WE’RE RAISING THE GAME
ANNUAL REPORT 2022
CONTENTS
Operating and financial review
About Tabcorp
Chairman’s and Managing Director’s message
Our strategy
Supporting a sustainable industry
FY22 overview
Review of FY22 results
Our FY23 priorities
Our people
Renewed Board
Experienced management and new capabilities
Wagering and Media
Gaming Services
Sustainability
Governance
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
Glossary
Company directory
Indicative key dates
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Tabcorp acknowledges Aboriginal and Torres Strait Islander peoples as the
Traditional Custodians of the land on which we live. We pay our respects to
Elders past, present and emerging.
Tabcorp Holdings Limited ABN 66 063 780 709
ABOUT TABCORP
We are a multi-branded, diversified wagering, media and gaming services operator. We have national scale
and reach across Australia with our leading TAB, Sky Racing and MAX brands, and international wagering
and broadcasting operations through Sky Racing World and Premier Gateway International.
Wagering and Media
Gaming Services
Demerger
®
®
®
783,000
4,000+
3,500+
85%
Active registered
TAB customers
Wagering retail
venues
Venues serviced
of Australian EGMs
serviced(ii)
(i) Data as at 30 June 2022 or in respect of the financial year ended 30 June 2022 (FY22), as applicable.
(ii) Based on total number of electronic gaming machines (EGMs) that MAX provides at least one product or service to.
Tabcorp successfully
implemented the
demerger of its former
Lotteries and Keno
businesses on 1 June 2022.
Following the Demerger,
Tabcorp operates
two businesses: its
Wagering and Media
business; and its Gaming
Services business.
Tabcorp’s former Lotteries
and Keno business is now
operated by The Lottery
Corporation Limited
(ASX code ‘TLC’),
and is disclosed as
discontinued operations
in this Annual Report.
1
Tabcorp Annual Report 2022OPERATING & FINANCIAL REVIEWDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCESUSTAINABILITY ABOUT TABCORP CONTINUED
WE ARE THE BIG
AUSTRALIAN PLAYER
Broad national footprint across Australia
TAB is one of the most recognised wagering brands in Australia.
Customers can wager with TAB anywhere in Australia online and by
phone, and in more than 4,000 retail venues including pubs, clubs,
agencies and on-course (except Western Australia).
Our Sky Racing business provides racing and sports vision
to 4,875 venues across Australia, via pay TV and over various
digital platforms.
Our Gaming Services business provides regulatory monitoring and
related services across NSW, Queensland and Northern Territory,
and in-venue EGM services across more than 3,500 venues in NSW
and Victoria, as well as other technology and value-added venue
services in NSW, Victoria, Queensland, Western Australia, South
Australia, Tasmania, ACT and Northern Territory.
Complementary international businesses
Our domestic Wagering and Media business is complemented
by Sky Racing World, a US-based international racing content
distributor and facilitator of associated tote pools, and Premier
Gateway International (PGI), one of the largest global tote hubs
based in Isle of Man.
2
Tabcorp Annual Report 2022 Northern Territory
Queensland
Western Australia
New South Wales
South Australia
LEGEND
Wagering
(Online and phone)
Wagering
(Pubs/Clubs)
Wagering
(Agencies)
Wagering
(On Course)
Media
Gaming Services
Global Operations
Media broadcasting
to 50+ countries
Media distribution
and licensed tote
provider in USA
Wagering
pooling hub in
Isle of Man
Victoria
ACT
Tasmania
3
Tabcorp Annual Report 2022OPERATING & FINANCIAL REVIEWDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCESUSTAINABILITY CHAIRMAN’S AND MANAGING DIRECTOR’S MESSAGE
and Media and Gaming Services
businesses heavily impacted in the
first half of the year by retail and
venue shutdowns in our largest
markets of NSW and Victoria. In
addition, unprecedented wet
weather in the second half
led to a record number of race
abandonments and rain affected
race tracks further impacting our
Wagering and Media business.
Tabcorp reported net profit after
tax (NPAT) of $6,775.9m in FY22,
which included a one-off net gain
on the Demerger of $6,513.8m
after tax and other non-recurring
significant items(i). In the previous
year, Tabcorp reported NPAT
of $269.4m.
Revenues for the Group were
$5,605.5m, down 1.4%,
and revenues from continuing
operations were $2,373.3m,
down 4.3% on the previous year.
Group EBITDA from continuing
operations before significant
items(i) was $381.6m, down from
$487.2m in the previous year.
The Group recorded a net loss
before income tax and finance
costs from continuing operations
of $75.1m, compared to a profit
of $66.9m for the previous year.
