E x c i t em e n t
w i t h I n t e g r i t y
ANNUAL REPORT 2021
Tabcorp operates three
market leading businesses
Lotteries
and Keno
Wagering
and Media
Gaming
Services
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Contents
Operating and financial review
About Tabcorp
Our vision and purpose
Creating stakeholder value
Chairman’s and MD’s message
Strategic review conclusion
and proposed demerger
FY21 overview
FY21 financial performance
Lotteries and Keno
Wagering and Media
Gaming Services
Corporate responsibility
Governance
Board of Directors
Executive Leadership Team
Corporate governance
Risk management and
material business risks
Directors’ Report
Remuneration Report
Financial Report
Independent auditor’s report
At the back
Five year review
Shareholder information
Company directory
Indicative key dates
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Tabcorp Holdings Limited ABN 66 063 780 709
Tabcorp Holdings Limited ABN 66 063 780 709
Tabcorp Holdings Limited ABN 66 063 780 709
Tabcorp operates three
market leading businesses
ABOUT TABCORP
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We are an Australian based company with a rich heritage in lotteries and wagering.
We manage iconic Australian brands which ignite passion and excitement in
millions of customers.
We also have international operations, with the European based Premier Gateway
International wagering pooling hub and the US based Sky Racing World vision
distribution hub and licensed tote provider.
We offer a unique portfolio of market leading products through our omni-channel
network: in retail, online, phone, and apps.
Our goal is to build a sustainable future for gambling entertainment while making
a positive impact for our stakeholders.
Our operations return billions of dollars each year to the Australian community,
the racing industry and venue partners including newsagents, hotels, clubs and
TAB agents.
$5.7 billion
Revenues
$6.7 billion
Net assets
$4.9 billion
Benefits to stakeholders
For the financial year ended 30 June 2021 (FY21), or as at 30 June 2021, as applicable.
Tabcorp Annual Report 2021
010101
GOVERNANCECORPORATE RESPONSIBILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTTabcorp Annual Report 2021
OUR VISION AND PURPOSE
Our vision is to be
THE TRUSTED GAMBLING ENTERTAINMENT COMPANY
Our purpose is
EXCITEMENT WITH INTEGRITY
We create excitement and value
for our stakeholders while acting
responsibly and with integrity.
We work collaboratively with
all our stakeholders to achieve
success in a responsible, enjoyable
and sustainable manner.
We do this by delivering on our
strategic pillars, modelling our
values in our behaviours, and
leveraging our strong foundations.
Our Strategic Pillars
Customer Led
Superb Experience
Brilliant Execution
Collaborative Partnerships
Our Values
Do it as one team
Do the right thing
Explore what’s possible
Create awesome moments
Make a difference
Our Foundations
Outstanding people
and teams
Commitment to community
and integrity
Leading technology
and innovation
02
Tabcorp Annual Report 2021
CREATING STAKEHOLDER VALUE
Tabcorp has a rich lotteries and wagering heritage. Our iconic
Australian brands have been a part of everyday Australian life
for decades, and they continue to provide entertainment
enjoyed by millions of Australians.
Our unique business model generates significant economic
benefits that are shared with our stakeholders.
In FY21, almost 70% of Tabcorp’s revenue(i) was returned
to governments, racing industry and retail partners, totalling
$4.2b(i) (up 7.7%).
These contributions support essential government-funded
community services and is a significant source of funding
for our industry partners.
In FY21, we continued to support our stakeholders during the
COVID-19 pandemic. Initiatives included providing approximately
$95m of fee relief for venue partners when they were unable to
trade because of lockdowns.
We also contributed $9.1m in voluntary community funding
through donations, unclaimed prize money, in-kind giving
and other support(ii).
$1.1b
$2.4b
$4.9b(i)
of total benefits
for our stakeholders
generated by Tabcorp’s
businesses in FY21
$0.7b
$0.4b
$0.3b
State and Federal
Government taxes
(Lottery, wagering and
Keno taxes, GST, and
income taxes paid
and payable)
Racing industry
(Payments to state and
territory racing industry
bodies)
Retail partners
(Commissions to hotels,
clubs, TAB agents,
newsagents and lottery
retailers)
Employee costs
(Salaries, training and
development)
Shareholders
(Dividends paid
and payable)
(i) Total includes 100% of Victorian Racing Industry joint venture interest
and 100% of Keno NSW interest.
(ii) Refer to the Community section on page 28 for further details.
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CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTTabcorp Annual Report 2021OPERATING & FINANCIAL REVIEW
CHAIRMAN’S AND MANAGING DIRECTOR’S MESSAGE
The pandemic, and associated restrictions,
saw a continued shift to customers
interacting and purchasing through
digital channels across many sectors.
Our Lotteries and Keno and Wagering and
Media businesses recorded healthy digital
growth, underpinned by some of the recent
investments we have made in digital
capability. We are sharing the benefits of this
with our venue partners through a digital
commissions initiative while continuing to
offer our products through an omni-channel
approach that puts customer choice front
and centre.
Our three-year enterprise-wide optimisation
program, called ‘3S’ (Simpler, Smarter,
Stronger) continued to advance. The
program delivered $30m in EBIT savings in
FY21. Further savings from the 3S program
are expected in FY22.
Dividend and capital
management
Growing returns to shareholders is a core
focus and Tabcorp has announced a final
dividend of 7.0 cents per share fully franked,
bringing the full year dividend to 14.5 cents
per share fully franked, up 31.8% on FY20,
and representing a payout ratio of 80% of
NPAT (before significant items).
During the year we executed a successful
equity raising – involving both institutional
and retail shareholders – with the proceeds
of approximately $600m used to pay down
existing debt facilities, creating a stronger,
more resilient balance sheet in these
challenging times.
We also sold our holding in Jumbo
Interactive Limited, following the extension
of our long-standing commercial distribution
partnership with Jumbo. The sale generated
gross proceeds of $98m. Our gearing ratio
(gross debt to EBITDA) now sits at 2.4 times,
against the target range of 2.5 to 3.0 times.
Strategic review and demerger
The strategic review initiated by the Board in
March 2021 evaluated all relevant structural
and ownership options to maximise value
for shareholders.
As part of the process, the Board engaged
with a number of bidders who had
submitted unsolicited, non-binding and
indicative proposals to acquire our Wagering
and Media business. The Board, together
with its advisers, carefully considered these
proposals. However, at the conclusion of its
review, the Board determined that a
demerger of our Lotteries and Keno
business is the optimal and most certain
path to unlock value for shareholders.
The demerger will create two standalone,
market leading ASX-listed companies with
distinct operating profiles, strategies and
growth opportunities:
• A new listed company that comprises
our Lotteries and Keno business:
Lotteries & KenoCo(iii)
• The existing listed Tabcorp group
continuing to hold the Wagering and
Media and Gaming Services businesses:
Wagering & GamingCo(iii)
Steven Gregg
Chairman
David Attenborough
Managing Director and
Chief Executive Officer
The 2020/21 financial year (FY21) saw the
COVID-19 pandemic continue to disrupt our
way of life and challenge our businesses.
Tabcorp’s priority has been ensuring the
safety and wellbeing of our people and
supporting our business partners and the
community.
While Tabcorp’s operations were impacted
by various government-imposed lockdowns
and other restrictions, our businesses
proved resilient and delivered a strong
operational result and earnings growth.
Tabcorp’s net profit after tax (NPAT) was
$269m in FY21, after incurring a non-cash
goodwill impairment charge of $122m
relating to the Gaming Services business
and other significant items totalling $8m(i).
Revenues were $5,686m, up 8.8%, and
EBITDA(ii) was $1,107m, up 11.3% on the
prior corresponding period.
Our Lotteries and Keno business produced
a record profit result and continued its
strong growth trajectory since the Tabcorp-
Tatts combination in December 2017.
Pleasingly, we saw improved performance
from Wagering and Media, with growth in its
TAB, Media and International businesses.
Gaming Services, however, was severely
impacted by the COVID-19 restrictions on
hotels and clubs, which limited its ability to
derive fees from these venues.
(i) For details of goodwill impairment and significant items, refer to page 8.
(ii) Earnings before interest, taxation, depreciation and amortisation (EBITDA) excluding significant items is non-IFRS financial information.
(iii) The names “Lotteries & KenoCo” and “Wagering & GamingCo” have been created for the purposes of illustration only.
04
Tabcorp Annual Report 2021
The two businesses (Lotteries & KenoCo
and Wagering & GamingCo) are expected to
be leaders in their respective markets,
creating great experiences for millions of
customers. They will both build on their
heritage of sharing the benefits of their
commercial success with governments,
the racing industry, licensed venues,
newsagents and other retail and
business partners.
Tabcorp is targeting the completion of the
demerger, via a scheme of arrangement, by
the end of June 2022, subject to all relevant
approvals, including shareholder approval at
an extraordinary general meeting expected
to be held in 2022.
More details will be contained in a scheme
booklet to be sent to shareholders in due
course.
the 2020 Annual General Meeting. She was
succeeded in that role by Anne Brennan,
who formally joined the Board in July
last year.
In September 2020, we welcomed Janette
Kendall to the Tabcorp Board. Janette is
a highly experienced director who brings
deep experience in the gambling and
entertainment industry. She is serving as
an Observer and will join the Board fully
on receipt of regulatory and ministerial
approvals.
The current Board of Directors will oversee
the implementation of the demerger and
David Attenborough will continue to lead the
Company as Managing Director and CEO
until the demerger is completed. The CEO
and Chairman designates of the proposed
demerged companies are:
Board changes
As part of an orderly Board succession
process, overseen by the Nomination
Committee, there were some changes
to the composition of the Tabcorp Board
during FY21.
Paula Dwyer retired as Chairman and from
the Board of Directors at the end of 2020.
Paula was instrumental in making Tabcorp
‘The Trusted Gambling Entertainment
Company’ and led the Board through the
Tabcorp-Tatts combination and successful
integration. We’d like to place on record her
significant contribution to Tabcorp.
Vickki McFadden, who chaired the Board’s
Audit Committee, retired from the Board at
• Lotteries & KenoCo:
Chair designate: Steven Gregg
CEO designate: Sue van der Merwe
• Wagering & GamingCo:
Chair designate: Bruce Akhurst
CEO designate: Adam Rytenskild
Community
Tabcorp is proud of its role as the provider
of Australia’s official lotteries, TAB wagering
and other gambling entertainment products.
In FY21, our businesses generated $4.2b
in taxes, levies and payments to state and
federal governments, the Australian racing
industry, and venue partners such as
newsagents, hotels and clubs. This
underscores the important role
Tabcorp has in the community beyond
the responsible delivery of gambling
entertainment to millions of Australians.
in the office when COVID-19 restrictions
permit, while maintaining the flexibility
of remote working.
In addition, Tabcorp was proud to support
several charitable causes including the
University of Queensland’s research into
vaccines for COVID-19, and strokes and
heart attacks, along with initiatives tackling
cancer and child safety. These initiatives
were financially supported by voluntary
contributions and the proceeds of
unclaimed prize money.
Tabcorp ranked first globally in the Casinos
and Gambling sector in the 2020 Dow Jones
Sustainability Index (DJSI) World and DJSI
Australia Indices. Maintaining strong
sustainability practices has been core to
Tabcorp’s purpose of delivering ‘Excitement
with integrity’. This ethos will move forward
with both new companies if the proposed
demerger goes ahead.
Our people
The whole Tabcorp team has done an
extraordinary job during the pandemic,
showing resilience and flexibility in the
face of rapidly changing restrictions, and
adapting well to new ways of working. They
have continued to serve our customers
safely, working with our venue partners and
the racing industry. We would like to thank
them for their commitment and
professionalism.
Conclusion
As well as managing the ongoing impacts
of COVID-19, our main priority for FY22
will be the successful execution of the
proposed demerger.
We look forward to the prospect of two
companies operating independently,
building on their market leading positions,
and delivering long term growth and
significant value for shareholders. We are
focused on ensuring that the businesses are
well positioned to maintain their momentum
and set up for success into the future.
Finally, we’d like to thank shareholders
for your support during FY21 and we look
forward to updating you on our progress at
Tabcorp’s Annual General Meeting in
October.
Steven Gregg
Chairman
We are aiming to recapture the benefits
of collaboration in an office environment
during FY22 through our balanced work
model, which will see employees working
David Attenborough
Managing Director and
Chief Executive Officer
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Tabcorp Annual Report 2021
05
OPERATING & FINANCIAL REVIEW
STRATEGIC REVIEW CONCLUSION AND
INTENTION TO DEMERGE LOTTERIES AND KENO
Tabcorp has announced that it intends to undertake a demerger of its Lotteries and Keno business
The decision to pursue a demerger of the Lotteries and Keno business
(Demerger) follows the conclusion of a comprehensive strategic review
of all relevant structural and ownership options to maximise value for
shareholders, including a demerger, a sale of one or more of Tabcorp’s
businesses and the retention of the status quo with a disciplined approach
to driving growth. The Board carefully considered the unsolicited
proposals received from third parties for the sale of the Wagering
and Media business, and concluded that the Demerger is the optimal,
and most certain, path to maximise the value of both businesses for
Tabcorp shareholders.
The proposed Demerger will create two standalone, market leading
ASX-listed companies with distinct operating profiles, strategies and
growth opportunities. The transaction will allow these two businesses
to operate independently with focused management, optimise their
capital structures and to trade at market values which reflect their
individual characteristics.
Lotteries & KenoCo(i)
Wagering & GamingCo(i)
A new standalone listed company
that comprises the Lotteries & Keno
business.
One of the highest performing
Lotteries businesses globally and
offers infrastructure like qualities,
with low capital intensity and upside
from continuing digital growth.
Chairman designate: Steven Gregg;
CEO designate: Sue van der Merwe.
The existing listed Tabcorp Group
will continue to hold the Wagering
and Media and Gaming Services
businesses.
Has national scale and reach,
a unique omni-channel offering,
organic growth options, and
potential upside from future
domestic structural reform and
further international expansion.
Chairman designate: Bruce Akhurst;
CEO designate: Adam Rytenskild.
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(i) The names “Lotteries & KenoCo” and “Wagering & GamingCo” have been created for
the purposes of illustration only. All appointments subject to formal board approvals
and all necessary regulatory approvals.
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Tabcorp Annual Report 2021
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The rationale for the Demerger is compelling…
The Demerger is expected to realise significant value for shareholders at a significantly lower level of execution risk compared to a sale of Wagering and Media and Gaming Services.
Creates two market leading businesses with focused management
Shareholders continue to benefit from the increased scale and diversification already
achieved through the combination with Tatts Group
Shareholders retain full upside from potential future regulatory reform and international
expansion opportunities in Wagering and Media
Allows each business to adopt a more focused operating profile and an optimised capital
structure more aligned to its core operations
Shareholders preserve the ability to benefit from participating in future merger and
acquisition activity in respect of both Lotteries & KenoCo and Wagering & GamingCo
Creates access to new and different investor categories with different investment
preferences and environmental, social and governance (ESG) criteria
Allows shareholders to value each business on a standalone basis with potential for
market re-rating
…and represents the next phase in the Tabcorp journey
The foundations have been laid for Lotteries & KenoCo and Wagering & GamingCo to deliver long term growth. The Tabcorp and Tatts integration(i) concluded in FY21 and has set up both
businesses to benefit from enhanced scale and diversification.
The proposed Demerger is subject to shareholder, court, regulatory and other approvals. Tabcorp is targeting completion of the Demerger by the end of June 2022. For further information refer
to Tabcorp’s ASX announcements of 5 July 2021.
Indicative Demerger timetable(ii)
July – September
• Detailed planning
and preliminary
execution phase
April
May
• First court hearing and scheme
• Demerger scheme
booklet dispatched
meeting
• Second court
hearing
May/June
• Demerger
completion
2021
2022
(i) Following the combination of Tabcorp and Tatts Group Limited (Tatts).
(ii) Dates are indicative only and subject to change.
Tabcorp Annual Report 2021
07
GOVERNANCECORPORATE RESPONSIBILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
FY21 OVERVIEW
REVENUE
$5,686m
UP 8.8%
NPAT
$269m
UP FROM $870M LOSS
TOTAL DIVIDENDS
14.5cps
80% PAYOUT RATIO
HIGHLIGHTS
KEY POINTS
Strong Group
results
Businesses
delivered strong
operational
performance
Group revenue up 8.8% to $5,686m
Group statutory NPAT of $269m(i) up from $870m loss in FY20
Group NPAT excluding significant items(ii) up 47.2% to $399m
Group EBITDA(iii) up 11.3% to $1,107m
Gearing 2.4x gross debt/EBITDA(iii)
Full year dividends totalled 14.5 cents per share fully franked, including
a final dividend of 7.0 cents per share fully franked
Lotteries and Keno:
• Record profit result (despite below average jackpots)
• Digital turnover growth of 30%; resilient performance in retail
Wagering and Media:
• Improved performance and revenue growth across Wagering, Media and International
• Digital wagering turnover growth of 27%(iv); resilient performance in retail venues
when re-opening after lockdowns
Gaming Services:
• Venue Services continued to be heavily COVID-19 impacted
• Progressing with plan to simplify and streamline the business
Strategic
initiatives
Announced strategic review outcome and intention to demerge the
Lotteries and Keno business
Tabcorp’s enterprise-wide optimisation program, ‘3S’, delivered $30m
EBIT savings(v)
(i) FY21 statutory NPAT includes a non-cash goodwill impairment charge of $122m relating to the Gaming Services business. FY20 statutory net loss after tax
included a non-cash goodwill impairment charge of $1,090m relating to the Wagering and Media and Gaming Services businesses.
(ii) Excludes significant items (after tax) in FY21 of $130m which comprise impairment of goodwill following the annual impairment review relating to Gaming
Services $122m, amended tax treatment of MAX CMS Licence $69m, Tatts Group combination implementation costs $14m, restructure costs $12m, Racing
Queensland arrangements $11m, strategic review costs $4m and property (net) $2m, partly offset by the profit on sale of Jumbo $69m and PGI revaluation
gain $35m.
(iii) Earnings before interest, taxation, depreciation, amortisation and impairment (EBITDA) excluding significant items is non-IFRS financial information.
(iv) Digital includes digital and call centre channels in which a customer transacts using their account.
(v) Before costs to implement (program costs) of $5m (pre tax).
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Tabcorp Annual Report 2021
FY21 FINANCIAL PERFORMANCE
Revenues
$m
5,686
5,224
EBIT before goodwill
impairment
$m
NPAT
$m
Earnings per share before
goodwill impairment(iii)
Cents per share
Dividends per share
Cents per share (fully franked)
773
269
17.9
14.5
516
10.9
11.0
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
Segment profit/(loss)
before interest and tax(ii)
$m
516
Segment
revenues
$m
3,206
2,298
216
183
(10)
(870)
FY20
FY21
Group results
For the year ended 30 June
Revenues
Taxes, levies, commission and fees
Operating expenses
Depreciation and amortisation
Impairment – other
EBIT before goodwill impairment
Impairment – goodwill(i)
EBIT
Statutory NPAT
NPAT before significant items(ii)
EPS – cents per share
EPS before goodwill impairment – cents per share
DPS – cents per share (fully franked)
(i) For details of goodwill impairment, refer to page 8.
Lotteries
and Keno
Wagering
and Media
Gaming
Services
(iii) Refer to note A2 of the Financial Report.
(iv) Percent change is not meaningful.
(ii)
For details of significant items, refer to page 8. Refer to note A1 of the Financial Report for segment information.
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FY21
$m
5,686
(3,770)
(753)
(380)
(10)
773
(122)
651
269
399
12.3
17.9
14.5
FY20
$m
5,224
(3,447)
(840)
(378)
(43)
516
(1,090)
(574)
(870)
271
(42.9)
10.9
11.0
Change
%
8.8
9.4
(10.4)
0.5
(76.7)
49.8
(88.8)
NM(iv)
NM
47.2
NM
64.2
31.8
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Tabcorp Annual Report 2021OPERATING & FINANCIAL REVIEW
Review of FY21 results
The financial results for FY21 relate to
the Tabcorp Group’s operations, which
comprise its three businesses of:
• Lotteries and Keno
• Wagering and Media
• Gaming Services
The Group reported FY21 revenues of
$5,686m, up 8.8% on the previous year.
Group NPAT was $269m after incurring
a non-cash goodwill impairment charge of
$122m relating to the Gaming Services
business, and other significant items(i)
totalling $8m. This was up from a net loss
after tax of $870m in the previous year.
Group NPAT excluding significant items(i)
was $399m, up 47.2% on the previous year.
Earnings per share (EPS) before goodwill
impairment was 17.9 cents per share,
up from 10.9 cents per share in the
previous year.
During FY21, and in the face of substantial
ongoing challenges from the COVID-19
pandemic, our businesses delivered a strong
operational performance and revenue
growth of 8.8%. Our teams and business
partners continued to work collaboratively
and our omni-channel business model
ensured our customers could continue
to safely enjoy our gambling entertainment
experiences.
The Group’s FY21 operational performance
and results reflects the strong Lotteries and
Keno result and the improved performance
of the Wagering and Media business during
the course of FY21.
The Lotteries and Keno business produced
another record profit result driven by game
development, active portfolio and sequence
management, and strong digital turnover
growth.
The Wagering and Media business was
impacted heavily by COVID-19 disruptions,
but importantly delivered improved
performance, achieving revenue growth
across its Wagering, Media and International
businesses. Growth was supported by
recent investments in customer experience,
including improvements in data and
personalisation capability, and further
enhancements to our unique digital
in-venue capability.
The Gaming Services business was most
impacted by the COVID-19 related trading
restrictions on hotels and clubs, particularly
in Victoria.
A non-cash goodwill impairment charge of
$122m related to Gaming Services reflects
reduced expectations for future growth and
contract extensions, particularly due to the
ongoing COVID-19 impacts. The business
made good progress in delivering its plan
to simplify and streamline its operations
during the year and this remains a key focus
moving forward.
Refer to pages 12 to 23 for further details
about the performance of each business.
In FY21, Tabcorp’s enterprise-wide
optimisation program, ‘3S’, delivered $30m
in EBIT savings(ii) primarily from improved
reseller agreements (Lotteries and Keno),
agency rationalisation (Wagering and
Media), operating model changes (Wagering
and Media and Gaming Services) and
process simplification and redesign
(Group-wide). Tabcorp is targeting
$20m-$25m of EBIT savings from the
3S program in FY22.
The Tabcorp-Tatts integration was
substantially completed in FY21. Annual
cost synergies totalling $95m of annual
EBITDA savings have been achieved.
$399m
NPAT excluding
significant items(i)
UP 47.2%
17.9cps
EPS before
goodwill impairment
UP 64.2%
$30m
In EBIT savings
delivered in FY21 from
the ‘3S’ optimisation
program
(i) For details of significant items, refer to page 8.
(ii) Comprises Lotteries and Keno $5m, Wagering and Media $19m, Gaming Services $6m. Amounts are before costs to implement (program costs) of $5m (pre tax).
10
Tabcorp Annual Report 2021 Capital management
The Group’s objectives when managing capital are to ensure the
Group continues as a going concern while providing optimal returns to
shareholders and benefits for other stakeholders, and to maintain an
appropriate capital structure to reduce the cost of capital. Our approach
to capital management includes the following key objectives:
Target Gearing of
2.5x – 3.0x
gross debt /
EBITDA
FY21
actual
2.4x at 30
June 2021
Minimise
the cost of
borrowing
Average
interest rate
of 5.3%(i)
Maintain
investment
grade credit
rating
S&P rating
BBB-/stable
Increase
returns to
cost of capital
over time
ROIC: 7.9%(ii)
(i) Based on drawn facilities (based on available facilities: 3.8%).
(ii) Return on invested capital (ROIC) is an absolute measure, defined as earnings before
interest, tax and significant items (EBIT before significant items), divided by the average
invested capital base. Invested capital base has been adjusted to reflect the goodwill
impairments of FY20 and FY21 as if they had occurred at the beginning of FY20.
In FY21, the Group undertook
numerous actions to preserve
liquidity and mitigate the financial
and earnings impacts of the
COVID-19 pandemic.
In September 2020, the Company
completed a 1-for-11 pro rata
accelerated renounceable
entitlement offer (with retail
entitlements trading) raising gross
proceeds of approximately $600m
which were used to pay down
existing drawn bank debt facilities,
strengthen the Company’s
balance sheet and provide greater
financial flexibility and additional
credit metric headroom for
covenant and rating purposes.
Our target gearing ratio is gross
debt to EBITDA of 2.5 – 3.0
times. As at 30 June 2021, the
Company’s gearing was 2.4 times.
The Company has a strong
balance sheet, as well as available
headroom of $909m under
existing bank facilities as at
30 June 2021.
The Group’s average debt maturity
is approximately 5.7 years and
approximately 99.4% of interest
rate risk is fixed, as at 30 June 2021.
The Company is mindful of
maintaining a suitable balance
between certainty and flexibility.
Refer to the graph above of the
Group’s debt profile.
Debt structure(i)
$m
700
600
500
400
300
200
100
0
FY22
FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 FY34 FY35 FY36
USPP (2012)
Bank facility (drawn)
Bank facility (undrawn)
USPP (2018)(ii)
(i) Excludes $100m overdraft facility maturing February 2022.
(ii) Tabcorp has reached preliminary agreement with holders of its US Private Placement (USPP) notes that would result in
these notes being tendered and exchanged for USPP notes in the proposed demerged Lotteries & KenoCo entity, subject
to demerger completion and the satisfaction of certain conditions.
Dividends
A final dividend of 7.0 cents per
share fully franked has been
announced. The final dividend will
be payable on 17 September 2021
to shareholders registered at 26
August 2021. The ex-dividend date
is 25 August 2021.
The interim and final dividends
payable in respect of FY21 totalled
14.5 cents per share fully franked.
This equates to a FY21 dividend
payout ratio of 80% of NPAT
before significant items. As part
of its response to managing the
financial impacts of COVID-19, the
Board resolved not to pay a FY20
final dividend.
The Board is pleased that the
Group is emerging from COVID-19
in a strong financial position and
resumed the payment of dividends
in FY21.
The Dividend Reinvestment Plan
will operate in respect of the FY21
final dividend, with no discount
applicable.
The table below shows the
dividends paid, declared or
recommended by the Company
since the end of the previous
financial year.
Further information regarding
dividends may be found in note
A3 of the Financial Report.
Description
2021 final
2021 interim
(i) Amount per share fully franked.
Amount(i)
7.0 cents
7.5 cents
Record date
26 August 2021
23 February 2021
Payment date
17 September 2021
17 March 2021
Total
$156m
$166m
11
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Tabcorp Annual Report 2021OPERATING & FINANCIAL REVIEW
®
A y e a r
o f w i n s
A winning performance
with 455 division one
winners who received
$1.3b of division one
prize money from the
Lott in FY21.
187.7m
Individual prizes won
across all Lottery
and Keno games and
prize levels in FY21.
12
Tabcorp Annual Report 2021
LOTTERIES AND KENO
Licensee Brands
Game Brands
®
®
®
®
®
®
®
®
®
®
®
®
®
®
®
®
®
®
Operations
The Lott is Australia’s leading
official licensed lottery business
with operations in NSW, Victoria,
Queensland, South Australia,
Tasmania, ACT and Northern
Territory.
We operate a portfolio of leading
game brands, such as:
• TattsLotto
• Powerball
• Oz Lotto
• Set for Life
• Lotto
• Gold Lotto
• X Lotto
• Super ‘66’
• Lucky Lotteries
• Lotto Strike
• Keno
• Instant Scratch-Its
Customers can purchase lottery
tickets and Instant Scratch-Its in
newsagents, convenience stores
and other retail outlets, and lottery
tickets can also be purchased
online.
Keno is a social lottery-style game
that is played every three minutes.
It is played in licensed clubs, hotels
and TABs in Victoria, Queensland,
South Australia and ACT, and in
clubs and hotels in NSW, and is
available online in ACT.
Refer to pages 43 and 44 for
further information.
Highlights
Long track record of strong organic
growth.
Extensive, highly visible retail network
with accelerating digital distribution.
One of the highest performing lotteries
businesses globally(i) with a significant
and broad customer base.
Low capital intensity, strong free cash
flow generation and margin expansion
from digital growth.
High profile trusted brands, a portfolio of
exclusive and/or long dated licences(ii)
and products with wide customer
acceptance.
Pipeline of potential growth opportunities
available, both domestically and
internationally.
(i) Third highest draw lottery (lotto) game sales per capita worldwide. Source: La Fleur’s almanac 2020.
(ii) Refer to pages 43 and 44 for further information.
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13
Tabcorp Annual Report 2021OPERATING & FINANCIAL REVIEW
LOTTERIES AND KENO
Review of FY21 performance
In FY21, Lotteries and Keno had a record result. Revenues were $3,206m, up 9.9%, and EBIT was $516m,
up 16.7%.
The business delivered strong revenue performance during the period as a result of game development,
and active portfolio and sequence management. Customer-centred improvements also led to better player
experiences, increased digital conversion, which was positive for margins, and greater retail integration.
Investments in product enhancements, the omni-channel program, the Lott’s digital platform and payment
options, helped deliver compelling offers and the ability for customers to buy when, where and how they wished.
Lotteries revenues were $2,951m, up 8.3% despite the cumulative value of Division 1 jackpots offered for
Powerball and Oz Lotto draws being down 20% due to less favourable sequences. Adjusting for those sequence
impacts, turnover in Powerball was up 21% and Oz Lotto was up 17%. All base games grew: Set for Life (33%),
Keno (33%), Saturday Lotto (22%), Instant Scratch-Its (15%) and Mon/Wed Lotto (11%). Game changes in
Saturday Lotto and Set for Life were well received by customers and contributed at least half of the growth for
the respective games.
Lotteries digital turnover grew 26.6% and accounted for 32.8% of all Lotteries turnover. Retail turnover grew
0.9% and continues to be the major Lotteries distribution channel. The number of active registered players
across digital and retail, as part of the omni-channel program, grew by approximately 100,000 to 3.8m.
Keno revenues were $255m, up 33.5%, as retail rebounded from the COVID-19 venue closures in FY20, and
supported by a very strong digital performance, with digital turnover growing 73.8% and representing 15.5%
of all Keno turnover. Performance also benefited from enhanced trade and loyalty programs, and alignment
of the game in South Australia with draws conducted along the east coast of Australia.
Lotteries and Keno results for the year ended 30 June
Revenues
Taxes, levies, commission and fees
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
FY21
$m
3,206
(2,348)
(238)
620
(104)
516
FY20
$m
2,917
(2,163)
(212)
542
(100)
442
Change
%
9.9
8.6
12.3
14.4
4.0
16.7
14
ACTIVE REGISTERED
LOTTERIES CUSTOMERS
3.8m
UP 2.7%
FY21 Lotteries revenue by product
5%
Other
5%
Set for Life
6%
Instant Scratch-Its
7%
Keno
30%
Powerball
Base
Games
Jackpot
Games
33%
Mon/Wed Lotto
& Saturday Lotto
2
14%
Oz Lotto
FY21 Lotteries turnover growth on like-for-like offers
Powerball (like-for-like)(i)
21% (-2% vs pcp)
Oz Lotto (like-for-like)(i)
17% (+5% vs pcp)
Saturday Lotto (pcp)
11%
11%
22%
Mon/Wed Lotto (pcp)
11%
Set for Life (pcp)
8%
25%
33%
Instant Scratch-Its (pcp)
15%
Keno (pcp)(ii)
33%
Game/price change
(i) Powerball and Oz Lotto adjusted to reflect comparable jackpot sequences.
(ii) Includes an estimated 24% net benefit due to the relatively greater opening
of retail venues in FY21 vs FY20 due to lesser COVID restrictions.
Tabcorp Annual Report 2021
LOTTERIES AND KENO
Key growth strategies
Lotteries and Keno growth to be underpinned by a customer-led focus on product innovation, deepened engagement across all channels and
digital expansion.
DRIVE INNOVATION
WITH A CUSTOMER
FOCUS
OPTIMISE DIGITAL
ENGAGEMENT
EVOLVE RETAIL
FOOTPRINT
PURSUE GROWTH
OPPORTUNITIES
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FY21 Lotteries turnover growth on like-for-like offers
• Continue to evolve game
portfolio to align with changing
player motivations
• Optimise channel mix to further
reflect consumer behaviour and
build loyalty
• Continue to diversify retail
channel mix to meet changing
customer behaviours
• Explore opportunities for
enhancements to existing
licences
‒ Review and refresh
existing games
‒ Develop and/or acquire
new games
• Leverage large known player
base to deliver tailored
customer experiences to drive
engagement
• Customer-led digital innovation
to enhance the user experience
and maximise engagement
• Innovative and data driven
personalised marketing,
including continued investment
in digital capability
• Continue to promote the
• Evaluate potential future new
omni-channel offering across
the retail network
• Customer-driven retail
experience design to support
broad range of outlet types
licence opportunities
• Leverage international profile
to explore partnerships with
global industry players
(i) Powerball and Oz Lotto adjusted to reflect comparable jackpot sequences.
(ii) Includes an estimated 24% net benefit due to the relatively greater opening
of retail venues in FY21 vs FY20 due to lesser COVID restrictions.
Tabcorp Annual Report 2021
15
GOVERNANCECORPORATE RESPONSIBILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
B a c k y o u r
c h a m p i o n s
Wagering and Media
provides a unique omni-
channel customer offering
with an integrated retail
and digital experience,
and leading racing and
sports media content.
784,000
Active registered
wagering customers
16
Tabcorp Annual Report 2021
WAGERING AND MEDIA
®
®
Operations
TAB is a leading omni-channel
wagering operator in Australia,
offering a broad range of betting
experiences across digital
channels and in retail (on-course,
in licensed venues and agencies)
throughout NSW, Victoria,
Queensland, South Australia,
Tasmania, ACT and Northern
Territory. The Victorian wagering
business operates as a 50:50
joint venture with the Victorian
racing industry.
Premier Gateway International
(PGI) operates an international
wagering and tote pooling hub,
licensed and operating out of
the Isle of Man.
Sky Racing is a leader in multi-
venue, multi-channel racing and
sports broadcasting in Australia.
Sky Racing distributes racing
vision to wagering operators
including TAB and Racing WA,
as well as digital content through
the Sky Racing Active app.
Sky Racing World, based in the
US and licensed in North Dakota,
manages international distribution
of Australian and international
racing content and facilitates
associated tote pools.
Refer to pages 44 and 45 for
further information.
(i) Refer to page 45 for further information.
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Highlights
Most diversified wagering operator in
Australia, with large and active customer
base and strong, well-recognised brands.
Unique omni-channel offering: long-dated
licences(i), unmatched media capabilities
and improved, unified digital platform.
TAB is the most recognised wagering
brand in Australia.
784,000 active registered wagering
customers and more than 1 billion bets
taken annually.
Well-established and profitable
international business in the US and
Europe, with significant growth potential.
Tabcorp Annual Report 2021
17
WAGERING AND MEDIA
Review of FY21 performance
In FY21, Wagering and Media revenues were $2,298m, up 10.3%, and EBIT was $216m, up 23.4%.
The business delivered improved performance, despite COVID-19 related shutdowns and government mandated
restrictions which meant that retail channels were impacted at various points in time. Revenue growth was achieved
across each of its Wagering, Media and International businesses.
A number of customer-driven initiatives strengthened the omni-channel experience, including in the exclusive
licensed venue network where customers are most engaged. Venue Mode, which gives customers access to
exclusive offers when betting digitally in TAB venues, continued to grow in popularity, supported by enhancements
such as differential pricing. More than one in three of TAB’s 784,000 active registered customers used Venue Mode
in FY21 and turnover through that channel grew 51.4%.
TAB digital wagering turnover grew 27% to $9.5b and active digital customers grew 9.7% to 784,000. Additionally,
the retail channel was resilient when it re-opened after lockdowns, with retail turnover down just 0.9%, to $5.3b, and
further steps were taken to optimise the venue footprint with agency rationalisation and a pilot of a digital only
venue offering.
The wagering market continued to be highly competitive in FY21, including significantly increased customer
generosities. During the period, Tabcorp enhanced its marketing and generosity program in a more digitally oriented
market through new data and personalisation capability.
The Sky Media business continued to expand racing and sporting content and its distribution through digital and
retail formats. Registered customers of the over-the-top media platform, Sky Racing Active, grew 55.3%.
