0
9
2
.
3
3
9
.
2
5
0
.
3
6
3
.
3
09/10
10/11
11/12
12/13
13/14
09/10
10/11
11/12
12/13
13/14
(i)
Whilst the closing share price for 10/11 is after the Demerger of Echo Entertainment Group, it is before the declaration
of the final dividend which was based on Group earnings pre-Demerger inclusive of Echo Entertainment Group.
Tabcorp Concise Annual Report 2014
Figure 10 shows Tabcorp’s currently existing LTI allocations, together with future test dates.
Figure 11B: KMP remuneration for the year ended 30 June 2013 – Non Executive Directors
Figure 10: Current LTI allocations
Grant year Grant date
2011
23 Sep 2011
26 Oct 2011
4 Oct 2012
31 Oct 2012
2 Oct 2013
31 Oct 2013
Allocation to
Senior management
MD & CEO
Senior management
MD & CEO
Senior management
MD & CEO
Expiry date
23 Sep 2014
23 Sep 2014
20 Sep 2015
20 Sep 2015
18 Sep 2016
18 Sep 2016
Future test date
23 Sep 2014
23 Sep 2014
20 Sep 2015
20 Sep 2015
18 Sep 2016
18 Sep 2016
2012
2013
During the year ended 30 June 2014, the 2010 allocations of Performance Rights issued
to the former MD & CEO pre-Demerger lapsed. The relative TSR percentile ranking of this
allocation at the final test date was at the 20th percentile.
7. Remuneration tables
7.1 Remuneration of KMP
Figure 11A: KMP remuneration for the year ended 30 June 2014 – Non Executive Directors
KMP
Current
Paula Dwyer
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Total
Short term
Salary & fees
$
Post employment
Superannuation
$
429,167
160,833
175,000
180,833
160,833
190,000
1,296,666
39,698
14,877
16,187
16,727
14,877
17,575
119,941
Total
$
468,865
175,710
191,187
197,560
175,710
207,575
1,416,607
Short term
Salary & fees(i)
Post employment
Superannuation(i)
KMP
Current
Paula Dwyer
Elmer Funke Kupper
Steven Gregg (ii)
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Total
$
422,917
151,667
161,667
171,667
151,667
176,667
1,236,252
$
38,063
13,650
14,550
15,450
13,650
15,900
111,263
Total
$
460,980
165,317
176,217
187,117
165,317
192,567
1,347,515
(i)
Includes amounts earned whilst an Observer.
(ii) Appointed as an Observer on 14 October 2011, and commenced as a Director and KMP on 18 July 2012 following
the receipt of all necessary regulatory approvals. Total remuneration for the period whilst a KMP was $168,414.
61
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
Figure 11C: KMP remuneration for the year ended 30 June 2014 – Executives
Short term
Salary & fees (i) Cash bonus (ii)
Non-monetary
benefits (iii)
$
$
$
Long term
Annual and
long service
Post
employment
Total
excluding
charge for
Charge for
share based
allocations (iv)
leave Superannuation
$
$
share based Performance
Rights
allocations
$
$
Total
$
928,974
506,250
306,967
(5,837)
17,775
1,754,129
758,858
2,512,987
614,057
157,766
130,708
513,429
2,344,934
249,638
64,565
53,804
219,713
1,093,970
-
459
-
-
307,426
(3,009)
36,058
12,959
18,605
58,776
17,775
4,580
4,580
17,775
62,485
878,461
263,428
202,051
769,522
3,867,591
282,932
41,949
34,799
247,533
1,366,071
1,161,393
305,377
236,850
1,017,055
5,233,662
Performance
related (v)
%
50%
46%
35%
37%
46%
Termination
benefits
$
-
-
-
-
-
-
KMP
Current Executive Director
David Attenborough
Current Executives
Damien Johnston
Craig Nugent(vi)
Adam Rytenskild(vi)
Kerry Willcock
Total
(i) Comprises salary and salary sacrificed benefits (including superannuation and motor vehicle novated leases).
(ii) Cash bonus reflects the 75% of the STI achieved in the year. The remaining 25% of the STI is deferred into Restricted Shares to be granted subsequent to 30 June 2014, and will be reflected in remuneration of future financial years, as outlined in section 6.4.1.5.
(iii) Comprises the cost to the Company for providing relocation expenses, living away from home benefits, accommodation, car parking, and airfares, where applicable.
(iv) Represents the fair value of share based payments expensed by the Company. Value only accrues to the KMP when conditions have been met.
(v) Represents the sum of cash bonus and Performance Rights as a percentage of total remuneration, excluding termination payments.
(vi) Commenced as a KMP on 28 March 2014. Remuneration reflects period as a KMP. Salary & fees and long service leave reflect increase in annual leave and long service leave accruals due to new salary levels.
62
Tabcorp Concise Annual Report 2014 Figure 11D: KMP remuneration for the year ended 30 June 2013 – Executives
Short term
Non-monetary
Long term
Annual and
long service
Post
employment
Total
excluding
charge for
Charge for
share based
allocations (iv)
Salary & fees(i) Cash bonus (ii)
benefits (iii)
$
$
$
leave Superannuation
$
$
share based Performance
Rights
allocations
$
$
Total
$
KMP
Current Executive Director
David Attenborough
Current Executives
Damien Johnston
Kerry Willcock
Former Executive
Mohan Jesudason(vi)
Total
908,530
620,000
375,262
9,575
16,470
1,929,837
383,033
2,312,870
601,030
520,287
311,000
271,000
-
-
316,765
2,346,612
-
1,202,000
-
375,262
16,713
13,213
(963)
38,538
16,470
16,470
945,213
820,970
173,342
151,364
1,118,555
972,334
8,235
57,645
324,037
4,020,057
52,901
760,640
376,938
4,780,697
Performance
related (v)
%
43%
43%
43%
14%
Termination
benefits
$
-
-
-
521,138
521,138
(i) Comprises salary and salary sacrificed benefits (including superannuation and motor vehicle novated leases).