In International, Tabcorp built on its established and profitable business by increasing its shareholding in the
international totalisator betting hub, Premier Gateway International, to 100% from 50%. Tabcorp also recently
enabled the co-mingling of its domestic pools with US wagering operators through a totalisator licence acquired
in North Dakota by Sky Racing World.
Wagering and Media results for the year ended 30 June
Revenues
Taxes, levies, commission and fees
Operating expenses
EBITDA
Depreciation and amortisation
Impairment
EBIT
FY21
$m
2,298
(1,414)
(470)
414
(198)
-
216
FY20
$m
2,084
(1,259)
(454)
371
(192)
(4)
175
Change
%
10.3
12.3
3.5
11.6
3.1
NM(iv)
23.4
18
ACTIVE REGISTERED
WAGERING CUSTOMERS(i)
784,000
UP 9.7%
DIGITAL SHARE OF
WAGERING TURNOVER(ii)
57.7%
UP 27%
Wagering turnover by channel
10.1%
Other(iii)
32.2%
Venue
57.7%
Digital(ii)
(i) Wagering active customers measured on a rolling 12 month
basis. For comparability, prior period data adjusted to exclude
duplication between TAB and ex UBET customers.
(ii) Digital includes digital and call centre channels in which a
customer transacts using their account.
(iii) Other comprises on-course, premium customers and PGI.
(iv) Percent change is not meaningful.
Tabcorp Annual Report 2021
WAGERING AND MEDIA
Key growth strategies
Wagering and Media growth to be underpinned by a unique and improved customer experience, domestic structural reform
and targeted international expansion.
CREATE THE BEST
CUSTOMER EXPERIENCE
ACROSS ALL CHANNELS
UNLEASH THE FULL
POTENTIAL OF SKY
STRUCTURAL REFORM AND
TARGETED INTERNATIONAL
EXPANSION
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• Further enhancement of the
• New SKY brand and vision
• Advocate for sustainable
TAB App
experience for racing and sport
• Unique customer experiences
• Unique vision in digital and retail
‒ Digital-in-venue
• New content and formats
‒ Vision and sports information
• Enhance capability, creativity and
innovation
‒ Tote revitalisation
‒ Product innovation
‒ Live in-play
‒ High-value customers
value through all channels
• Expanded distribution channels
and unique integration to TAB
brand
gambling regulation and licence
reform to ensure long term
industry sustainability
• Achieve regulatory simplification
• Targeted growth of the existing
international businesses,
particularly in the US
Tabcorp Annual Report 2021
19
GOVERNANCECORPORATE RESPONSIBILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
S u c c e s s
s t a r t s h e r e
As Australia’s largest gaming
services provider, MAX offers
the most comprehensive
suite of end-to-end solutions
for venues, governments
and industry. Our dedicated
service and support, coupled
with well-established
relationships, has seen us
deliver value for pubs and
clubs across the country.
National reach across
Over 85%
of the Australian
EGM market
20
Tabcorp Annual Report 2021
GAMING SERVICES
®
Operations
Tabcorp operates the MAX
business, which is Australia’s
largest gaming services provider.
MAX Regulatory Services provides
electronic gaming machine (EGM)
monitoring and related services
for regulatory purposes across
NSW, Queensland and Northern
Territory.
MAX Venue Services provides
a range of services, including the
supply, financing and maintenance
of EGMs, specialist advice to
licensed gaming venues in NSW
and Victoria, and other technology
and value-added venue services
in NSW, Victoria, Queensland,
Tasmania, ACT and Northern
Territory.
Refer to page 45 for further
information.
Highlights
Australia’s largest gaming services
provider.
National reach across over 85%
of the EGM market in Australia.
Long dated monitoring licences(i).
Offering a complete solution platform
for venues and government.
Extensive range of services, including
monitoring systems for regulatory
purposes, EGM financing and
maintenance, value-added technology
solutions and consultancy
for venues.
Strong longstanding relationships with
licensed venues.
(i) Refer to page 45 for further information.
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Tabcorp Annual Report 2021OPERATING & FINANCIAL REVIEW
GAMING SERVICES
Review of FY21 performance
In FY21, Gaming Services revenues were $183m, down 17.2%, and the business reported a loss before interest
and tax of $10m.
Gaming Services was significantly impacted by the COVID-19 restrictions on licensed venues (hotels and clubs).
In support of its venue partners, Tabcorp suspended all material fees for venues during the period in which their
gaming floors were not operational. As gaming floor operations recommenced, fees were scaled up progressively
to return to pre-COVID-19 levels.
Revenues for MAX Venue Services were $99m, down 34.0%. The business was heavily impacted by the closures
and restrictions placed on venues as a result of COVID-19, especially in Victoria which has the most gaming
machines under contract.
The performance of the gaming machine monitoring business, MAX Regulatory Services, was more resilient,
with revenues growing 18.3% to $84m due primarily to lesser impacts in FY21 from venue closures in Queensland
and NSW.
Gaming Services’ earnings were also impacted by the non-renewal of a Telstra service contract, and the expiry of
the NSW Inter-Club Linked Gaming Systems Licence and Inter-Hotel Linked Gaming Systems Licence. These
income streams ceased in the latter part of FY20 and contributed $5m to EBITDA in that year.
Gaming Services continued to progress its plan to simplify and streamline its operations. A key initiative has been
simplifying its operating structure, which helped deliver a significant reduction in operating expenses.
EGMS UNDER
CONTRACT
8,510
DOWN 16.2%
EGMS MONITORED
122,010
DOWN 2.8%
Gaming Services results for the year ended 30 June
Revenues
Taxes, levies, commission and fees
Operating expenses
EBITDA
Depreciation and amortisation
Impairment
EBIT
(i) Percent change is not meaningful.
22
FY21
$m
183
(11)
(101)
71
(78)
(3)
(10)
FY20
$m
221
(11)
(126)
84
(86)
(12)
(14)
Change
%
(17.2)
0.0
(19.8)
(15.5)
(9.3)
(75.0)
NM(i)
EGMs under contract
EGMs monitored
6.2%
NSW
1.2%
NT
24.5%
QLD
93.8%
Victoria
74.3%
NSW
Tabcorp Annual Report 2021 GAMING SERVICES
Key strategies
Gaming Services is focused on executing the current plan to simplify the operating and business model, and streamline
the operating cost base amidst continued COVID-19 disruptions.
EXECUTE PLAN TO SIMPLIFY AND
STREAMLINE THE BUSINESS
INVEST TO GROW THE CORE
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• Leaner management and simplified operating
• Pursue additional monitoring products and licences
structure
• Develop and implement new products for
core MAX Venue Services offer, targeting
capex reductions
• Review and modify operating model of field
services activities
• Streamline the product portfolio of the systems
business
• Focus on core monitoring activity within MAX
Regulatory Services
• Pursue venue advisory opportunities
• Continue to grow data and analytics function
and revenues
• Expand product portfolio via third party distribution
partnerships
Tabcorp Annual Report 2021
23
GOVERNANCECORPORATE RESPONSIBILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
CORPORATE RESPONSIBILITY
Our purpose of Excitement with Integrity
underpins everything we do at Tabcorp.
We aim to deliver superb entertainment
experiences ethically, responsibly and
sustainably. We believe in taking
responsibility for the role we play in our
communities and sharing the benefits of
our success with all our stakeholders – our
shareholders, customers, people, industry
partners, governments, and the community.
Tabcorp’s corporate responsibility program
supports our strategy and vision to be
The Trusted Gambling Entertainment
Company.
In FY21, Tabcorp was recognised for our
continued improvements in sustainability
performance and disclosure, ranking first
globally in the Casinos and Gambling sector
in the Dow Jones Sustainability Index (DJSI)
World and DJSI Australia Indices. Tabcorp
has also been independently assessed
according to the FTSE4Good criteria and
continued to be a member of the
FTSE4Good Index in 2021.
More detail about Tabcorp’s corporate
responsibility activities can be found on
our website and in our annual Corporate
Responsibility Report available at
www.tabcorp.com.au.
24
Making a
positive impact
We aim to deliver superb entertainment
experiences ethically, responsibly and
sustainably. We are committed to
supporting our customers, people
and communities.
$9.1m
Contributed to charities
and community
organisations in FY21
Tabcorp Annual Report 2021 In FY21, we also continued to enhance
customer care technology and human-led
tools that work hand-in-hand to better
understand gambling behaviour and
empower customer choice. Recent
initiatives to minimise gambling
harm include:
• improved governance and reporting
on customer care related issues;
• enhanced responsible gambling signage
across all our retail venues;
• enhancing the early intervention model for
Keno digital customers to better identify
risk of gambling harm;
• additional Responsible Gambling Training
to relevant Tabcorp teams; and
• improved customer notifications for
deposit limit changes.
Customer Care
Tabcorp is committed to responsible
gambling, gaming and play – it’s integral
to our long term success. We are committed
to complying with, or exceeding, the
requirements of relevant legislation
in all areas in which we operate.
Tabcorp’s approach to customer care
is underpinned by our Customer Care
Principles for responsible gambling. These
principles demonstrate our commitment
to the responsible provision and use of our
products, empower our team members to
support responsible gambling use, raise
awareness about responsible gambling
through sharing information and encourage
wider use of responsible gambling tools.
We also provide customers with information
and resources to help them make informed
decisions about how they gamble to
minimise potential harm.
In FY21, Tabcorp launched a program to
further enhance our approach to customer
care in Wagering and Media. A number of
enhancements that reflect leading practice
in customer care research and industry and
community expectations have been
identified. These enhancements will be
progressively implemented across the
business.
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Tabcorp Annual Report 2021DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCE
CORPORATE RESPONSIBILITY
Tabcorp’s Customer Care Principles
RESPECT THE
CUSTOMER DECISION
ENABLE INFORMED
CHOICE
CUSTOMER CARE
BY DESIGN
CREATE TOOLS
THAT CARE
Customer Care Principles
Our customers are adults and we respect
their freedom to make their own choices,
except in specific situations where
individual safety is compromised. Meaning,
when a customer informs us they need
help directly, or when Tabcorp analysis
indicates the customer is displaying
signs of problem gambling behaviour
that present an unacceptable risk.
We distribute ‘helpful yet human’
educational messages along with
legally required messages, to give
our customers the right information,
at the right time, to make their own
individual decisions.
We always put our customers first,
especially when designing new products.
From a fresh idea to product design and
implementation; customer needs are
central to everything we do. That’s why
our products support our customers,
and our business.
We develop gambling management
tools to minimise harm and enable our
customers to make informed choices.
From implementing self-service tools,
to AI that helps us better understand
our customers and our business –
our commitment goes both ways.
ANALYSE CUSTOMER BEHAVIOUR
INTERACT RESPONSIBLY
PROVIDE A SAFETY NET
We unlock insights that help us understand the impact
our products, services and experiences have on our
customers. We use technology and human sourced
data, and we use it with integrity to further benefit
our customers – and our business.
We equip our people with the training to know when
and how they should interact with customers; from
providing customers with helpful self-service tools
online, to knowing when to step in and address high
risk behaviour in a retail location.
We endeavour to protect our customers and minimise
harm. We do this by placing restrictions and exclusions
on our products and services when either; a customer
informs us they wish to self-exclude or when Tabcorp
analysis indicates the customer is displaying signs of
problem gambling behaviour that present an
unacceptable risk.
26
Tabcorp Annual Report 2021
GOVERNANCETabcorp Annual Report 2021 People
Inclusion and Diversity
This included:
• Developing a Gender Affirmation
Statement of Support outlining our
approach to gender affirmation, including
leave, flexible work arrangements and
financial support.
• Establishing the Tabcorp Pride Allies
Network, an employee group to promote
respect and inclusion of all LGBTIQ
identifying people.
• Introducing paid leave for employees
to take part in cultural activities.
When it comes to our people, our mission is
to make Tabcorp the most exciting place to
succeed. We aim to be the inclusion and
diversity leader in our industry and an
employer of choice. Tabcorp is committed
to fostering an inclusive culture that reflects
a diverse workplace, where team members
can share their unique perspectives and
contribute their experience to achieve
the best possible business outcomes.
In FY21, Tabcorp continued to focus on the
wellbeing of its people in response to the
ongoing COVID-19 pandemic. Tabcorp
continually reviews its organisation-wide
COVID Safe Plan to ensure compliance
with health orders in order to protect our
employees, contractors, customers and
the public.
Tabcorp supports employees through
flexible work practices to enable employees
to work remotely and supports wellbeing
through our Employee Assistance Program.
This year Tabcorp provided additional
support to our employees by offering
one week of additional annual leave to
permanent employees, additional personal
leave for employees receiving COVID-19
vaccinations, and reimbursement for
specific home office equipment for
employees who have been required
to work from home during this period.
The Board has set a target for the Tabcorp Board
to comprise at least 40% female Non-executive
Directors by the end of FY23 and to have at least
40% female representation in the Senior
Leadership Cohort by the end of FY21.
At 30 June 2021, Tabcorp’s representation
of women in the Senior Leadership Cohort
was 43%, exceeding this target. The
proportion of female Non-executive
Directors on the Board is 29%. Due to
the impending demerger of the Lotteries
and Keno business, the Board has
maintained the Senior Leadership Cohort
gender diversity target at 40% female
representation for FY22. This target
will be revised by the end of FY22.
Tabcorp has further cemented its
commitment to achieving gender balance
in our executive leadership ranks by
becoming a signatory to the investor led
HESTA 40:40 Vision initiative in 2021.
Tabcorp has once again been recognised for
its strong performance in gender equality,
being named an Employer of Choice for
Gender Equality by the Workplace Gender
Equality Agency for six consecutive years.
In FY21, Tabcorp progressed the delivery of
its Inclusion and Diversity Strategy as part
of our commitment to creating a safe and
inclusive workforce.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITY
CORPORATE RESPONSIBILITY
• Supporting the Daniel Morcombe
Foundation to continue its important work
in child safety education.
• For the third consecutive year, funding
research into improved treatments and
survivorship outcomes for children
diagnosed with brain cancer at the
Children’s Brain Cancer Centre.
Charitable Games
Tabcorp’s Charitable Games Division
facilitates fundraising for more than
500 charities and sporting clubs around
Australia through Play For Purpose and
the 50-50 Charity Raffle.
Play For Purpose is the first charity raffle of
its kind in Australia enabling participants to
play for prizes while supporting their
favourite cause. Five Play For Purpose draws
were conducted in FY21 with $1.5m in prizes
awarded and $1.9m distributed to more
than 200 charities. In partnership with the
Australian Sports Foundation and Sport
Australia, Play For Purpose has helped
raise funds for a variety of charitable
projects at over 360 grassroots sporting
clubs across Australia.
Community
Tabcorp has a long history of supporting
the community. We believe that contributing
to the wellbeing of the communities in
which we operate is critical to our long
term success.
In FY21, Tabcorp contributed $9.1m(i) to
charities and community organisations.
This community funding was provided
through direct donations, unclaimed prize
money donations, in-kind giving and
foregone revenue (predominantly Sky
advertising costs and margin), management
costs and employee time.
In addition to supporting our long-term
community partners, this year we
continued to provide assistance to
community and sporting groups through
the Lott and Tabcorp’s Charitable Games.
The Lott’s community contributions
The Lott has a long history of contributing
to causes that support healthy and happy
communities. In FY21, the Lott, via Golden
Casket, contributed $2.4m from unclaimed
prize money to long-term projects,
including:
• Funding two research projects at the
University of Queensland to improve
health outcomes for Australians
recovering from stroke and heart attack
and developing new technology to
improve future vaccines.
The 50-50 Charity Raffle gives sports fans
and the public the chance to play for large
cash prizes while supporting local charities
at major sporting events. The 50-50 Charity
Raffle is Australia’s largest event-based
charity and sports fundraising raffle, and
has partnered with teams from the NRL,
AFL, ARL, racing, cricket and netball across
NSW and Queensland. In FY21, the 50-50
Charity Raffle held almost 200 raffles,
raising approximately $400,000 for local
charities and contributing over 4,000
volunteer hours.
The Starlight Children’s Foundation supports
sick kids and their families.
The Daniel Morcombe Foundation is helping
to keep kids safe.
(i) Independently verified by B4SI (LBG was rebranded to Business for Societal Impact).
28
Tabcorp Annual Report 2021
The Stars Foundation delivers health and education
outcomes for young indigenous women.
Tabcorp Annual Report 2021 Business Integrity
Tabcorp is committed to building a
sustainable future for its business and
industry and aims to set the standard for
integrity in every aspect of its business.
Human Rights and Modern Slavery
In FY21, Tabcorp formalised its commitment
to upholding human rights by launching a
Human Rights Policy. The policy embeds
human rights into Tabcorp’s operations and
through its supply chain and other business
relationships. The policy aims to protect the
values of respect, dignity and equality for
every person, free of discrimination based
on race, ethnicity, religion, gender identity,
sexual orientation, mental or physical
disability, relationship status or political
opinion.
In December 2020, Tabcorp published its
first Modern Slavery Statement under the
Modern Slavery Act 2018 (Cth).
Tabcorp’s Human Rights Policy and
Modern Slavery Statement are available
on our website at www.tabcorp.com.au/
who-we-are/corporate-governance.
Health and Safety
Tabcorp is committed to providing a safe
environment for employees and visitors, and
actively promotes health, safety and
wellbeing in the workplace.
In FY21, the Group reported a decrease in
lost time injuries resulting in a lost time
injury frequency rate of 2.3 (per million
hours worked), down from 4.1 in FY20. This
reduction is due to focussed work
undertaken during the year, with continuing
risk reviews, proactive reporting and
promotion of Tabcorp’s early intervention
program to support injured and ill
employees. This rate is well below the
industry average of 7.7 based on Safe
Work Australia benchmarks.
Animal Welfare
As part of our commitment to building a
sustainable future for our business and
industry, Tabcorp expects the highest
standards of animal welfare and integrity.
We have a zero tolerance to animal cruelty,
in racing and in society in general. Tabcorp
recognises the significant efforts the racing
industry has made in advancing animal
welfare and the progress made by the
existing animal welfare initiatives. Tabcorp
will continue to work in partnership with the
thoroughbred, harness and greyhound
racing industries to ensure the welfare
of animals is prioritised.
In FY21, Tabcorp supported the racing
industry’s animal welfare efforts through
several initiatives, including the Sock Stable
campaign, donating 100% of profits of sock
sales to Racing Victoria’s Off The Track
program and Team Thoroughbred NSW.
Tabcorp was also a major contributor to the
national Thoroughbred Welfare initiative,
working with racing industry bodies to
improve the welfare of horses.
Environment
Tabcorp aims to understand and minimise
our environmental impact to reduce
the cost of doing business and protect
the environment. We are committed to
complying with, or exceeding, the
requirements of relevant environmental
legislation, regulation and codes in all
areas in which we operate. Tabcorp
recognises that climate change is a
significant global challenge and is
committed to reducing our environmental
impact and identifying and managing
climate related risks and opportunities
across our business.
While Tabcorp has in recent years
experienced physical climate related
events such as bushfires and other extreme
weather events, these have had a limited
impact on the Group, primarily to the
operations of the Wagering and Media
business due to the disruption or
cancellation of some racing and sporting
events, and temporary closure of a small
number of retail venues and agencies.
In FY21, Tabcorp undertook modelling with
a view to setting greenhouse gas emission
reduction targets over the medium and
long term. Looking ahead, Tabcorp plans
to expand its climate risk and opportunity
analysis and set emissions reduction
targets in line with the Task Force on
Climate-Related Financial Disclosures
recommendations.
Details of Tabcorp’s environmental
footprint and greenhouse gas emission
reduction initiatives are available in
Tabcorp’s Corporate Responsibility
Report available on our website at
www.tabcorp.com.au/
corporate-responsibility.
Tabcorp team members used their volunteer leave to plant trees for Conservation Volunteers
Australia’s annual Tree Planting Challenge.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITY
BOARD OF DIRECTORS
Steven Gregg
Independent Chairman from January 2021 and
Independent Non-executive Director from July 2012
David Attenborough
Managing Director and Chief
Executive Officer from June 2011
Bruce Akhurst
Independent Non-executive Director
from July 2017
Harry Boon
Independent Non-executive Director
from December 2017
Bruce Akhurst is a Director of McMillan Shakespeare
Limited. He is also Chairman of the Peter MacCallum
Cancer Foundation and a Council Member of RMIT
University.
Harry Boon joined the Tabcorp Board in December
2017 following the Tabcorp-Tatts combination. He was
previously the Chairman of Tatts, and served as a
Non-executive Director of Tatts from May 2005.
Steven Gregg is Chairman of Ampol Limited and a
Director of Challenger Limited and thoroughbred
bloodstock company William Inglis & Son Limited. He is
also a Trustee of the Australian Museum Trust and
Chairman of Unisson Disability Limited.
He is the former Chairman of Goodman Fielder Limited
and former Chairman of Austock Group Limited, and he
was a Member of the Grant Samuel non-executive
Advisory Board.
David Attenborough joined Tabcorp in April 2010 as
Managing Director – Wagering. He became Managing
Director and Chief Executive Officer when Tabcorp’s
demerger of its former casinos business was
completed in June 2011. He was appointed as the
Managing Director and Chief Executive Officer
following the Tabcorp-Tatts combination in 2017.
Mr Attenborough is also a Director of the Australasian
Gaming Council and a Director of Hostplus Pty Ltd.
Mr Gregg had an executive career in investment
banking and management consulting, including as
Global Head of Investment Banking and CEO at ABN
Amro Bank, and Partner and Senior Adviser to
McKinsey & Company.
Mr Gregg brings to the Board extensive experience in
corporate finance and capital management, strategic
and commercial acumen, leadership, retailing and
racing industry experience.
Tabcorp Committees:
• Chairman of Nomination Committee
Qualifications:
• Bachelor of Commerce
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).
Mr Attenborough brings to the Board extensive
gambling industry experience, strategic and
commercial acumen, international experience, retailing
and customer experience, and corporate responsibility.
Qualifications:
• Bachelor of Science (Honours)
• Master of Business Administration
Other ASX company directorships in past 3 years:
• Graduate Member of AICD
Mr Akhurst was the Executive Chairman of Adstream
Holdings Pty Ltd and was a Director of Vocus Group
Limited and private investment company Paul Ramsay
Holdings Pty Ltd. In his executive career, Mr Akhurst
was Chief Executive Officer of Sensis Pty Ltd from
2005 to 2012 and a Director and Chairman of FOXTEL.
He also spent seven years as Group Managing Director
and Group General Counsel at Telstra Corporation
Limited, and prior to that he was a Partner at Mallesons
Stephen Jaques.
Mr Akhurst brings to the Board extensive experience in
legal and regulatory compliance, governance and risk
management, marketing and customer experience,
digital innovation, information technology, strategy,
finance and capital management.
Tabcorp Committees:
• Chairman of Risk and Compliance Committee
• Member of People and Remuneration Committee
• Member of Technology Committee
• Member of Nomination Committee
• Ampol Limited (previously called Caltex Limited)
since October 2015
• Challenger Limited since October 2012
Other ASX company directorships in past 3 years:
Qualifications:
• Nil
• Bachelor of Economics (Honours)
• Bachelor of Laws
• Fellow of AICD
Other ASX company directorships in past 3 years:
• McMillan Shakespeare Limited since April 2021
• Vocus Group Limited from September 2018 to
July 2021
30
Mr Boon is the former Chairman of Asaleo Care Limited
and a former Director of Toll Holdings Limited.
Mr Boon was previously Chief Executive Officer and
Managing Director of ASX listed company Ansell
Limited until he retired in 2004, a position which
capped a career spanning some 28 years with the
Ansell Group. Mr Boon has held senior positions in
Australia, Europe, the US and Canada.
Mr Boon brings to the Board extensive experience in
global marketing and sales, retailing and customer
experience, gambling industry experience, leadership,
remuneration, people and organisational culture.
Tabcorp Committees:
• Member of Audit Committee
• Member of People and Remuneration Committee
• Member of Technology Committee
• Member of Nomination Committee
Qualifications:
• Bachelor of Laws (Honours)
• Bachelor of Commerce
Other ASX company directorships in past 3 years:
• Asaleo Care Limited from May 2014 to June 2021
Tabcorp Annual Report 2021 Anne Brennan
David Gallop AM
Janette Kendall
Justin Milne
Independent Non-executive Director
from July 2020
Independent Non-executive Director
from July 2020
Board Observer from September 2020.
Proposed to be an independent Non-executive
Director (subject to regulatory approval)
Independent Non-executive Director
from August 2011
Anne Brennan is a Director of Spark Infrastructure
Group and Argo Investments Limited. She is also on the
boards of NSW Treasury Corporation and Rabobank
New Zealand Limited.
Ms Brennan previously served as Deputy Chair of Echo
Entertainment Group Limited, and as a Director of
Charter Hall Group, Nufarm Limited, Metcash Limited,
Myer Holdings Limited and Rabobank Australia Limited.
Ms Brennan was formerly the Executive Finance
Director of Coates Group and Chief Financial Officer at
CSR Limited. She was previously a partner at KPMG,
then Arthur Andersen and Ernst & Young.
Ms Brennan brings to the Board extensive experience in
finance, capital management, risk and compliance,
gambling industry experience and experience in retail
and highly regulated industries.
Tabcorp Committees:
• Chairman of Audit Committee
• Member of Risk and Compliance Committee
• Member of Nomination Committee
Qualifications:
• Bachelor of Commerce (Honours)
• Fellow of the Chartered Accountants Australia and
New Zealand
• Fellow of AICD
Other ASX company directorships
in past 3 years:
• Argo Investments Limited since
September 2011
• Charter Hall Group from October 2010
to May 2021
• Metcash Limited from March 2018
to August 2019
• Nufarm Limited from February 2011
to December 2020
• Spark Infrastructure Group since
June 2020
David Gallop AM is Chairman of Alacria Pty Ltd, a
Director of Australasian Media Company Pty Ltd and is
on the Board of Cricket NSW.
Janette Kendall is a Director of Vicinity Centres, Costa
Group Holdings Limited, Australian VenueCo and
KM Property Funds Limited.
Mr Gallop was previously the Chief Executive Officer
and General Secretary of Football Federation Australia
from 2012 to 2019 and Chief Executive Officer of the
National Rugby League from 2002 to 2012. He also
held senior legal roles with the National Rugby League,
News Corporation (Super League) and law firm
Holman Webb.
Mr Gallop has served on numerous sports governing
bodies including the Australian Sports Commission,
Rugby League International Federation and the Asian
Football Confederation’s 2015 AFC Asian Cup Local
Organising Committee.
Ms Kendall previously served as a Director of Nine
Entertainment Co. Holdings Limited, Wellcom
Worldwide Pty Ltd and the Melbourne Theatre
Company.
During her executive career, Ms Kendall served in
various senior management roles including as Senior
Vice President of Marketing at Galaxy Entertainment
Group in China, Executive General Manager of
Marketing at Crown Resorts, General Manager and
Divisional Manager roles at Pacific Brands, Managing
Director of emitch Limited, and Executive Director of
Clemenger BBDO.
Mr Gallop brings to the Board extensive experience and
background in sports administration, media rights and
broadcasting, digital content delivery, customer
experience, legal and regulatory frameworks and
stakeholder relationship management.
Ms Kendall brings to the Board extensive experience
in marketing, operations and digital transformation.
She also has a depth of experience in the gambling,
retail and hospitality industries both in Australia
and overseas.
Tabcorp Committees:
• Chairman of People and Remuneration Committee
• Member of Audit Committee
• Member of Nomination Committee
Qualifications:
• Bachelor of Laws
• Bachelor of Arts
• Graduate Member of AICD
Other ASX company directorships
in past 3 years:
• Nil
Tabcorp Committees:
• Member of Audit Committee
• Member of People and Remuneration Committee
• Member of Technology Committee
• Member of Nomination Committee
Qualifications:
• Bachelor of Business (Marketing)
• Fellow of AICD
• Member of Chief Executive Women
Other ASX company directorships
in past 3 years:
• Vicinity Centres since December 2017
• Costa Group Holdings Limited since October 2016
• Nine Entertainment Co. Holdings Limited from
June 2017 to December 2018
Justin Milne is a former Chairman of NetComm Wireless
Limited, MYOB Group Limited, Australian Broadcasting
Corporation and pieNETWORKS Limited, and was a
Director of NBN Co Limited, SMS Management and
Technology Limited, Members Equity Bank Limited
and Basketball Australia Limited.
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 was also the Chief Executive
Officer of OzEmail and the Microsoft Network.
Mr Milne brings to the Board extensive experience
in information technology, media, digital innovation,
marketing and customer experience, public policy,
strategic and commercial acumen and governance.
Tabcorp Committees:
• Chairman of Technology Committee
• Member of Risk and Compliance Committee
• Member of Nomination Committee
Qualifications:
• Bachelor of Arts
• Fellow of AICD
Other ASX company directorships
in past 3 years:
• MYOB Group Limited from March 2015 to May 2019
• NetComm Wireless Limited from March 2012
to July 2019
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GOVERNANCETabcorp Annual Report 2021
EXECUTIVE LEADERSHIP TEAM
David Attenborough
Managing Director and
Chief Executive Officer
Adam Newman
Chief Financial Officer
Paul Carew
Chief Operating Officer
– Gaming Services
Patrick McGlinchey
Chief Legal and Risk Officer
and Co-Company Secretary
Françoise Russo
Chief Information Officer
Adam joined Tabcorp in October
2019 as Chief Financial Officer.
He was previously the Chief Financial
Officer of ASX-listed energy company
AusNet Services Limited. He also
held senior leadership roles at
BlueScope Steel in Australia and
the USA, and worked at BHP and
in Coopers & Lybrand’s Perth and
London Corporate Advisory groups.
Adam holds a Bachelor of
Business, a Post Graduate Diploma
of Business, and a Graduate Diploma
in Applied Finance. He has also
attended the Advanced Management
Program at INSEAD (France).
Adam is a Member of Chartered
Accountants Australia and
New Zealand and FINSIA.
Paul commenced as Chief Operating
Officer – Gaming Services in
February 2020. Since joining
Tabcorp in 2006, he has held various
senior management positions across
the Gaming, Retail Wagering and
Keno businesses.
Prior to joining Tabcorp, Paul was
Sales Manager at Fosters Group
and was a licensed venue operator.
Paul holds a Bachelor of Commerce,
Marketing and Management, and
has attended the University of
Nevada Executive Development
Program in the USA.
Patrick leads the Legal, Risk,
Regulatory and Governance teams
and commenced at Tabcorp
in March 2019.
Prior to joining Tabcorp, he was
Regional General Counsel Asia
Pacific at LafargeHolcim Group
leading the legal, corporate
governance and compliance teams
across the region. Patrick has
extensive international experience in
a range of senior roles with multi
nationals and also the gambling
entertainment industry, having
served previously as Chief Legal
Officer and Company Secretary
at Aristocrat Leisure Limited.
Patrick holds a Bachelor of Laws
(Honours) and a Bachelor of
Economics (Soc Sc). He has
attended various executive
development courses including
the International Institute for
Management Development
in Switzerland and the Wharton
School in the USA.
Françoise commenced as
Tabcorp’s Chief Information
Officer in May 2020.
With over 25 years of experience
in IT and Transformation, prior
to joining Tabcorp, Françoise was
Global Chief Information Officer
at Toll Group, where she led a
multi-year business transformation
underpinned by a program of global
technology modernisation. She
has also worked overseas with
organisations such as Procter
& Gamble Ltd, Diageo PLC and
British American Tobacco PLC,
where she was the Regional Chief
Information Officer for Europe,
Middle East and Africa.
Françoise holds a Masters of
Business Administration, a Masters
in Information Systems and a
Bachelor in Psychology. She has
attended the University of Oxford’s
Said Business School and Warwick
Business School at the University of
Warwick, UK. She is also a Graduate
of the AICD.
David joined Tabcorp in April 2010
as Managing Director – Wagering.
He became Managing Director
and Chief Executive Officer when
Tabcorp’s demerger of its former
casinos business was completed
in June 2011.
David has an extensive background
in totalisator 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
also includes the development of
casino, bookmaking and gaming
opportunities for British bookmaking
company Ladbrokes (formerly part
of the Hilton Group Plc).
David is a Director of the
Australasian Gaming Council
and a Director of Hostplus Pty Ltd.
David holds a Bachelor of Science
(Honours) and a Master of Business
Administration, and he is a Graduate
Member of AICD.
32
Tabcorp Annual Report 2021 Adam Rytenskild
Managing Director
– Wagering and Media
Ben Simons
Chief Strategy Officer
Sue van der Merwe
Managing Director
– Lotteries and Keno
Michelle Williams
Chief People Officer
Michelle commenced with Tabcorp
in February 2020 as Chief People
Officer.
Prior to joining Tabcorp, she was
Group Director Human Resources
at Fairfax Media Limited and was
responsible for setting and
implementing human resources
strategy across Fairfax’s portfolio
of newspapers, websites, radio
stations, events and digital ventures
in Australia and New Zealand. Prior
to Fairfax, she held human resources
roles with AXA and Colonial Limited.
Michelle holds a Bachelor of
Commerce and a Bachelor of
Science, and is a member of the
Australian Human Resources
Institute.
Ben commenced with Tabcorp in
July 2017 in the position of Chief
Strategy Officer. He has oversight
of corporate strategy and branding,
business development, and the
Office of the CEO, which includes
corporate communications and
government and stakeholder
relations.
He was previously with Telstra where
he held positions as Director of
Retail Product Strategy and Director
of Telstra Air, Australia’s largest wifi
hotspot network. Prior to Telstra, he
was a Principal at management
consulting firm Bain and Company.
Ben holds a Masters in Business
Administration, a Bachelor of
Economics, a Bachelor of Laws,
and a Graduate Diploma in Applied
Finance from the Securities Institute
of Australia.
Sue became Tabcorp’s Managing
Director – Lotteries and Keno
following the Tabcorp-Tatts
combination in December 2017.
Previously she held the role of
Chief Operating Officer – Lotteries
at Tatts Group.
Sue has extensive experience
in lotteries spanning 31 years.
She has played a central role in
the successful development of the
Australian lottery industry, and was
instrumental in the acquisition of
multiple lottery licences and the
successful integration of these
businesses. Today she is responsible
for one of the most complex
multi-jurisdictional lottery
businesses in the world.
She is Chairman of the Asia Pacific
Lottery Association, sits on the
World Lottery Association Executive
Committee and was inducted into
PGRI’s Lottery Industry Hall of Fame
in 2016, recognising her contribution
to world lottery excellence and
integrity.
Sue holds a Bachelor of Social
Science, Marketing and Economics,
and is a Member of AICD.
Adam joined Tabcorp in 2000 and has
been a member of Tabcorp’s Executive
Leadership Team since 2010. During
this time he has led Wagering’s Digital
and Retail Operations, Gaming
Services business, Keno business
and has been Managing Director –
Wagering and Media since the
Tabcorp-Tatts combination in
December 2017.
Adam has 25 years of experience
leading large, highly regulated complex
businesses, focused on transforming
retail and digital through periods of
increasing competition and significant
change while delivering businesses
to be customer led, digitally-integrated
and competitive.
Adam has led expansion to new
markets, established digital channels,
disrupted old business models,
turned-around declining businesses,
successfully led difficult negotiations
and has been at the forefront of
several large acquisitions, mergers
and business integrations.
He is an Alternate Director of the
Australasian Gaming Council.
Adam holds a Masters of Business
Administration, has attended the
Senior Executive Program at the
London Business School and the
Executive Breakthrough Program
with Egon Zehnder. He is a Member
of AICD.
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33
GOVERNANCETabcorp Annual Report 2021
CORPORATE GOVERNANCE
Tabcorp’s Board recognises the importance of having proper and effective corporate
governance arrangements and maintaining high standards of corporate behaviour, culture
and accountability. The governance arrangements adopted by the Group enable the Board
and management to make well informed decisions, provide appropriate accountability and
transparency, and instil and reinforce a culture and behaviours that support Tabcorp’s vision
to be The Trusted Gambling Entertainment Company.
Key updates
• As part of the orderly and
coordinated Board renewal
process, Steven Gregg
succeeded Paula Dwyer as
Chairman following Ms Dwyer’s
retirement from the Board on
31 December 2020.
• Janette Kendall was appointed
as a new Non-executive Director
(subject to regulatory approval),
and Vickki McFadden retired
from the Board.
• David Attenborough, who
previously announced his
intention to retire as MD & CEO,
will remain as MD & CEO of
Tabcorp until the proposed
demerger of the Lotteries and
Keno business is completed.
Balanced Board
• The Board comprises a mix of
longer serving Non-executive
Directors (NEDs) and more
recent appointments, with three
new Directors appointed in the
past two years.
• The Board has a target of at
least 40% female NEDs by
the end of FY23 (FY21: 29%).
• All of Tabcorp’s NEDs are
considered by the Board
to be independent.
• The Board is comprised of
Directors who bring a diverse
range of skills, experience,
qualifications and backgrounds
to provide effective leadership
and add value.
Board Committees
• In FY21 the Board established
a Technology Committee to
provide strong governance
and oversight of Tabcorp’s
technology strategy and
roadmap.
• The Board has five standing
Committees:
– Audit Committee
– Risk and Compliance
Committee
– People and Remuneration
Committee
– Technology Committee
– Nomination Committee
• All Committee members,
including Chairmen, are
independent Non-executive
Directors.
34
Board skills matrix
A. Leadership
Q
8
A
8
P
8
B
8
C
8
O
7
N
7
D
8
8
E
8
F
M
8
L
Experience
Technical
Skills
7
K
7
8
G
8
J
8
I
8
H
B. Strategic and commercial acumen
C. Financial acumen/capital management
D. Governance
E. Legal and regulatory
F. Risk management and compliance
G. People
H. Organisational culture
I. Remuneration
J. Government/stakeholder relations
and public policy
K. Gambling industry experience
L. Experience in other relevant industries
M. International experience
N. Information technology
O. Digital innovation
P. Retailing, marketing and
customer experience
Q. Corporate responsibility
Number of Directors with developed capability
NED diversity
NED tenure
Male
Female
2
5 to 10
years
2
Target of
40% female
NEDs by end
of FY23
5
Average of
4.9 years
<2 years
3
2
2
2 to <5
years
Tabcorp’s Corporate Governance Statement 2021, Appendix
4G, Board and Committee Charters, key policies and
governance documents are available from the Who We Are >
Corporate Governance section of Tabcorp’s website at
www.tabcorp.com.au
Tabcorp Annual Report 2021
Board and Committee meeting attendance
The attendance of the Directors at meetings of the Board and standing Board Committees during the year in
review were:
Board
meetings
A
B
Audit
Committee
A
B
Risk and
Compliance
Committee
A
B
People and
Remuneration
Committee
A
B
Technology
Committee(i)
A
B
Nomination
Committee
A
B
10
10
10
10
10
10
7
10
5
3
10
10
10
10
10
10
7
10
5
3
6
6
-
6
6
6
4
-
2
2
6
6
-
6
6
6
4
-
3
2
3
4
4
2
4
2
-
4
1
1
3
4
4
2
4
2
-
4
2
1
4
4
4
4
-
2
2
-
1
-
4
4
4
4
-
2
2
-
2
-
2
3
3
3
-
-
3
3
-
-
3
3
3
3
-
-
3
3
-
-
4
4
4
4
4
4
2
4
3
1
4
4
4
4
4
4
2
4
3
1
Name
Current Directors
Steven Gregg(ii)
David Attenborough(iii)
Bruce Akhurst
Harry Boon
Anne Brennan
David Gallop
Janette Kendall(iv)
Justin Milne
Former Directors
Paula Dwyer(v)
Vickki McFadden(v)
A – Number of meetings attended
B – Maximum number of possible meetings available for attendance
(i) The Board established the Technology Committee effective from 16 February 2021.
(ii) Steven Gregg also attended meetings of the Victorian Joint Venture Management Committee as Chairman of this Committee
from 1 January 2021.
(iii) David Attenborough attends Committee meetings, but he is not a member of any Committee. Only Non-executive Directors are members
of Board Committees.
(iv) Janette Kendall’s appointment is subject to the receipt of all necessary regulatory and ministerial approvals. For the meetings disclosed
above, Ms Kendall attended as an Observer whilst awaiting regulatory approval, for which she was not required to attend and could not
vote on any matter.
(v) Paula Dwyer and Vickki McFadden retired as Directors of Tabcorp on 31 December 2020 and 20 October 2020 respectively.
In addition to the meetings above, Directors also participated in 22 additional meetings of the Board or
Board Sub-Committees established for special purposes during the year to consider a range of matters,
including the impacts of the COVID-19 pandemic on the Group, the 2020 Entitlement Offer and the strategic
review of the Group’s structural and ownership options. Management also provided regular briefings to
Directors on developments regarding these and other matters during this period.
The functions and memberships of the Board Committees are set out in the Company’s Corporate Governance
Statement available on Tabcorp’s website. The Board and Committee Charters are also available on
Tabcorp’s website.
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
Current Directors
Steven Gregg(i)
David Attenborough(ii)
Bruce Akhurst
Harry Boon
Anne Brennan(iii)
David Gallop(iii)
Janette Kendall(iv)
Justin Milne
Former Directors
Paula Dwyer(v)
Vickki McFadden(v)
Number of
Ordinary shares
45,820
1,628,649
120,000
76,364
8,182
7,637
0
50,846
136,364
54,547
(i) Steven Gregg commenced as Chairman on 1 January 2021.
(ii) David Attenborough also has an interest in 2,138,469 Performance Rights.
(iii) Anne Brennan and David Gallop commenced as Non-executive Directors on 17 July 2020
and 3 July 2020 respectively following the receipt of all necessary regulatory and
ministerial approvals.
(iv) Janette Kendall’s appointment is subject to the receipt of all necessary regulatory
and ministerial approvals.
(v) Paula Dwyer and Vickki McFadden retired as Directors of Tabcorp on 31 December 2020
and 20 October 2020 respectively, and the interests disclosed above were applicable
at the time of their retirement.
(vi) The MD & CEO’s shareholding is within the Executive Shareholding Policy. All NED
shareholdings are within the Non-executive Director Shareholding Policy, noting that
NEDs are required to reach the applicable threshold within three years of appointment
(as referenced above) to achieve the minimum shareholding threshold.
35
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GOVERNANCETabcorp Annual Report 2021
RISK MANAGEMENT AND MATERIAL BUSINESS RISKS
The Group has a structured and proactive approach to understanding, identifying and managing risk which is aligned
to the Group’s strategies and operations. The Group’s Risk Management Framework (summarised opposite) enables
the effective identification, monitoring, management, reporting and oversight of risks throughout the Group and
is based on concepts and principles identified in the International Standard ISO 31000:2018 Risk Management –
Guidelines. This framework supports a strong culture of proactive risk management, helps protect our reputation and
supports long term value creation for our stakeholders.
The Chief Legal and Risk Officer and Executive Leadership Team, together with the business units, actively manage
the Risk Management Framework, with oversight from the Board and Risk and Compliance Committee.
The Risk Management Framework is regularly reviewed having regard to the Group’s evolving needs and changes in
the external landscape, and enhanced where necessary to further mature the Group’s approach to risk management.
For further information regarding the Group’s approach to risk management and risk governance, refer to Tabcorp’s
2021 Corporate Governance Statement.
Risk Management Framework
Business Strategy
Risk
Governance
Risk Categories
Key Risk Policies
Risk Management Lifecycle and Tools
Enterprise Risk Management (ERM) System
There are various risks that could potentially have a material impact at a whole-of-Group level on the achievement of the Group’s strategies and future prospects which are presented below,
in no particular order, together with existing mitigations employed by the Group. Many of the risks may arise due to events occurring that are outside the control of the Group.
Description and potential consequences
The Group’s businesses, as well as third parties that distribute the Group’s products
and services, including agencies, retail venues and retailers, are regulated by laws,
licences, regulations, rules, permits and other approvals (including, for example,
responsible gambling and AML/CTF laws). Any material breach of the relevant
obligations or failure to meet compliance and conduct requirements may have an
adverse impact on the financial performance and operating position of the Group.
Any such adverse impact may arise as a result of the suspension or loss of
applicable material gambling licences, renewal of licences on less favourable terms,
increased supervision and oversight by regulators and other stakeholders, civil or
criminal penalties, brand or reputational damage, and the inability to obtain future
licences or business opportunities.
In addition, a breakdown in material operational processes, system errors or failure
to comply with the requirements for the calculation of jackpots, tote and fixed odds
dividends, gambling taxes or other stakeholder returns, may require the Group to
repay winnings or other financial impacts, or seek reimbursement of any
overpayments, while also exposing the Group to litigation, including class actions,
or other forms of disputes.
The conduct of wagering, lotteries, Keno and the provision of gaming services are
regulated by laws, licences, permits and other approvals from relevant state and
territory governments. The loss of, or failure to renew, any material licence, permit,
authorisation or other approval (or renewal on less favourable terms) may have an
adverse impact on the financial position, performance and operations of the Group.
Mitigations employed
• The Group has risk management, compliance and accountability frameworks, considered
risk appetite positions on material matters, and supporting policies, procedures, tools,
training and other controls.
• Employees and managers are provided with training and support to enable them to
effectively manage their risk and compliance obligations.
• The Group regularly engages with regulators and has a robust environment for testing and
approving systems before deployment.
• Systems, processes and equipment are regularly monitored and tested. Internal Audit
periodically reviews and provides independent assurance regarding the adequacy of controls
and processes for managing risk and compliance obligations.
• The Group has processes in place to ensure that relevant third parties are appropriately
trained on requirements, and that compliance with such requirements are monitored.
• The Group operates a diverse portfolio of businesses across a number of jurisdictions,
business segments and customer categories which reduces the reliance on any one specific
business or jurisdiction.
• The Group maintains long term gambling licences and, where the terms are appropriate,
seeks new licences and to extend existing licences where possible.
Risk
Breach of laws
and licences, and
compliance and
conduct risks
Licences and
other approvals
36
Tabcorp Annual Report 2021 Risk
Changes in laws
and the
regulatory
environment
Description and potential consequences
The Group’s businesses operate in a highly regulated environment and are
significantly affected by government policy and the manner in which governments
and regulators exercise their powers. From time to time, government policy and
decisions shift and are influenced by societal attitudes and political and/or
media attention.
Litigation,
disputes and
investigations
Consumer
discretionary
spending and
preferences
Changes in legislation, regulation, taxation or government policy (and related
judicial decisions and enforcement policy) by government agencies, tribunals and
departments, including as a result of changes in societal attitudes towards gambling
products, may have an adverse impact, to varying degrees, on the Group’s
operational and financial performance as a result of significant changes in the
nature of operations, increased compliance or other costs, resourcing demands,
and potential changes in the level of competition in relevant markets.
From time to time, members of the Group become involved, or could become
involved, in litigation and disputes, including class actions, including with Federal
or State regulatory or law enforcement bodies (such as Australian Competition
and Consumer Commission, Australian Securities and Investments Commission,
Australian Transaction Reports and Analysis Centre, Australian Taxation Office and
State-based gambling regulators), joint venture and other business partners,
stakeholders and third parties.
In addition, members of the Group (as well as their current and former officers and
executives) may be subject to various investigations carried out by Federal or State
regulatory or law enforcement bodies. Probity-related implications may also arise
for Tabcorp.
This could potentially lead to the suspension or loss of applicable gambling licences,
other financial or criminal penalties, disciplinary action, brand damage and/or loss
of future business opportunities, each of which may, if they were to occur, have a
material adverse effect on the financial position, performance and/or operations of
the Group. There is also the risk that Tabcorp’s reputation may further suffer due to
public scrutiny surrounding any such litigation, dispute or investigations regardless
of their outcome, and this may also adversely affect the Group’s ability to generate
revenue or conduct its operations.
Gambling activities compete with other consumer products for consumers’
discretionary spending and in particular with other forms of leisure and
entertainment. If the Group does not adequately respond to competition for
consumers’ discretionary expenditure, there may be an adverse effect on the
operational and financial performance of the Group.
Consumer discretionary spending may also be affected by adverse changes to
general economic or industry conditions, changes in consumers’ attitudes towards
gambling products and the availability of payment channels, which may in turn
adversely affect the financial performance of the Group.
Mitigations employed
• The Group proactively engages with regulators and governments, and from time to time
makes submissions relating to proposed changes in laws, and regulatory and licensing
environments, which may impact the Group.
• The Group regularly reviews its operating business model and strategies to take account
of changes to the regulatory and licensing environments to mitigate adverse consequences
of these changes.
• The Group proactively engages with industry bodies to align the Group’s business strategies
with potential industry changes and ensure the sustainability of the Group’s businesses
and those industries more broadly.
• The Group continues to invest in and embed customer care initiatives and responsible
gambling practices.
• The Group is supported by legal, regulatory and risk teams and implements robust risk,
compliance, contract management processes, and has systems and controls to help mitigate
risks of any potential litigation, disputes and investigations where possible. Any litigation,
disputes or investigations that arise from time to time are managed in an effective and
efficient manner with a view to protecting not only Tabcorp’s financial position, but also
its reputation and ongoing operations.
• As noted, the Group also endeavours to maintain strong working relationships through
regular proactive engagement with regulatory and law enforcement bodies, industry
controlling bodies, other industry partners and governments. This can help prevent
actual and potential issues arising and/or from escalating.
• As noted above, the Group operates a diverse portfolio of businesses with operations
spanning multiple jurisdictions and market segments, which reduces the reliance
on any single business and customer category.
• The Group adopts a range of strategies to further mitigate this risk, including using its
exclusive retail network, customer service and relationship management, alternative
payment channels, and product and digital innovation across a multi-channel network.
• The Group’s strategic marketing and consumer insights teams support the businesses
to understand and respond to changing consumer trends.
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GOVERNANCETabcorp Annual Report 2021
RISK MANAGEMENT AND MATERIAL BUSINESS RISKS
Risk
Competition
and disruption
Financial risks
Technology,
cybersecurity
and data/privacy
risks
Description and potential consequences
The Group’s businesses are affected, to varying degrees, by competing suppliers
of gambling and media products and services, based both in Australia and overseas.
New competitors and disruptors may also enter the Group’s traditional markets and
be subject to less regulation compared to the Group. As a result, there is a risk that
the Group may not be able to compete on the same terms as other operators, or
may face increased levels of competition from suppliers of gambling products and
services, which could adversely affect the operational and financial performance of
the Group. A sustained increase in competition from existing competitors or new
entrants may result in a material failure to grow, or a loss of market share or revenue
in some markets.
The Group is exposed to risks relating to the cost and availability of funds to support
its operations, including changes in interest rates and foreign currency exchange
rates, counterparty credit and liquidity risks which could impact its financing
activities.
The Group is also exposed to various financial and trading risks arising from
operating its Wagering and Media and Lotteries and Keno businesses.
In addition, as part of its arrangements with its external financiers, the Group is
subject to a number of customary conditions and financial covenants. A failure
to comply with such conditions and covenants may require the Group to repay
borrowings earlier than anticipated, or result in increased financing costs for the
Group, which could in turn adversely affect the financial performance of the Group.
The Group’s businesses rely on the successful operation of technology
infrastructure, which could be adversely affected by various factors including
obsolescence, complexity of core environments, malicious attacks on technology
systems and customer, company data and regulatory information, ability to recover
from a significant hardware, software, digital or data centre failure, and managing
risks associated with outsourcing key processes and activities to third parties.
The Group’s businesses also rely on technology infrastructure to support ongoing
business growth. Where such infrastructure cannot efficiently support the changing
needs of the business, this may potentially adversely impact the reputation,
operations or financial performance of the Group.
The COVID-19 working environment has seen an enhanced threat level across
all industries and organisations as opportunistic criminals seek to exploit
organisations’ cyber defenses. Additionally, ransomware cyber-attacks on
companies across the world are on the rise.
A significant cyber incident or prolonged failure of the computer systems and/or
related infrastructure or technology security failure could impact upon the Group’s
technology systems and equipment, prevent operation of revenue generating
functions, result in the loss or exposure of information assets, or personal customer
or regulatory data could be wrongfully appropriated, lost or disclosed, which may
potentially adversely impact the reputation, operations or financial performance of
the Group and expose the Group to significant regulatory enforcement actions,
litigation and other disputes.
Mitigations employed
• As noted above, the Group operates a diverse portfolio of businesses with operations
spanning multiple jurisdictions and market segments, which reduces the reliance on any
single business and/or customer category.
• The Group strives for continual improvement in its product and service offering to attract and
retain customers, including customer service and relationship management, and product
and digital innovation across a multi-channel network.
• The Group supports an industry where all gambling operators can compete effectively and
are required to adhere to, and are held to, the same laws, regulations, industry codes and
standards.
• The Group’s finance facilities and interest rate, credit, liquidity and currency risks are
managed by the Group’s Treasury department in line with policies approved by the Board.
• The Group maintains an active capital management program with a range of funding sources
and long dated maturities.
• Various policies and processes are in place to manage financial and trading risks arising from
the Group’s operations.
• Refer to the sections titled “Capital Management” on page 11 and “Capital and risk
management” on pages 90 to 100.
• The Group’s Technology team dedicates resources, systems and expertise to the
identification, analysis, and mitigation of technology, cyber and data risks, and leverages the
expertise from key technology partners.
• A dedicated information and cyber-security team within the Technology function is tasked
with protecting key information assets, detecting any attempted attacks, and responding
appropriately. Regular reviews and assessments with follow up actions assist ongoing
defensive strategies and response readiness.
• The Group maintains support arrangements for cyber incident response and recovery,
and holds a cyber breach insurance policy.
• The Group has a Privacy Policy, Privacy Officer, and a number of internal working groups, and
adopts practices, procedures and systems to provide oversight and support the appropriate
management of data and its privacy.
• The Group has disaster recovery plans and business continuity plans in place to manage
major technology failures, cyber-security attacks and privacy breaches should they occur.
Following an incident at a third party managed data centre that impacted a number of the
Group’s systems in November 2020, a number of enhancements have been made and are
planned to further strengthen the Group’s enterprise resilience and disaster recovery
processes.
• In FY21, the Board established a Technology Committee to oversee the Group’s technology
strategy, including major technology investments to address the Group’s technology and
cybersecurity risks.
38
Tabcorp Annual Report 2021 Risk
Reliance on
infrastructure
and third party
commercial
arrangements
Racing and
sports products
Description and potential consequences
The Group is reliant on key infrastructure and third party commercial arrangements
for the operation of its business. A significant malfunction or interruption to key
infrastructure, or a failure of, significant interruption to, or reduction in the quality of
third party products and services that the Group relies upon for a sustained period
of time, may have an adverse impact on the reputation and the operating and/or
financial performance of the Group.
The Group’s Wagering and Media business is reliant on racing industries,
stakeholders and sporting bodies across Australia, and internationally, providing a
program of events for the purposes of wagering, and obtaining and maintaining the
necessary broadcast rights and content for race meetings and sporting events. A
significant decline in the quality or number of events that comprise this program
(for example due to adverse weather conditions, climate change, natural disasters,
epidemic/pandemic outbreaks (such as the COVID-19 pandemic), an outbreak of
equine influenza or other animal sickness pandemics, or changes in societal
attitudes associated with animal welfare or other sustainability issues) would have a
significant adverse effect on Wagering and Media revenue and may potentially have
a material adverse effect on the operational and financial performance of the Group.
Changes in race
fields and sports
product fees and
taxes
Each state and territory of Australia has implemented race fields arrangements,
under which wagering operators pay product fees for use of that industry’s race
fields information. Similar arrangements exist in relation to various sports. There is
the potential that fees will increase, new fees will be introduced, or the method for
determining fees will change, and such changes may have an adverse effect on the
operational and financial performance of the Group.
In addition, a material increase in the taxes and levies payable by the Group in
respect of its wagering, lotteries or gaming businesses may reduce margins and
have an adverse impact on the financial performance of the Group.
There is also a risk that racing, sport or industry bodies may disagree with the
Group regarding the application of certain aspects of the race fields regimes,
contracts that govern product fees or relevant commercial arrangements generally,
or the manner in which taxes, levies and fees are determined. Such disagreements
may lead to litigation or other dispute resolution processes being involved,
including negotiated settlement of relevant commercial disputes.
Mitigations employed
• The Group’s procurement function maintains commercial relationships across a diverse
supplier base with clear contracts, terms of engagement, agreed service levels, regular
reporting and monitoring, and where necessary risk mitigation and remediation action plans.
• The Group has in place business continuity and disaster recovery plans.
• The Group maintains an insurance program which includes limited recourse in the event
of major failures of infrastructure or third party supply arrangements.
• As noted above, the Group operates a diverse portfolio of businesses with operations
spanning multiple jurisdictions and market segments, which reduces the reliance on any
single business and customer category.
• In addition, the Group’s Wagering and Media business offers betting products on,
and broadcasts, a wide variety of racing, sports and other events, domestically
and internationally.
• The Group works closely with racing bodies and industry stakeholders to optimise racing
schedules and broadcasts to provide the best racing product available to customers and
mitigate the potential for adverse impacts which may result from a decline in racing product.
• The Group has in place business continuity plans and maintains an insurance program
providing limited cover for major disruptions.
• The Group performs financial modelling and sensitivity analysis to monitor and respond to
the impacts of racing and sport product supply disruptions.
• The Group currently has contracts in place that the Group considers will allow it to offset or
share some of the race field fees or offer additional protections under the respective
arrangements.
• The Group maintains strong relationships with industry controlling bodies, other industry
partners and governments, and engages with them in respect of proposed changes to
industry funding arrangements, fees and other taxes and levies.
• Where possible, the Group seeks to enter into contracts with racing and sports controlling
bodies that provide long term certainty of commercial arrangements.
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GOVERNANCETabcorp Annual Report 2021
RISK MANAGEMENT AND MATERIAL BUSINESS RISKS
Risk
Disruption or
decline of
licensed venues,
agencies and
retail network
COVID-19
pandemic
Description and potential consequences
The operating and financial performance of the Group’s businesses are materially
dependent on the operation of a network of licensed venues (hotels and clubs), TAB
agencies, newsagencies, convenience stores and other retail outlets which offer the
Group’s products. Significant disruption or closures of, or a decline in, these
channels, whether as a result of a particular event (for example, due to adverse
weather events or climate change, epidemic/pandemic outbreak (such as the
COVID-19 pandemic), or natural disaster), economic conditions, changes in
consumer behaviour or any other factors, may have a direct adverse effect on the
operating and financial performance of the Group.
The ongoing COVID-19 pandemic and government restrictions have impacted and
may continue to impact the Group’s operating businesses to varying degrees, and
in turn the Group’s financial and operational performance. In FY21, the main
impacts have been to the Group’s Gaming Services business (due to the temporary
closure of licensed venues) and Wagering and Media business (due primarily to the
temporary closure of licensed venues (hotels and clubs) and TAB agencies, crowd
restrictions at racing events, and disruption to Australian and international sport
and racing events).
The COVID-19 pandemic and related actions taken in response by the Australian
and other governments, including lockdowns, border controls/travel restrictions,
and the effects of the pandemic on the global and domestic economy have had, and
are likely to continue to have, an adverse effect on Tabcorp and its financial
performance. There is ongoing uncertainty as to the frequency and length of
Australian and other government restrictions in the future.
The long term impacts from COVID-19 on general economic or industry conditions
and consumer discretionary spending are uncertain and may adversely impact the
financial and operational performance of the Group and the delivery of its growth
strategies in the future.
Refer also to the risk topics “Racing and sports products”, “Disruption or decline
of licensed venues, agencies and retail network” and “People, health, safety and
wellbeing” for further information about other risks which could be impacted by
COVID-19 and other potential pandemics.
Mitigations employed
• The Group operates a diverse portfolio of businesses through a multi-channel strategy
across retail and digital networks, which reduces the reliance on any single channel.
• The Group regularly reviews its omni-channel strategies and seeks to optimise its investment
in the retail network to align with changing market and consumer trends.
• The Group works with industry peak bodies and retail network partners to optimise the
product and service offering, and enhance the customer experience in retail venues.
• The Group has in place business continuity and disaster recovery plans.
• The Group has plans, processes and resources in place to respond to government
restrictions and mitigate health and safety risks, maintain continuity of service (albeit at
reduced levels for some of its businesses and channels), and ameliorate the associated
financial and operational impacts.
• The Group regularly engages with governments, regulators, customers, venue and racing
industry partners, and employees to help manage the impact on our stakeholders.
• The diversification of the Group’s businesses across multiple channels, products and
jurisdictions provides greater resilience when such pandemics occur.
• During FY21, the Group continued to implement initiatives to mitigate the financial and
earnings impacts on the Group, including reducing operating and capital expenditure,
securing debt covenant waivers and preserving liquidity, not paying a FY20 final dividend,
securing government agreement for the temporary deferral of lottery, Keno and payroll taxes,
encouraging retail customers to use digital channels, and actively promoting remaining
available products. A range of people related initiatives were also implemented, including
standing down some groups of employees, promoting remote and flexible working
arrangements, and accessing the Federal Government’s JobKeeper scheme.
• The Group established the Pandemic Preparedness Working Group to coordinate and
oversee the Group’s response to the COVID-19 pandemic.
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Tabcorp Annual Report 2021 Risk
People, health,
safety and
wellbeing
Demerger
Description and potential consequences
The Group’s performance and the execution of its strategies depends on its ability
to attract and retain key senior management and operating personnel and foster
a high performance culture. The loss of any key personnel, or the Group’s inability
to attract the requisite personnel with suitable experience, could have an adverse
effect on the performance of the Group and the delivery of its strategies and/or
operations.
A failure by the Group to appropriately manage our team members’ physical and/or
psychological health and wellbeing, or failure to comply with relevant workplace
health and safety laws and regulations, could expose the Group (and individual
employees and Directors) to civil, criminal and/or regulatory action with associated
financial and reputational consequences.
There is a heightened risk that the people-related initiatives implemented in
response to the COVID-19 pandemic (refer above), and the previously announced
intention to demerge the Lotteries and Keno business, may have an adverse impact
on the Group’s ability to attract and retain certain key senior management and
personnel, as well as employee engagement and productivity. COVID-19 has also
heightened both physical and psychological health risks, with mental wellbeing an
area of particular focus due to ongoing public health directions.
The Group is undergoing significant change across the organisation as it executes a
proposed demerger of the Lotteries and Keno business, including in relation to its
organisational structure, business operations and technology. There are risks
associated with executing the proposed demerger, including that it does not
proceed, it may take longer than expected to complete, one-off and ongoing costs
may be higher than expected, key shareholder, regulatory, stakeholder and other
approvals may not be obtained, business disruption from technology separation,
and potential impacts on people and the delivery of the Group’s strategies
and operations.
Refer also to the risk topics “Licences and other approvals”, “Technology,
cybersecurity and data/privacy risks”, and “People, health, safety and wellbeing”
for further information about other risks which could be impacted by the
proposed demerger.
Mitigations employed
• The Board, People and Remuneration Committee, Chief People Officer and various
management committees have responsibility for overseeing strategies and programs related
to people, health, safety and wellbeing.
• The Group has adopted strategies, policies and processes for the recruitment, development
and retention of talent, and for fostering an inclusive, diverse and engaged workforce.
• Tabcorp is committed to providing a safe working environment and actively prioritises the
health, safety and wellbeing of our team members. The Group has implemented a health,
safety and wellbeing framework which includes policies, procedures, reporting, training
and education.
• The Group undertakes regular surveys of team members to monitor employee engagement
and wellbeing, and has implemented various policies and programs aimed at supporting
team member wellbeing.
• The Group’s remuneration framework aims to attract, motivate and retain high calibre
individuals through performance-linked remuneration based on the achievement of Group
and individual performance (financial and non-financial) outcomes.
• The Group has in place business continuity plans and has implemented COVID Safe Plans
across all Tabcorp locations.
• The Group has established a Steering Committee, with a clear governance structure and
defined workstream leads, to oversee the planning, design and delivery of the proposed
demerger, reporting to the Executive Leadership Team and Board.
• The Group has dedicated and experienced internal resources, with external advisors and
resources engaged to support the program to deliver the proposed demerger.
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GOVERNANCETabcorp Annual Report 2021
DIRECTORS’ REPORT
Contents
1. Principal activities
2. Operating and financial review
3. Significant changes in the state of affairs
4. Other matters
5. Significant events after the end of the financial year
6. Business strategies
7. Likely developments and expected results
8. Directors
9. Directors’ interests in contracts
10. Indemnification and insurance of Directors and Officers
11. Company Secretaries
12. Environmental regulation and performance
13. Political contributions and engagement
14. Rounding of amounts
15. Auditors
16. Non-audit services
17. Auditor’s independence declaration
18. Remuneration Report
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Tabcorp Annual Report 2021
The Directors of Tabcorp Holdings Limited (the Company) present their report for the consolidated entity comprising the Company and its subsidiaries (the Group) and the Group’s interests
in joint arrangements and associates in respect of the financial year ended 30 June 2021.
1. PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial year comprised the provision of gambling and entertainment services. The Group’s principal activities remain unchanged from
the previous financial year, except as disclosed elsewhere in this Directors’ Report.
2. OPERATING AND FINANCIAL REVIEW
The financial results of the Group for the financial year ended 30 June 2021 comprise its three operating segments of Lotteries and Keno, Wagering and Media, and Gaming Services.
The activities and financial performance of the Group and each of its operating segments for the financial year are set out on pages 1 to 23 and below.
Lotteries and Keno
The Lotteries and Keno business has the following operations and licences/approvals.
Lotteries operations:
• The Lott is the brand that unites Tabcorp’s licensed lottery operations under one banner. Tabcorp conducts lotteries under licence arrangements in all states and territories of Australia,
except Western Australia.
• Our leading game brands include Set for Life, Powerball, Oz Lotto, TattsLotto, Saturday Lotto, Gold Lotto, X Lotto, Monday and Wednesday Lotto, Lucky Lotteries, Lotto Strike, Super 66,
Keno and Instant Scratch-Its.
• Our lotteries products can be purchased in newsagencies, convenience stores and other retail outlets, online at theLott.com and via our mobile app.
Keno operations:
• Keno is a random number game that is played every 3 to 3.5 minutes with the chance for customers to win instant prizes and multi-million dollar lifechanging jackpots.
• Keno is played in clubs, hotels and TABs in Victoria, Queensland, South Australia and ACT, and in clubs and hotels in NSW, and is available online in ACT.
• Keno jackpot pooling across NSW, Victoria, Queensland and ACT.
Lotteries licences/approvals(i):
• NSW Operator Licence and various product licences expire in April 2050.
• Victorian Public Lottery Licence expires in June 2028.
• Queensland Licensed Lottery Operator’s Licence expires in July 2072.
• Lotteries operates under an agency agreement with the Lotteries Commission of South Australia which runs until December 2052.
• Tasmanian lotteries operate under renewable five year permits linked to Victorian (June 2025) and Queensland
(June 2023) licences.
• ACT Approval to conduct a lottery indefinitely unless revoked.
• Northern Territory Lottery Agreement expires in June 2032.
(i) Ordered by population of states/territories.
(ii) Indefinitely unless revoked.
Lotteries licences/approvals(i)
2050
2052
2072
NSW
VIC
QLD
SA
TAS
ACT(ii)
NT
2028
2025
2032
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Tabcorp Annual Report 2021DIRECTORS’ REPORT
DIRECTORS’ REPORT
Keno licences/approvals(i):
• NSW Keno Licence expires in April 2050. Tabcorp operates Keno in NSW under a management agreement
with ClubKENO Holdings Pty Ltd.
• Victorian Keno Licence expires in April 2022.
• Queensland Keno Licence expires in June 2047.
• Keno operates under an agency agreement with the Lotteries Commission of South Australia which runs until
December 2052.
• ACT Approval to Conduct Keno expires in October 2064.
Wagering and Media
The Wagering and Media business has the following operations and licences/approvals.
Wagering operations:
• The business offers totalisator (or pari-mutuel) and fixed odds betting on racing, sports and other events.
Keno licences/approvals(i)
2022
NSW
VIC
QLD
SA
2050
2047
2052
ACT
2020
2064
• The business operates through a network of TAB agencies, hotels and clubs, and on-course operations in Victoria, NSW, Queensland, South Australia, Tasmania, ACT and Northern
Territory.
• Wagering channels include retail, internet, mobile devices and phone.
• Trackside, a computer simulated racing product, operates in NSW, Victoria and ACT, and is licensed in other Australian and overseas jurisdictions.
• The Victorian wagering business operates as a 50:50 unincorporated joint venture with the Victorian racing industry.
• International wagering and pooling is conducted through Premier Gateway International (PGI) on the Isle of Man (the Group has 100% interest in PGI after acquiring the remaining
50% interest in February 2021) and Sky Racing World in the US.
Media operations:
• Three Sky Racing television channels broadcast thoroughbred, harness and greyhound racing to audiences in TAB outlets, hotels, clubs, other licensed venues, in-home to pay TV
subscribers and over various digital platforms.
• Sky Racing Active is a digital app providing an ‘access all areas’ pass to Sky Racing’s live and on-demand racing content across thoroughbred (excluding Victoria and South Australia),
harness and greyhound racing. Sky Racing Active allows users to create their own racing playlists and showcases.
• Three Sky Sports television channels broadcast various sports to audiences in TAB outlets, hotels, clubs and other licensed venues.
• The Sky Sports Radio network operates in NSW and ACT, the RadioTAB network operates in Queensland, South Australia, Tasmania and Northern Territory, and the business has
advertising and sponsorship arrangements with Radio Sport National.
• The business broadcasts Australian racing throughout Australia, and distributes Australian and international racing to other countries and imports overseas racing to Australia through
the Sky Racing World vision distribution hub in the US.
(i) Ordered by population of states/territories.
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Tabcorp Annual Report 2021 Wagering licences/approvals(i):
• NSW Wagering Licence expires in March 2097, with retail exclusivity period to expire in June 2033.
Wagering licences/approvals(i)
• Victorian Wagering and Betting Licence expires in August 2024, and may be extended by the State of Victoria
for a further two year period.
• Queensland Race Wagering Licence and Sports Wagering Licence expire in June 2098.
• South Australian Major Betting Operations Licence expires in June 2100, with retail exclusivity period to expire
in December 2032.
• Tasmanian Gaming Licence expires in March 2062.
• ACT Totalisator Licence expires in October 2064.
• ACT Sports Bookmaking Licence expires in October 2029, with further rolling extensions to October 2064.
• ACT Approval to Conduct Trackside expires in October 2064.
• Northern Territory Totalisator Licence and Sports Bookmaker Licence expire in October 2035.
NSW
VIC
QLD
SA
TAS
ACT
NT
2024
2062
2064
2035
2097
2098
2100
• Isle of Man Totalisator Licence held by Premier Gateway International (PGI) expires in October 2023, with renewal capability every five years.
• North Dakota (US) Totalisator Licence held by Sky Racing World expires in December 2021, with annual renewal capability.
Gaming Services
The Gaming Services business has the following operations and licences/approvals.
Gaming Services operations:
• The Gaming Services business operates two units under the MAX brand: MAX Regulatory Services and MAX Venue Services.
• MAX Regulatory Services provides EGM monitoring and related services across NSW, Queensland, and Northern Territory.
• MAX Venue Services provides a mix of services including: EGM and systems supply and expertise, specialised services and strategic advice to licensed gaming venues in NSW and Victoria;
value-add services to venues in NSW, Victoria, Queensland, Tasmania, ACT and Northern Territory such as gaming and loyalty systems, business intelligence tools, and cashless and ticket
in ticket out (TITO) services; and logistics, installation, relocation, repair and maintenance of EGMs, lottery and wagering terminals and other transaction devices across Australia.
Monitoring licences(i):
• NSW Centralised Monitoring System Licence expires in November 2032.
• Queensland Monitoring Operator’s Licence expires in August 2027, with indefinite rolling renewal capability.
• Northern Territory Monitoring Provider’s Licence expires in June 2026, with indefinite rolling renewal capability.
Other licences/approvals(i):
• NSW Gaming Machine Dealer’s and Seller’s Licences.
• Listings on the Victorian Roll of Manufacturers, Suppliers and Testers.
• Queensland Service Contractor Licence and Approved Financier status.
• South Australian Gaming Machine Dealer’s Licence (voluntarily suspended) and Gaming Machine Service Licence.
• Listings on the Tasmanian Roll of Recognised Manufacturers, Suppliers and Testers of Gaming Equipment.
• ACT Supplier Certificates.
• Northern Territory listing on the Roll of Approved Gaming Equipment Suppliers, Gaming Machine Service Contractors Licence and other approvals.
(i) Ordered by population of states/territories.