(ii) Cash bonus reflects 100% of the total STI awarded. For the year ended 30 June 2013 there was no STI deferral into Restricted Shares for KMP.
(iii) Comprises the cost to the Company for providing relocation expenses, living away from home benefits, accommodation, car parking, and airfares, where applicable.
(iv) Represents the fair value of share based payments expensed by the Company. Value only accrues to the KMP when conditions have been met.
(v) Represents the sum of cash bonus and Performance Rights as a percentage of total remuneration, excluding termination payments.
(vi) Ceased employment and as a KMP on 31 December 2012. Termination payment includes $487,500 payment in lieu of notice and $33,638 payment in lieu of the 2013 financial year long term incentive. In addition to the amounts disclosed above, payment
on cessation of annual leave amounted to $63,187 and long service leave amounted to $152,961.
The amounts that appear under the heading ‘charge for share based allocations’ are the amounts required under the Accounting Standards to be expensed by the Company in respect
of the allocation of long term incentives and Restricted Shares to KMP. Each year, the Board may decide to allocate long term incentives to executives. Currently, these long term incentives
are allocated in the form of Performance Rights, which are expensed by the Company over the three year vesting period. Figures 11C and 11D represent the expenses incurred during the
year in respect of current and past incentive allocations. These amounts are therefore not amounts actually received by executives during the year. Whether executives receive any value
from the allocation of long term incentives in the future will depend on the performance of the Company relative to a peer group of listed companies. The mechanism which determines
whether or not long term incentives vest in the future is described in sections 6.4.2 and 6.5.1.3.
63
Tabcorp Concise Annual Report 2014 Remuneration report (audited) (continued)
Figure 12C: Performance Rights vested and exercised during the year
For the year ended 30 June 2014
No Performance Rights vested or were exercised during the current year.
Figure 12D: Value of Performance Rights granted as part of remuneration
During the year ended 30 June 2014
KMP
Current
David Attenborough
Damien Johnston
Craig Nugent(iv)
Adam Rytenskild (iv)
Kerry Willcock
Elmer Funke Kupper(v)
Total
Granted(i)
$
Exercised
$
1,221,428
340,573
-
-
299,525
-
1,861,526
-
-
-
-
-
-
-
As a % of
Lapsed (ii) remuneration(iii)
$
-
-
-
-
-
131,254
131,254
%
30%
24%
14%
15%
24%
n/a
(i)
Represents the value of Performance Rights granted during the year. For details on the valuation of the Performance
Rights, including models and assumptions used, refer to note 21 of the Tabcorp Financial Report.
(ii) Represents the value of Performance Rights as a result of not satisfying the performance conditions during the year.
The value is determined assuming the performance conditions had been achieved, and is calculated based on the market
value of Tabcorp shares at the date of lapsing.
(iii) Represents the fair value of Performance Rights expensed during the year as a percentage of total remuneration,
excluding termination payments. Total remuneration includes share based payments.
(iv) Commenced as a KMP on 28 March 2014. No Performance Rights were granted, exercised or lapsed after commencement
date. Remuneration percentage represents period as a KMP.
(v)
Performance rights that lapsed were granted in relation to the former position held of Managing Director and
Chief Executive Officer (refer to section 5.1).
7.2 Other remuneration tables
Figure 12A: Short term incentive (STI) achieved
For the year ended 30 June 2014
Actual STI achieved
25%
Restricted
Shares
75% cash
portion $ (i) portion $(ii)
Actual STI
achieved
as a % of
STI not
achieved
as a % of
Total $ target STI target STI maximum STI (iii)
Actual
STI achieved
as a % of
506,250
168,750
675,000
105%
249,638
64,565
53,804
219,713
83,212
21,521
332,850
86,086
17,934
73,237
71,738
292,950
105%
105%
105%
105%
0%
0%
0%
0%
0%
42%
42%
42%
42%
42%
KMP
Current
David
Attenborough
Damien
Johnston
Craig Nugent(iv)
Adam
Rytenskild (iv)
Kerry Willcock
(i) 75% of the actual STI achieved is paid as cash, and is included in remuneration of the current financial year.
(ii) 25% of the actual STI achieved is deferred in the form of Restricted Shares which are subject to a two year service
restriction from the grant date. The Restricted Shares will be granted after the end of the financial year, and the
value will be reflected in remuneration of future financial years.
(iii) Maximum STI for KMPs may vary, as it is subject to Board discretion.
(iv) Commenced as a KMP on 28 March 2014. STI represents period as a KMP.