Monitoring licences (i)
NSW
QLD
NT
2032
2027
2026
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Tabcorp Annual Report 2021DIRECTORS’ REPORT
DIRECTORS’ REPORT
3. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Other than matters arising from the impacts of the COVID-19 pandemic discussed in the Operating and Financial Review and elsewhere in the Directors’ Report, no other significant changes
in the state of affairs of the Group have occurred since the commencement of the financial year on 1 July 2020.
4. OTHER MATTERS
Entitlement Offer
In September 2020, the Company completed a 1-for-11 pro rata accelerated renounceable entitlement offer (with retail entitlements trading) raising gross proceeds of approximately $600m.
The proceeds of the Entitlement Offer were used to pay down existing drawn bank debt facilities, strengthen the Company’s balance sheet and provide greater financial flexibility and additional
credit metric headroom for covenant and rating purposes.
Jumbo share disposal
In September 2020, the Group disposed its 11.6% interest in Jumbo Interactive Limited (ASX code: JIN) for gross proceeds of approximately $98m, with a profit before tax of $69m.
Premier Gateway International (PGI)
In February 2021, the Group acquired the remaining 50% interest in the PGI wagering pooling hub business located in the Isle of Man, and now has 100% interest in this business.
Amended 2016 tax assessment
During FY21, the Australian Taxation Office issued the Group with an amended assessment for the 2016 taxation year in relation to the deductibility of the licence fee incurred by Tatts Group
Limited in relation to monitoring gaming machines in NSW. The primary tax in dispute of $62m and interest charges of $9m were paid in December 2020. The Group lodged an objection
against the amended assessment and a Notice of Decision was issued in June 2021 disallowing the objection. The Group intends to appeal this decision, and if successful, the Group expects
that the amended assessment amounts should be refunded.
5. SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR
On 5 July 2021, Tabcorp announced the intention to demerge its Lotteries and Keno business and create two standalone ASX-listed companies. The demerger is expected to be implemented
through a court-approved Scheme of Arrangement, subject to shareholder, final Board, regulatory and third party approvals and consents. Tabcorp is targeting completion of the demerger
by the end of June 2022. The decision to pursue a demerger follows the conclusion of a comprehensive strategic review of all relevant structural and ownership options to maximise value for
shareholders, including the evaluation of unsolicited approaches and proposals received for the sale of the Group’s Wagering and Media and Gaming Services businesses.
The Group notes the recent developments since the end of the financial year in relation to the COVID-19 pandemic in NSW, Victoria, South Australia and Queensland, and related actions
taken by respective state governments, including imposing lockdowns, travel and other government-mandated restrictions. These restrictions have resulted in the temporary closure at
various times of licensed venues (hotels and clubs) and TAB agencies which offer Tabcorp’s Wagering and Media, Keno and Gaming Services products (particularly in metropolitan Sydney
and Melbourne). At the reporting date a definitive assessment of the future effects of these restrictions, and COVID-19 more generally, on the Group cannot be made.
No other matters or circumstances have arisen since the end of the financial year, which are not otherwise dealt with in this Directors’ Report or in the Financial Report, that have significantly
affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial years.
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Tabcorp Annual Report 2021
6. BUSINESS STRATEGIES
The 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 Group continues to focus on a number of key priorities, which are discussed on pages 1 to 23. The priorities of the Group’s
operating businesses are set out on pages 12 to 23.
7. LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Each year the Board participates in a formal strategic review and planning process to provide guidance to management about the Group’s strategic direction. The Group plans to continue
with its business strategies, as set out in this report and referenced above. 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 material business risks described on pages 36 to 41.
The Directors have excluded from this report any further information on the likely developments in the operations of the 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 Group.
8. DIRECTORS
The names and details of the Company’s Directors in office during the financial year and up to the date of this report (unless otherwise stated) are set out on pages 30 to 31 and below.
Paula Dwyer retired as Chairman and independent Non-executive Director of the Company on 31 December 2020, having served as Chairman of the Company from June 2011 and as a
Director of the Company from August 2005. At the time of her retirement, she was Chairman of Allianz Australia Limited and a Director of Australia and New Zealand Banking Group Limited
and Lion Pty Ltd. She was also a Member of the Kirin Holdings International Advisory Board and a Member of the Takeovers Panel. Ms Dwyer was formerly the Chairman of Healthscope
Limited and a Director of Leighton Holdings Limited, Suncorp Group Limited and Foster’s Group Limited. She was formerly a member of the ASIC External Advisory Panel, the Victorian
Casino and Gaming Authority and of the Victorian Gaming Commission. Ms Dwyer held senior executive positions with Ord Minnett (now JP Morgan) and PricewaterhouseCoopers. Ms
Dwyer was Chairman of the Tabcorp Nomination Committee and the Victorian Joint Venture Management Committee. She was also a member of Tabcorp’s Audit Committee, Risk and
Compliance Committee and People and Remuneration Committee. Ms Dwyer holds a Bachelor of Commerce. She is a Fellow of the Chartered Accountants Australia and New Zealand,
Senior Fellow of the Financial Services Institute of Australasia and Fellow of AICD. In the past three years, she was a director of other ASX listed companies as follows: Healthscope Limited
from June 2014 to June 2019; and Australia and New Zealand Banking Group Limited from April 2012.
Vickki McFadden retired as an independent Non-executive Director of the Company on 20 October 2020, having served as a Director of the Company from July 2017. At the time of her
retirement, she was Chairman of GPT Group, a Director of Newcrest Mining Limited, Allianz Australia Ltd and Myer Family Investments Pty Ltd, and a Member of Chief Executive Women.
Ms McFadden was Chairman of Eftpos Payments Australia Limited and Skilled Group Limited, President of the Takeovers Panel, and was previously a Director of Leighton Holdings Limited.
Prior to this, she was Managing Director, Investment Banking at Merrill Lynch (Australia) Pty Ltd. Ms McFadden was Chairman of Tabcorp’s Audit Committee and a member of Tabcorp’s Risk
and Compliance Committee and Nomination Committee. She holds a Bachelor of Commerce and a Bachelor of Laws, and is a Member of AICD. In the past three years, she was a director of
other ASX listed companies as follows: GPT Group from March 2018; and Newcrest Mining Limited from October 2016.
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DIRECTORS’ REPORT
9. DIRECTORS’ INTERESTS IN CONTRACTS
Some Directors of the Company, or related entities of the Directors, conduct transactions with entities within the 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.
The Board assesses the independence of Directors and, among other things, takes into account 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 Group which is material. No such
circumstances arose during the financial year. For more information refer to the Corporate Governance Statement available on Tabcorp’s website.
10. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Directors and Officers of the Group are indemnified against liabilities pursuant to agreements with the Group. Members of the Group have 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.
11. COMPANY SECRETARIES
Chris Murphy commenced as Acting Company Secretary on 23 March 2018 and was formally appointed as Company Secretary on 6 February 2019 following receipt of the necessary
regulatory and ministerial approvals. Prior to joining Tabcorp, he was Assistant Company Secretary of Transurban Group and previously held company secretariat and/or legal roles at
Cleanaway Limited, Alstom Limited and Melbourne Stadiums Limited. Chris holds a Bachelor of Laws (Honours), Bachelor of Commerce, a Graduate Diploma of Applied Corporate
Governance and a Graduate Certificate in Applied Finance and Investment, and he is an Associate Member of the Governance Institute of Australia.
Patrick McGlinchey was appointed as Company Secretary on 26 June 2020. Patrick is Tabcorp’s Chief Legal and Risk Officer with responsibility for the Group’s Legal, Risk, Regulatory and
Governance functions. Prior to joining Tabcorp in March 2019, he held senior legal, governance and compliance roles at LafargeHolcim Group and Aristocrat Leisure Limited. Patrick holds
a Bachelor of Laws (Honours) and a Bachelor of Economics (Soc Sc). He has also attended various executive development courses including the International Institute for Management
Development in Switzerland and the Wharton School in the USA.
12. ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group’s environmental obligations are regulated under both state and federal laws. The Group complies with, or in many cases exceeds, its environmental performance obligations.
During the financial year ended 30 June 2021, no environmental breaches have been notified to the Group by any government agency.
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Tabcorp Annual Report 2021 13. POLITICAL CONTRIBUTIONS AND ENGAGEMENT
As a listed entity operating in a highly regulated environment, Tabcorp has an obligation to its shareholders and stakeholders to participate in the process of public policy development. From
time to time Tabcorp holds memberships with various networking forums organised by political parties and Tabcorp personnel attend networking events that support political parties as they
participate in the democratic system of parliamentary government in Australia – at both a Commonwealth and state/territory level. Under various Australian laws the cost of these
networking forums and events is classified as a ‘political donation’ and is sometimes required to be publicly disclosed.
Tabcorp takes a strict principles-based approach when making contributions to political parties in accordance with our Political Contributions Policy. In particular, Tabcorp does not make any
‘cash only donations’ to any political party or affiliate. The Board has oversight of this policy and approves Tabcorp’s political expenditure program and budget each year.
In the interest of transparency, Tabcorp discloses all political contributions made under our political expenditure program to the Australian Electoral Commission (AEC) and other bodies,
irrespective of whether such contributions are classified by law as a ‘political donation’ or are required to be disclosed. In FY21, Tabcorp’s political contributions totalled $186,940
(FY20: $190,445). These contributions were to meet the cost of memberships of political party business forums and attendance at events and party conference corporate days.
Further details are available in Tabcorp’s Corporate Governance Statement and under the Corporate Governance section of Tabcorp’s website, including Tabcorp’s Political Contributions
Policy and a link to Tabcorp’s most recent Annual Return to the AEC.
14. ROUNDING OF AMOUNTS
Dollar amounts in the Financial Report and the Directors’ Report have been rounded to the nearest million and in the Remuneration Report to the nearest hundred thousand unless
specifically stated to be otherwise, in accordance with the Australian Securities and Investments Commission Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.
15. AUDITORS
The Group’s external auditor is Ernst & Young. The 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 Company’s Corporate Governance Statement.
16. NON-AUDIT SERVICES
Ernst & Young, the external auditor to the Company and the Group, provided non-statutory audit services to the Company during the financial year ended 30 June 2021. 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 Audit Committee regularly reviews the activities of the independent external auditor and reviews the auditor’s performance on an annual basis. The Chairman of the Audit Committee
must approve all non-statutory audit and other work to be undertaken by the auditor (if any). Further details relating to the Audit Committee and the engagement of auditors are available
in the Company’s Corporate Governance Statement available on the Tabcorp website.
Ernst & Young, acting as the Company’s external auditor, received or are due to receive $1,110,000 in relation to the provision of non-statutory audit services to the Company in respect of the
financial year ended 30 June 2021. These services relate to other assurance and agreed upon procedures services under other legislation or contractual arrangements and other services.
Amounts paid or payable by the Company for audit and non-statutory audit services are disclosed in note E6 to the Financial Report.
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Tabcorp Annual Report 2021DIRECTORS’ REPORT
DIRECTORS’ REPORT
17. AUDITOR’S INDEPENDENCE DECLARATION
Shown opposite 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 2021.
This auditor’s independence declaration forms part of this Directors’ Report.
18. REMUNERATION REPORT
The Remuneration Report for the financial year ended 30 June 2021 forms part of this Directors’
Report, and can be found on pages 51 to 76.
This Directors’ Report has been signed in accordance with a resolution of Directors.
Steven Gregg
Chairman
Melbourne
18 August 2021
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Tabcorp Annual Report 2021
REMUNERATION REPORT (AUDITED)
Contents
1. Letter from the People and Remuneration Committee Chairman
2. Purpose
3. Overview
4. Key Management Personnel
(a) Non-executive Director changes during FY21
(b) Executive KMP changes during FY21
5. Remuneration governance
6. Executive KMP remuneration
(a) Strategy
(b) Structure
(c) Remuneration packages
(d) Remuneration structure and operation
(e) Remuneration and accountability
(f) Policy prohibiting hedging
(g) Executive Shareholding Policy
(h) Executive KMP employment contracts
7. Executive KMP remuneration outcomes in FY21
(a) Five-year business performance
(b) FY21 STI outcomes
(c) LTI awards granted in FY21
(d) LTI awards tested in FY21
(e) Actual remuneration received in FY21
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(f) Variable remuneration outcomes over the preceding five financial years 71
8. FY22 Short Term Incentive Structure
9. 2021 Long Term Incentive Offer
10. Non-executive Director fees
(a) Strategy and framework
(b) FY21 fee structure
(c) Fees paid during FY21
(d) Non-executive Director Shareholding Policy
11. Statutory remuneration disclosures
(a) Executive KMP statutory remuneration tables
(b) Transactions and loans with KMP
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Tabcorp Annual Report 2021
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GOVERNANCECORPORATE RESPONSIBILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT For the year ended 30 June 2021
1. LETTER FROM THE PEOPLE AND REMUNERATION COMMITTEE CHAIRMAN
Dear Shareholder,
On behalf of the Tabcorp Board of Directors, I am pleased to present Tabcorp’s 2021 Remuneration Report.
Tabcorp delivered a strong operational performance and earnings growth in a year marked by significant disruptions resulting from COVID-19. The pandemic continues to impact our
company and communities and we have remained focused on prioritising the wellbeing of our people and partners. This included supporting our venue partners who were impacted by
temporary closures, by suspending their contracted service and equipment fees.
Facing into the uncertainty of COVID-19, we strengthened the Group’s balance sheet through an equity raising and sold our equity stake in Jumbo Interactive. These actions, combined with a
strong recovery in operational cash flows, have significantly reduced our gearing ratio. We also accelerated the Group’s enterprise-wide optimisation program which delivered efficiencies and
EBIT savings in FY21.
Lotteries and Keno delivered a record profit result on the back of strong revenue growth driven by game development and active portfolio and sequence management. Wagering and Media
showed improved performance and revenue growth across its TAB, Media and International segments. Both businesses made good progress on their strategic priorities, which included
enhancing the customer experience through our successful omni-channel model. This delivered good customer acquisition and strong digital growth. However, the impact of closures
and other restrictions on licensed venues significantly disrupted our Gaming Services business. Notwithstanding this, the business is progressing its plan to simplify and streamline its
operations and reduced its operating costs in FY21.
Unfortunately, the year was not without other challenges. In November 2020, an outage at a third-party owned data centre impacted our customers and stakeholders. We have completed
a comprehensive review of the event and implemented changes to strengthen our disaster recovery capability.
Due to the strong operational result and good progress achieved across key business areas, albeit with some challenges, the Board determined the Short Term Incentive (STI) Group Funding
Multiplier (GFM) (STI pool) to be 1.00. Under the STI plan, given the above target Group financial results, a higher GFM would have applied. However, the Board exercised its discretion
to reduce the GFM, reflecting a balanced assessment of Group and operating business unit performance in FY21.
MD & CEO remuneration
Fixed remuneration
There were no adjustments to the MD & CEO’s remuneration structure or levels in FY21 and it is intended that these will remain the same in FY22. The MD & CEO’s fixed remuneration has not
increased since 2017.
Short Term Incentive (STI)
Given the balance of strong operational and strategic performance, offset by the data centre outage, the Board determined to provide the MD & CEO with an STI award equivalent to 100%
of his target STI opportunity (67% of his maximum opportunity) in the form of a combination of cash (50%) and Restricted Shares (50%). Restricted Shares will be restricted for two years
and subject to forfeiture, malus and clawback conditions. The treatment of Restricted Shares on completion of a demerger is yet to be determined and will be disclosed in the demerger
scheme booklet.
Long Term Incentive (LTI)
Mr Attenborough’s 2017 LTI offer performance conditions were tested in September 2020. The testing resulted in relative total shareholder return (the only performance measure) being
positioned at the 52nd percentile rank against the peer group. 54% of the Performance Rights under this offer vested and the remainder (46%) lapsed.
During the year, the Board considered providing Mr Attenborough with a 2021 LTI offer having regard to his intention to retire and the proposed demerger. Given Mr Attenborough has
a contractual entitlement to a long term remuneration component, the proposed demerger is still subject to regulatory and shareholder approvals, and his employment end date is yet
to be decided, the Board believes it is in shareholders’ best interests to provide him with a 2021 LTI offer. The rationale for this being:
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• if Mr Attenborough retired during the offer’s performance period, a pro rata portion of the Performance Rights would remain on foot and be subject to the original terms and conditions.
This means that Mr Attenborough would only retain Performance Rights that were relevant to his employment period and that these would be subject to performance conditions after
he has ceased employment;
• if regulatory and shareholder approvals for the proposed demerger are not obtained and Tabcorp continues as a consolidated Group, Mr Attenborough would still be measured against long
term performance hurdles, even if he retired; and
• if regulatory and shareholder approvals for the proposed demerger are obtained and the demerger completes, only a pro rata number of Performance Rights would vest and the majority
of the Performance Rights would lapse at this point.
The proposed 2021 LTI offer to Mr Attenborough will be put to a shareholder vote at Tabcorp’s 2021 AGM (and will be included in the 2021 Notice of Meeting).
Executive KMP remuneration
Fixed remuneration
There were no adjustments to executive KMP remuneration structures or levels during FY21. There will be modest adjustments to executive KMP fixed remuneration levels in FY22
(average of 1.83% increase) with the exception of the Managing Director Lotteries and Keno, reflecting an alignment to market peers and the importance for the Group to retain critical
experience and knowledge. The Managing Director Lotteries and Keno’s fixed remuneration level increased from $800,000 to $918,000 (effective 1 July 2021), to align her remuneration
with market and internal peers and to recognise her performance since the combination with Tatts.
Short Term Incentive
The average STI award for the executive KMP (other than the MD & CEO) was 105% of their target opportunity or 52% of their maximum opportunity, reflecting strong Group financial and
operational performance and the delivery of individual business unit strategic priorities.
2021 Long Term Incentive offer
The Board has agreed that the 2021 LTI offer will proceed with 75% of the Performance Rights being subject to relative TSR performance and 25% subject to return on invested capital
(ROIC) performance. This is consistent with the 2020 LTI offer.
FY22 STI Structure
A new STI structure has been implemented in FY22, which has been designed considering market best practice, Tabcorp’s three-year strategy, the need to balance financial and non-financial
priorities (including sustainability) and feedback from shareholders. The new design ensures that participants are rewarded for strong Group performance, incentivised to deliver sustainable
business unit strategic and operational objectives and are recognised for their individual contributions. Importantly, the plan includes a “Sustainability Modifier” which allows the Board to
adjust the STI pool when considering risk management, responsible gambling, community and reputation impacts and performance, ensuring results are achieved in a sustainable manner.
Non-executive Director fees
The Board reviewed Non-executive Director fees and elected not to increase fees during FY21 and FY22. As a result of the changes to the Superannuation Guarantee Contribution rate from
9.5% to 10% (effective 1 July 2021), the Board agreed to absorb the increase into current fees, thereby reducing cash fees. This will have the effect of keeping total Board fees (inclusive of
Superannuation Guarantee Contributions) at the same level as those for FY21.
FY22 is an important year for Tabcorp as the Group executes on the proposed demerger, while also continuing to focus on achieving strong financial and non-financial results. The Board
remains confident that Tabcorp is well positioned to execute the demerger and is looking forward to it creating two highly profitable, market leading businesses with exciting futures.
David Gallop
People and Remuneration Committee Chairman
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
2. PURPOSE
This Remuneration Report details the remuneration policies and arrangements for the Key Management Personnel (KMP) of the Group, comprising Tabcorp and its subsidiaries, for the year
ended 30 June 2021 (FY21). KMP are those persons having the authority and responsibility for planning, directing and controlling the activities of Tabcorp and the Group, and comprises the
Directors of Tabcorp and certain members of the Executive Leadership Team. This Remuneration Report is presented in accordance with the requirements of the Corporations Act 2001 (Cth)
(Act) and its regulations and has been audited as required by section 308(3C) of the Act.
3. OVERVIEW
The COVID-19 pandemic was very challenging for Tabcorp in FY20. The shutdown of retail venues and disruption to racing and sporting competitions had a material impact on the Group’s
business operations. No short term incentives were paid in respect of FY20 and executive KMP (including the Managing Director and Chief Executive Office (MD & CEO)) did not receive any
increases to fixed remuneration in FY21. Non-executive Director fees were also not increased in FY21.
Notwithstanding the ongoing COVID-19 impacts, Tabcorp delivered strong operational and strategic outcomes in FY21. On 5 July 2021, Tabcorp announced its intention to demerge its
Lotteries and Keno business (subject to the receipt of regulatory and shareholder approvals). Tabcorp anticipates that the demerger will be complete by June 2022. The next twelve months
will be critical for Tabcorp, as it aims to execute the demerger and procure the many necessary approvals, while maintaining business performance across the Group. This heightens the
responsibilities and expectations placed on the Executive Leadership Team and other key employees. The Board determined that the following remuneration outcomes in FY21 were
appropriate, considering the strong performance outcomes, the need to retain critical skills during this period and maintaining alignment with shareholder value creation.
Non-executive
Director fees
FY21
FY22
Board and Board
Committee fees
Board and Board
Committee fees
No adjustments.
No adjustments will be made.
Fixed remuneration
No adjustments.
FY21
MD & CEO
remuneration
Short term incentive (STI)
opportunity and award
Target opportunity: 75% of fixed remuneration (unchanged).
Maximum opportunity: 112.5% of fixed remuneration (unchanged).
Actual FY21 STI award: 75% of fixed remuneration (100% of target).
Target opportunity: 75% of fixed remuneration (unchanged).
Maximum opportunity (at grant): 150% of fixed remuneration (unchanged).
Long term incentive (LTI)
opportunity and vesting
2020 LTI grant: Made in October 2020 and includes two performance measures, being relative total shareholder return (TSR)
(75% weighting) and return on invested capital (ROIC) (25% weighting).
2017 LTI grant: Tabcorp’s 3-year TSR (the only measure) performance placed the Group at the 52nd percentile of the peer group.
54% of the Performance Rights granted under the offer vested (the remainder (46%) lapsed).
FY22
Fixed remuneration
No adjustments will be made.
STI and LTI opportunities No adjustments will be made.
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FY21
Other
executive KMP
remuneration
Fixed remuneration
No adjustments.
STI opportunity
and award
Target opportunity: 50% of fixed remuneration (unchanged).
Maximum opportunity: 100% of fixed remuneration (unchanged).
Actual FY21 STI award: Average STI award of 52.5% of fixed remuneration (105% of target).
Target opportunity: 50% of fixed remuneration (unchanged).
Maximum opportunity: 100% of fixed remuneration (unchanged).
LTI opportunity
and vesting
2020 LTI grant: Made in October 2020 and includes two performance measures, being relative TSR (75% weighting) and ROIC
(25% weighting).
2017 LTI grant: Tabcorp’s 3-year TSR (the only measure) performance placed the Group at the 52nd percentile of the peer group.
54% of the Performance Rights granted under the offer vested (the remainder (46%) lapsed).
Fixed remuneration
FY22
Average increase of 1.83% across executive KMP. This excludes an increase for the Managing Director Lotteries and Keno from
$800,000 to $918,000 which aims to align her remuneration with internal and external peers and is in recognition of her performance.
STI and LTI opportunities No adjustments will be made.
Remuneration framework changes for FY22
A new simpler and strategically aligned plan was introduced from 1 July 2021. More details are outlined in section 8.
In July 2020, Tabcorp announced that following the successful integration of the Tatts business, David Attenborough would retire as Tabcorp’s MD & CEO and cease employment with the
Group in the first half of the 2021 calendar year.
In March 2021, Tabcorp announced that it would undertake a strategic review of all structural and ownership options and that it would pause its MD & CEO recruitment process pending the
outcome of the review. Mr Attenborough agreed to continue as MD & CEO during that time.
The Board resolved to provide Mr Attenborough with a 2020 LTI grant (which was approved at the 2020 Annual General Meeting) on the basis that:
• Mr Attenborough was employed at all times during the relevant period having continued to lead the Tabcorp business through the COVID-19 pandemic and the strategic review, and his
employment has once again been extended due to the announced demerger;
• an LTI offer to Mr Attenborough was in the best interests of shareholders as it ensures that Mr Attenborough’s remuneration will continue to be impacted by Group performance for a
significant period.
If Mr Attenborough retires during the 2020 LTI performance period:
• a pro rata portion of the Performance Rights granted under this offer will lapse; and
• a pro rata portion of the Performance Rights granted under this offer will continue on foot and be subject to the original terms and conditions of that offer.
Treatment of this LTI grant in the event a demerger is completed will be in line with disclosures to be presented in the demerger scheme booklet which will be communicated to shareholders
in due course.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
4. KEY MANAGEMENT PERSONNEL
(a) Non-executive Director changes during FY21
As part of a coordinated process of Board renewal, the following changes occurred in FY21:
• Vickki McFadden retired from the Tabcorp Board on 20 October 2020;
• Paula Dwyer retired as Chairman and from the Tabcorp Board on 31 December 2020;
• Steven Gregg commenced as Chairman of the Tabcorp Board and as Chairman of the Nomination Committee, effective 1 January 2021. At this time, he also ceased to be Chairman of the
People and Remuneration Committee and a member of the Audit Committee; and
• Janette Kendall joined the Tabcorp Board initially as an Observer and will formally commence as a Director following the receipt of all necessary regulatory approvals.
(b) Executive KMP changes during FY21
Patrick McGlinchey was appointed to the role of Chief Legal and Risk Officer and became a KMP, effective 1 March 2021. His role was expanded from Group General Counsel and became
Chief Legal and Risk Officer (CLRO) from 1 March 2021 to include executive responsibility for risk and compliance across the Group.
Table 1: KMP for FY21
Name
Non-executive Directors
Steven Gregg
Bruce Akhurst
Harry Boon
Anne Brennan
David Gallop
Justin Milne
Future Non-executive Directors, pending
regulatory approval
Janette Kendall
Former Non-executive Directors
Paula Dwyer
Vickki McFadden
Executive Director
David Attenborough
Executive KMP
Patrick McGlinchey
Adam Newman
Adam Rytenskild
Sue van der Merwe
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Position held
Period in position if less than full year
Chairman and Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Chairman from 1 January 2021
From 17 July 2020, previously was an Observer
From 3 July 2020, previously was an Observer
Observer
From 21 September 2020
Chairman and Non-executive Director
Non-executive Director
Until and including 31 December 2020
Until and including 20 October 2020
Managing Director and Chief Executive Officer (MD & CEO)
Chief Legal and Risk Officer
Chief Financial Officer
Managing Director (MD) Wagering and Media
MD Lotteries and Keno
From 1 March 2021
Tabcorp Annual Report 2021
5. REMUNERATION GOVERNANCE
The People and Remuneration Committee comprises three independent Non-executive Directors and assists the Board in fulfilling its responsibilities with respect to people-related and
remuneration matters as outlined below.
People and remuneration policies,
frameworks and structures
Establishing and maintaining people (including talent and retention, diversity and inclusion, and culture and engagement) and remuneration policies,
frameworks, and structures. Ensuring that these are strategically aligned and market-competitive, encourage strong employee performance, fairness
and equity, engagement and shareholder value creation while mitigating risks.
Non-executive Director
fee structure and levels
Establishing and determining market-competitive and appropriate fee structures and levels that remunerate Non-executive Directors effectively for
their responsibilities in a highly complex and regulated business.
Executive remuneration levels
Setting remuneration levels that are market-competitive and appropriate, encouraging and recognising strong performance and retaining key skills.
Incentive outcomes
Determining performance and incentive outcomes that align with Tabcorp’s risk and compliance framework and correlate with business performance
and shareholder value creation.
People strategy and projects
Oversee the Group’s people strategies and projects, including talent and retention, diversity and inclusion, culture and engagement, as well as the
Group’s health, safety and wellbeing strategy and performance.
The People and Remuneration Committee regularly reviews remuneration arrangements to ensure they continue to be fair, competitive, encourage strong business performance and
shareholder value creation, and align with the Group’s values and approach to risk management and compliance. The Committee and the Board also considers feedback from shareholders,
shareholder representative groups and proxy advisors and other stakeholders. To inform its decisions, the Committee sources a range of data and may receive independent advice, as
appropriate. No remuneration-related advice was sought, and no remuneration recommendations were received in respect of KMP during FY21 and to the date of this report. In determining
executive KMP remuneration outcomes, the Committee also receives feedback from the Risk and Compliance Committee.
The Committee is governed by its Charter, which is available on Tabcorp’s website (www.tabcorp.com.au) under the Corporate Governance section.
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6. EXECUTIVE KMP REMUNERATION
(a) Strategy
Tabcorp aims to reward its executive KMP competitively and appropriately for:
Strong Group financial and
non-financial performance
Creating long term shareholder value
Behaving in line with Tabcorp’s values
Tabcorp’s short term incentive pool
and 60% of short term incentive awards
are based on Group performance
(financial and non-financial).
Tabcorp’s short and long term incentive
performance measures are directly linked
to shareholder value creation.
All executive KMP are assessed equally
on performance and behaviours annually.
This determines fixed and variable
remuneration outcomes.
Acting in line with Tabcorp’s risk
management and compliance framework
Key scorecard measures and a documented
accountability framework (which feeds into
the performance management framework)
ensures that executive KMP are rewarded
for results that are achieved in a sustainable
and ethical manner.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
(b) Structure
Diagram 1: Executive KMP remuneration structure
Attract, motivate and retain high calibre individuals across the organisation through a market-competitive, performance-linked and shareholder aligned remuneration framework.
Remuneration philosophy
Remuneration
structure
Fixed remuneration (FR)
Remuneration
mix at target
MD &
CEO
Other
executive
KMP
Set and
adjusted,
considering:
Role
responsibilities
Qualifications and
experience
Market movements
and economic data
Individual
performance
ASX 25 to
75 median
Cash
40%
50%
Dependent on:
Group financial
and non-financial
performance
+
Short Term Incentive (STI)
Individual balanced scorecards
Financial
Strategic
Customer
Operational
excellence (including
risk and compliance)
People and culture
+
Long Term Incentive (LTI)
Behaviours
in line with
Tabcorp’s values
and approach
to risk and compliance.
Cash (50% for the
MD & CEO and 75% for
other executive KMP).
15%
19%
+
Restricted Shares
(50% for the MD & CEO
and 25% for other
executive KMP). Restricted
for 2 years and subject
to forfeiture conditions.
15%
6%
Remuneration
principles
Ensure remuneration
structures and levels
are market
competitive.
Appropriately
recognise and reward
superior Group
and individual
performance.
Reward behaviours
in line with the
Group’s values.
Reward for the
creation of sustained
shareholder value.
2020 LTI
Performance
Rights
(no dividends)
Relative total shareholder return (TSR) performance and service periods
Return on invested capital (ROIC) performance period
ROIC service period
July 2020 September 2020
June 2023
September 2023
Shares
(only issued if
performance and
service conditions
are met in
September 2023).
30%
25%
ROIC performance
test date
(no retesting)
Relative TSR performance
condition and ROIC service
condition test date
(no retesting)
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Tabcorp Annual Report 2021 (c) Remuneration packages
The following diagram details executive KMP FY21 annual remuneration packages assuming minimum, target and stretch levels of performance (Group, business unit and individual).
Executive KMP remuneration packages are set in line with their responsibilities in a complex and highly regulated business and are reviewed annually against market peers (being the ASX 25
to 75 group of companies) to ensure they remain competitive and that their skills are retained.
60% of the MD & CEO’s target remuneration package is variable and at risk (72% at maximum). 50% of the executive KMP (excluding the MD & CEO) target remuneration packages are
variable and at risk (67% at maximum).
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There were no increases to the MD & CEO’s and the executive KMP’s remuneration packages in FY21.
Diagram 2: Annual executive KMP remuneration packages
MD & CEO
MD Wagering and Media
Minimum(i)
$2.0m
$2.0m
Minimum
$918k
$918k
Target(ii)
$2.0m
$750k $750k
$1.5m
$5.0m
Target
$918k
$344k $115k $459k
$1.8m
Maximum(iii)
$2.0m
$1.125m
$1.125m
$3.0m
$7.25m
Maximum
$918k
$689k
$229k
$918k
$2.8m
MD Lotteries and Keno
Chief Financial Officer
Minimum
$800k
$800k
Minimum
$800k
$800k
Target
$800k
$300k $100k $400k
$1.6m
Target
$800k
$300k $100k $400k
$1.6m
Maximum
$800k
$600k
$200k
$800k
$2.4m
Maximum
$800k
$600k
$200k
$800k
$2.4m
Chief Legal and Risk Officer
Minimum
$750k
$750k
Target
$750k
$281k $94k
$375k
$1.5m
Maximum
$750k
$563k
$187k
$750k
$2.25m
Fixed remuneration
Short term incentive – Cash
Short term incentive – Restricted Shares
Long term incentive
(i) The “minimum” value represents the value of annual remuneration where short and long term performance (Group, business unit and individual) is below target and no STI awards are made and LTI Performance Rights (granted in that year)
are assumed not to vest.
(ii) The “target” value represents the value of annual remuneration where target levels of performance (Group, business unit and individual) have been achieved and the target STI opportunity is awarded and 50% of the LTI Performance Rights
(granted in that year) are assumed to vest. This LTI value is calculated using Tabcorp’s share price as at the LTI grant date.
(iii) The “maximum” value represents the value of annual remuneration where stretch levels of performance (Group, business unit and individual) have been achieved and the maximum STI opportunity is awarded and 100% of the LTI Performance
Rights (granted in that year) are assumed to vest. This LTI value is calculated using Tabcorp’s share price as at the LTI grant date.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
(d) Remuneration structure and operation
(i) Fixed remuneration
What constitutes fixed remuneration?
Cash salary, statutory superannuation contributions and employee-elected salary sacrificed benefits.
How is it set?
With reference to the responsibilities and complexities of the role, the executive’s knowledge, experience and skills
and market benchmarks.
What is Tabcorp’s remuneration benchmarking peer group?
The ASX 25 to 75 group of companies.
(ii) Short term incentive (STI)
Diagram 3: Executive KMP STI operation
Target STI
opportunity
X
Group Funding
Multiplier
(GFM)
Group
component
(60%)
Individual
component
(40%)
X
Individual
Performance
Multiplier
(IPM)
Outcomes assessed against
a range of financial and
non-financial performance
measures within the balanced
scorecard.
Range
0 to 2.50
l
e
d
r
u
H
If the IPM is zero,
no STI awards are
provided to the
participant (including
no Group component).
Range
0 to 1.25
FY21 actual
1.0
l
e
d
r
u
H
If the GFM is set at
zero, no STI pool will
form. The Board
retains discretion
to set a smaller
pool in exceptional
circumstances.
60
STI award
Cash
(50% for the MD &
CEO and 75% for
other executive KMP)
Restricted Shares
(50% for the MD &
CEO and 25% for
other executive KMP)
+
Range
FY21
actual
MD & CEO
0% to 112.5%
of fixed
remuneration.
Other
executive
KMP
0% to 100%
of fixed
remuneration.
MD & CEO
75% of fixed
remuneration
(100% of target)
Other
executive
KMP
average
Average of
52.5% of fixed
remuneration
(105% of target)
Restricted Shares are restricted for two years
and subject to malus and clawback.
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What is the target STI opportunity?
The value of the STI award if target performance levels are achieved and behaviours are in accordance with the Group’s values.
It is set at the end of the financial year by the People and Remuneration Committee.
It is based on the Group’s net profit/loss after tax (NPAT) before significant items result but also considers strategic, operational, risk
and compliance and customer performance.
How does the GFM operate?
It can range from between 0 and 1.25.
No STI awards are provided to any participant if the GFM is set at 0 (first gateway).
It was set at 1.0 for FY21.
What are the “Group” and “Individual”
components?
60% of the STI opportunity is dependent on Group results and rewards participants for their contribution to it.
40% of the STI opportunity is dependent on individual performance (financial and non-financial).
For executive KMP, other than the MD & CEO, individual performance is reflective of business unit and individual performance.
How does the IPM operate?
Executive KMP are assigned IPMs depending on their business unit performance (against a scorecard of measures) and their behaviours
as assessed against the Group’s values.
If the IPM is set at 0, the full STI award is forfeited (second gateway).
In what form are STI awards made
to executive KMP?
Cash (50% for the MD & CEO and 75% for other executive KMP) and Restricted Shares (50% for the MD & CEO and 25% for other
executive KMP).
The Restricted Shares are restricted for two years and subject to forfeiture and clawback conditions.
What happens to Restricted Shares if an STI
participant leaves the Group during the 2-year
restriction period?
If the participant resigns or is terminated for cause, Restricted Shares are forfeited (unless the Board determines otherwise).
If the participant leaves the Group under any other circumstances (including as a result of redundancy, retirement or ill health), then
Restricted Shares will remain on foot until the end of the original restriction period (unless the Board determines otherwise).
Can Restricted Shares be forfeited or clawed
back?
Restricted Shares may be forfeited at the Board’s discretion, based on certain adverse events or information that may come to light.
If these adverse events occur or adverse information becomes available after the Restricted Shares have become unrestricted, the
Board may require the participants to (amongst other things) repay all or part of the value of the Restricted Shares.
How does the STI framework align with
Tabcorp’s risk and compliance objectives?
What happens in the event of a change in
control of the Group?
The STI scorecard contains non-financial measures which include adherence with risk management and compliance objectives,
appropriate customer outcomes and cultural measures.
The STI award is also dependent on participants displaying the appropriate behaviours in line with the Group’s values.
The STI award is delivered partly as Restricted Shares (restricted for two years) and subject to malus and clawback provisions.
The Board is required to determine, in its absolute discretion, the appropriate treatment regarding any Restricted Shares.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
(iii) 2020 Long term incentive (LTI)
Diagram 4: 2020 LTI operation
Relative total shareholder return (TSR)
(75%)
Return on invested capital (ROIC)
(25%)
Performance Rights lapse/
Shares allocated
Performance Rights lapse/
Shares allocated
30 June 2023
ROIC performance
test date
(no retesting)
25 September 2023
Relative TSR
performance and ROIC
service test dates
(no retesting)
Performance Rights granted
(at face value)
Grant date
20 October 2020
Formula for allocating Performance Rights
Maximum LTI opportunity
Five-day volume weighted average price of Tabcorp shares traded
on the ASX up to but not including the grant date
On what basis are
Performance Rights
allocated?
Participants are allocated a maximum number of Performance Rights (based on their maximum LTI opportunities) using a face value allocation methodology.
Each Performance Right provides the right to receive one Tabcorp ordinary share, at no cost to the participant, subject to the satisfaction of specified
performance and service conditions. Performance Rights do not attract dividends or voting rights.
What are the performance
measures?
For the 2020 LTI offer, 75% of the Performance Rights are subject to relative TSR performance and 25% to ROIC performance. If performance conditions are
not met, Performance Rights will lapse.
What is relative TSR?
The return to shareholders (comprising capital returns, dividends and share price movements over the performance period) relative to a peer group of
companies. It was chosen as an LTI measure as it directly aligns to rewarding executive KMP for sustained shareholder value creation. Relative TSR is
measured over a three-year period.
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Tabcorp Annual Report 2021 What is return on invested
capital?
The ROIC performance condition replaces the Combination Synergy condition which was adopted (as an interim measure) under the 2018 and 2019 LTI
offers. The ROIC performance condition was chosen as the most appropriate second performance measure for the 2020 LTI offer because it focuses
management on achieving targeted returns on Tabcorp’s invested capital (equity and debt). This is particularly important following the combination
between Tabcorp and Tatts Group (“Combination”) which required significant investment.
The ROIC performance condition requires three-year average ROIC performance (measured over three financial years, from 1 July 2020 to 30 June 2023)
to exceed specified targets.
For the 2020 LTI offer, a stretch three-year average ROIC target of 8.4% was set by the Board, at which point 100% of the ROIC tranche will vest (subject to
satisfaction of an additional service condition to be tested in September 2023). The Board is of the view that the stretch target was set at a sufficiently high
value, such that its achievement would require significant growth in Tabcorp’s earnings over the three-year performance period, which would ultimately
deliver healthy shareholder returns. The stretch target was also set considering past, present, and future expected ROIC performance and market consensus.
The ROIC threshold was set at a level that ensures there is sufficient stretch earnings growth after the 2021 financial year and in line with targeted longer term
investment returns. The targets have also been set considering Tabcorp’s invested capital base which contains goodwill and Tabcorp’s investments, following
the combination with Tatts.
When will the performance
and service conditions be
tested?
Relative TSR performance will be tested on 23 September 2023.
ROIC performance will be tested at the end of June 2023 and the service condition will be tested on 23 September 2023.
Any potential vesting of Performance Rights and issuing of shares will only occur after the 23 September 2023 test date and there is no retesting.
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Relative TSR
% of the Performance
Rights that will vest
Peer Group
Return on invested capital
Average three-year ROIC
(between 1 July 2020 and
30 June 2023)
% of Performance
Rights that will vest
What are the performance
conditions?
Below threshold
Percentile ranking(i)
Below 50th
percentile
Threshold(ii)
N/A
0%
N/A
Target(ii)
50th percentile
37.5%
Maximum(ii)
75th percentile
75%
S&P/ASX 100 index excluding
organisations operating in the
Metals & Mining and Oil and
Gas sectors.
Below 7.1%
7.1%
7.6%
8.4%
0%
2.5%
12.5%
25%
Relative TSR will be calculated by an independent organisation at the end of the performance and service periods.
What if performance and
service conditions are met?
ROIC performance will be calculated and verified by Tabcorp’s external auditors following 30 June 2023. The ROIC service condition will be tested and agreed
with the Board on 23 September 2023. If the service and performance conditions have been met, Tabcorp will issue or transfer ordinary shares to the
participant, which will rank equally with other fully paid shares (full voting and dividend rights).
What happens when an LTI
participant leaves the
Group?
If a participant resigns or is dismissed for cause, Performance Rights will lapse (unless the Board determines otherwise). In all other circumstances a pro rata
number of Performance Rights (based on the portion of the service period that the participant was employed) remain on foot and are subject to the original
terms and conditions (including performance conditions), unless the Board determines otherwise.
(i) The vesting schedule aligns to predominant ASX 100 practice.
(ii) Straight line (pro rata) vesting occurs between threshold and target, and target and maximum performance levels.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
What happens in the event
of a change in control
of the Group?
Can Performance Rights be
cancelled or clawed back?
Accounting treatment
The Board can determine, in its absolute discretion, the appropriate treatment regarding any unvested Performance Rights.
Performance Rights may lapse at the Board’s discretion based on adverse events that have occurred or where adverse material information becomes
available after the Performance Rights have been granted to participants. If these adverse events occurred or adverse information becomes available after
the Performance Rights have vested and shares or cash have been awarded, the Board may require participants to repay all or part of the value of the award.
Performance Rights are expensed on a straight line basis over the vesting period. Under Accounting Standards, for the relative TSR measure Tabcorp is
required to recognise an expense irrespective of whether Performance Rights ultimately vest to the participant. A reversal of the expense is only recognised
in the event the Performance Rights lapse due to cessation of employment within the vesting period (for relative TSR and ROIC measures) or the
Performance Rights do not vest (for the ROIC measure).
(e) Remuneration and accountability
In FY21 no STI or LTI awards were clawed back.
Tabcorp has embedded a set of organisational values of which “Doing the Right Thing” is a core component. Tabcorp is committed to ensuring that its employees operate with integrity
and that its customers and the communities that we operate in can benefit from our products in a responsible manner. Tabcorp has a Board approved Code of Conduct which outlines
expectations of its employees and which is communicated to employees through regular training programs. Tabcorp operates an accountability framework which provides a link between risk
management and compliance breaches and implications for both employee remuneration outcomes and employment.
To assist the People and Remuneration Committee to determine appropriate remuneration outcomes for the organisation, including for executive KMP, several sources of information are
presented. These include risk culture reports which are presented to the Risk and Compliance Committee and then shared and discussed with the People and Remuneration Committee.
It also includes culture surveys and workforce snapshot reports to ensure they are taken into consideration when making decisions relating to incentives. The Chairman of the Risk and
Compliance Committee is also a member of the People and Remuneration Committee and has a standing agenda item to present risk and compliance performance outcomes when
incentive outcomes are discussed.
As mentioned in sections 6(d)(ii) and 6(d)(iii), if an adverse material event has occurred or adverse material information has become available, the Board has the ability to (amongst other things):
• reduce, or not make, STI awards and/or reduce LTI offers (partially or fully) prior to awarding them;
• forfeit STI Restricted Shares and/or lapse Performance Rights (partially or fully) while they are restricted/still on foot; and/or
• request part or full repayment of the value of the Restricted Shares/Performance Rights that have already become unrestricted/vested.
Material events or information may include (but is not limited to) where the participant has:
• acted dishonestly (including, but not limited to, misappropriation of funds, or deliberately concealing material events that would have influenced business outcomes);
• contributed to materially breaching Tabcorp’s compliance obligations (regulatory or legal);
• been accountable for significant reputational harm to the Group; and/or
• acted in such a way that the Group has made a financial misstatement.
In addition to STI and LTI impacts, Tabcorp can terminate staff where such events have occurred. If this was to occur, by default, all STI and LTI awards on foot would be forfeited/lapsed.
64
Tabcorp Annual Report 2021 (f) Policy prohibiting hedging
Participants in the Group’s incentive plans 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. These prohibitions are included in the terms and
conditions of the incentive plans and Tabcorp’s Securities Trading Policy, available on Tabcorp’s website (www.tabcorp.com.au) under the Corporate Governance section.
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).
(g) Executive Shareholding Policy
The Executive Shareholding Policy (applicable to all executive KMP) ensures that the interests of executives, the Group and shareholders are aligned. Under the Policy, the MD & CEO
is required to hold the equivalent of 200% of the value of his annual fixed remuneration in Tabcorp shares. Other executive KMP are required to hold the equivalent of 100% of the value of
their annual fixed remuneration in Tabcorp shares. The minimum shareholding must be achieved within five years from the executive KMP’s appointment or by December 2022 (whichever
is later). At the date of this report, all executive KMP complied with this policy. A copy of this policy is available on Tabcorp’s website (www.tabcorp.com.au) under the Corporate Governance
section.
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(h) Executive KMP employment contracts
Table 2: Current executive KMP contracts and notice periods
Executive KMP
David Attenborough
Patrick McGlinchey
Adam Newman
Adam Rytenskild
Sue van der Merwe
Position
MD & CEO
Chief Legal and Risk Officer
Chief Financial Officer
MD Wagering and Media
MD Lotteries and Keno
Contract duration
Open ended
Open ended
Open ended
Open ended
Open ended
Minimum notice period (months)
Tabcorp
12
9
9
9
9
Executive
6
6
6
6
6
Where Tabcorp terminates the executive KMP’s employment, Tabcorp may, at its discretion, elect to pay the executive KMP an amount in lieu of notice for any portion of the relevant notice
period worked. On cessation of employment, STI or LTI awards may vest, lapse or be forfeited in accordance with the relevant plan rules.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
7. EXECUTIVE KMP REMUNERATION OUTCOMES IN FY21
(a) Five-year business performance
Table 3: Five-year Group financial performance and remuneration outcomes
Net profit/(loss) after tax (NPAT)
Basic earnings per share (EPS)
Closing share price(i)
Dividends(ii)
STI Group Funding Multiplier (STI pool)
STI awards
MD & CEO
Other executive KMP (average)
LTI vesting
All executive KMP
Measurement unit
$m
Cents
$
Cents per share
% of target pool
% of target opportunity
% of maximum opportunity
% of target opportunity
% of maximum opportunity
FY17
(21)
(2.5)
4.37
25.0
30%
0%
0%
17%
8%
% of maximum opportunity
100%
FY18
29
1.9
4.46
21.0
33%
33%
17%
33%
17%
80%
FY19
361
17.9
4.45
22.0
100%
85%
43%
89%
44%
0%
FY20
(870) (iii)
(42.9) (v)
3.38
11.0
0%
0%
0%
0%
0%
0%
FY21
269(iv)
12.3(vi)
5.18
14.5
100%
100%
67%
105%
52%
54%(vii)
(i) Closing share price is as at 30 June of the respective financial year. Opening share price as at 1 July 2016 was $4.57.
(ii) Includes interim and final dividends. For FY20, a final dividend was not paid.
(iii) Includes impairment of goodwill of $1,090m.
(iv) Includes impairment of goodwill of $122m.
(v) FY20 EPS before impairment of goodwill was 10.9c.
(vi) FY21 EPS before impairment of goodwill was 17.9c.
(vii) The 2017 LTI grant of Performance Rights was tested on 15 September 2020. Tabcorp’s 3-year TSR performance placed the Group at the 52nd percentile of the peer group and, accordingly, 54% of the Performance Rights granted under the
offer vested. The remainder of the Performance Rights (46%) lapsed.
As detailed in Table 3 both the overall Group STI pool and executive KMP incentive outcomes (long and short term) have varied over the preceding five years in line with business results
(financial and non-financial), demonstrating a strong link between variable pay and Group performance.
(b) FY21 STI outcomes
Diagram 5: FY21 Group STI scorecard and performance outcomes
Scorecard
category
Key priority
Measures
Achieve profit targets
NPAT (before significant items)
Prudent capital management
Variable contribution
Financial
Enterprise optimisation
Integration of Tabcorp
and Tatts Group
ROIC
Gross debt / EBITDA ratio
Cost savings
Deliver integration
(i) FY21 ROIC before impairment of goodwill was 7.8%.
66
FY21 performance
outcome
Comments
Target
• NPAT (statutory) result of $269m, after incurring a $122m non-cash goodwill impairment charge for the Gaming
Services business.
• NPAT (before significant items) result of $399m, exceeding target. NPAT (before significant items)
is the basis for setting the STI group funding multiplier (STI pool).
• Variable contribution result of $1,914m, in line with target.
• ROIC performance was above target at 7.9%(i), largely driven by strong EBIT performance and cash flow generation.
• Following the $600m equity raising, the gross debt/EBITDA ratio reduced significantly (from FY20) to 2.4x to be
at the lower end of the revised target range. This outcome was supported by disciplined capital expenditure and
effective management of working capital.
• Enterprise-wide optimisation program (3S), delivered efficiencies and $30m in EBIT savings.
• The Tabcorp-Tatts integration is largely complete and has delivered above target cost synergy savings of $95m.
However, total integration costs exceeded the original target. On balance, this metric had a neutral effect on
STI payouts.
Tabcorp Annual Report 2021
Scorecard
category
Key priority
Measures
FY21 performance
outcome
Grow domestic business
Strategic
Explore international opportunities
Business transformation
Progress opportunities to acquire new licences
Extend and enhance existing licences
Target
Gaming Services review
Technology transformation
Operational
excellence
(including
risk and
compliance)
Compliance and reputation
Responsible gambling
Business optimisation
Relationship management
Corporate responsibility
Optimal systems, process and
operational performance
Compliance and reputation management
Advance Tabcorp’s responsible gambling program
Operational efficiency
External stakeholder management
Collaborate with and support stakeholders
on animal welfare initiatives
Dow Jones Sustainability Index
Achieve technology service levels across
key business periods and events
Customer growth and retention
Digital turnover growth
Grow the customer base
Customer loyalty
Customer
first
Improve employee experience
People and
Culture
Strong health and safety
performance
Employee wellbeing
Market share
Customer experience
Engagement
Inclusion and diversity
LTIFR
Future of work strategy and
pandemic support
Target
Target
Target
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Comments
• New licence opportunities and renewals continue to be progressed but have been impacted by COVID-19.
• Successful completion of the pro rata accelerated renounceable entitlement offer with retail trading rights
which raised approximately $600m in new equity. This has successfully strengthened Tabcorp’s balance sheet,
provided greater financial flexibility during the COVID-19 pandemic and provided credit metric headroom.
• Increased shareholding in Premier Gateway International (PGI) to 100% from 50% providing greater exposure
to international tote pooling.
• Successful sale of Tabcorp’s shareholding in Jumbo Interactive Limited. This has allowed Tabcorp to pay down
existing drawn bank debt facilities and further strengthen the balance sheet.
• Preliminary agreement with US Private Placement (USPP) holders to allocate all outstanding debt notes to the
Lotteries and Keno entity upon demerger, subject to satisfaction of certain conditions, thereby avoiding
significant make-whole costs.
• Gaming Services operational review has been completed. Resulting action plan has been mobilised with early
benefits, including a simplified operating structure.
• The technology operating model review is complete with significant changes implemented to simplify and
upweight capability. Technology transformation plans progressing well.
• The data centre outage (7-8 November 2020) resulted in impact to customers, and stakeholders. A formal
review was completed and changes have been implemented to strengthen disaster recovery processes.
• Regulators have been proactively engaged on Tabcorp’s responsible gambling program with regular updates at
strategy meetings in each jurisdiction. Responsible gambling has been a core focus for Tabcorp over the year.
• Lotteries received re-certification by the World Lotteries Association with the Lott’s program meeting all criteria
across the 10 assessment categories and was called out as best practice in the remote Gaming Channels
(digital) category.
• In August 2020, Tabcorp made a submission to the national Thoroughbred Welfare Initiative’s Thoroughbred
Aftercare Welfare Working Group (TAWWG). Tabcorp’s financial contribution helped fund the working group’s
operations.
• Tabcorp was recognised as the global leader in the Casino and Gaming sector in the 2020 Dow Jones
Sustainability Index. Recognised by the Australasian Investor Relations Association (AIRA) in 2021 as a gold
award winner for ranking first globally in the industry.
• Strong customer acquisition within both Lotteries and Keno and Wagering and Media.
• Customer retention in Wagering and Media up, despite challenging market conditions and COVID-19 impacts.
• Strong digital growth in Lotteries and Keno and Wagering and Media.
• Positive net promoter scores across Lotteries and Keno and Gaming Services.
• Re-certification of World Lotteries Association Level 4 status which is the highest attainable and demonstrates
continuous improvement and international best practice.
• Senior female leadership representation has exceeded the stated target of 40%.
• Employee wellbeing was a core focus for Tabcorp during the COVID-19 pandemic. Tabcorp supported employees
through various employee wellbeing policies and initiatives. Return to workplace strategies were well executed with
no impact to employee health and wellbeing.
• Significant reduction to LTIFR demonstrating strong focus on health and wellbeing.
• Employee engagement results declined towards the end of FY21, impacted by the uncertain environment as a result
of COVID-19, operating model changes and the recent strategic review of the Group. This is a strong focus for FY22.
Under Tabcorp’s STI plan, the FY21 Group STI pool was principally based on the NPAT (before significant items) result which was above target for the year. This outcome would have ordinarily resulted in an STI pool of 125% of the
target pool. In determining the FY21 STI pool, the Board considered financial, strategic, operational (including risk and compliance), customer and people performance as well as market consensus and feedback from the Group’s
shareholders. The Board exercised discretion to reduce the STI pool to 100%. In applying discretion, the Board carefully considered:
• The above target financial results in a challenging year (acknowledging the impact of COVID-19 on the Group’s financial results, its customers and its people);
• Operational excellence outcomes which were slightly below target, primarily as a result of the impact of the November 2020 data centre outage; and
• Strong customer acquisition and retention performance offset by revenue market share challenges in Wagering and Media.
When reviewing the individual executive KMP STI outcomes for FY21, the Board considered individual and business performance and the need to retain critical expertise and knowledge while the proposed demerger completes.
In assessing the individual KMP STI outcomes the Board considered the following:
• MD & CEO - Balanced assessment of financial and non-financial performance across the Lotteries and Keno, Wagering and Media, and Gaming Services businesses.
• Chief Legal and Risk Officer – The continued evolution of risk and compliance frameworks since commencing in the role and the significant legal support provided to the business, which has resulted in strong
commercial outcomes.
• Chief Financial Officer – The successful delivery of strategic projects which have strengthened Tabcorp’s balance sheet and financial resilience.
• MD Wagering and Media – Delivery of the business unit’s strategic priorities balanced with challenging market conditions (resulting in reduced market share).
• MD Lotteries and Keno – Strong financial and customer outcomes, resulting from significant strategic and product changes.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
Table 4: Executive KMP FY21 STI awards
Group component
(60%)
Individual component
(40%)
Total STI awarded
achieved STI foregone
Actual STI
Actual STI
achieved
Executive KMP
David Attenborough
Patrick McGlinchey(ii)
Adam Newman
Adam Rytenskild
Sue van der Merwe
Financial
year
Target
$’000
Awarded
$’000
Target
$’000
Awarded
$’000
FY21
FY20
FY21
FY21
FY20
FY21
FY20
FY21
FY20
900
900
75
240
240
275
275
240
240
900
-
75
240
-
275
-
240
-
600
600
50
160
160
184
184
160
160
600
-
53
200
-
165
-
200
-
Total(i)
$’000
1,500
-
128
440
-
440
-
440
-
Cash
portion
$’000
Deferred
portion
$
As a % of
target
As a % of
target
As a % of
maximum
750
-
96
330
-
330
-
330
-
750
-
32
110
-
110
-
110
-
100%
-
102%
110%
-
96%
-
110%
-
0%
100%
0%
0%
100%
4%
100%
0%
100%
67%
-
51%
55%
-
48%
-
55%
-
(i) The minimum STI value possible is zero.
(ii) Mr McGlinchey commenced as an executive KMP from 1 March 2021. STI represents the period as KMP.
(c) LTI awards granted in FY21
In FY21, LTI grants were provided to executive KMP following shareholder approval of the MD & CEO’s 2020 LTI grant received at the Tabcorp Annual General Meeting on 20 October 2020
and obtained under ASX Listing Rule 10.14. These LTI grants are subject to two performance conditions and a service condition as detailed in section 6(d)(iii).
Table 5: Performance Rights granted during FY21
Current executive KMP
David Attenborough
Patrick McGlinchey(v)
Adam Newman
Adam Rytenskild
Sue van der Merwe
Total
Grant date(i)
20 October 2020
20 October 2020
20 October 2020
20 October 2020
20 October 2020
Number granted(ii)
874,635
184,373
233,236
267,638
233,236
1,793,118
Fair value per Performance Right(iii)
Relative TSR
$
1.71
1.71
1.71
1.71
1.71
Return on invested
capital (ROIC)
$
3.11
3.11
3.11
3.11
3.11
Fair value
at grant date(iv)
$’000
1,802
380
480
551
480
3,693
Vesting date
23 September 2023
23 September 2023
23 September 2023
23 September 2023
23 September 2023
(i) Vesting of the 2020 LTI allocation of Performance Rights is subject to three-year relative TSR and ROIC performance conditions and additional service conditions. Accordingly, no testing or vesting of the 2020 LTI grant occurred during FY21.
The value of the Performance Rights is amortised over the vesting period.
(ii) The number of Performance Rights granted was based on a face value allocation methodology, being the five-day volume weighted average price of Tabcorp shares traded on the ASX up to but not including the grant date (independently
calculated as $3.43). Approval for the issue of Performance Rights to Mr Attenborough was obtained under ASX Listing Rule 10.14.
(iii) The LTI allocation is weighted 75% – relative TSR and 25% – ROIC.
(iv) Represents the maximum value of the grants to each executive KMP for accounting purposes. The minimum possible total value of the grant is nil. For details of the valuation of the Performance Rights, including models and assumptions used,
refer to note E1 of the Tabcorp Financial Report.
(v) Granted prior to Mr McGlinchey commencing as a KMP from 1 March 2021.
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Tabcorp Annual Report 2021
(d) LTI awards tested in FY21
The 2017 LTI grant (which had one performance measure – relative TSR) was tested on 15 September 2020. The three-year TSR result placed Tabcorp at the 52nd percentile of the peer
group, and accordingly 54% of the Performance Rights vested (46% of the Performance Rights lapsed).
Table 6: Performance Rights vested and lapsed and shares issued during FY21
Executive KMP
David Attenborough
Patrick McGlinchey
Adam Newman
Adam Rytenskild
Sue van der Merwe
Total
Number of Performance
Rights vested
309,632
-
-
111,467
-
421,099
Value of Performance
Rights exercised(i)
$’000
1,068
-
-
385
-
1,453
Number of
Performance
Rights lapsed(ii)
263,762
-
-
94,955
-
358,717
Number of
shares issued
309,632
-
-
111,467
-
421,099
Amount paid
per share
$
-
-
-
-
-
-
(i) Represents the value of Performance Rights exercised during the year. The value is calculated based on the market value of Tabcorp shares at the date of exercise.
(ii) Performance Rights that lapsed were granted on 27 October 2017 under the 2017 LTI offer.
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Table 7: KMP interests in Performance Rights (number)
Executive KMP
David Attenborough
Patrick McGlinchey
Adam Newman
Adam Rytenskild
Sue van der Merwe
Total
(i) Reflects Performance Rights held at 1 March 2021 for Mr McGlinchey.
(ii) Reflects the number of 2017 LTI Performance Rights that were tested and lapsed during FY21.
(iii) The number of Performance Rights vested and exercisable at year end was nil.
Balance at
start of year(i)
1,837,228
314,496
164,609
589,275
315,471
3,221,079
Granted as
remuneration
874,635
-
233,236
267,638
233,236
1,608,745
Vested
(309,632)
-
-
(111,467)
-
(421,099)
Lapsed(ii)
(263,762)
-
-
(94,955)
-
(358,717)
Balance at
end of year(iii)
2,138,469
314,496
397,845
650,491
548,707
4,050,008
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
Table 8: Current LTI Performance Rights allocations to KMP on foot
Grant year
Grant date
2018
2019
2020
17 October 2018
24 October 2019
20 October 2020
Number of Performance
Rights on foot
743,535
247,843
949,136
316,376
1,344,840
448,278
Allocation to
MD & CEO, senior management
MD & CEO, senior management
MD & CEO, senior management
Performance
measures
Relative TSR
Combination Synergy
Relative TSR
Combination Synergy
Relative TSR
Return on invested capital
Performance
test date
19 September 2021
30 June 2021
25 September 2022
30 June 2021
23 September 2023
30 June 2023
Service test date
and expiry date
19 September 2021
19 September 2021
25 September 2022
25 September 2022
23 September 2023
23 September 2023
(e) Actual remuneration received in FY21
Table 9 provides a non-statutory voluntary disclosure of the total remuneration received by executive KMP during FY21. Some of the figures in the table have not been prepared in
accordance with the Australian Accounting Standards. This information is supplementary to the remuneration disclosure prepared in accordance with the statutory requirements and
Australian Accounting Standards as detailed in section 10 of this report. We believe this information will help shareholders understand the cash and other benefits received by executive KMP
from the various components of their remuneration during FY21.
Table 9: Actual value of remuneration received by executive KMP during FY21
Executive KMP
David Attenborough
Patrick McGlinchey(v)
Adam Newman
Adam Rytenskild
Sue van der Merwe
Total
Salary and fees(i)
$’000
1,978
243
778
896
712
4,607
STI cash bonus(ii)
$’000
-
-
-
-
-
-
Superannuation
$’000
22
7
22
22
91
164
Value of Restricted
Shares that became
unrestricted(iii)
$’000
174
75
-
26
11
286
Value of
LTI vested(iv)
$’000
1,068
-
-
385
-
1,453
Total
$’000
3,242
325
800
1,329
814
6,510
(i) Comprises salary and sacrificed benefits (including salary sacrificed superannuation and motor vehicle novated leases including fringe benefits tax (FBT) where applicable).
(ii) No bonus was paid in relation to the FY20 STI.
(iii) Comprises both the value of the deferred component of the FY18 STI (provided in the form of Restricted Shares) and the value of Restricted Shares allocated on commencement of employment; where restrictions ceased to apply during FY21.
Calculated based on the market value of Tabcorp shares at the date the restrictions ceased (being 1 August 2020 and 31 March 2021 respectively).
(iv) Value of shares issued during FY21 on the vesting of the 2017 LTI grant of Performance Rights and calculated based on the market value of Tabcorp shares at the date of exercise (being 23 September 2020).
(v) Mr McGlinchey commenced as an executive KMP on 1 March 2021. Remuneration is reflective of the period as KMP. Remuneration includes Restricted Shares allocated on commencement of employment (in 2019) as restrictions ceased to apply
during the period as KMP.
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Tabcorp Annual Report 2021
(f) Variable remuneration outcomes over the preceding five financial years
Diagram 6: MD & CEO and executive KMP STI historical outcomes
MD & CEO – historical STI outcomes
Executive KMP (excl. MD & CEO) – historical STI outcomes
d
r
a
w
a
I
T
S
)
y
t
i
n
u
t
r
o
p
p
o
t
e
g
r
a
t
f
o
%
(
250%
200%
150%
100%
50%
0%
0%
FY17
17%
17%
FY18
42%
42%
FY19
50%
50%
0%
FY20(i)(ii)
FY21(iii)
$400
$200
$0
-$200
-$400
-$600
-$800
e
c
n
a
m
r
o
f
r
e
p
T
A
P
N
y
r
o
t
u
t
a
t
S
)
m
$
(
d
r
a
w
a
I
T
S
)
y
t
i
n
u
t
r
o
p
p
o
t
e
g
r
a
t
f
o
%
(
250%
200%
150%
100%
50%
0%
4%
13%
FY17
8%
25%
FY18
22%
67%
FY19
26%
79%
0%
FY20(ii)
FY21(iii)
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$400
$200
$0
-$200
-$400
-$600
-$800
e
c
n
a
m
r
o
f
r
e
p
T
A
P
N
y
r
o
t
u
t
a
t
S
)
m
$
(
Financial year
Financial year
STI award as a % of target opportunity (cash)
Maximum STI opportunity
Actual NPAT result ($m)
STI award as a % of target
opportunity (Restricted Shares)
Target opportunity
STI award as a % of target opportunity (cash)
Maximum STI opportunity
Actual NPAT result ($m)
STI award as a % of target
opportunity (Restricted Shares)
Target opportunity
(i) The MD & CEO’s maximum STI opportunity was reduced to 150% of the target opportunity in FY20.
(ii) FY20 statutory NPAT includes impairment of goodwill of $1,090m.
(iii) FY21 statutory NPAT includes impairment of goodwill of $122m.
Diagram 7: Executive KMP five year LTI historical vesting outcomes
Executive KMP LTI vesting outcomes
i
s
t
h
g
R
e
c
n
a
m
r
o
f
r
e
P
f
o
%
d
e
t
s
e
v
t
a
h
t
100%
80%
60%
40%
20%
0%
120%
100%
80%
60%
40%
20%
0%
l
R
S
T
e
t
u
o
s
b
a
r
a
e
y
-
3
e
c
n
a
m
r
o
f
r
e
p
100%
80%
54%
2013 LTI Offer
(tested in 2016)
2014 LTI Offer
(tested in 2017)
2015 LTI Offer
(tested in 2018)
2016 LTI Offer
(tested in 2019)
2017 LTI Offer
(tested in 2020)
0%
0%
% of Performance Rights that vested
3-year Absolute TSR performance
Performance Rights allocated
3-year relative TSR percentile ranking
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
8. FY22 SHORT TERM INCENTIVE STRUCTURE
With the Tatts integration largely complete, a new STI structure was introduced from 1 July 2021. The new structure retains the overarching remuneration philosophy to:
• ensure participants’ incentive outcomes are appropriate and linked to Group performance through the introduction of a Group EBIT hurdle (which replaced the previous NPAT hurdle);
• recognise good risk and compliance and sustainability practices and behaviours through the introduction of a ‘Group Sustainability’ modifier. This provides the Board with discretion to
adjust the pool when considering risk management, responsible gambling performance, community impacts and reputation management;
• provide greater clarity and focus for participants and the market through the introduction of executive KMP STI scorecard weightings (to be disclosed in the FY22 Remuneration Report); and
• ensure executive KMP are rewarded for Group, business unit and individual performance.
There is no change to eligibility and opportunities. Awards remain as a combination of cash and restricted shares.
Diagram 8: Executive KMP STI operation for FY22
Target STI
opportunity
X
Group financial
hurdle
X
Sustainability
assessment
X
Individual weighted performance scorecard
STI award
Cash
(50% for the MD &
CEO and 75% for
other executive KMP)
+
Restricted Shares
(50% for the MD &
CEO and 25% for
other executive KMP)
Restricted Shares are restricted for two years
and subject to malus and clawback.
l
e
d
r
u
H
EBIT hurdle – If the
financial hurdle is not
met then no STI pool
will form. The Board
retains discretion
to set a smaller
pool in exceptional
circumstances.
The Board considers sustainability
measures such as risk management,
responsible gambling performance,
community impacts and reputation
management and may exercise
discretion to adjust the pool
(up or down).
If the EBIT hurdle is not met, the Board may set a smaller STI pool in exceptional circumstances. These circumstances may include (but not limited to):
• where financial performance has been impacted by factors outside of management’s control (eg COVID-19) but non-financial performance has been at or above target; or
• where financial performance has been impacted by strategic activities that benefit shareholders (eg acquisitions) and non-financial performance has been at or above target.
An example of this has been the exercising of the Board’s discretion to reduce the Group Funding Multiplier (STI Pool) in FY21 from 1.25 to 1.00.
More details will be provided in Tabcorp’s FY22 Remuneration Report.
72
Tabcorp Annual Report 2021 9. 2021 LONG TERM INCENTIVE OFFER
Although Tabcorp has announced a demerger of its Lotteries and Keno business, it is still subject to regulatory and shareholder approvals. It is important that the Group’s executive team
continue to be measured on long-term performance hurdles.
During the demerger process it will also be important to ensure the Group retains critical experience and knowledge. Given this, and employment contractual obligations, it is intended that
an LTI offer will be provided to the MD & CEO (for which Tabcorp will seek shareholder approval at the 2021 Annual General Meeting) and other executive KMP in FY22.
The 2021 LTI grant (intended to be made in October 2021) will include two performance measures. Vesting of 75% of the grant will be subject to relative TSR performance over a three-year
period. Vesting of 25% of the grant will be based on ROIC performance over three financial years (commencing with FY22).
More details will be provided in Tabcorp’s FY22 Remuneration Report and the 2021 Notice of Meeting.
10. NON-EXECUTIVE DIRECTOR FEES
(a) Strategy and framework
Non-executive Director fees are set based on workload, responsibilities, qualifications, experience and market benchmarks. Board and Board Committee fees are benchmarked to the
median of a peer group, comprising the ASX 25 to 75 group of companies. Non-executive Directors do not receive any performance or incentive-related payments. Board fees are not paid to
the MD & CEO or to executives for directorships of any subsidiaries.
(b) FY21 fee structure
Non-executive Directors receive a base Board fee and a fee for each Board Committee that they chair or are a member of (except for the Nomination Committee, where no additional fees are
paid). The Board Chairman receives a single fixed fee which is inclusive of services on applicable Board Committees. Superannuation contributions form part of the fees and Non-executive
Directors are not eligible to receive any other retirement benefits.
On 1 July 2021, the Superannuation Guarantee Contribution rate increased from 9.5% to 10%. The Board agreed to absorb this change into existing fees, thereby reducing the Non-executive
Director cash fees by 0.45%. This results in no changes to total fees (inclusive of superannuation) in FY22.
Table 10: FY21 Non-executive Director fee structure
Board
Audit Committee
Risk and Compliance Committee
People and Remuneration Committee
Technology Committee(ii)
Chairman
Member(i)
Chairman
Member
Chairman
Member
Chairman
Member
Chairman
Member
(i) The fee paid to Board members is inclusive of services on the Nomination Committee.
(ii) The Technology Committee commenced from 16 February 2021.
Non-executive Director fees ($’000 per annum, including superannuation) as at 30 June 2021
$’000
580
186
55
24
49
22
49
22
49
22
There were no changes to the Non-executive Director fee structure or levels in FY21 (other than the establishment of the Technology Committee).
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYOPERATING & FINANCIAL REVIEWGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
(c) Fees paid during FY21
During FY21, in recognition of the strategic importance of technology to the Group, the Board Technology Committee was established with the primary purpose of overseeing the Group’s
technology strategy and roadmap, including major technology investments. Certain Non-executive Directors may receive additional fees for membership of other Board Sub-Committees,
however during FY21 no such fees were paid. As part of the coordinated process of Board renewal a number of changes were made to Committee membership during the year. Table 11
details all fees paid to Non-executive Directors. Non-executive Directors are entitled to be reimbursed for all business-related expenses, including travel, which may be incurred as part
of their duties.
Table 11: FY21 Non-executive Director fees paid during FY21
Current Non-executive Directors
Steven Gregg(i)
Bruce Akhurst
Harry Boon
Anne Brennan
David Gallop
Justin Milne
Future Non-executive Directors, pending regulatory approval
Janette Kendall(iii)
Former Non-executive Directors
Paula Dwyer(i)(iv)
Vickki McFadden(v)
Zygmunt Switkowski(vi)
Total
Short term
Fees Non-monetary
benefits
$’000
Post-employment
Superannuation(ii)
$’000
384
239
242
236
228
229
232
83
225
133
205
191
160
278
551
80
237
130
2,034
2,029
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
2
-
36
23
23
22
22
22
22
8
21
13
19
18
15
12
26
8
23
12
178
167
Year
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY21
FY20
FY21
FY20
FY20
FY21
FY20
Total
$’000
420
262
265
258
250
251
254
91
246
146
224
209
175
290
577
90
260
142
2,214
2,196
(i) Mr Gregg (in FY21) and Ms Dwyer (in FY20) also received a per annum fee of $35,000 (plus superannuation at 9.5%) for the role of Chairman of the Victorian Joint Venture Management Committee. The fee was borne by the Joint Venture, which
is jointly controlled by Tabcorp.