Figure 12B: Performance Rights granted during the year
For the year ended 30 June 2014
Grant date Number
KMP
Current
David Attenborough 31 October 2013(i) 590,062
2 October 2013(i) 196,863
Damien Johnston
Craig Nugent(ii)
–
–
Adam Rytenskild(ii)
–
–
2 October 2013(i) 173,136
Kerry Willcock
Fair
value at
grant
date $
2.07
1.73
–
–
1.73
Exercise
price $
Exercise and
expiry date
- 18 September 2016
– 18 September 2016
–
–
–
–
- 18 September 2016
(i)
Terms and conditions of the Performance Rights are the same. Grant date differs due to Performance Rights granted
to the Managing Director and Chief Executive Officer which required shareholder approval at the AGM. Fair value under
accounting standards is determined at grant date.
(ii) Commenced as a KMP on 28 March 2014. No Performance Rights were granted after commencement date.
64
Tabcorp Concise Annual Report 2014 Figure 12E: KMP interests in Performance Rights of Tabcorp Holdings Limited (number)
For the year ended 30 June 2014
Figure 12F: KMP interests in shares of Tabcorp Holdings Limited (number)
For the year ended 30 June 2014
KMP
Non Executive
Directors
Elmer Funke
Kupper (iii)
Current
Executive
Director
David
Attenborough
Current
Executives
Damien
Johnston
Craig Nugent
Adam
Rytenskild
Kerry Willcock
Total
Balance
at start
of year start date remuneration Exercised
Balance
at KMP
Granted as
Net
change
Balance at
other(i) end of year (ii)
41,017
n/a
-
- (41,017)
-
875,347
n/a
590,062
438,017
n/a
n/a
342,198
n/a
382,360
1,736,741
280,666
n/a
622,864
196,863
-
-
173,136
960,061
-
-
-
-
1,465,409
-
-
634,880
342,198
-
-
-
-
- (41,017)
280,666
555,496
3,278,649
KMP
Non Executive Directors
Paula Dwyer
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Current Executive Director
David Attenborough
Current Executives
Damien Johnston
Craig Nugent
Adam Rytenskild
Kerry Willcock
Total
Balance
at start
of year
Balance at
KMP start
date
On exercise of
Performance
Rights
Net
change
other
Balance
at end of
year
34,292
20,000
10,000
23,181
8,500
84,876
58,609
66,383
n/a
n/a
120,320
426,161
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
20,931
-
20,931
-
-
-
-
-
-
-
-
-
-
-
-
15,708
20,000
-
-
-
-
50,000
40,000
10,000
23,181
8,500
84,876
-
58,609
-
-
712
66,383
-
21,643
5,891 126,211
42,311 489,403
Figure 12G: KMP interests in bonds of Tabcorp Holdings Limited
For the year ended 30 June 2014
(i)
Includes forfeitures.
(ii) The number of rights vested and exercisable at year end was nil.
(iii) Performance rights that lapsed were granted in relation to the former position held of Managing Director
and Chief Executive Officer (refer to section 5.1).
KMP
Non Executive Directors
Paula Dwyer
Elmer Funke Kupper
Steven Gregg
Jane Hemstritch
Justin Milne
Zygmunt Switkowski
Current Executive Director
David Attenborough
Current Executives
Damien Johnston
Craig Nugent
Adam Rytenskild
Kerry Willcock
Balance at
start of year
$
Balance
at KMP
start date
$
Net
Balance at
change(i) end of year
$
$
-
150,000
-
200,000
-
-
-
-
n/a
n/a
-
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-
-
n/a
-
(150,000)
-
(200,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Interest
costs (ii)
$
-
8,611
-
11,481
-
-
-
-
-
-
-
(i) Bonds were redeemed in May 2014.
(ii) Interest costs for the period while the individuals were a KMP. Amount included as interest expense for Tabcorp Holdings
Limited for the year.
65
Tabcorp Concise Annual Report 2014 Income statement
For the year ended 30 June 2014
Revenue
Other income
Government taxes and levies
Commissions and fees
Employment costs
Communications and technology costs
Depreciation and amortisation
Impairment
Property costs
Advertising and promotions
Other expenses
Profit before income tax expense and net finance costs
Finance income
Finance costs
Profit from continuing operations before income tax expense
Income tax expense
Profit from continuing operations after income tax
Discontinued operations
Loss from discontinued operations, net of tax
Net profit after tax
Other comprehensive income
Change in fair value of cash flow hedges taken to equity that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Income tax on items that may be reclassified to profit or loss
Items that will not be reclassified to profit or loss
Income tax on items that will not be reclassified to profit or loss
Other comprehensive income/(loss) for the period, net of income tax
Total comprehensive income for the period
Earnings per share:
From continuing operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
Total attributable to shareholders of Tabcorp
Basic earnings per share (cents)
Diluted earnings per share (cents)
66
2014
$m
2,039.8
0.7
(349.5)
(770.8)
(165.1)
(75.9)
(164.4)
–
(41.3)
(38.1)
(113.7)
321.7
3.4
(100.6)
224.5
(75.1)
149.4
(19.5)
129.9