(ii) Recent legislation changes now allow persons with multiple employers to instruct one or more (but not all) of those employers to stop superannuation deductions and receive these fees in cash. Certain Non-executive Directors directed Tabcorp
to stop superannuation deductions in FY21 and receive the equivalent superannuation contributions in cash.
(iii) Appointed as an Observer on 21 September 2020.
(iv) Retired from the Board on 31 December 2020.
(v) Retired from the Board on 20 October 2020.
(vi) Retired from the Board on 28 February 2020.
The current maximum aggregate amount of fees that can be paid to Non-executive Directors per year for their services (including superannuation contributions) is set at $3.0m, as approved
by shareholders at the Annual General Meeting held on 17 October 2018. No adjustment to this limit is proposed for FY22. The total fees paid (including superannuation) to Non-executive
Directors in FY21 was $2.2m (which includes Observer fees paid to Ms Brennan, Mr Gallop and Ms Kendall).
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Tabcorp Annual Report 2021
(d) Non-executive Director Shareholding Policy
This policy requires Non-executive Directors to hold a minimum shareholding in Tabcorp equivalent to the annual Board Member base fee (currently $170,000, excluding superannuation),
and the Board Chairman to hold a minimum shareholding equivalent to double this annual Board Member base fee. At the date of this report, all Non-executive Directors (including the Board
Chairman) complied with this policy, noting that Non-executive Directors are required to reach the applicable threshold within three years of appointment. A copy of this policy is available on
Tabcorp’s website (www.tabcorp.com.au) under the Corporate Governance section.
11. STATUTORY REMUNERATION DISCLOSURES
(a) Executive KMP statutory remuneration tables
The following table provides a breakdown of the executive KMP remuneration in accordance with statutory requirements and the Australian Accounting Standards.
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Table 12: Executive KMP remuneration for FY21
Short term
Long term Post-employment
Financial
year
FY21
FY20
FY21
FY21
FY20
FY21
FY20
FY21
FY20
Salary
and fees(i)
$’000
1,978
1,879
243
778
560
896
894
712
709
Cash
bonus(ii)
$’000
750
-
96
330
-
330
-
330
-
Accrued leave
benefits
$’000
189
(109)
21
45
11
14
(33)
(19)
95
Superannuation
$’000
22
21
7
22
16
22
21
91
80
Charge for share based allocations(iii)
Merger
Completion
Award
(Restricted
Shares)(iv)
$’000
-
63
-
-
-
-
11
-
-
Performance
Rights
$’000
1,236
1,565
49
233
132
385
507
293
262
Restricted
Shares
$’000
457
287
16
136
75
66
42
70
39
FY20
FY20
FY21
FY20
233
427
4,607
4,702
-
-
1,836
-
(6)
8
250
(34)
5
13
164
156
3
16
745
462
5
-
-
79
106
154
2,196
2,726
Performance
related%(v)
53%
52%
37%
45%
26%
46%
39%
47%
25%
33%
27%
Total
$’000
4,632
3,706
432
1,544
794
1,713
1,442
1,477
1,185
346
618
9,798
8,091
Termination
benefits
$’000
-
-
-
-
-
-
-
-
-
450
175
-
625
Current executive KMP
David Attenborough
Patrick McGlinchey(vi)
Adam Newman(vii)
Adam Rytenskild
Sue van der Merwe
Former executive KMP
Damien Johnston(viii)
Frank Makryllos(ix)
Total
(i) Comprises salary and sacrificed benefits (including salary sacrificed superannuation and motor vehicle novated leases including fringe benefits tax where applicable). FY20 outcomes were impacted by adjustments made to accommodate for
COVID-19 impacts.
(ii) Cash bonus reflects the cash portion of the STI achieved in the relevant financial year, being 50% for the MD & CEO and 75% for other executive KMP. The remaining portion of the STI is deferred into Restricted Shares and is reflected in the
Restricted Shares column in accordance with Accounting Standards.
(iii) Represents the fair value of share-based payments expensed by Tabcorp. Includes the restricted portion of the Merger Completion Award that was expensed by Tabcorp during the year.
(iv) Merger Completion Awards were granted to select employees (employed by Tabcorp prior to the Combination) in recognition of their contribution to the successful completion of the Combination. This included only the following executive
KMP – Mr Attenborough (MD & CEO), Mr Rytenskild (MD Wagering and Media) and Mr Johnston (the previous Chief Financial Officer). More details can be found in Tabcorp’s FY18 Annual Report. For executive KMP who participated, vesting
of the Awards are subject to Combination Synergy performance measures, measured over a 3.5-year (approximately) period.
(v) Represents the sum of the cash bonus (from STI awards), Restricted Shares (from STI and Merger Completion Awards) and LTI Performance Rights as a percentage of total remuneration, excluding termination payments.
(vi)
Mr McGlinchey commenced as an executive KMP on 1 March 2021. Remuneration reflects period as KMP. Mr McGlinchey was allocated 15,957 Restricted Shares on commencement of employment. These Restricted Shares, were subject to
a 2-year service condition.
(vii) Commenced employment and as executive KMP from 7 October 2019. Mr Newman was allocated 40,985 Restricted Shares on commencement of employment. These Restricted Shares, which replaced foregone entitlements, are subject
to a 2-year service condition.
(viii) Mr Johnston ceased as an executive KMP on 6 October 2019.
(ix) Mr Makryllos ceased as an executive KMP on 17 February 2020.
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Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
REMUNERATION REPORT For the year ended 30 June 2021
Table 13: KMP interests in Tabcorp shares for FY21 (number)
KMP
Current Non-executive Directors
Steven Gregg
Bruce Akhurst
Harry Boon
Anne Brennan
David Gallop
Justin Milne
Future Non-executive Directors, pending regulatory approval
Janette Kendall(v)
Former Non-executive Directors
Paula Dwyer
Vickki McFadden
Executive Director
David Attenborough
Executive KMP
Patrick McGlinchey(vi)
Adam Newman
Adam Rytenskild
Sue van der Merwe
Total
Balance at
start of year(i)
Granted as
remuneration(ii)
On vesting of
Performance Rights
Net change other(iii)
Balance at
end of year(iv)
42,000
100,000
70,000
7,500
7,000
46,608
-
125,000
50,000
1,209,097
23,785
53,940
257,942
103,196
2,096,068
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
309,632
-
-
111,467
-
421,099
3,820
20,000
6,364
682
637
4,238
-
11,364
4,547
45,820
120,000
76,364
8,182
7,637
50,846
-
136,364
54,547
109,920
1,628,649
-
4,904
19,091
9,383
194,950
23,785
58,844
388,500
112,579
2,712,117
(i) Reflects shareholdings on 21 September 2020 for Ms Kendall and 1 March 2021 for Mr McGlinchey.
(ii) No Restricted Shares were issued during FY21, as a bonus was not paid in relation to the FY20 STI.
(iii) Includes voluntary on-market transactions.
(iv) Reflects shareholdings on 31 December 2020 for Ms Dwyer and 20 October 2020 for Ms McFadden, when they ceased as KMP.
(v) Ms Kendall commenced as an Observer on 21 September 2020.
(vi) Mr McGlinchey commenced as executive KMP on 1 March 2021.
(b) Transactions and loans with KMP
No KMP (including their related parties) have entered into material commercial relationships or transactions with the Company or a subsidiary during FY21 other than as disclosed in
this Remuneration Report. All KMP related party relationships are at arm’s length and on normal commercial terms and none of the KMP were, or are, involved in any procurement or other
decision-making regarding organisations with which they have an association. No KMP (including their related parties) have entered into a loan made, guaranteed or secured, directly or
indirectly, by the Company or a subsidiary during the reporting period.
76
Tabcorp Annual Report 2021
FINANCIAL REPORT
Contents
Income statement
Balance sheet
Cash flow statement
Statement of changes in equity
Notes to the financial statements
About this report
Section A – Group performance
Section B – Capital and risk management
Section C – Operating assets and liabilities
Section D – Group structure
Section E – Other disclosures
Directors’ declaration
Independent auditor’s report
78
79
80
81
82
82
84
90
101
111
117
124
125
Tabcorp Annual Report 2021
77
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OPERATING & FINANCIAL REVIEWCORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORT
INCOME STATEMENT For the year ended 30 June 2021
Revenue
Other income
Commissions and fees
Government taxes and levies
Employment costs
Communications and technology costs
Advertising and promotions
Other expenses
Depreciation and amortisation
Impairment – goodwill
Impairment – other
Profit/(loss) before income tax and net finance costs
Finance income
Finance costs
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) after tax
Other comprehensive income
Items that may be reclassified to profit or loss
Change in fair value of cash flow hedges taken to equity
Exchange differences on translation of foreign operations
Income tax relating to these items
Items that will not be reclassified to profit or loss
Actuarial gains on retirement benefit obligation
Income tax relating to these items
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Earnings per share:
Basic earnings per share
Diluted earnings per share
Earnings per share before goodwill impairment:
Basic earnings per share
Diluted earnings per share
Dividends per share:
Declared and paid during the year
Determined in respect of the year
The accompanying notes form an integral part of this income statement.
78
Note
A4
A4
C2
A4
A4
A5
E2
A2
A2
A2
A2
A3
A3
2021
$m
5,686
114
(1,618)
(2,152)
(419)
(116)
(148)
(184)
(380)
(122)
(10)
651
1
(169)
483
(214)
269
(74)
1
22
4
(1)
(48)
221
2021
cents
12.3
12.3
17.9
17.9
7.5
14.5
2020
$m
5,224
1
(1,442)
(2,005)
(378)
(111)
(155)
(197)
(378)
(1,090)
(43)
(574)
2
(195)
(767)
(103)
(870)
146
2
(44)
1
-
105
(765)
2020
cents
(42.9)
(42.9)
10.9
10.8
22.0
11.0
Tabcorp Annual Report 2021
BALANCE SHEET As at 30 June 2021
Current assets
Cash and cash equivalents
Receivables
Prepayments
Derivative financial instruments
Other financial assets
Assets held for sale
Other
Total current assets
Non current assets
Receivables
Investment in an associate
Other financial assets
Licences
Other intangible assets
Property, plant and equipment
Right-of-use assets
Prepayments
Derivative financial instruments
Other
Total non current assets
TOTAL ASSETS
Current liabilities
Payables
Interest bearing liabilities
Lease liabilities
Current tax liabilities
Provisions
Derivative financial instruments
Other
Total current liabilities
Non current liabilities
Payables
Interest bearing liabilities
Lease 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
The accompanying notes form an integral part of this balance sheet.
Tabcorp Annual Report 2021
Note
C6
C7
B4
B2
E7
C7
D5
B2
C1
C2
C4
C5
B4
C8
B3
C5
C9
B4
C8
B3
C5
A5
C9
B4
2021
$m
424
117
45
70
129
-
113
898
2
-
129
2,041
8,056
376
233
26
88
20
10,971
11,869
1,237
177
47
55
61
50
89
1,716
271
2,299
262
526
25
55
19
3,457
5,173
6,696
9,230
(1,864)
(670)
6,696
2020
$m
349
72
33
103
26
39
105
727
3
29
159
2,148
8,134
456
275
20
426
39
11,689
12,416
1,178
249
47
-
47
44
81
1,646
238
3,471
306
586
29
104
9
4,743
6,389
6,027
8,617
(1,970)
(620)
6,027
79
CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW CASH FLOW STATEMENT For the year ended 30 June 2021
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
Finance income received
Finance costs paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Cash acquired net of payment for business acquisition
Payment for property, plant and equipment and intangibles
Proceeds from sale of property, plant and equipment and intangibles
Proceeds from sale of shares in an associate
Payment for other financial assets
Loan repayments received from customers
Net cash flows used in investing activities
Cash flows from financing activities
Net cash flows from revolving bank facilities
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of shares
Payment of transaction costs for share issue
Payment of lease liabilities
Dividends paid
Payments for on-market share purchase
Net cash flows used in financing activities
Net increase/(decrease) in cash held
Cash at beginning of year
Cash at end of year
The accompanying notes form an integral part of this cash flow statement.
80
Note
C6
D4
C6
2021
$m
5,881
(2,684)
(2,120)
1
(167)
(191)
720
52
(183)
68
98
(73)
-
(38)
(1)
-
(995)
600
(13)
(49)
(146)
(3)
(607)
75
349
424
2020
$m
5,243
(2,523)
(1,754)
2
(197)
(100)
671
-
(290)
12
-
(15)
1
(292)
(80)
226
(192)
-
-
(52)
(392)
(3)
(493)
(114)
463
349
Tabcorp Annual Report 2021 STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2021
2021
Balance at beginning of year
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Dividend reinvestment plan
Ordinary shares issued (i)
Transaction costs for share issue
Transfers
Share based payments expense
Net outlay to purchase shares
Balance at end of year
2020
Balance at beginning of year
Loss for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Dividend reinvestment plan
Transfers
Restricted shares issued
Share based payments expense
Balance at end of year
Issued capital
Reserves
Number of
ordinary shares
m
Ordinary
shares
$m
Treasury
shares
$m
Accumulated
losses
$m
Hedging
$m
Demerger
$m
Other
$m
2,032
8,618
-
-
-
-
5
185
-
-
-
-
2,222
-
-
-
-
21
600
(9)
3
-
(2)
9,231
(1)
-
-
-
-
-
-
-
-
1
(1)
(1)
Total issued capital $9,230m
2,019
8,562
-
-
-
-
13
-
-
-
2,032
-
-
-
-
53
3
-
-
8,618
-
-
-
-
-
-
-
(3)
2
(1)
Total issued capital $8,617m
(1,970)
269
3
272
(166)
-
-
-
-
-
-
(1,864)
(656)
(870)
1
(869)
(445)
-
-
-
-
(1,970)
42
-
(52)
(52)
-
-
-
-
-
-
-
(10)
(670)
-
-
-
-
-
-
-
-
-
-
(670)
Total reserves $(670)m
(60)
-
102
102
(670)
-
-
-
-
-
-
-
-
42
Total reserves ($620m)
-
-
-
-
-
(670)
8
-
1
1
-
-
-
-
(3)
4
-
10
4
-
2
2
-
-
(3)
-
5
8
Total
equity
$m
6,027
269
(48)
221
(166)
21
600
(9)
-
5
(3)
6,696
7,180
(870)
105
(765)
(445)
53
-
(3)
7
6,027
(i) Ordinary shares issued under a pro rata accelerated renounceable entitlement offer. The proceeds have been used to pay down existing drawn bank facilities. Refer to note B3.
Issued capital
Ordinary shares are issued and fully paid. They carry one vote per share and hold rights to dividends. Issued capital is recognised at the fair value of the consideration received. When issued capital is
repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from total issued capital. Any transaction costs directly attributable to the issue
of ordinary shares are recognised directly in equity, net of tax, as a reduction of the share proceeds received.
Treasury shares represent the unvested portion of Restricted Shares issued to executives as an incentive, on appointment or for retention, which is recognised as a reduction in issued capital.
The amount which has been credited to the employee equity benefit reserve is transferred to issued capital to the extent the relevant Performance Rights vest or have been treated as vested.
Nature of reserves
Hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges.
Demerger reserve arose on the demerger of The Star Entertainment Group (previously the Echo Entertainment Group) in 2011. It represents the difference between the fair value of The Star
Entertainment Group shares (being the distribution liability arising on demerger), the amount allocated as a capital reduction and any transfers to retained earnings.
Other reserves contain the employee equity benefit reserve and the foreign currency translation reserve.
The accompanying notes form an integral part of this statement of changes in equity.
81
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021
ABOUT THIS REPORT
Tabcorp Holdings Limited (the Company) is a company limited by shares which are traded on the Australian Securities Exchange. The Company is incorporated and domiciled in Australia,
and is a for-profit entity. The Financial Report of the Company for the year ended 30 June 2021 comprises the Company and its subsidiaries (the Group) and the Group’s interest in joint
arrangements and associates.
The COVID-19 pandemic and related actions taken in response by the Australian and other governments, including national lockdowns, border controls/travel restrictions and social
distancing measures continue to have an adverse impact on the financial performance of the Group. The financial statements reflect the impacts of these measures on the results and the
cash flows of the Group in both the current and prior year. Refer to the Operating and Financial Review section of the Annual Report for further information.
The Group accessed the Federal Government’s JobKeeper scheme in relation to Gaming Services (refer to note A4). This business suspended all material fees for venues and temporarily
stood down most of its workforce during the period where impacted by COVID-19 venue closures.
An assessment of the impact of COVID-19 on the Group’s balance sheet is set out below:
Balance sheet item COVID-19 assessment
Interest bearing
liabilities
Goodwill
The Group engaged with the respective lending groups and secured covenant relief for 30 June 2020 and 31 December 2020 testing dates.
The Group considered the impact of government and other measures taken to address the COVID-19 pandemic on the assumptions used in its annual
impairment test. An impairment charge against goodwill was recognised for the Gaming Services segment in the current and prior year, and for the
Wagering and Media segment in the prior year.
Prior year trade debtors include the impact of the temporary closure of venues resulting in suspension of invoicing and increase in allowance for
expected credit losses.
Prior year current payables include lottery and Keno taxes and payroll tax deferred as a result of government support received during the COVID-19
pandemic and reflect employee bonus accruals of nil.
Employee benefits provisions reflect the utilisation of leave entitlements as part of COVID-19 response measures taken in the prior year.
In September 2020, the Company completed a 1-for-11 pro rata accelerated renounceable entitlement offer raising gross proceeds of approximately
$600m which were used to pay down existing drawn bank debt facilities.
Receivables
Payables
Provisions
Issued capital
Note
B1 and B3
C2 and C3
C7
C8
C9
Statement of
changes in equity
Further details on the impact of COVID-19 on the Group’s results can be found in the Directors’ report for the year ended 30 June 2021.
The Financial Report was authorised for issue by the Board of Directors on 18 August 2021.
The Financial Report is a general purpose financial report which:
• has been prepared in accordance with the Corporations Act 2001 (Cth), Australian Accounting Standards as issued by the Australian Accounting Standards Board and other mandatory
financial reporting requirements in Australia;
• complies with International Financial Reporting Standards as issued by the International Accounting Standards Board;
• is presented in Australian dollars with dollar amounts rounded to the nearest million unless specifically stated to be otherwise, in accordance with ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191; and
• is prepared on the historical cost basis, except for derivative financial instruments and equity instruments that have been measured at fair value and assets held for sale that have been
measured at the lower of cost and fair value.
The accounting policies have been applied consistently throughout the Group for the purposes of this Financial Report.
Note disclosures have been grouped into five sections. The notes within each section detail the accounting policies applied, together with any key judgements and estimates used.
The purpose of this format is to provide users with a clear understanding of the key drivers of the Group’s financial performance and financial position.
82
Tabcorp Annual Report 2021 A Group performance
A1 Segment information
A2 Earnings per share
A3 Dividends
A4 Revenue and expenses
A5
A6 Subsequent events
Income tax
D Group structure
D1 Subsidiaries
D2 Deed of cross guarantee
D3 Parent entity disclosures
D4 Business combinations
D5
Investment in an associate
84
86
86
87
88
89
111
113
115
116
117
B Capital and risk management
B1 Capital management
B2 Other financial assets
B3
B4
B5 Fair value measurement
B6
Interest bearing liabilities
Derivative financial instruments
Financial instruments – risk management
E Other disclosures
E1 Employee share plans
E2
Pensions and other post employment
benefit plans
E3 Commitments
E4 Contingencies
E5 Related party disclosures
E6 Auditor’s remuneration
E7 Assets held for sale
E8 Other accounting policies
C Operating assets and liabilities
C1 Licences
C2 Other intangible assets
Impairment testing
C3
C4
Property, plant and equipment
C5 Leases
C6
C7 Receivables
C8 Payables
C9 Provisions
Notes to the cash flow statement
101
102
103
105
106
108
109
109
110
90
90
91
93
96
97
117
119
121
121
122
122
122
123
Significant accounting estimates and assumptions
The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amounts of these assets and liabilities recognised in the financial statements are described in the following notes:
Note
A5 – Income tax
B2 – Other financial assets
B4 – Derivative financial instruments
C1 – Licences
C2 – Other intangible assets
C4 – Property, plant and equipment
C3 – Impairment testing
C5 – Leases
C9 – Provisions
D4 – Business combinations
E4 – Contingencies
Underlying estimates and assumptions
Calculation of provision for income tax.
Fair value measurement.
Asset useful lives.
Recoverable amount of cash generating units (CGUs).
Lease term, make good and incremental borrowing rate.
Future obligations and probability of outflow.
Acquisition date fair value of identifiable assets and liabilities.
Assessment of possible obligation and probability of outflow.
83
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: GROUP PERFORMANCE For the year ended 30 June 2021
SECTION A – GROUP PERFORMANCE
A1 Segment information
Operating segments reflect the business level at which financial information is provided to the Managing Director and Chief Executive Officer (Chief Operating Decision Maker), 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. Intersegment pricing is determined on commercial terms and conditions.
The Group has three operating segments at year end.
Tabcorp
Group
Lotteries and Keno
Wagering and Media
Gaming Services
Operation of lotteries and Keno pursuant
to licences and approvals in certain
Australian states and territories
Provision of totalisator and fixed odds
betting and retail wagering networks,
and global racing media business
Gaming machine monitoring operations
in New South Wales, Queensland and
the Northern Territory and venue
services nationwide
Segment revenue
$m
3,206
2021
2,298
2,917
2020
2,084
Segment profit/(loss) before interest and tax
$m
2021
2020
516
442
216
175
183
221
Lotteries and Keno
Wagering and Media
Gaming Services
(10)
(14)
84
Tabcorp Annual Report 2021 2021
Revenue – external
Revenue – intersegment
Segment revenue
Segment profit/(loss) before interest and tax
Depreciation and amortisation
Impairment – other
Capital expenditure (i)
2020
Revenue – external
Revenue – intersegment
Segment revenue
Segment profit/(loss) before interest and tax
Depreciation and amortisation
Impairment – other (ii)
Capital expenditure (i)
(i) Capital expenditure excludes the acquisition of licences, unallocated items, make good provisions raised during the year and additions to right-of-use assets.
(ii) Prior year includes write down of certain operating assets.
A reconciliation of segment result to the Group’s income statement is as follows:
Lotteries
and Keno
$m
Wagering
and Media
$m
Gaming
Services
$m
3,206
-
3,206
516
104
-
37
2,917
-
2,917
442
100
-
55
2,297
1
2,298
216
198
-
98
2,083
1
2,084
175
192
4
144
183
-
183
(10)
78
3
26
221
-
221
(14)
86
12
63
Total
$m
5,686
1
5,687
722
380
3
161
5,221
1
5,222
603
378
16
262
Impairment (vii)
Segment total (per above)
Intersegment revenue elimination
Unallocated items:
– significant items:
– net gain on disposal of investment in an associate (i)
– gain on revaluation of previously held equity interest (ii)
– implementation costs relating to combination with Tatts Group
– Racing Queensland arrangements (iii)
– restructuring costs
– gain on sale of property
– impairment – goodwill (iv)
– impairment – other (v)
– strategic review costs
– onerous contract
– finance income
– finance costs (vi)
– other
Total per income statement
Revenue
2021
$m
5,687
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,686
2020
$m
5,222
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
3
5,224
Profit/(loss)
before income tax
2020
$m
603
-
2021
$m
722
-
Depreciation
and amortisation
2020
$m
378
-
2021
$m
380
-
69
35
(20)
(15)
(17)
5
(122)
(7)
(1)
-
(73)
1
(169)
2
483
-
-
(26)
(27)
-
-
(1,090)
(22)
-
(5)
(1,170)
2
(195)
(7)
(767)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
380
-
-
-
-
-
-
-
-
-
-
-
-
-
-
378
2021
$m
3
-
-
-
-
-
-
-
122
7
-
-
129
-
-
-
132
(i)
Refer to note D5.
(ii) Refer to note D4.
(iii) Additional fees related to the minimum performance obligations for three years to December 2020 under Racing Queensland arrangements.
(iv) Comprises write down of goodwill following the annual impairment review relating to Gaming Services of $122m (2020: $185m) and Wagering and Media (2020: $905m). Refer to notes C2 and C3.
(v) Current year comprises write down of right-of-use assets in respect of surplus corporate lease space. Prior year comprises write down of certain operating assets relating to Wagering and Media ($15m) and Gaming Services ($7m).
(vi) Current year includes interest charges relating to uncertain tax positions of $9m (refer to note E4) and finance costs relating to the strategic review of $4m.
(vii) Prior year includes impairment of surplus corporate properties ($5m).
2020
$m
16
-
-
-
-
-
-
-
1,090
22
-
-
1,112
-
-
5
1,133
85
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: GROUP PERFORMANCE For the year ended 30 June 2021
A2 Earnings per share
Earnings used in calculation of earnings per share (EPS) attributable to shareholders
Profit/(loss) after income tax
Adjustment for impairment – goodwill
Earnings used in calculation of EPS before goodwill impairment
Weighted average number of ordinary shares used in calculating basic EPS
Effect of dilution from Performance Rights
Weighted average number of ordinary shares used in calculating diluted EPS
2021
$m
269
269
122
391
2020
$m
(870)
(870)
1,090
220
2021
Number (m)
2,183
6
2,189
2020
Number (m)
2,026
4
2,030
Basic EPS is calculated as net profit after tax divided by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated on the same basis as basic EPS except that it reflects the impact of any potential commitments the Group has to issue shares in the future, for example shares
to be issued upon vesting of Performance Rights.
A3 Dividends
Fully franked dividends declared and paid during the year:
Prior year final dividend
Interim dividend
Fully franked dividends determined in respect of the year:
Interim dividend
Final dividend (determined and recognised after balance date)
Franking credits available at balance date
Impact of estimated current tax payable/(refunds)
Franking credits/(deficit) available at the 30% company tax rate after allowing for tax payable or receivable
2021
cents per share
2020
cents per share
-
7.5
7.5
7.5
7.0
14.5
11.0
11.0
22.0
11.0
-
11.0
2021
$m
-
166
166
166
156
322
133
40
173
2020
$m
222
223
445
223
-
223
12
(16)
(4)
86
Tabcorp Annual Report 2021 A4 Revenue and expenses
(a) Revenue comprises:
Revenue from contracts with customers
Other revenue (i)
(b) Other income
Net gain on disposal of investment in an associate
Gain on revaluation of previously held equity interest
Net gain/(loss) on disposal of non current assets
Other (ii)
(c) Employment costs include:
Defined contribution plan expense
(d) Finance costs
Interest costs on interest bearing liabilities
Interest costs on lease liabilities
Other (iii)
(e) Impairment – other
Buildings (iv)
Plant and equipment (iv)
Other intangible assets – software (iv)
Right-of-use assets(v)
(i) Includes fixed odds betting revenue, refer accounting policy below.
(ii) Includes subsidy received under the Federal Government’s JobKeeper scheme in relation to Gaming Services of $8m (2020: $4m).
(iii) Current year includes interest charges relating to uncertain tax positions of $9m (refer to note E4) and finance costs relating to the strategic review of $4m.
(iv) Prior year includes write down of certain operating assets and surplus corporate properties. Refer to note A1.
(v) Current year comprises write down of right-of-use assets in respect of surplus corporate lease space.
Note
D5
D4
2021
$m
4,585
1,101
5,686
69
35
1
9
114
30
135
13
21
169
-
-
3
7
10
2020
$m
4,239
985
5,224
-
-
(5)
6
1
32
163
16
16
195
5
10
27
1
43
87
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: GROUP PERFORMANCE For the year ended 30 June 2021
A4 Revenue and expenses (continued)
Revenue from contracts with customers is recognised when control of the goods or services is transferred to customers at an amount that reflects the consideration the Group expects to
be entitled to in exchange for those goods or services. Incremental costs of obtaining contracts with a duration of one year or less are expensed as incurred. The following specific criteria
must also be met before revenue is recognised:
Lotteries revenue is recognised as the gross subscriptions received for lotteries less prizes payable when the official draw for each game is completed. Subscriptions received during the
year for games which will be drawn in the next financial period are deferred and recognised as revenue in the next financial period. Revenue from lottery card subscriptions is recognised
over the life of the subscription. Management fees recognised in relation to the Master Agent Agreement associated with the operation of SA Lotteries are recognised in revenue.
Keno revenue is recognised as the residual value after deducting the return to customers from Keno turnover.
Wagering revenue is recognised as the residual value after deducting the return to customers from wagering turnover. Fixed odds betting revenue is classified as other revenue and
recognised as the net win or loss on an event. The amounts bet on an event are recognised as a liability until the outcome of the event is determined, at which time the revenue is brought
to account. Open fixed odds betting positions are carried at fair value and gains and losses arising on these positions are recognised in revenue.
In the prior year, the Group operated loyalty programmes enabling customers to accumulate award credits for wagering spend. A portion of the spend was allocated to the loyalty points
awarded to customers on relative stand-alone selling price and was recognised as a contract liability until the points were redeemed. Revenue from the award credits was recognised when
the award was redeemed or expired.
Media revenue includes subscription income and advertising revenue, and is recognised once the service has been rendered. Subscriptions received relating to future periods are treated
as deferred revenue.
Gaming services revenue is recognised once the service has been rendered or the goods have been delivered to the buyer.
Interest revenue earned from customers in the ordinary course of operations is disclosed within revenue.
Contributions to defined contribution plans are recognised in the income statement as they become payable.
Finance income is recognised using the effective interest rate method.
Finance costs are recognised as an expense when incurred.
A5 Income tax
(a) The major components of income tax expense are:
Current tax
Adjustments in respect of current income tax of previous years (i)
Deferred tax
Income tax reconciliation:
Profit/(loss) before income tax
Income tax receivable/(payable) at the 30% company tax rate
Tax effect of adjustments in calculating taxable income:
– impairment of goodwill
– amortisation of licences
– uncertain tax positions relating to NSW gaming machine monitoring licence(i)
– net gain on disposal of investment in an associate
– gain on revaluation of previously held equity interest
– research and development claims
– other
Income tax expense
(i) Current year includes $62m relating to uncertain tax positions. Refer to note E4 for details on related contingent asset.
88
2021
$m
(197)
(56)
39
(214)
483
(145)
(37)
(12)
(62)
21
10
3
8
(214)
2020
$m
(127)
(2)
26
(103)
(767)
230
(327)
(12)
-
-
-
3
3
(103)
Tabcorp Annual Report 2021 (b) Deferred tax assets/(liabilities)
Licences
Right-of-use assets
Other intangible assets
Research and development
Unclaimed dividends
Lease liabilities
Provisions
Property, plant and equipment
Other
Accrued expenses
Fair value of cash flow hedges
NSW Trackside concessions
Net deferred tax assets/(liabilities)
Balance at
1 July 2019
$m
(603)
(109)
(42)
(16)
(8)
123
26
14
6
10
26
5
(568)
Recognised
in income
statement
$m
20
19
8
7
1
(19)
(3)
-
2
(6)
-
(3)
26
Recognised
directly
in equity
$m
-
-
-
-
-
-
-
-
-
-
(44)
-
(44)
Balance at
30 June 2020
$m
(583)
(90)
(34)
(9)
(7)
104
23
14
8
4
(18)
2
(586)
Recognised
in income
statement
$m
20
12
4
-
(1)
(11)
3
(3)
6
11
-
(2)
39
Recognised
directly
in equity
$m
-
-
-
-
-
-
-
-
(1)
-
22
-
21
Balance at
30 June 2021
$m
(563)
(78)
(30)
(9)
(8)
93
26
11
13
15
4
-
(526)
Income tax comprises current and deferred income tax. Income tax is recognised in the income statement except when it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period and any adjustment to tax payable in respect of previous years.
Deferred tax is calculated using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes. The
temporary differences for goodwill and the initial recognition of an asset or liability in a transaction which is not a business combination and that affect neither accounting nor taxable profit at the time of the transaction are not
provided for. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets and deferred tax liabilities are offset only if a legally
enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
The income tax expense and deferred tax balances assume certain tax outcomes in relation to the application of tax legislation as it applies to the Group. An uncertain tax treatment occurs where there is uncertainty over
whether a tax authority will accept a tax treatment adopted by the Group under tax law. The Group revisits the accounting in relation to an uncertain tax treatment when there are changes in relevant facts and circumstances
(refer to note E4).
A6 Subsequent events
Subsequent events other than those disclosed elsewhere in this report are:
Announced intention to demerge Lotteries and Keno business
On 5 July 2021, Tabcorp announced the intention to demerge its Lotteries and Keno business and create two standalone ASX-listed companies. The demerger is expected to be implemented
through a court-approved Scheme of Arrangement, subject to shareholder, final Board, regulatory and third party approvals and consents. Tabcorp is targeting completion of the demerger
by the end of June 2022. The decision to pursue a demerger follows the conclusion of a comprehensive strategic review of all relevant structural and ownership options to maximise value
for shareholders, including the evaluation of unsolicited approaches and proposals received for the sale of the Group’s Wagering and Media and Gaming Services businesses.
COVID-19 restrictions
The Group notes the recent developments since the end of the financial year in relation to the COVID-19 pandemic in NSW, Victoria, South Australia and Queensland, and related actions
taken by respective state governments, including imposing lockdowns, travel and other government-mandated restrictions. These restrictions have resulted in the temporary closure at
various times of licensed venues (hotels and clubs) and TAB agencies which offer Tabcorp’s Wagering and Media, Keno and Gaming Services products (particularly in metropolitan Sydney
and Melbourne). At the reporting date a definitive assessment of the future effects of these restrictions, and COVID-19 more generally, on the Group cannot be made.
89
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2021
SECTION B – CAPITAL AND RISK MANAGEMENT
B1 Capital management
The Group’s objectives when managing capital are to ensure the Group continues as a going concern while providing optimal returns to shareholders and benefits for other stakeholders,
and to maintain an appropriate capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders or issue new shares.
The Group has a target of an investment grade credit rating. Gearing is managed primarily through the ratio of gross debt to earnings before interest, tax, depreciation, amortisation and
impairment (EBITDA).
At 30 June the Group’s gearing ratio was:
Gross debt (US private placement debt at the Australian dollar principal repayable under cross currency swaps) (i)
EBITDA (before significant items)
Gearing ratio
(i) Includes lease liabilities following the implementation of AASB 16.
B2 Other financial assets
Other financial assets are held to fund payments to winners of certain lottery games, where winnings are payable for up to 20 years.
Equity instruments at fair value through other comprehensive income
Unlisted investments – managed fund
Debt instruments at amortised cost
Investment – term deposits
Current
Non current
2021
$m
2,708
1,107
2.4
2021
$m
22
236
258
129
129
258
2020
$m
3,748
995
3.8
2020
$m
22
163
185
26
159
185
Equity instruments at fair value through other comprehensive income are equity instruments which the Group intends to hold for the foreseeable future, and for which an irrevocable
election to classify as such upon transition to AASB 9 has been made.
After initial measurement, they are subsequently carried at fair value (refer to note B5). Changes in the fair value are recognised in other comprehensive income and accumulated
in a reserve within equity. No subsequent recycling of gains or losses to profit or loss is permitted.
Debt instruments at amortised cost are financial assets held in order to collect contractual cash flows that solely represent payments of principal and interest. They are carried
at amortised cost.
90
Tabcorp Annual Report 2021 B3 Interest bearing liabilities
The Group borrows money from financial institutions and debt investors in the form of bank loans, overdraft and foreign currency denominated notes.
The following table details the debt position of the Group at 30 June:
Facility
Bank overdraft
Details
Floating interest rate overdraft facility.
Bank loans – unsecured
Floating interest rate revolving facility. Subject to financial undertakings as to gearing
and interest cover.
US private placement
Fixed interest rate US dollar debt. At 30 June 2021 aggregate US dollar principal of
$1,383m (2020: $1,553m). Cross currency swaps are in place for all US dollar debt.
Under these swaps the aggregate Australian dollar amount payable at maturity is
$1,754m (2020: $1,925m). Subject to financial undertakings as to gearing and
interest cover.
Facility limit
$m
100
226
660
600
600
2,086
USD 170
USD 133
USD 105
USD 450
USD 520
USD 175
AUD 97
AUD 97
Maturity
Feb-22
n/a(i)
Jul-22
Jul-23
n/a(i)
n/a
Apr-22
Jun-26
Jun-28
Jun-30
Jun-33
Jun-35
Jun-36
Current
Non current
(i) Facilities were repaid in full and cancelled during the year (original maturity dates were Jul-21 and Jul-24 respectively).
2021
$m
-
-
449
-
-
449
-
177
139
596
689
232
97
97
2,027
2,476
177
2,299
2,476
2020
$m
-
226
299
148
598
1,271
249
193
152
653
754
254
97
97
2,449
3,720
249
3,471
3,720
91
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2021
B3 Interest bearing liabilities (continued)
B3.1 Changes in liabilities arising from financing activities:
Interest bearing liabilities
Current
Non current
Cross currency interest rate swaps
Current assets
Non current assets
Current liabilities
Lease liabilities
Current
Non current
Interest bearing liabilities
Current
Non current
Cross currency interest rate swaps
Current assets
Non current assets
Current liabilities
Lease liabilities
Current
Non current
Balance at
30 June 2020
$m
Cash flows
$m
Foreign exchange
movement
$m
Changes in fair
values
$m
Lease
additions
$m
249
3,471
(103)
(426)
4
47
306
3,548
(171)
(825)
-
-
-
(49)
-
(1,045)
(77)
(176)
-
-
-
-
-
(253)
-
-
33
338
3
-
-
374
-
-
-
-
-
-
2
2
Balance at
30 June 2019
$m
Cash flows
$m
Foreign exchange
movement
$m
Changes in fair
values
$m
Lease
additions
$m
192
3,527
(19)
(289)
5
51
358
3,825
(192)
146
-
-
-
(52)
-
(98)
-
51
-
-
-
-
-
51
-
-
(84)
(137)
(1)
-
-
(222)
-
-
-
-
-
1
11
12
Other
$m
176
(171)
-
-
-
49
(46)
8
Other
$m
249
(253)
-
-
-
47
(63)
(20)
Balance at
30 June 2021
$m
177
2,299
(70)
(88)
7
47
262
2,634
Balance at
30 June 2020
$m
249
3,471
(103)
(426)
4
47
306
3,548
Interest bearing liabilities are recognised initially at fair value net of transaction costs, and subsequent to initial recognition are recognised at amortised cost which is calculated using
the effective interest rate method. Foreign currency liabilities are carried at amortised cost and are translated at the exchange rates at reporting date. Gains and losses are recognised
in the income statement when the liabilities are derecognised in addition to the amortisation process.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan. These fees are capitalised as a prepayment for liquidity services and amortised over the
period of the facility to which they relate.
92
Tabcorp Annual Report 2021 B4 Derivative financial instruments
The Group holds the following derivative financial instruments, all at fair value based on level 2 observable inputs (refer to note B5):
Current assets
Cross currency swaps
Non current assets
Cross currency swaps
Current liabilities
Cross currency swaps
Interest rate swaps
Fixed Odds open betting positions
Non current liabilities
Interest rate swaps
2021
$m
70
88
158
7
30
13
50
55
105
2020
$m
103
426
529
4
31
9
44
104
148
Derivative financial instruments are recognised initially at cost, and subsequently are stated at fair value (refer to note B5). The method of recognising any remeasurement gain or loss
depends on the nature of the item being hedged. For the purposes of hedge accounting, the Group’s hedges are classified as cash flow hedges.
At inception, hedge relationships are designated as such and documented. This includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged,
and how the hedge effectiveness requirements are assessed.
A hedging relationship qualifies for hedge accounting if it meets all of the following effectiveness requirements:
• there is an economic relationship between the hedged item and the hedging instrument;
• the effect of credit risk does not dominate the value changes that result from that economic relationship; and
• the hedge ratio is the same as that resulting from actual amounts of hedged items and hedging instruments for risk management.
Cash flow hedges are used to hedge the exposure to variability in cash flows attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast
transaction. Hedge effectiveness is measured by comparing the change in the fair value of the hedged item and the hedging instrument respectively each quarter. Any difference
represents ineffectiveness. The effective portion of any gain or loss on the hedging instrument is recognised directly in equity, with any ineffective portion recognised in the income
statement. For hedged items relating to financial assets or liabilities, amounts recognised in equity are reclassified into the income statement when the hedged transaction affects
the income statement (i.e. when interest income or expense is recognised). When the hedged item is the cost of a non-financial asset or liability, the amounts recognised in equity
are transferred into the initial cost or other carrying amount of the non-financial asset or liability.
When a hedging instrument expires or is sold, terminated or exercised, or the designation of the hedge relationship is revoked but the hedged forecast transaction is still expected to
occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above when the transaction occurs. If the hedged transaction is no longer
expected to take place, then the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement.
Financial instruments that do not qualify for hedge accounting are stated at fair value with any resultant gain or loss being recognised in the income statement.
93
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2021
B4 Derivative financial instruments (continued)
B4.1 Interest rate swaps
These swaps are used to mitigate the risk of variability in cash flows due to movements in the reference interest rate of the designated debt.
The notional principal amounts and periods of expiry of these interest rate swap contracts are:
Less than one year
One to five years
More than five years
Notional principal
Fixed interest rate range p.a.
Variable interest rate range p.a.
Notional principal
2021
$m
427
137
585
1,149
2020
$m
-
427
722
1,149
1.9% – 4.9%
0.02% – 0.04%
1.9% – 4.9%
0.1% – 0.1%
Net settlement receipts and payments are recognised as an adjustment to interest expense on an accruals basis over the term of the swaps, such that the overall interest expense on
borrowings reflects the average cost of funds achieved by entering into the swap agreements.
There is an economic relationship between the hedged item and the hedged instrument as the key terms of the interest rate swap are similar to the key terms of the floating rate borrowings.
The Group has established a hedge ratio of 1:1 which has been determined by comparing the notional principal of the swap with the notional amount of the designated debt.
Further information about the Group’s interest rate risk management is disclosed in note B6.1.
B4.2 Cross currency swaps
These swaps are used to reduce the exposure to the variability of movements in the forward USD exchange rate in relation to the USD private placement debt.
The principal amounts and periods of expiry of the cross currency swap contracts are:
Less than one year
One to five years
More than five years
Notional principal
Fixed interest rate range p.a.
Variable interest rate range p.a.
2021
2020
Pay principal
AUD m
127
137
1,490
1,754
Receive principal
USD m
133
105
1,145
1,383
Pay principal
AUD m
171
127
1,627
1,925
Receive principal
USD m
170
133
1,250
1,553
5.3% – 5.6%
2.1% – 3.9%
4.6% – 5.2%
5.3% – 5.6%
2.2% – 4.0%
4.6% – 5.2%
There is an economic relationship between the hedged item and the hedged instrument as the terms and conditions in relation to the interest rate and maturity of the cross currency swaps
are similar to the terms and conditions of the underlying hedged US private placement debt. The Group has established a hedge ratio of 1:1 which has been determined by comparing the
notional principal of the swap with the notional amount of the designated debt.
Further information about the Group’s foreign currency risk management is disclosed in note B6.2.
94
Tabcorp Annual Report 2021 B4.3 Impact of hedging on balance sheet
The change in fair value used for measuring ineffectiveness is set out in the below table. All hedging instruments are presented within derivative financial instruments in the balance sheet.
Interest rate swaps
Cross currency swaps
The ineffectiveness recognised in the income statement was immaterial in both the current and prior financial year.
B4.4 Impact of hedging on equity
Set out below is a reconciliation of the movement in the hedging reserve:
As at 1 July 2020
Effective portion of changes in fair value arising from:
– Interest rate swaps
– Cross currency swaps
Gain on revaluation of USD debt
Other
Tax effect
As at 30 June 2021
As at 1 July 2019
Effective portion of changes in fair value arising from:
– Interest rate swaps
– Cross currency swaps
Loss on revaluation of USD debt
Other
Tax effect
As at 30 June 2020
2021
$m
50
(295)
(245)
2020
$m
(23)
222
199
Hedging reserve
$m
42
50
(295)
176
(5)
22
(10)
(60)
(23)
222
(51)
(2)
(44)
42
95
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2021
B5 Fair value measurement
The fair value of financial assets and financial liabilities is estimated for recognition, measurement and disclosure purposes at each balance date. Various methods are available to estimate
the fair value of a financial instrument, and comprise:
Level 1 – calculated using quoted prices in active markets.
Level 2 – estimated using inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – estimated using inputs for the asset or liability that are not based on observable market data.
The carrying amount of financial assets or liabilities recognised in the financial statements is deemed to be the fair value unless stated below:
Financial assets
Investment in an associate
Financial liabilities
US private placement
The fair value of the Group’s financial instruments is estimated as follows:
Investment in an associate
Fair value was determined using quoted market price (level 1 in fair value hierarchy).
Carrying amount
Fair value
2021
$m
-
-
2,034
2,034
2020
$m
29
29
2,459
2,459
2021
$m
-
-
2,431
2,431
2020
$m
69
69
3,037
3,037
US private placement
Fair value is calculated using discounted future cash flow techniques, where estimated cash flows and estimated discount rates are based on market data at balance date, in combination
with restatement to foreign exchange rates at balance date (level 2 in fair value hierarchy).
Cross currency and interest rate swaps
Fair value is calculated using discounted future cash flow techniques, where estimated cash flows and estimated discount rates are based on market data at balance date (level 2 in fair
value hierarchy).
Equity instruments at fair value through other comprehensive income
Fair value is reference to market prices prevailing at balance date (level 2 in fair value hierarchy).
There have been no significant transfers between level 1 and level 2 during the financial year ended 30 June 2021.
96
Tabcorp Annual Report 2021 B6 Financial instruments – risk management
The Group’s principal financial instruments, other than derivatives, comprise cash, term deposits, unlisted investments and interest bearing liabilities. The main purpose of these financial
instruments is to raise finance for the Group’s operations. The Group also has various other financial assets and liabilities which arise directly from its operations.
The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities, principally
interest rate swaps and cross currency swaps. The Group does not hold or issue derivative financial instruments for trading purposes.
The main risks arising from the Group’s financial instruments are discussed in section B6.1 to B6.4.
B6.1 Interest rate risk
The Group has a policy of controlling exposure to interest rate fluctuations by the use of fixed and variable rate debt, floating rate term deposits, interest rate swaps, capped or collar options
and forward rate agreements. It has entered into interest rate swap arrangements to hedge underlying debt obligations and allow floating rate borrowings to be swapped to fixed rate
borrowings. Under these arrangements, the Group pays fixed interest rates and receives the bank bill swap rate (BBSW) calculated on the notional principal amount of the contracts.
The Group also has entered into floating rate term deposits where it receives variable interest that is priced against the BBSW.
At 30 June 2021 after taking into account the effect of interest rate swaps and floating rate term deposits, approximately 99.4% (2020: 71.0%) of the Group’s borrowings are at a fixed rate
of interest.
The following assets and liabilities are exposed to floating interest rate risk:
Cash assets
Short term deposits
Investment terms deposits – current
Investment terms deposits – non current
Bank loans – unsecured
Interest rate swaps – notional principal amounts
Cross currency swaps – notional principal amounts
2021
$m
243
83
129
107
562
(449)
(1,149)
(849)
(2,447)
2020
$m
217
93
26
137
473
(1,271)
(1,149)
(1,021)
(3,441)
97
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2021
B6 Financial instruments – risk management (continued)
B6.1 Interest rate risk (continued)
Sensitivity analysis – interest rates – AUD and USD
The Group’s sensitivity to reasonably possible changes in interest rates on the affected financial assets and financial liabilities in existence at year end is shown below. With all other variables
held constant, post tax profit and other comprehensive income would have been affected as follows:
AUD
+ 0.5% (50 basis points) (2020: + 0.5%)
- 0.5% (50 basis points) (2020: - 0.5%)
USD
+ 0.2% (20 basis points) (2020: + 0.2%)
- 0.2% (20 basis points) (2020: - 0.2%)
Post tax profit
higher/(lower)
2021
$m
2020
$m
Other comprehensive
income higher/(lower)
2020
2021
$m
$m
1
-
-
-
(3)
1
-
-
52
(54)
(21)
22
63
(66)
(29)
29
The movements in profit are due to higher/lower interest costs from variable rate debt and investments. The movement in other comprehensive income is due to an increase/decrease
in the fair value of financial instruments designated as cash flow hedges.
Significant assumptions used in the analysis include:
• reasonably possible movements were determined based on the Group’s current credit rating and mix of debt, and the level of debt that is expected to be renewed, as well as a review
of the last two years’ historical movements and economic forecasters’ expectations;
• price sensitivity of derivatives is based on a reasonably possible movement of spot rates at balance date; and
• net exposure at balance date is representative of what the Group was and is expecting to be exposed to in the next twelve months.
B6.2 Foreign currency risk
The Group’s primary currency exposure is to US dollars as a result of issuing US private placement debt. In order to hedge this exposure, the Group has entered into cross currency swaps
to fix the exchange rate on the USD debt until maturity. The Group agrees to pay a fixed USD amount in exchange for an agreed AUD amount with swap counterparties, and to re-exchange
this again at maturity. These swaps are designated to hedge the principal and interest obligations of the US private placement debt.
Sensitivity analysis foreign exchange
The following analysis is based on the Group’s foreign currency risk exposures in existence at balance date and demonstrates the Group’s sensitivity to reasonably possible changes in the
AUD/USD exchange rate. With all other variables held constant, post tax profit and other comprehensive income would have been affected as follows:
AUD/USD + 10 cents (2020: + 10 cents)
AUD/USD - 10 cents (2020: - 10 cents)
Post tax profit
higher/(lower)
2021
$m
-
-
2020
$m
-
-
Other comprehensive
income higher/(lower)
2020
2021
$m
$m
(65)
(39)
87
51
The movement in other comprehensive income is due to an increase/decrease in the fair value of financial instruments designated as cash flow hedges. Management believe the balance
date risk exposures are representative of the risk exposure inherent in the financial instruments.
98
Tabcorp Annual Report 2021 Significant assumptions used in the foreign currency exposure sensitivity analysis include:
• reasonably possible movements were determined based on a review of the last two years’ historical movements and economic forecasters’ expectations;
• movement of 10 cents was calculated by taking the USD spot rate as at balance date, moving this spot rate by 10 cents and then re-converting the USD into AUD with the ‘new spot rate’.
This methodology reflects the translation methodology undertaken by the Group;
• price sensitivity of derivatives is based on a reasonably possible movement of spot rates at balance dates; and
• net exposure at balance date is representative of what the Group was and is expecting to be exposed to in the next twelve months.
The translation of the results of the Group’s foreign subsidiaries into the Group presentation currency has not been included in the above sensitivity analysis as it represents translation risk
rather than transaction risk.
B6.3 Credit risk
The Group’s credit risk arises in relation to cash and cash equivalents, receivables, term deposits, financial liabilities and liabilities under financial guarantees. Credit risk on financial assets
which have been recognised on the balance sheet, is the carrying amount less any allowance for non recovery.
Credit risk is managed by:
• adherence to a strict cash management policy;
• conducting all investment and financial instrument activity with approved counterparties with investment grade credit ratings and setting exposure limits based on these ratings; and
• reviewing compliance with counterparty exposure limits on a continuous basis, and spreading the aggregate value of transactions amongst the approved counterparties; ensuring no more
than 60% of investments are held with any one counterparty.
Credit risk associated with financial liabilities arises from the potential failure of counterparties to meet their obligations under the contract or arrangement. The Group’s maximum credit
risk exposure in respect of derivative contracts is detailed in the liquidity risk table in note B6.4.
Credit risk includes liabilities under financial guarantees. For financial guarantee contract liabilities the fair value at initial recognition is determined using a probability weighted discounted
cash flow approach. The fair value of financial guarantee contract liabilities has been assessed as nil (2020: nil), as the possibility of an outflow occurring is considered remote.
Details of the financial guarantee contracts at balance date are outlined below:
• The Company has entered into a deed of cross guarantee as outlined in note D2.
• The maximum amount of bank guarantee contracts at balance date is $34m (2020: $34m).
99
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2021
B6 Financial instruments – risk management (continued)
B6.4 Liquidity risk
Liquidity risk arises from the financial liabilities of the Group and the Group’s subsequent ability to meet its obligations to repay its financial liabilities as and when they fall due.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and notes. To help reduce liquidity risk, the Group targets
a minimum level of cash and cash equivalents to be maintained, and has sufficient undrawn funds available.
The Group’s current policy is that not more than 33% of debt facilities should mature in any financial year. At 30 June 2021, 7% (2020: 7%) of debt facilities will mature in less than one year.
Due to the measures in place for managing liquidity and access to capital markets, this risk is not considered significant.
The contractual cash flows including principal and estimated interest payments of financial liabilities in existence at year end are as follows:
Non-derivative financial instruments
Financial liabilities
Payables
Bank loans – unsecured
US private placement
Lease liabilities
Net inflow/(outflow)
Derivative financial instruments
Financial assets
Interest rate swaps – receive AUD floating
Cross currency swaps – receive USD fixed
Financial liabilities
Interest rate swaps – pay AUD fixed
Cross currency swaps – pay AUD floating
Fixed Odds open betting positions
Net inflow/(outflow)
< 1 year
$m
(1,237)
(7)
(225)
(57)
(1,526)
-
214
214
(29)
(197)
(13)
(239)
(25)
2021
1 - 5 years
$m
> 5 years
$m
< 1 year
$m
2020
1 - 5 years
$m
> 5 years
$m
(107)
(451)
(499)
(170)
(1,227)
27
455
482
(80)
(425)
-
(505)
(23)
(167)
-
(2,056)
(135)
(2,358)
23
1,757
1,780
(32)
(1,771)
-
(1,803)
(23)
(1,178)
(25)
(286)
(60)
(1,549)
2
275
277
(32)
(247)
(9)
(288)
(11)
(95)
(1,332)
(528)
(190)
(2,145)
16
484
500
(89)
(409)
-
(498)
2
(143)
-
(2,316)
(167)
(2,626)
24
2,006
2,030
(52)
(1,973)
-
(2,025)
5
For floating rate instruments, the amount disclosed is determined by reference to the interest rate at the last repricing date. For foreign currency receipts and payments, the amount
disclosed is determined by reference to the AUD/USD rate at balance date.
100
Tabcorp Annual Report 2021
SECTION C – OPERATING ASSETS AND LIABILITIES
C1 Licences
2021
Carrying amount at beginning of year
Amortisation
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
2020
Carrying amount at beginning of year
Amortisation
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
Lotteries
licences
$m
Wagering
licences
$m
Gaming
machine
monitoring
licence
$m
Keno
licences
$m
1,283
(46)
1,237
1,391
(154)
1,237
1,328
(45)
1,283
1,391
(108)
1,283
636
(41)
595
978
(383)
595
678
(42)
636
978
(342)
636
166
(13)
153
200
(47)
153
179
(13)
166
200
(34)
166
63
(7)
56
128
(72)
56
69
(6)
63
128
(65)
63
Amortisation policy – straight line basis over useful life (years):
10 - 55
12 - 93
15
10 - 34
Licence expiration date:
– Victoria
– Queensland
– New South Wales
– Australian Capital Territory
– Northern Territory
– South Australia
2028
2072
2050
2032
2052
2024
2098
2097
2064 (i)
2100
2022
2047
2050
2032
(i) ACT sports bookmaking licence was granted for an initial term of 15 years with further rolling extensions to a total term of 50 years.
Licences that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
Total
$m
2,148
(107)
2,041
2,697
(656)
2,041
2,254
(106)
2,148
2,697
(549)
2,148
101
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2021
C2 Other intangible assets
2021
Carrying amount at beginning of year
Additions:
– acquired
– internally developed
Acquisition via business combinations
Amortisation
Impairment
Transfers
Disposals
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
Includes capital works in progress of:
2020
Carrying amount at beginning of year
Additions:
Goodwill(i)
$m
NSW Trackside
concessions
$m
Customer
related assets
$m
Brand
names
$m
Media content
and broadcast
rights
$m
Other
$m
Software
$m
Total
$m
7,160
-
-
-
-
(122)
-
-
7,038
8,956
(1,918)
7,038
133
-
-
-
(1)
-
-
-
132
150
(18)
132
123
218
31
36
433
8,134
-
-
49
(11)
-
-
-
161
196
(35)
161
-
-
5
-
-
-
-
223
223
-
223
-
-
-
-
-
-
-
31
31
-
31
-
-
-
(3)
-
-
-
33
55
(22)
33
43
91
-
(116)
(3)
(4)
(6)
438
1,062
(624)
438
106
43
91
54
(131)
(125)
(4)
(6)
8,056
10,673
(2,617)
8,056
106
8,250
135
138
218
31
39
373
9,184
– acquired
– internally developed
Amortisation
Impairment
Transfers
Disposals
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
40
149
(119)
(1,117)
2
(5)
8,134
10,517
(2,383)
8,134
136
The impairment of goodwill in the current year relates to the Gaming Services segment. Refer to note C3. The impairment of goodwill in the prior year relates to the Wagering and Media and Gaming Services segments reflecting the direct impact
of the government and other measures to address the COVID-19 pandemic, the possible acceleration of retail contraction, the level of competitive intensity and structural changes and the potential decline in consumer confidence and increased
economic uncertainty.
-
-
-
(1,090)
-
-
7,160
8,956
(1,796)
7,160
Includes capital works in progress of:
(i)
40
149
(99)
(27)
2
(5)
433
960
(527)
433
136
-
-
(2)
-
-
-
133
150
(17)
133
-
-
(15)
-
-
-
123
147
(24)
123
-
-
-
-
-
-
218
218
-
218
-
-
(3)
-
-
-
36
55
(19)
36
-
-
-
-
-
-
31
31
-
31
Amortisation policy – straight line basis over useful life (years):
Expiration date:
(ii) New South Wales Wagering Licence retail exclusivity period.
87
2097
8–20 5–Indefinite
Indefinite
20
3–15
2033(ii)
Goodwill arising in a business combination represents the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assumed. All business combinations are accounted for
by applying the acquisition method. Any contingent consideration is recognised at fair value at the acquisition date. Negative goodwill arising on an acquisition is recognised directly in the income statement. Goodwill is not amortised, and is
stated at cost less any accumulated impairment losses. Any impairment losses recognised against goodwill cannot be reversed.
Brand names, media content and broadcast rights with indefinite useful lives are not amortised as the Board of Directors believe that the life of these intangibles to the Group will not materially diminish over time, and the residual value at the
end of that life would be such that the amortisation charge, if any, would not be material.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. The cost of internally developed software includes the cost of materials, direct labour and an appropriate
proportion of overheads.
Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
102
Tabcorp Annual Report 2021 C3 Impairment testing
Goodwill and indefinite life intangible assets are tested for impairment annually, or whenever there is an indicator of impairment.
Carrying amount of goodwill and other intangible assets with indefinite useful lives allocated to each cash generating unit (CGU) or segment:
Goodwill
Lotteries and Keno
Wagering and Media
Gaming Services
Other intangible assets with indefinite useful lives
Lotteries
NSW Wagering
Sky Racing
Sky Sports Radio
ACTTAB
2021
$m
5,304
1,734
-
7,038
108
99
31
6
5
249
2020
$m
5,304
1,734
122
7,160
108
99
31
6
5
249
In accordance with the Group’s accounting policies, the Group performs its impairment testing annually at 30 June.
The recoverable amount of each CGU is determined based on fair value less costs of disposal, calculated using discounted cash flows. The cash flow forecasts are principally based upon
a four year period and extrapolated using long term growth rates ranging from 1.0% to 3.5% (2020: 1.0% to 3.5%). These cash flows are then discounted using a relevant long term post tax
discount rate, ranging between 7.5% and 8.4% (2020: 7.5% and 8.4%). This is considered to be level 3 in the fair value hierarchy (refer to note B5 for explanation of the valuation hierarchy).
Key assumptions on which management has based its cash flow projections:
• Impact of the government and other measures on the business to address the COVID-19 pandemic.
• Fees paid to Racing Queensland (RQ) following the introduction of point of consumption tax have been calculated on the basis of the Group’s interpretation of the calculation. This is subject
to a dispute with RQ (refer note E4 Contingencies).
• State tax regimes and the regulatory environment in which the Group currently operates remain largely unchanged, other than announced.
• Exclusive retail wagering licences held are assumed to be retained. The wagering business competes with bookmakers and other interstate and international wagering operators who accept
bets over the phone and the internet. There is a possibility that competition from interstate and international operators may extend further to the Group’s retail wagering network in the future.
• Race fields arrangements implemented in each State and Territory of Australia remain largely unchanged.
• Growth rates used to extrapolate cash flows are either in line with or do not exceed the long term average growth rate for the industry in which the CGU operates.
• Discount rates applied are based on the post tax weighted average cost of capital applicable to the relevant CGU.
• Terminal growth rate used is in line with the forecast long term underlying growth rate in Consumer Price Index.
103
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2021
C3 Impairment testing (continued)
The key estimates and assumptions used to determine the fair value less costs of disposal of a CGU are based on management’s current expectations after considering past experience
and external information, and are considered to be achievable.
The impairment assessment has determined the carrying value of the Gaming Services segment, including allocation of corporate assets, exceeded its recoverable amount at 30 June 2021.
As a result, an impairment charge against goodwill of $122m has been recognised in the income statement.
The COVID-19 pandemic and government restrictions have impacted this business to varying degrees, and in turn its financial and operational performance primarily due to the closure
of licensed venues and venue density requirements. The outlook for FY22 and beyond continues to be uncertain due to the timing of lifting of government imposed COVID-19 restrictions,
any potential longer term changes to consumer behaviour as an indirect result of the pandemic and reduced expectations for future growth and contract extensions in an uncertain
economic environment.
The carrying value of the Gaming Services segment has been impaired to its recoverable amount at 30 June 2021. Adverse movements in key assumptions may lead to further impairment.
At each balance date, in addition to goodwill and intangible assets with indefinite useful lives, all non-current assets are reviewed for impairment if events or changes in circumstances
indicate they may be impaired. When an indicator of impairment exists, the Group makes a formal assessment of recoverable amount. An impairment loss is recognised in the income
statement for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the greater of fair value less costs of disposal and value in use. It is determined for an individual asset, unless the asset’s recoverable value cannot be estimated as
it does not generate cash inflows that are largely independent of those from other assets or groups of assets. In this case, the recoverable amount is determined for the CGU, being assets
grouped at the lowest levels for which there are separately identifiable cash flows.
Goodwill and intangible assets with indefinite useful lives (brand names, broadcast rights and media content) acquired through business combinations have been allocated to each CGU
or group of CGUs expected to benefit from the business combination’s synergies for impairment testing.
104
Tabcorp Annual Report 2021
C4 Property, plant and equipment
2021
Carrying amount at beginning of year
Additions
Acquisitions via business combinations
Disposals
Depreciation
Transfers
Carrying amount at end of year
Cost
Accumulated depreciation and impairment
Includes capital works in progress of:
2020
Carrying amount at beginning of year
Additions
Disposals
Depreciation
Transfers
Transferred to assets held for sale
Impairment
Carrying amount at end of year
Cost
Accumulated depreciation and impairment
Includes capital works in progress of:
Freehold land
$m
Buildings
$m
Leasehold
improvements
$m
Plant and
equipment
$m
18
-
-
-
-
-
18
18
-
18
61
-
(6)
-
-
(37)
-
18
18
-
18
15
-
-
-
(1)
-
14
35
(21)
14
-
27
-
(3)
(2)
-
(2)
(5)
15
35
(20)
15
-
80
-
-
-
(13)
(1)
66
160
(94)
66
-
86
15
(1)
(14)
(6)
-
-
80
162
(82)
80
2
343
27
1
(16)
(82)
5
278
960
(682)
278
14
381
58
(2)
(88)
4
-
(10)
343
997
(654)
343
21
Total
$m
456
27
1
(16)
(96)
4
376
1,173
(797)
376
14
555
73
(12)
(104)
(2)
(39)
(15)
456
1,212
(756)
456
23
Depreciation policy – straight line basis over useful life (years):
7 – 40
5 – 14
3 – 10
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and equipment.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed annually and adjusted prospectively, if appropriate.
105
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2021
C5 Leases
The Group has lease contracts for various properties, motor vehicles and other equipment with lease terms expiring from 1 to 12 years. Leases generally provide the Group with a right
of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements
in the Consumer Price Index or are subject to market rate review.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the year:
2021
Carrying amount at beginning of year
Additions
Lease remeasurements
Depreciation
Impairment
Carrying amount at end of year
2020
Carrying amount at beginning of year
Additions
Lease remeasurements
Depreciation
Gain on termination
Impairment
Carrying amount at end of year
Set out below are the carrying amounts of lease liabilities and the movements during the year:
Carrying amount at beginning of year
Additions
Lease remeasurements
Interest expense
Payments (cash outflow)
Carrying amount at end of year
Current
Non current
106
Property
$m
Other
$m
266
1
7
(41)
(7)
226
317
8
(16)
(43)
1
(1)
266
9
1
1
(4)
-
7
11
4
-
(6)
-
-
9
2021
$m
353
2
3
13
(62)
309
47
262
309
Total
$m
275
2
8
(45)
(7)
233
328
12
(16)
(49)
1
(1)
275
2020
$m
409
12
(16)
16
(68)
353
47
306
353
Tabcorp Annual Report 2021 Future minimum rentals receivable under non-cancellable operating subleases as at 30 June:
Not later than one year
Later than one year but not later than five years
2021
$m
2
7
9
2020
$m
2
9
11
When a contract is entered into, the Group assesses whether the contract contains a lease. A lease arises when the contract conveys the right to control the use of an identified asset
for a period of time in exchange for consideration. At commencement of the lease, the Group recognises a right-of-use asset representing its right to use the underlying leased asset
and a lease liability representing its obligation to make lease payments.
Right-of-use assets are recognised at the commencement date of the lease, which is when the underlying assets are available for use. Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, any make good costs, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. The right-of-use assets are also subject to impairment.
Lease liabilities are recognised at the commencement date of the lease, measured at the present value of lease payments to be made over the lease term using the Group’s incremental
borrowing rate if the rate implicit in the lease cannot be readily determined. Lease payments include fixed payments or variable lease payments that depend on an index or a rate,
incorporating the Group’s expectations of extension options which is a key area of judgement. Option periods are only included in determining the lease term at inception when they
are reasonably certain to be exercised.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for lease payments made. Lease liabilities are remeasured when
there is a modification, a change in the lease term, or changes in future lease payments arising from a change in rates or index used to determine the payments.
Short term leases (lease term of 12 months or less) and leases of low value assets are recognised as an expense as incurred.
107
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2021
C6 Notes to the cash flow statement
(a) Cash and cash equivalents comprise:
Cash on hand and in banks
Short term deposits
2021
$m
341
83
424
2020
$m
256
93
349
For the purpose of the cash flow statement, cash comprises cash and short term deposits with an original maturity of three months or less, and bank overdrafts (refer note B3).
Significant restrictions
The Group operates under various state based licences which have regulatory requirements in place that restrict the Group’s use of certain cash balances. The carrying amount of these cash
balances included within the consolidated financial statements is $275m (2020: $206m).
(b) Reconciliation of net profit/(loss) after tax to net cash flows from operating activities
Net profit/(loss) after tax
Add items classified as investing/financing activities:
– net gain on disposal of investment in an associate
– net (gain)/loss on disposal of non current assets
– other
Add non cash income and expense items:
– depreciation and amortisation
– impairment – goodwill
– impairment – other
– gain on revaluation of previously held equity interest
– share based payments expense
– other
Net cash provided by operating activities before changes in assets and liabilities
Changes in assets and liabilities:
(Increase)/decrease in:
– debtors
– current tax assets
– other assets
(Decrease)/increase in:
– payables
– provisions
– deferred tax liabilities
– current tax liabilities
– other liabilities
Net cash flows from operating activities
108
2021
$m
269
(69)
(1)
-
380
122
10
(35)
5
13
694
(16)
-
(2)
6
5
(34)
57
10
720
2020
$m
(870)
-
5
(2)
378
1,090
43
-
7
(6)
645
50
29
(6)
3
(9)
(26)
-
(15)
671
Tabcorp Annual Report 2021 C7 Receivables
Current
Trade debtors (i)
Allowance for expected credit losses (ii)
Other
(i) Prior year includes the impact of suspending Gaming Services fees for venues during the period they were not trading due to COVID-19.
(ii) The impact of COVID-19 on the recoverability of receivables has been considered and reflected in the allowance for expected credit losses.
Non current
Trade debtors
Other
2021
$m
92
(6)
86
31
117
1
1
2
2020
$m
43
(5)
38
34
72
1
2
3
Trade debtors are recognised and carried at original invoice amount less an allowance for any uncollectible amount.
Expected credit losses for the Group are calculated using a lifetime expected loss allowance under the simplified approach of AASB 9. The expected credit loss is based on historical credit
loss experience adjusted for forward-looking factors specific to the debtors and the economic environment.
C8 Payables
Current
Payables
Prior year balance includes the deferral of lottery and Keno taxes of $114m as a result of government support received during the COVID-19 pandemic,
and reflects employee bonus accruals of nil.
Non current
Payables
2021
$m
1,237
2020
$m
1,178
271
238
Non current payables includes prizes payable to the winners of certain lottery games where winnings are payable for up to 20 years and the final Queensland wagering licence instalment.
Non current payables relating to the Queensland wagering licence are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
109
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2021
C9 Provisions
Current
Employee benefits (i)
Premises
Other
Non current
Employee benefits
Premises
Other
(i) Employee benefits provisions in the prior year reflect the utilisation of leave entitlements as part of COVID-19 response measures.
Movement in provisions other than employee benefits during the year are set out below:
Carrying amount at beginning of year
Provisions made during year
Provisions reversed during year
Provisions used during year
Carrying amount at end of year
2021
$m
2020
$m
43
6
12
61
9
12
4
25
Premises
$m
17
3
(2)
-
18
41
1
5
47
7
16
6
29
Other
$m
11
30
-
(25)
16
Premises provisions comprise make good provisions for leasehold properties requiring remedial work at the end of the lease arrangement.
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic
benefits will be required to settle the obligation and the amount can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows
at a pre tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recorded as a finance cost.
Employee benefits (short term) are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or
constructive obligation to pay this amount as a result of past service provided and the obligation can be estimated reliably.
Employee benefits (long term) – the Group’s net obligation is the amount of future benefit that employees have earned in return for their service in the current and prior periods.
The obligation is discounted to determine its present value. Remeasurements are recognised in the income statement in the period in which they arise. This excludes pension plans.
110
Tabcorp Annual Report 2021 SECTION D – GROUP STRUCTURE
D1 Subsidiaries
The ultimate parent entity within the Group is Tabcorp Holdings Limited.