(4.9)
(0.2)
1.5
(0.4)
0.1
(3.9)
126.0
2013
$m
2,003.2
8.5
(334.1)
(763.1)
(154.2)
(85.2)
(151.1)
(18.6)
(40.3)
(36.8)
(106.2)
322.1
3.1
(106.8)
218.4
(70.8)
147.6
(21.0)
126.6
(6.7)
-
2.0
0.9
(0.3)
(4.1)
122.5
19.8
19.7
17.2
17.1
20.0
20.0
17.2
17.1
Tabcorp Concise Annual Report 2014 Balance sheet
As at 30 June 2014
Current assets
Cash and cash equivalents
Receivables
Consumables
Current tax assets
Other
Total current assets
Non current assets
Receivables
Property, plant and equipment
Intangible assets – licences
Intangible assets – other
Derivative financial instruments
Other
Total non current assets
TOTAL ASSETS
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Derivative financial instruments
Other
Total current liabilities
Non current liabilities
Interest bearing liabilities
Deferred tax liabilities
Provisions
Derivative financial instruments
Other
Total non current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
2014
$m
126.8
39.9
4.7
0.7
8.9
181.0
16.8
312.6
726.6
1,833.9
21.6
12.6
2,924.1
3,105.1
340.9
-
-
25.9
22.6
7.2
396.6
1,094.3
66.9
10.9
50.5
4.5
1,227.1
1,623.7
1,481.4
2,188.7
(0.7)
(706.6)
1,481.4
2013
$m
109.7
94.9
4.4
-
12.3
221.3
52.4
308.5
750.3
1,772.4
26.0
13.7
2,923.3
3,144.6
293.6
432.9
13.7
22.5
23.1
3.8
789.6
821.5
64.3
10.9
43.8
1.3
941.8
1,731.4
1,413.2
2,128.7
(10.4)
(705.1)
1,413.2
67
Tabcorp Concise Annual Report 2014 Cash flow statement
For the year ended 30 June 2014
Cash flows from operating activities
Net cash receipts in the course of operations
Payments to suppliers, service providers and employees
Payment of government levies, betting taxes and GST
Refund of GST relating to prior years
Finance income received
Finance costs paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Payment for property, plant and equipment and intangibles
Proceeds from sale of property, plant and equipment and intangibles
Loan repayments received from customers
Loans advanced to customers
Net cash flows used in investing activities
Cash flows from financing activities
Net cash flows from revolving bank facilities
Proceeds from long term borrowings
Repayment of long term borrowings
Dividends paid
Proceeds from issue of shares
Payment of transaction costs for demerger
Payments for on-market share purchase
Proceeds from sale of treasury shares
Net cash flows used in financing activities
Net increase/(decrease) in cash held
Cash at beginning of year
Cash at end of year
The cash flow statement includes the cash flows of the discontinued gaming operations.
2014
$m
2013
$m
2,091.0
(1,274.7)
(253.6)
-
3.8
(103.9)
(75.2)
387.4
(198.4)
2.1
40.9
(0.1)
(155.5)
(154.5)
434.5
(434.5)
(67.0)
7.0
-
(0.4)
0.1
(214.8)
17.1
109.7
126.8
2,189.8
(1,393.5)
(346.9)
25.4
3.1
(104.6)
(108.4)
264.9
(204.2)
15.7
15.6
(6.4)
(179.3)
-
-
-
(116.1)
-
(10.7)
(0.5)
-
(127.3)
(41.7)
151.4
109.7
68
Tabcorp Concise Annual Report 2014 Statement of changes in equity
For the year ended 30 June 2014
Issued capital
Ordinary
shares
$m
Treasury
shares
$m
Retained
earnings/
(accumulated
losses)
$m
Net
unrealised
losses
reserve
$m
Employee
equity
benefit
reserve
$m
Foreign
currency
translation
reserve
$m
Demerger
reserve
$m
Total
equity
$m
2014
Balance at beginning of year
Profit for the period
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Dividend reinvestment plan
Restricted shares issued
Share based payments expense
Disposal of shares
Balance at end of year
2013
Balance at beginning of year
Profit for the period
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Dividend reinvestment plan
Restricted shares issued
Share based payments expense
Balance at end of year
2,129.3
-
-
-
-
59.9
-
-
-
2,189.2
2,084.4
-
-
-
-
44.9
-
-
2,129.3
(0.6)
-
-
-
-
-
(0.4)
0.4
0.1
(0.5)
(0.4)
-
-
-
-
-
(0.5)
0.3
(0.6)
(10.4)
129.9
(0.3)
129.6
(119.9)
-
-
-
-
(0.7)
23.4
126.6
0.6
127.2
(161.0)
-
-
-
(10.4)
(37.1)
-
(3.4)
(3.4)
-
-
-
-
-
(40.5)
(32.4)
-
(4.7)
(4.7)
-
-
-
-
(37.1)
1.9
-
-
-
-
-
-
2.1
-
4.0
0.7
-
-
-
-
-
-
1.2
1.9
(669.9)
-
-
-
-
-
-
-
-
(669.9)
(669.9)
-
-
-
-
-
-
-
(669.9)
-
-
(0.2)
(0.2)
-
-
-
-
-
1,413.2
129.9
(3.9)
126.0
(119.9)
59.9
(0.4)
2.5
0.1
(0.2) 1,481.4
- 1,405.8
126.6
-
(4.1)
-
122.5
-
(161.0)
-
44.9
-
-
(0.5)
1.5
-
- 1,413.2
69
Tabcorp Concise Annual Report 2014 Notes to the concise financial statements
For the year ended 30 June 2014
1. Accounting policies
This concise financial report has been prepared in accordance with the Corporations
Act 2001 and Accounting Standard AASB 1039 Concise Financial Reports. The financial
statements and specific disclosures required by AASB 1039 are an extract of, and have been
derived from the Group’s full financial report for the financial year. Other information
included in the concise financial report is consistent with the Group’s full financial report.
All amounts are presented in Australian dollars.
A full description of the accounting policies adopted by the Group is provided in the 2014
financial statements which form part of the full financial report.
The Group has four operating segments:
Wagering
Totalizator and fixed odds betting activities.
Media and International National and international broadcasting of racing and
sporting events.
Gaming Services
Supply of electronic gaming machines and specialised
services to licensed gaming venues.
Keno
Keno operations in licensed venues and TABs in Victoria
and Queensland, and in licensed venues in New South Wales.
2. Dividends
Dividends declared and paid during the year on ordinary shares:
(a) Interim dividend for 2014 of 8.0 cents per share paid
on 24 March 2014 (2013: 11.0 cents per share paid on
25 March 2013)
(b) Final dividend for 2013 of 8.0 cents per share paid
on 24 September 2013 (2012: 11.0 cents per share paid
on 26 September 2012)
Dividends declared after balance date
Since the end of the financial year, the Directors
declared the following dividend:
Final dividend for 2014 of 8.0 cents per share to be paid
on 24 September 2014 (2013: 8.0 cents per share)
2014
$m
2013
$m
60.3
80.7
59.6
119.9
80.3
161.0
61.0
59.6
The financial effect of this dividend has not been brought to account in the financial
statements and will be recognised in subsequent financial reports (refer to note 4).
3. Segment information
The Group’s operating segments have been determined based on the internal
management reporting structure and the nature of products and services provided
by the Group. They reflect the business level at which financial information is provided
to management for decision making regarding resource allocation and performance
assessment. The measure of segment profit used excludes significant items not
considered integral to the ongoing performance of the segment, which are outlined
in the reconciliation below. Intersegment pricing is determined on commercial terms
and conditions.
70
Wagering
$m
Media and
International
$m
Gaming
Services
$m
Keno
$m
Total
$m
2014
Revenue – external
Revenue – intersegment
Segment revenue
Segment profit before
interest and tax
Depreciation and amortisation
Capital expenditure
2013
Revenue – external
Revenue – intersegment
Segment revenue
Segment profit before
impairment, interest and tax
Depreciation and amortisation
Impairment losses recognised
in the income statement
Capital expenditure
1,574.7
-
1,574.7
175.4
106.8
114.4
1,558.0
-
1,558.0
167.3
97.7
-
58.8
163.1
57.3
220.4
58.7
9.8
10.2
153.5
54.1
207.6
57.7
9.3
-
8.7
98.1
-
98.1
39.7
27.3
43.5
86.3
-
86.3
37.5
20.8
-
37.5
203.9 2,039.8
57.3
203.9 2,097.1
-
51.7
20.5
35.9
325.5
164.4
204.0
205.4 2,003.2
54.1
205.4 2,057.3
-
52.2
23.3
18.6
18.5
314.7
151.1
18.6
123.5
Tabcorp Concise Annual Report 2014 3. Segment information (continued)
Reconciliation of segment revenue and profit
(a) Revenue
Segment revenue
Intersegment revenue elimination
Consolidated revenue
(b) Profit
Segment profit before impairment, interest and tax
Significant items not considered integral to the ongoing
performance of the segment:
– impairment
– refund of GST relating to prior years
– consideration for extinguishing a right to acquire specified assets
Unallocated items:
– finance income
– finance costs
– other
Profit from continuing operations before income tax expense
Directors’ declaration
2014
$m
2013
$m
In the opinion of the Directors of Tabcorp Holdings Limited the accompanying concise
financial report of the consolidated entity, comprising Tabcorp Holdings Limited and its
controlled entities for the year ended 30 June 2014:
2,097.1
(57.3)
2,039.8
2,057.3
(54.1)
2,003.2
(a) has been derived from or is consistent with the full financial report for the financial
year; and
(b) complies with Accounting Standard AASB 1039 Concise Financial Reports.
This declaration has been made after receiving the declarations required to be made
to the Directors in accordance with sections 295A of the Corporations Act 2001.
325.5
314.7
Signed in accordance with a resolution of Directors.
-
-
-
-
3.4
(100.6)
(3.8)
224.5
(18.6)
20.4
7.5
9.3
3.1
(106.8)
(1.9)
218.4
Paula J Dwyer
Chairman
4. Subsequent events
(a) Dividends
Since 30 June 2014, the Directors have declared a final dividend of 8.0 cents per ordinary
share. The total amount of the final dividend is $61.0 million. This has not been provided
for in the 30 June 2014 financial statements (refer to note 2).
(b) Acquisition of ACTTAB
On 30 July 2014 the Group agreed to acquire ACTTAB for $105.5 million, subject to regulatory
approvals, including ACCC clearance. The ACT Government will issue a 50 year exclusive
totalizator licence, a sports bookmaking licence for an initial term of 15 years with further
rolling extensions to a total term of 50 years, and ongoing approvals to offer Keno and
Trackside products for 50 years. The financial effects of the above transaction have not
been brought to account in the financial statements for the year ended 30 June 2014.