The consolidated financial statements incorporate the assets, liabilities and results of Tabcorp Holdings Limited and the following controlled entities, that were held in both current and prior
period unless otherwise stated:
100% owned Australian subsidiaries in a deed of cross guarantee with Tabcorp Holdings Limited (refer to note D2)
Tabcorp Assets Pty Ltd
Tabcorp Participant Pty Ltd
Luxbet Pty Ltd
Tabcorp Wagering Holdings Pty Ltd
Tabcorp ACT Pty Ltd
Tabcorp Gaming Holdings Pty Ltd
Keno (Qld) Pty Ltd
TAHAL Pty Ltd
Keno (NSW) Pty Ltd
Tabcorp Gaming Solutions (NSW) Pty Ltd
Tabcorp Gaming Solutions Pty Ltd
Intecq Limited
eBET Gaming Systems Pty Limited
Tabcorp Investments No.5 Pty Ltd
Tabcorp Investments No.6 Pty Ltd
Tabcorp Wagering (Vic) Pty Ltd
Tabcorp Wagering Assets (Vic) Pty Ltd
100% owned Australian subsidiaries
Tabcorp Gaming Solutions (ACT) Pty Ltd
Tabcorp Gaming Solutions (Qld) Pty Ltd
Tabcorp International No.5 Pty Ltd
Tabcorp International No.6 Pty Ltd
Tabcorp Investments No.9 Pty Ltd
Tabcorp Investments No.10 Pty Ltd
Tabcorp Investments No.11 Pty Ltd
Tabcorp Wagering Manager (Vic) Pty Ltd
OneTab Australia Pty Ltd
Tabcorp Wagering Participant (Vic) Pty Ltd
Tab Limited
Tabcorp Services Pty Ltd
Tabcorp Finance Pty Ltd
Sky Channel Pty Ltd
2KY Broadcasters Pty Ltd
Tabcorp Training Pty Ltd
Tabcorp International Pty Ltd
Tabcorp International No.4 Pty Ltd
Tatts Group Limited
Ubet Qld Limited
Ubet NT Pty Ltd
Ubet Radio Pty Ltd
Ubet SA Pty Ltd
Ubet Tas Pty Ltd
Tasradio Pty Ltd
OneTab Holdings Pty Ltd
Tattersall’s Gaming Pty Ltd
Tatts Employment Co (NSW) Pty Ltd
Tatts Employee Share Plan Pty Ltd
Sky Australia International Racing Pty Ltd
Club Gaming Systems (Holdings) Pty Ltd
COPL Pty Ltd
eBET Systems Pty Limited
Maxgaming Holdings Pty Ltd
Maxgaming NSW Pty Ltd
Maxgaming Qld Pty Ltd
Reaftin Pty Ltd
Bytecraft Systems Pty Ltd
Bytecraft Systems (NSW) Pty Ltd
Tattersall’s Holdings Pty Ltd
Tattersall’s Sweeps Pty Ltd
George Adams Pty Ltd
Tatts NT Lotteries Pty Ltd
New South Wales Lotteries Corporation Pty Limited
Golden Casket Lottery Corporation Limited
Tatts Lotteries SA Pty Ltd
TattsTech Pty Ltd
50-50 Software Pty Ltd
tatts.com Pty Ltd
Industry Data Online Pty Ltd
Tabcorp Employee Share Administration Pty Ltd
Sky Channel Marketing Pty Ltd
Tattersall’s Gaming Systems NSW Pty Ltd
Tatts Online Pty Ltd
Thelott Enterprises Pty Ltd
Ubet Enterprises Pty Ltd
Wintech Investments Pty Ltd
111
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2021
D1 Subsidiaries (continued)
International subsidiaries
Name
Premier Gateway International Limited (i)
Premier Gateway Services Limited (i)
Tabcorp Europe Holdings Limited
Tabcorp Europe Limited
Bytecraft Systems (NZ) Limited
Tattersall’s Investments (South Africa) (Pty) Limited
Tabcorp UK Limited (ii)
Sky Racing World Holdco, LLC
Sky Racing World, LLC
Tabusa, LLC
Country of incorporation
Isle of Man
Isle of Man
Isle of Man
Isle of Man
New Zealand
South Africa
United Kingdom
United States of America
United States of America
United States of America
% equity interest
100
100
100
100
100
100
100
100
100
100
(i) Equity interest at 30 June 2020 was 50% with the remaining equity acquired during the current year (refer to note D4).
(ii) Company was placed in members’ voluntary liquidation during 2019.
Subsidiaries are entities controlled by the Company. The Group controls an entity if and only if the Group has:
• power over the entity;
• exposure, or rights, to variable returns from its involvement with the entity; and
• the ability to use its power over the entity to affect its returns.
The financial statements of subsidiaries are included in the consolidated financial report from the date control commences until the date control ceases.
On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of the exchange prevailing at balance date, and their income statements are
translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognised in other comprehensive income.
Elimination of intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are undertaken in preparing the consolidated
financial statements.
All investments are initially recognised at cost, being the fair value of the consideration given, and if acquired prior to 1 July 2009 included acquisition charges associated with the
investment. Subsequently investments are carried at cost less any impairment losses.
A joint arrangement is an arrangement over which the Group has joint control with other parties and is bound by a contractual arrangement. A joint arrangement is classified as either
a joint operation or a joint venture depending upon the rights and obligations of the parties to the arrangement.
• A joint operation is where the parties have rights to the assets and obligations for the liabilities, relating to the arrangement. The Group recognises in relation to its interest in a joint
operation its assets, including its share of assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue including its share of revenue from the sale
of the output by the joint operation; and its expenses, including its share of any expenses incurred jointly.
• A joint venture is where the parties have rights to the net assets of the arrangement. Investments in joint ventures are accounted for using the equity method. Under the equity method,
the investment in a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the joint
venture since acquisition date.
112
Tabcorp Annual Report 2021 D2 Deed of cross guarantee
The parties to the deed of cross guarantee, as identified in note D1, each guarantee the debts of the others. By entering into the deed, the subsidiaries are relieved from the requirements of
preparation, audit and lodgement of a financial report and a Directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. Together with Tabcorp Holdings
Limited, the entities represent a ‘Closed Group’ for the purposes of the ASIC Instrument.
The consolidated income statement and balance sheet of all entities included in the Closed Group are set out below.
Income statement
Revenue
Expenses
Profit/(loss) before income tax and net finance costs
Finance income
Finance costs
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) after tax
Other comprehensive income
Change in fair value of cash flow hedges taken to equity that may be reclassified to profit or loss
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 for the year, net of income tax
Total comprehensive income for the year
Net profit/(loss) after tax
Accumulated losses at beginning of year
Other comprehensive income
Dividends paid
Accumulated losses at end of year
2021
$m
5,700
(5,113)
587
1
(169)
419
(214)
205
(74)
22
3
(1)
(50)
155
205
(2,085)
2
(166)
(2,044)
2020
$m
5,219
(5,853)
(634)
2
(195)
(827)
(104)
(931)
146
(44)
(1)
-
101
(830)
(931)
(708)
(1)
(445)
(2,085)
113
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2021
D2 Deed of cross guarantee (continued)
Balance sheet
Cash and cash equivalents
Receivables
Prepayments
Derivative financial instruments
Other financial assets
Assets held for sale
Other
Total current assets
Receivables
Investment in controlled entities
Other financial assets
Licences
Other intangible assets
Property, plant and equipment
Right-of-use assets
Prepayments
Derivative financial instruments
Other
Total non current assets
TOTAL ASSETS
Payables
Interest bearing liabilities
Lease liabilities
Current tax liabilities
Provisions
Derivative financial instruments
Other
Total current liabilities
Payables
Interest bearing liabilities
Lease liabilities
Deferred tax liabilities
Provisions
Derivative financial instruments
Other
Total non current liabilities
TOTAL LIABILITIES
NET ASSETS
Issued capital
Accumulated losses
Reserves
TOTAL EQUITY
114
2021
$m
328
83
45
70
129
-
113
768
2
36
129
2,041
7,909
375
233
26
88
20
10,859
11,627
1,181
177
47
55
61
50
89
1,660
271
2,299
262
527
25
55
13
3,452
5,112
6,515
9,230
(2,044)
(671)
6,515
2020
$m
338
71
33
103
26
39
105
715
3
36
159
2,148
8,039
456
275
20
426
24
11,586
12,301
1,184
249
47
-
47
44
81
1,652
238
3,471
306
588
29
104
1
4,737
6,389
5,912
8,617
(2,085)
(620)
5,912
Tabcorp Annual Report 2021 D3 Parent entity disclosures
Result of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of the parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Issued capital
Retained earnings/(accumulated losses)
Demerger reserve
Other reserves
Total equity
Contingent liabilities
Refer to note E4.
Capital expenditure
Tabcorp Holdings
2021
$m
471
3
474
36
8,928
101
101
9,230
259
(670)
8
8,827
2020
$m
321
(1)
320
71
7,959
43
52
8,617
(48)
(670)
8
7,907
The parent entity did not have any capital expenditure commitments for the acquisition of property, plant and equipment contracted but not provided for at 30 June 2021 or 30 June 2020.
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a deed of cross guarantee with the effect that the Company guarantees debts in respect of its subsidiaries. Further details of the deed of cross guarantee
and the subsidiaries subject to the deed, are set out in note D2.
Tax consolidation
Tabcorp Holdings Limited (the Head Company) and its 100% owned Australian tax resident subsidiaries have formed an income tax consolidation group, and are therefore taxed as a single
entity. Members of the tax consolidation group entered into a tax sharing arrangement that provides for the allocation of income tax liabilities between the entities should the Head Company
default on its tax payment obligations. At balance date, the possibility of default is remote.
Members of the tax consolidation group have entered into a tax funding agreement which requires each member of the tax consolidation group to make a tax equivalent payment to or from
the Head Company, based on the current tax liability or current tax asset of the member. These amounts are recognised as either an increase or decrease in the subsidiaries’ intercompany
accounts with the Head Company. Deferred taxes are recognised separately by each member of the tax consolidation group.
115
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2021
D4 Business combinations
Acquisition of Premier Gateway International Limited and Premier Gateway Services Limited
In February 2021, the Group purchased the remaining 50% ordinary shares of Premier Gateway International Limited and Premier Gateway Services Limited (PGI) from Phumelela Gold
International Limited (Phumelela) and obtained control over these entities. PGI operates an online wagering and betting business in the Isle of Man and was previously operated pursuant
to a joint venture arrangement between the Group and Phumelela. The acquisition complemented the Group’s existing Wagering and Media business.
(a) Identifiable assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of PGI as at the date of the acquisition were:
Cash and cash equivalents
Receivables
Prepayments
Property, plant and equipment
Other intangible assets(i)
Payables
Net identifiable assets acquired
Goodwill arising on acquisition
Fair value of previously held equity interest (ii)
Purchase consideration transferred (cash)
(i) Intangible assets have a useful life of 5–8 years.
(ii) At the acquisition date, the Group’s existing 50% investment in PGI was remeasured to fair value and a gain of $35m was recognised in other income in the income statement.
At the acquisition date, the fair value and gross contractual amounts due from trade debtors was $24m. This amount was expected to be fully collectible at the acquisition date.
(b) Purchase consideration
The cash inflow on acquisition was:
Net cash acquired
Cash paid
Net cash inflow
(c) Revenue and profit contribution
2021
$m
71
31
1
1
54
(104)
54
-
(35)
19
2021
$m
71
(19)
52
Since the date of acquisition, the additional 50% investment in PGI has contributed $41m revenue and nil profit before income tax expense, after amortisation of the identifiable intangible
assets of $2m. If the acquisition had taken place at the beginning of the year, the Group’s revenue and profit before income tax expense would have been $5,769m and $482m respectively.
116
Tabcorp Annual Report 2021 D5 Investment in an associate
Investment in Jumbo Interactive Ltd (Jumbo)
2021
$m
-
2020
$m
29
During the year, the Group disposed of its 7,234,178 shares (11.6% interest) in Jumbo at a price of $13.52 per share, with a profit before tax impact of $69m. Jumbo is a retailer of official
government and charitable lotteries in Australia, and is listed on the ASX under the ticker ‘JIN’.
The equity accounted profit recognised during the year was nil (2020: $3m). Dividends received from Jumbo during the year were $1m (2020: $3m).
The above associate was incorporated in Australia. The Group did not have representation on the Board of Directors, although it did have the option to have representation. The Group did not
participate in the significant financial and operating decisions but has arrangements in place with the associate which are material to Jumbo’s operational financial performance. The Group
had therefore determined that it had significant influence over this entity. In the normal course of business, commission is paid to Jumbo for acting as an agent in regards to the sale of
lottery tickets.
An associate is an entity over which the Group has significant influence but not control or joint control. Significant influence is the power to participate in the financial and operating
decisions of the investee. Investments in associates are accounted for using the equity method.
SECTION E – OTHER DISCLOSURES
E1 Employee share plans
The Company operates share plans which provide equity instruments to senior executives and management as a component of their remuneration.
Long Term Performance Plan (LTPP)
The LTPP is available at the most senior executive levels. Under the LTPP employees may become entitled to Performance Rights in the Company. Performance Rights are subject to a relative
total shareholder return (relative TSR) measure, a market vesting condition. A second performance measure (weighted 25%), being a non-market vesting condition, was introduced in the
grants from 2019 onwards.
The fair value of Performance Rights under each performance measure is determined at grant date by an external valuer and takes into account the terms and conditions upon which they
were granted. The fair value is recognised as an employee expense (with a corresponding increase in equity) over the vesting period.
For the relative TSR measure the fair value is recognised as an expense irrespective of whether the Performance Rights vest to the holder, and a reversal of the expense is only recognised
in the event the instruments lapse due to cessation of employment within the vesting period. For the second performance measure, the amount expensed is based on the expected number
of Performance Rights vesting, with the ultimate expense reflecting the actual Performance Rights that vest.
The dilutive effect, if any, of outstanding Performance Rights is reflected in the computation of diluted earnings per share.
117
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2021
Short Term Performance Plan (STPP)
For senior management it is mandatory to defer 25% (50% for the Managing Director and Chief Executive Officer) of their STPP into Restricted Shares, which are subject to a two year
service condition. The cost of the Restricted Shares is based on the market price at grant date and is recognised over the vesting period.
The maximum number of shares that can be outstanding at any time under these plans is limited to 5% of the Company’s issued capital.
The share based payments expense in respect of the equity instruments granted is recognised in the income statement for the period.
Further explanation of the share plans is disclosed in the Remuneration Report.
Performance Rights (number)
Details of and movements in Performance Rights granted under the LTPP that existed during the current or prior year are:
Grant date
2021
27 October 2017
17 October 2018
17 October 2018
24 October 2019
20 October 2020
2020
25 October 2016
27 October 2017
17 October 2018
17 October 2018
24 October 2019
Expiry date
15 September 2020
19 September 2021
30 June 2021
25 September 2022
24 September 2023
14 September 2019
15 September 2020
19 September 2021
30 June 2021
25 September 2022
Balance at
start of year
Movement during the year
Granted
Forfeited
Vested
Balance at
end of year
1,296,970
1,486,967
495,645
2,022,456
-
5,302,038
1,110,418
1,333,108
1,727,310
575,758
-
4,746,594
-
-
-
-
3,288,875
3,288,875
-
-
-
-
2,153,685
2,153,685
(596,613)
(145,937)
(48,646)
(266,033)
(143,016)
(1,200,245)
(1,110,418)
(36,138)
(240,343)
(80,113)
(131,229)
(1,598,241)
(700,357)
-
-
-
-
(700,357)
-
-
-
-
-
-
-
1,341,030
446,999
1,756,423
3,145,859
6,690,311
-
1,296,970
1,486,967
495,645
2,022,456
5,302,038
No Performance Rights were exercisable at the end of the current or prior year.
Fair value of equity instruments
Performance Rights have been independently valued at the date of grant using a modified form of Monte-Carlo simulation-based model.
The weighted average fair value of Performance Rights granted during the year was $2.06 (2020: $2.87).
118
Tabcorp Annual Report 2021 The assumptions underlying the Performance Rights valuations are:
Grant date
25 October 2016
27 October 2017
17 October 2018
17 October 2018
24 October 2019
24 October 2019
20 October 2020
20 October 2020
Expiry date
14 September 2019
15 September 2020
19 September 2021
30 June 2021
25 September 2022
25 September 2022
24 September 2023
24 September 2023
Share price
at date
of grant
$
4.91
4.45
4.76
4.76
4.85
4.85
3.44
3.44
Expected
volatility in
share price(i)
%
22.00
22.00
21.00
21.00
20.00
20.00
30.00
30.00
Expected
dividend
yield(ii)
%
5.00
5.50
5.06
5.06
4.62
4.62
3.40
3.40
Risk free
interest
rate(iii)
%
1.78
2.04
2.05
2.05
0.73
0.73
0.27
0.27
Value per
Performance
Right
$
2.51
2.37
2.59
4.16
2.42
4.24
1.71
3.11
(i) Reflects the assumption that the historical volatility is indicative of future trends.
(ii) Reflects the assumption that the current payout ratio will continue with no anticipated increases.
(iii) Represents the zero coupon interest rate derived from government bond market interest rates on the valuation date and vary according to each maturity date.
E2 Pensions and other post employment benefit plans
The Group has two defined benefit superannuation plans (closed to new entrants), the New South Wales Lotteries Corporation Pty Limited defined benefit plan (‘NSW Lotteries plan’) and
the Tabcorp Superannuation Plan (‘Tabcorp plan’), which provide benefits based on salary and length of service. The plans are governed by the employment laws of Australia and the Group
contributes to the plans at rates based on actuarial advice.
Reconciliation of the net defined benefit asset/(liability) recognised in the balance sheet(i)
NSW Lotteries plan
Balance at 30 June 2019
Actuarial gains
Benefits paid
Other
Balance at 30 June 2020
Actuarial gains/(losses)
Benefits paid
Other
Balance at 30 June 2021
Fair value of
plan assets
$m
Present value of
defined benefit
obligation
$m
Net defined
benefit plan
assets/
(liabilities)
$m
17
-
(1)
1
17
2
(1)
1
19
(28)
3
1
(1)
(25)
(1)
1
(1)
(26)
(11)
3
-
-
(8)
1
-
-
(7)
119
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2021
Fair value of
plan assets
$m
Present value of
defined benefit
obligation
$m
Net defined
benefit plan
assets/
(liabilities)
$m
15
-
(1)
(1)
1
14
-
2
(3)
-
13
(13)
(1)
-
1
-
(13)
1
-
3
-
(9)
2
(1)
(1)
-
1
1
1
2
-
-
4
2020
$m
3
(2)
1
Reconciliation of the net defined benefit asset/(liability) recognised in the balance sheet(i)
Tabcorp plan
Balance at 30 June 2019
Actuarial losses
Actual return on plan assets excluding interest income
Benefits paid
Other
Balance at 30 June 2020
Actuarial gains
Actual return on plan assets excluding interest income
Benefits paid
Other
Balance at 30 June 2021
(i) Net defined benefit plan assets and net defined benefit plan liabilities are recognised on the balance sheet in other non current assets and other non current liabilities respectively.
Amounts recognised in other comprehensive income
NSW Lotteries plan
Tabcorp plan
Fair value of plan assets
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:
Cash
Fixed interest
Australian equities
International equities
Property
Alternatives
2021
$m
1
3
4
2021
%
4.0
12.0
26.0
27.0
8.0
23.0
100.0
NSW Lotteries plan
2020
%
10.2
7.5
18.1
29.7
8.3
26.2
100.0
2021
%
12.2
6.4
19.9
33.2
7.9
20.4
100.0
Tabcorp plan
2020
%
5.0
17.0
28.0
25.0
6.0
19.0
100.0
The Trustees are responsible for the governance and administration of the funds, the management and investment of the fund assets and compliance with other applicable regulations.
The defined benefit fund assets are invested with independent fund managers and have a diversified asset mix. The funds have no significant concentration of investment risk or liquidity risk.
The Group’s total defined benefit obligation is not materially sensitive to changes in assumptions.
120
Tabcorp Annual Report 2021 Defined benefit plans are recognised in the balance sheet as the difference between the present value of the estimated future benefits that will be payable to plan members and the fair
value of the plan’s assets. An annual adjustment is made to recognise all movements in the carrying amount of the plan in the income statement, except for the portion of the movement
that is attributable to actuarial gains and losses, which are recognised directly in equity. Actuarial gains and losses represent the difference between previous actuarial assumptions of
future outcomes and the actual outcome, in addition to the effect of changes in actuarial assumptions.
E3 Commitments
Capital expenditure commitments
Property, plant and equipment
Software
2021
$m
8
5
13
2020
$m
6
6
12
E4 Contingencies
Details of contingencies where the probability of future payments is not considered remote are set out below as well as details of contingencies, which although considered remote,
the Directors consider should be disclosed as they are not disclosed elsewhere in the notes to the financial statements.
Contingent assets
(a) Australian Taxation Office Audit
During the year the Australian Taxation Office (ATO) issued Tatts Group Limited (Tatts) (a wholly owned subsidiary of Tabcorp) with an amended assessment for the tax year ended 30 June
2016. The amended assessment relates to the deductibility of the licence fee incurred by Tatts in relation to monitoring gaming machines in New South Wales. The primary amount in dispute
of $62m and interest charges of $9m were paid in December 2020. An objection was lodged with the ATO in January 2021 in relation to the amended assessment and a Notice of Decision
was issued in June 2021 disallowing the objection. Tatts intends to appeal this decision. If Tatts is ultimately successful in its claim, the Company expects that the amended assessment
amounts will be refunded.
Contingent liabilities
(a) Charge
A controlled entity, Tabcorp Wagering Participant (Vic) Pty Ltd, which is a participant in the joint venture outlined in note E5(a), has entered into a deed of cross charge with its joint venture
partner to cover the non payment of a called sum in the event of the joint venture incurring a loss. The charge is over undistributed and future earnings of the joint venture to the level of the
unpaid call.
(b) Legal challenges
There are outstanding legal actions on foot and other potential legal exposures between controlled entities and third parties at 30 June 2021. It is expected that any liabilities arising from
such legal action or other potential exposures would not have a material adverse effect on the Group’s financial position, except as set out below.
(c) Racing Queensland Dispute
On 28 June 2019 Racing Queensland (RQ) commenced legal proceedings against the Company and UBET Qld Limited (UBET). RQ is seeking damages and other relief. The proceedings are
in relation to two interrelated disputes relating to the calculation of fees following the introduction of the point of consumption tax in Queensland on 1 October 2018. The Company and UBET
currently consider, on the balance of probability, that no provision for liability is required. The relevant variable fees are paid monthly. If the Company and UBET are ultimately unsuccessful
in the proceedings, the estimated financial impact covering the 33 month period to 30 June 2021 is an expense of up to $66m post tax (30 June 2020: $44m post tax). The impact of the
alleged underpayment on the relevant variable fees would extend until June 2044 when the relevant deed expires.
121
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2021
E5 Related party disclosures
(a) Transactions with joint arrangements
The Group conducts an unincorporated joint venture with VicRacing Pty Ltd in Victoria (the joint venture). The principal activity of the joint venture is the organisation, conduct, promotion
and development of wagering and betting in Victoria. The Group receives 50% of the revenue and expenses of the joint venture, which is accounted for as a joint operation.
The Group charges the joint venture for the provision of employee, management and asset services. On consolidation, 50% of the charges eliminate (being the Group’s interest in the joint
venture). Charges for the remaining 50% of $76m were received by the Group in 2021 (2020: $80m).
(b) Compensation of Key Management Personnel (KMP)
Short term
Other long term
Post employment
Share based payments
Termination benefits
E6 Auditor’s remuneration
Amounts received or due and receivable by Ernst and Young for:
– audit and review of the statutory financial reports of the Group and subsidiaries
– other assurance and agreed upon procedures services under other legislation or contractual arrangements
– other services(i)
(i) The Group engages Ernst and Young to provide permitted non-audit services where there is a compelling reason to do so provided stringent independence requirements are satisfied.
E7 Assets held for sale
Freehold land
Buildings
2021
$000
8,479
250
342
2,941
-
12,012
2021
$000
1,829
268
842
2,939
2021
$m
-
-
-
2020
$000
6,731
(34)
323
3,267
625
10,912
2020
$000
1,868
280
862
3,010
2020
$m
37
2
39
During the prior year, the Group entered into sale agreements in relation to two surplus corporate properties. The sales were completed by 30 June 2021.
Assets classified as held for sale are recognised at the lower of carrying amount and fair value less costs to sell. Gains and losses on subsequent re-measurement are included in the
income statement. No depreciation or amortisation is charged on these assets while they are classified as held for sale.
122
Tabcorp Annual Report 2021 E8 Other accounting policies
(a) Statement of compliance
(i) Changes in accounting policy and disclosures
A number of new and amended accounting standards became mandatorily applicable for the Group for the first time in the current financial year. The adoption of these new and amended
standards had no impact on the financial position or performance of the Group, or the disclosures included in this Financial Report.
The IFRS Interpretations Committee (IFRIC) recently issued an agenda decision providing guidance on the treatment of costs for configuring or customising a supplier’s application software
in a Software as a Service (Saas) arrangement, where the customer is provided with the right to receive access to the supplier’s application software over a contracted term, and for which no
intangible asset is recognised as the customer does not have control of the software. Entities are required to assess whether any configuration or customisation costs incurred result in an
intangible asset, by considering if these activities create a resource controlled by the entity which is separate from the software, and from which the entity has the power to obtain economic
benefit, and restrict others’ access to these benefits. If no intangible asset can be recognised, these costs are expensed when the services are deemed to be received. The adoption of the
agenda decision did not have a material effect on the Group’s Financial Report.
(ii) New Australian Accounting Standards or International Financial Reporting Standards issued but not yet effective
A number of new and amended accounting standards and interpretations have been recently issued by the Australian Accounting Standards Board but not yet effective. These new or
amended accounting standards and interpretations have not been early adopted and are not expected to have a material impact on the financial position or performance of the Group.
(b) Goods and services tax
Revenues, expenses, assets and liabilities are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset
or as part of the expense item as applicable;
• wagering and certain Keno revenues, due to the GST being offset against government taxes; and
• receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from,
or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(c) Foreign currency translation and balances
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at balance date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the income statement with the exception of differences on foreign currency borrowings that are in an effective hedge relationship.
These are taken directly to equity until the liability is extinguished at which time they are recognised in the income statement. Refer to note B4 for further detail.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Non monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair
value was determined.
123
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW DIRECTORS’ DECLARATION
In the opinion of the Directors of Tabcorp Holdings Limited:
(a)
the financial statements and notes of the Group are in accordance with the Corporations Act 2001 (Cth), including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001 (Cth);
(b)
the financial statements and notes also comply with International Financial Reporting Standards; and
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration has been made after receiving the declarations required to be made to the Directors by the Chief Executive Officer and Chief Financial Officer in accordance with section
295A of the Corporations Act 2001 for the financial year ended 30 June 2021.
In the opinion of the Directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note D2 will be able to meet any
obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.
Signed in accordance with a resolution of Directors.
Steven Gregg
Chairman
David Attenborough
Managing Director and Chief Executive Officer
Melbourne
18 August 2021
124
Tabcorp Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
125
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW INDEPENDENT AUDITOR’S REPORT
126
Tabcorp Annual Report 2021 127
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW INDEPENDENT AUDITOR’S REPORT
128
Tabcorp Annual Report 2021 129
Tabcorp Annual Report 2021CORPORATE RESPONSIBILITYGOVERNANCEDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW FIVE YEAR REVIEW
Financial performance
Total revenue(ii)
EBITDA(iii)
Profit/(loss) before interest and tax
Profit/(loss) after income tax attributable
to members of parent entity
Dividend(iv)
Financial position and cash flow
Total assets
Total liabilities
Shareholders' funds/total equity
Net cash flows from operating activities
Capital expenditure – payments
Cash at end of year
Shareholder value
Earnings per share
Dividends per share(iv)
Operating cash flow per share(v)
Net assets per share
Return on shareholders’ funds
Total shareholder return(vi)
Share price close
Market capitalisation
Segment revenue from continuing operations(vii)
Lotteries and Keno(viii)
Wagering and Media(ii)
Gaming Services
Employee
Safety(ix)
Females in senior management roles
Other stakeholder benefits
Returns to racing industry
State and territory gambling taxes and GST
Income tax expense
Unit
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
cents
cents
cents
$
%
%
$
$m
$m
$m
$m
LTIFR
%
$m
$m
$m
130
FY21
5,686
1,031
651
269
322
11,869
5,173
6,696
720
183
424
12.3
14.5
24.6
3.07
4.1
55.8
5.18
11,508
3,206
2,298
183
2.3
43
1,037
2,240
214
FY20
5,224
(196)
(574)
(870)
223
12,416
6,389
6,027
671
290
349
(42.9)
11.0
18.8
2.97
(12.8)
(19.9)
3.38
6,869
2,917
2,084
221
FY19 (i)
5,488
1,082
730
361
444
13,623
6,443
7,180
770
278
463
17.9
22.0
24.4
3.56
5.0
4.2
4.45
8,986
2,865
2,318
304
4.1
39
3.6
36
954
2,086
103
975
2,100
161
FY18
3,765
490
241
29
423
12,941
5,702
7,239
448
292
353
1.9
21.0
10.5
4.89
0.6
7.5
4.46
8,978
1,391
2,122
250
2.3
36
917
1,166
85
FY17
2,234
285
102
(21)
209
3,741
2,258
1,483
223
197
114
(2.5)
25.0
3.0
1.78
(1.3)
0.6
4.37
3,650
213
1,873
144
1.5
39
813
406
46
The Tabcorp-Tatts combination was implemented in December 2017,
therefore FY18 includes approximately six months contribution from
the Tatts business, and FY19 represents the first full financial year for
the combined group.
(i) FY19 has been restated to reflect the impact of the application
of AASB 16 Leases which was adopted in FY20. Periods prior
to FY19 have not been restated.
(ii) Periods since FY18 (which was restated) reflect the impact of the
application of AASB 15 Revenue from Contracts with Customers.
(iii) Includes impairment of:
FY21: Goodwill – $122m and other assets – $10m.
FY20: Goodwill – $1,090m and other assets – $43m.
FY19: Other assets – ($4)m.
FY18: Other assets – $39m.
FY17: Other assets – $28m.
(iv) Dividends attributable to the year, but which may be payable after
the end of the period.
(v) Net operating cash flow per the cash flow statement 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.
(vi) Total shareholder return (TSR) is calculated from 1 July to 30 June.
The share price used for calculating TSR is the volume weighted
average share price used in the Tabcorp Dividend Reinvestment
Plan (DRP). Where no DRP was in operation, the closing share
price on the dividend payment date is used.
(vii) Revenue includes both external and internal revenue.
(viii) Prior to FY18, this was the Keno segment.
(ix) The lost time injury frequency rate (LTIFR) is the number
of lost time injuries per million hours worked.
Tabcorp Annual Report 2021
SHAREHOLDER INFORMATION As at 30 July 2021
Securities on issue
Tabcorp has on issue 2,221,617,545 fully paid ordinary shares (shares) which are quoted on the Australian Securities Exchange (ASX) under the code TAH. The issued capital has increased
since 30 June 2020 due to shares issued under the 1 for 11 pro rata accelerated renounceable entitlement offer which concluded in September 2020, and shares issued pursuant to
Tabcorp’s Dividend Reinvestment Plan. These shares represent the only Company securities quoted on the ASX. There currently isn’t a share buy-back in operation in respect of the
Company’s shares.
Tabcorp also has 6,690,311 Performance Rights issued to executives pursuant to Tabcorp’s Long Term Incentive Plan which are not quoted on the ASX.
During FY21, a total of 123,965 shares were acquired on market at an average price of $4.76 per share pursuant to Tabcorp’s employee incentive plans.
Shareholding restrictions
There are a number of restrictions applying to shareholdings in Tabcorp, which arise under legislation, requirements of various regulatory authorities and in the Company’s Constitution.
Some of these restrictions limit the number of shares and/or voting power in the Company that can be held by a shareholder. In particular, the Company’s Constitution (to be read in
conjunction with applicable legislation) contains restrictions prohibiting a person from having voting power in the Company in excess of 10% without obtaining the written consent of relevant
Government Ministers in NSW and Queensland. In addition, legislative change to the Totalizator Act 1997 (NSW) (and related legislation) would also be required in order for a person to hold
in excess of 10% of the shares in the Company (or the NSW Wagering Licence holder, TAB Limited). The Company may refuse to register any transfer of shares which would contravene
relevant shareholding restrictions or require divestiture of the shares that cause an individual to exceed the shareholding restrictions.
Voting rights
Shares issued by Tabcorp carry one vote per share. 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.
Substantial shareholders
The following is a summary of the substantial shareholders pursuant to notices lodged with the ASX in accordance with section 671B of the Corporations Act 2001:
Name
AustralianSuper Pty Ltd
BlackRock Group
The Vanguard Group, Inc
Date of interest
16 March 2020
22 January 2020
29 December 2017
Number of ordinary shares(i)
174,180,122
121,798,304
106,462,742
% of issued capital(ii)
8.60
6.01
5.295
(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.
131
Tabcorp Annual Report 2021 SHAREHOLDER INFORMATION As at 30 July 2021
Twenty largest registered holders of ordinary shares
Investor name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd Six Sis Ltd
HSBC Custody Nominees (Australia) Limited
Argo Investments Limited
BNP Paribas Nominees Pty Ltd ACF Clearstream
Est Robin Edward Davey
UBS Nominees Pty Ltd
Wentworth Investments Pty Ltd
Netwealth Investments Limited
Seymour Group Pty Ltd
Australian Executor Trustees Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Neweconomy Com Au Nominees Pty Limited <900 A/C>
Total of top 20 registered holders
Distribution of securities held
Number of ordinary shares
573,923,576
495,926,965
246,614,427
90,116,862
43,212,652
26,859,886
24,914,503
18,854,314
16,292,047
14,223,758
10,548,951
9,381,867
7,654,934
5,989,702
5,311,910
5,193,453
5,090,911
4,503,848
3,985,232
3,885,138
1,612,484,936
% of issued capital
25.83
22.32
11.10
4.06
1.95
1.21
1.12
0.85
0.73
0.64
0.47
0.42
0.34
0.27
0.24
0.23
0.23
0.20
0.18
0.17
72.58
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
76,246
63,777
11,247
8,394
379
160,043
Ordinary shares(i)
Number of
securities
25,143,830
151,567,245
79,599,326
180,065,575
1,785,241,569
2,221,617,545
% of
securities
1.13
6.82
3.58
8.11
80.36
100%
Number of
holders
-
-
-
16
14
30
Performance Rights(ii)
Number of
securities
-
-
-
969,459
5,720,852
6,690,311
% of
securities
-
-
-
14.49
85.51
100%
(i) Ordinary shares includes Restricted Shares offered to employees under the Company’s incentive arrangements.
(ii) Performance Rights were issued pursuant to the Company’s long term incentive arrangements. Refer to the Remuneration Report on pages 51 to 76 for more information about the Company’s incentive arrangements.
Unmarketable parcels
There were 11,558 shareholders holding less than a marketable parcel of ordinary shares ($500 or more, equivalent to 102 ordinary shares) based on a market price of $4.95 at the close
of trading on 30 July 2021.
132
Tabcorp Annual Report 2021 COMPANY DIRECTORY
Registered office
Tabcorp Holdings Limited
Level 21, Tower 2, Collins Square
727 Collins Street
Melbourne VIC 3008
Australia
Telephone 03 9246 6010
03 9246 6684
Facsimile
enquiries@tabcorp.com.au
Email
Share registry
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Australia
Telephone
1300 665 661
Telephone 02 8280 7418
02 9287 0303
Facsimile
02 9287 0309 (proxy forms only)
Facsimile
tabcorp@linkmarketservices.com.au
Email
www.linkmarketservices.com.au
Website
Website
www.tabcorp.com.au
New South Wales office
Level 31
680 George Street
Sydney NSW 2000
Telephone 02 9218 1000
Queensland office
Level 8
180 Ann Street
Brisbane QLD 4000
Telephone 07 3877 1010
Sky Racing/Sky Sports Radio
79 Frenchs Forest Road
Frenchs Forest NSW 2086
Telephone
02 9452 8400
Follow us on social media
INDICATIVE KEY DATES
2021
Last date for receipt of AGM director nominations
Annual General Meeting
2022*
Half year results announcement
Ex-dividend for interim dividend
Record date for interim dividend
Last date for receipt of DRP elections
Interim dividend payment
End of financial year
Full year results announcement
Ex-dividend for final dividend
Record date for final dividend
Last date for receipt of DRP elections
Last date for receipt of AGM director nominations
Final dividend payment
Annual General Meeting
31 August
19 October
17 February
22 February
23 February
24 February
17 March
30 June
24 August
31 August
1 September
2 September
7 September
23 September
26 October
* Proposed dates set out above are subject to change. Payment of any dividend is subject to
Board approval and the key dates for each dividend will be confirmed to the ASX. Refer to
the Company’s website for any updates.
Notice of meeting
The Annual General Meeting of Tabcorp Holdings Limited will commence
at 10.00am (AEDT) on 19 October 2021.
Corporate information
Stock exchange listing
Copyright
Investment warning
Privacy
Trade marks
The Company is a company
limited by shares that is
incorporated and domiciled
in Australia.
The Company’s ordinary
shares are quoted on the
Australian Securities
Exchange (ASX) under
the code ‘TAH’.
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.
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.
Tabcorp respects the
privacy of its stakeholders.
Tabcorp’s Privacy Policy
is available on the
Company’s website at
www.tabcorp.com.au.
Currency
References to currency are
in Australian dollars unless
otherwise stated.
® These trade marks are
registered in Australia
(either across Australia or
limited to certain state/s
or territory/ies) and are
owned by or licensed
to a company in the
Tabcorp Group.
133
Tabcorp Annual Report 2021 WWW.TABCORP.COM.AU