David R H Attenborough
Managing Director and Chief Executive Officer
Melbourne
7 August 2014
71
Tabcorp Concise Annual Report 2014
Independent auditor’s report
72
Tabcorp Concise Annual Report 2014 Five year review
Total revenue
EBITDA1
Profit before interest and tax2
Profit after income tax attributable
to members of parent entity3
Dividend4
Cash and deposits
Other current assets
Intangible assets – licences
Intangible assets – other
Other non current assets
Total assets
Current interest bearing liabilities
Other current liabilities
Non current interest bearing liabilities
Other non current liabilities
Total liabilities
Shareholders’ funds
Capital expenditure – payments
Earnings per share
Dividends per share 4
Operating cash flow per share5
Return on shareholders’ funds
Net assets per share
Revenue 6
Wagering
Media and International
Gaming Services
Keno
Gaming7
Casinos8
Unallocated/elimination
Normalisation adjustment
Total
2014
$m
2,039.8
459.4
295.0
2013
$m
2,133.4
472.3
313.1
2012
$m
3,038.5
725.2
591.7
2011
$m
4,469.6
774.7
856.3
2010
$m
4,219.8
998.0
794.4
129.9
121.3
126.6
140.3
340.0
173.0
534.8
295.1
469.5
335.5
126.8
54.2
726.6
1,833.9
363.6
3,105.1
-
396.6
1,094.3
132.8
1,623.7
1,481.4
198.4
cents
17.2
16.0
25.0
8.9%
$1.96
$m
1,574.7
220.4
98.1
203.9
-
-
(57.3)
-
2,039.8
109.7
111.6
750.3
1,772.4
400.6
3,144.6
432.9
356.7
821.5
120.3
1,731.4
1,413.2
204.2
cents
17.2
19.0
8.2
9.0%
$1.92
$m
1,558.0
207.6
86.3
205.4
130.2
-
(54.1)
-
2,133.4
151.4
76.8
814.8
1,803.2
402.8
3,249.0
-
490.2
1,224.0
129.0
1,843.2
1,405.8
631.0
cents
47.6
24.0
(14.8)
25.9%
$1.97
$m
1,637.4
190.2
4.7
183.1
1,074.2
-
(51.1)
-
3,038.5
147.1
103.8
430.2
1,805.7
351.7
2,838.5
449.8
502.2
515.2
160.4
1,627.6
1,210.9
595.6
cents
80.7
43.0
9.4
18.5%
$1.83
$m
1,569.1
179.3
-
169.6
1,077.4
1,439.4
(53.0)
87.8
4,469.6
261.9
119.2
652.6
3,627.5
1,796.5
6,457.7
175.0
671.0
1,816.8
340.2
3,003.0
3,454.7
408.1
cents
77.1
55.0
48.2
13.9%
$5.68
$m
1,553.5
164.0
-
157.2
1,037.2
1,371.9
(51.8)
(12.2)
4,219.8
1. 2013 includes impairment of $65.8 million, 2011 includes impairment of $358.0 million and excludes net gain on demerger
of Echo Entertainment Group before income tax benefit of $304.6 million.
2. 2011 includes net gain on demerger of Echo Entertainment Group before income tax benefit of $304.6 million.
3. 2011 includes net gain on demerger of Echo Entertainment Group of $351.2 million.
4. Dividends attributable to the year, but which may be payable after the end of the period.
5. Net operating cash flow per the statement of cashflows does not include payments for property plant and equipment and
intangibles, whereas these items are included in the calculation for the operating cash flow per share ratio. 2012 includes
payment for the Victorian Wagering and Betting Licence of $418.7 million.
6. Revenue includes both external and internal revenue.
7. Gaming includes the Victorian Tabaret business which ceased operations on 15 August 2012.
8. The Casino revenues are normalised.
73
Tabcorp Concise Annual Report 2014 Shareholder information
As at 15 August 2014
Ordinary shares
Tabcorp has on issue 762,954,019 fully paid ordinary shares which are listed on the
Australian Securities Exchange (ASX) under the code TAH. The issued capital has increased
from last year due to ordinary shares issued pursuant to Tabcorp’s Dividend Reinvestment
Plan. There currently isn’t a share buy-back in operation in respect of the Company’s
ordinary shares.
Voting rights
All ordinary shares issued by Tabcorp Holdings Limited carry one vote per share. Tabcorp
Subordinated Notes and Performance Rights do not carry any rights to vote at general
meetings of the Company’s shareholders. Failure to comply with certain provisions of
the Victorian Gambling Regulation Act 2003 or Tabcorp’s Constitution, including the
shareholder restrictions discussed above, may result in suspension of voting rights.
Tabcorp Subordinated Notes
Tabcorp has on issue 2,500,000 Tabcorp Subordinated Notes which are unsecured,
subordinated, cumulative debt securities listed on the ASX under the code TAHHB. They
were initially issued on 22 March 2012 to successful applicants pursuant to the Tabcorp
Subordinated Notes Prospectus dated 22 February 2012. Holders of Tabcorp Subordinated
Notes are entitled to receive quarterly interest payments (subject to deferral) and $100 cash
per Tabcorp Subordinated Note upon redemption. The interest rate is equal to the three
month bank bill rate plus a fixed margin of 4.00% per annum. If Tabcorp does not elect
to redeem the Tabcorp Subordinated Notes on 22 March 2017 (the First Call Date), then
the fixed margin increases by 0.25% per annum.
Tabcorp Bonds
The Tabcorp Bonds matured on 1 May 2014 and as a result a redemption payment of
$100 per Bond was made to all eligible Bondholders. Tabcorp Bonds were five year debt
securities listed on the ASX under the code TAHHA. They were initially issued on 1 May 2009
to successful applicants pursuant to the Tabcorp Bonds Prospectus dated 1 April 2009.
Holders of Tabcorp Bonds were entitled to receive quarterly interest payments and
$100 cash per Tabcorp Bond upon redemption. The interest rate was equal to the
three month bank bill rate plus a fixed margin of 4.25% per annum.
Shareholding restrictions
The Company’s Constitution, together with an agreement entered into with the State of
Queensland, contain restrictions prohibiting an individual from having a voting power
of more than 10% in the Company. The Company may refuse to register any transfer of
shares which would contravene these shareholding restrictions or require divestiture
of the shares that cause an individual to exceed the shareholding restrictions.
Shareholder benefits scheme
Tabcorp introduced a benefits scheme for shareholders in April 2004. The scheme is aligned
with Tabcorp’s key wagering business and associated racing industries, and provides free
entry into nominated thoroughbred, harness and greyhound racing events. Shareholders
only have to register once, then they will receive a new benefits card in July each year.
Details of the scheme and its terms and conditions are available on Tabcorp’s website
www.tabcorp.com.au.
Substantial shareholders
The following is a summary of the current substantial shareholders pursuant to notices
lodged with the ASX in accordance with section 671B of the Corporations Act 2001:
Name
Northcape Capital Pty Ltd
Date of interest ordinary shares(i)
22 July 2014
54,626,100
capital (ii)
7.16%
Number of
% of issued
(i) As disclosed in the last notice lodged with the ASX by the substantial shareholder.
(ii) The percentage set out in the notice lodged with the ASX is based on the total issued share capital of Tabcorp at the date
of interest.
Marketable parcel
There were 36,054 shareholders holding less than a marketable parcel of ordinary shares
($500 or more, equivalent to 143 ordinary shares) based on a market price of $3.52 at the
close of trading on 15 August 2014.
74
Tabcorp Concise Annual Report 2014 Twenty largest registered holders of ordinary shares
Twenty largest registered holders of Tabcorp Subordinated Notes
Investor name
J P Morgan Nominees Australia Limited
HSBC (Custody) Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
AMP Life Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
CS Fourth Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 3
Questor Financial Services Limited
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
Warbont Nominees Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
QIC Limited
Argo Investments Limited
UBS Nominees Pty Ltd
Pan Australian Nominees Pty Limited
Total of top 20 registered holders
Distribution of securities held
Number of
Ordinary
Shares
165,163,715
129,295,131
90,014,348
44,016,553
26,455,165
7,892,214
7,621,715
6,387,132
6,065,342
5,934,307
4,664,473
4,298,151
4,115,710
3,674,140
3,468,886
3,265,796
2,775,910
2,631,388
2,629,752
2,012,101
522,381,929
% of issued
capital
21.65
16.95
11.80
5.77
3.47
1.03
1.00
0.84
0.79
0.78
0.61
0.56
0.54
0.48
0.45
0.43
0.36
0.34
0.34
0.26
68.45
Investor group name
UBS Wealth Management Australia Nominees Pty Ltd
National Nominees Limited
National Nominees Limited
UBS Nominees Pty Ltd
Citicorp Nominees Pty Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
Arrowcrest Group Pty Ltd
First Option Credit Union Ltd
Mr Masaji Kitagawa
Nulis Nominees (Australia) Limited
RBC Investor Service Australia Nominees Pty Limited
Map Capital Pty Ltd
Navigator Australia Ltd
Netwealth Investments Limited
J P Morgan Nominees Australia Limited
BT Portfolio Services Limited
Ramm Investments Pty Ltd
Strandell Pty Ltd
Total of top 20 registered holders
Number of
Subordinated
Notes
229,785
156,593
111,817
92,024
81,613
70,187
67,532
42,355
22,500
20,000
20,000
14,518
14,203
13,500
13,344
12,702
11,365
11,250
10,500
10,100
1,025,888
% of total
Notes
9.19
6.26
4.47
3.68
3.26
2.81
2.70
1.69
0.90
0.80
0.80
0.58
0.57
0.54
0.53
0.51
0.45
0.45
0.42
0.40
41.01
Ordinary Shares(i)
Tabcorp Subordinated Notes
Performance Rights(ii)
Number of securities held
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of holders
79,462
35,458
6,034
3,483
92
124,529
Number of securities
24,817,251
78,124,565
43,199,262
71,746,092
545,066,849
762,954,019
Number of holders
3,407
215
14
17
3
3,656
Number of securities
907,720
455,491
110,901
527,693
498,195
2,500,000
Number of holders
-
-
-
1
10
11
Number of securities
-
-
-
45,174
4,518,374
4,563,548
(i) Ordinary Shares includes Restricted Shares and Deferred Shares offered to employees under the Company’s incentive arrangements.
(ii) Rights were issued pursuant to the Company’s long term incentive arrangements.
Refer to the Remuneration report on pages 50 to 65 for more information about the Company’s incentive arrangements.
75
Tabcorp Concise Annual Report 2014
Shareholder information (continued)
As at 15 August 2014
Online shareholder services
Major announcements
Tabcorp’s major Company announcements since the previous Annual Report are listed below.
These announcements are available on the Company’s website at www.tabcorp.com.au
following their release to the Australian Securities Exchange.
Use the internet to easily manage your shareholding
Shareholders can use the online share registry facility on the Company’s website,
www.tabcorp.com.au, or through www.linkmarketservices.com.au to conduct
standard shareholding enquiries and transactions, including:
Full year results – statutory net profit after tax of $129.9 million, up 2.6%
Tabcorp to acquire ACTTAB
Health Benefit Levy on gaming machines – Tabcorp applies for special leave to appeal
Tabcorp’s claim for approx. $686 million – Tabcorp lodges appeal against
judgment of Supreme Court of Victoria
Levy on gaming machines – Court of Appeal found in favour of the Victorian
Government
Tabcorp’s claim for approx. $686 million – Supreme Court of Victoria ruled
in favour of the Victorian Government
Sky Racing broadcasting expanded to include Latin American races and
extended US coverage
Racing Queensland proposed race information fees for 2014-15
Racing Victoria Limited race fields fees to apply from 1 July 2014
Trading update for the third quarter of the 2014 financial year
Half year results – statutory net profit after tax of $74.6 million, up 2.3%
Tabcorp amends bank debt facility
Chairman’s and Managing Director’s AGM addresses
Investor day presentation
Trading update for the first quarter of the 2014 financial year
Tabcorp’s Queensland Keno Licence extension to 2047 finalised
Tabcorp again tops global gambling sustainability ranking in Dow Jones
Sustainability Index results
Retail exclusivity extension finalised for Tabcorp’s NSW Wagering Licence
• Download dividend statements
• Update registered address
• Check current and previous shareholding balances
• Appoint a proxy to vote at the Annual General Meeting
• Lodge or update banking details
• Participate in the Dividend Reinvestment Plan
• Notify Tax File Number/Australian Business Number
Dividend payments
All dividends paid by Tabcorp to shareholders with a registered address in Australia
are paid by direct credit into a nominated bank account with an Australian financial
institution. Payments are electronically credited on payment date, allowing shareholders
to utilise their funds immediately without any mailing or handling delays. There are also
no misplaced or undeposited cheques, and reduces the likelihood of mail fraud. Shareholders
can provide and update their bank account details by using the online share registry facility
or by contacting the share registry.
Dividend Reinvestment Plan (DRP)
Tabcorp operates a DRP which enables participants to reinvest their dividends into
acquiring additional Tabcorp shares without incurring any brokerage or handling costs.
A 2.5% discount was applied to the price at which shares were issued under the DRP in
respect of the interim dividend with payment date of 24 March 2014. To elect to participate
in the Company’s DRP, use the online share registry facility or contact the share registry.
Annual Report
Tabcorp’s interactive Annual Reports are available online from the Company’s website,
www.tabcorp.com.au. Annual Reports are sent to those shareholders who have requested
to receive a copy. Shareholders who no longer wish to receive a hard copy of the Annual
Report or wish to receive the Annual Report electronically should contact the share registry
or make their election by using the online share registry facility at www.tabcorp.com.au.
2014
7 Aug
30 Jul
28 Jul
10 Jul
1 Jul
26 Jun
2 Jun
28 May
16 May
30 Apr
6 Feb
2013
17 Dec
31 Oct
17 Oct
15 Oct
25 Sep
13 Sep
10 Sep
76
Tabcorp Concise Annual Report 2014 Company directory
Registered office
Tabcorp Holdings Limited
5 Bowen Crescent
Melbourne VIC 3004
Australia
Telephone 03 9868 2100
Facsimile 03 9868 2300
Email
investor@tabcorp.com.au
Website
www.tabcorp.com.au
Stock exchange listings
The Company’s securities are quoted on the
Australian Securities Exchange (ASX) under
the codes ‘TAH’ for ordinary shares and
‘TAHHB’ for Tabcorp Subordinated Notes.
New South Wales office
495 Harris Street
Ultimo NSW 2007
Telephone 02 9218 1000
Sky Racing/Sky Sports Radio
79 Frenchs Forest Road
Frenchs Forest NSW 2086
Telephone 02 9451 0888
Queensland office
Level 16
15 Adelaide Street
Brisbane QLD 4000
Telephone 07 3243 4100
Share Registry
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Australia
Telephone 1300 665 661
Telephone 02 8280 7418
Facsimile 02 9287 0303
Facsimile 02 9287 0309 (proxy forms only)
Email
Website www.linkmarketservices.com.au
tabcorp@linkmarketservices.com.au
Key dates
2014
Annual General Meeting
(Shangri-La Hotel, Sydney)
2015*
Half-year results announcement
Ex-dividend for interim dividend
Record date for interim dividend
Interim dividend payment
End of financial year
Full-year results announcement
Ex-dividend for final dividend
Record date for final dividend
Final dividend payment
Annual General Meeting
* These are proposed dates.
See the Company’s website for updates (if any).
28 October
5 February
10 February
12 February
18 March
30 June
13 August
18 August
20 August
24 September
29 October
Currency
References to currency are in Australian dollars
unless otherwise stated.
Copyright
Information in this report has been prepared by
Tabcorp, unless otherwise indicated. Information
may be reproduced provided it is reproduced
accurately and not in a misleading context.
Where the material is being published or issued
to others, the sources and copyright status
should be acknowledged.
Investment warning
Past performance of shares is not necessarily
a guide to future performance. The value of
investments and any income from them is not
guaranteed and can fall as well as rise. Tabcorp
recommends investors seek independent
professional advice before making investment
decisions.
Privacy
Tabcorp respects the privacy of its
stakeholders. Tabcorp’s Privacy Policy
is available on the Company’s website
at www.tabcorp.com.au.
Tabcorp Concise Annual Report 2014
77
www.tabcorp.com.au