Pleasingly, following the end of
COVID-19 related lockdowns, the
performance of Wagering and
Media and Gaming Services
improved. Importantly, we are
seeing stabilisation in our
wagering digital market share.
Dividend and a disciplined
approach to cost
Tabcorp announced a final
dividend of 6.5 cents per share
fully franked. The final dividend
reflects five months of earnings
from the demerged Lotteries and
Keno business, and a full six
months of earnings from Tabcorp’s
continuing businesses. Dividends
payable in respect of the full year
totalled 13.0 cents per share fully
franked, representing a payout
ratio of 80% of NPAT before
significant items.
In FY22, the Group’s enterprise-
wide optimisation program ‘3S’
was completed, delivering a
further $23m of EBIT savings from
continuing operations. Pleasingly,
the continuing operations of the
Group contributed over 75% of
the savings over the life of the
program.
Cost discipline remains a priority
for the Group, and we have
established the new Genesis
program to improve organisational
efficiency and support the
management of cost growth within
a high inflationary environment.
We’re Raising the Game
Following the Demerger, we
have commenced a multi-year
transformation of Tabcorp.
We have a clear strategy that
is focused on growth and we
are working at pace to transform
Tabcorp into a more competitive
and profitable digital wagering
and integrity services business.
We showed in our first month
following the Demerger what
we can achieve with this new
approach. Proposed reforms
to the Queensland wagering
industry announced by the
Queensland Government will,
when implemented, ensure
Tabcorp no longer pays more
wagering taxes and fees than
Northern Territory licensed
online wagering operators in
that state. We also welcome
the announcements in NSW and
ACT of changes in the Point of
Consumption Tax (POCT) rate
in those states. These reforms
are a positive first step towards
allowing us to compete on
a level playing field.
(i) Earnings before interest, taxation, depreciation and amortisation (EBITDA) from continuing operations and before significant items
is non-IFRS financial information. For details of significant items, refer to page 13.
Bruce Akhurst
Chairman and independent
Non-Executive Director
Adam Rytenskild
Managing Director and
Chief Executive Officer
The 2021/22 financial year (FY22)
was an historic year for Tabcorp.
On 1 June 2022, the Company
successfully implemented the
demerger of its former Lotteries
and Keno business, which is
now operated by the ASX listed
company The Lottery Corporation
Limited (Demerger). The Demerger
was completed on time and
with strong support from our
shareholders.
We are confident the Demerger
will create value for shareholders,
with each business now able to
adopt more focused operating
structures and strategies, and
shareholders better able
to value each business on
a standalone value.
Tabcorp’s results for FY22 includes
the activities and results for our
continuing operations comprising
the Wagering and Media and
Gaming Services businesses for
the full year, as well as the former
Lotteries and Keno business for
the 11 month period until 1 June
2022 (treated as discontinued
operations in this report).
During FY22, the COVID-19
pandemic continued to disrupt our
business, with both the Wagering
4
Tabcorp Annual Report 2022 We have commenced the staged
rollout of the new TAB App, which
will be simpler, faster and marks
the beginning of a new era for the
TAB experience. We plan to follow
this up with new product releases
and an improved customer
experience that will enhance our
competitiveness.
Our Gaming Services business
has begun to pivot towards our
unique capabilities in providing
integrity services to governments
that are increasingly in demand.
We are engaged in a sale process
for our eBet business following
a strategic review process.
Renewed Board and
Leadership Team
Upon implementation of the
Demerger, Steven Gregg retired
as Chairman and Non-Executive
Director (NED) of Tabcorp, and
Harry Boon and Anne Brennan
also retired as NEDs to join The
Lottery Corporation Limited Board.
We’d like to thank them for their
contributions to Tabcorp.
Bruce Akhurst was appointed the
new Tabcorp Chairman and three
new NEDs were appointed to
the Board. Raelene Murphy and
Brett Chenoweth were formally
appointed to the Board in August,
having served as Board Observers
since 1 June 2022. Karen Stocks
also joined the Board on 1 June
2022 as an Observer and will be
appointed a NED pending receipt
of regulatory approvals. Our new
Board is diverse and brings a
breadth of knowledge and
experience aligned with our new
strategy and growth priorities.
David Attenborough retired as
Tabcorp MD & CEO after 11 years
and Adam Rytenskild was
appointed our new MD & CEO,
effective 1 June 2022. We thank
David for his leadership and
contributions to Tabcorp. A new
Executive Leadership Team has
also been appointed, with new
capability and a broad set of skills
across customer, digital products,
technology and media.
Sustainability
Tabcorp is committed to putting
our customers first and delivering
experiences that are enjoyed safely
and responsibly. We aim to set the
benchmark for sustainability
and in FY22 Tabcorp adopted a
new Sustainability Framework,
to be overseen by the Risk,
Compliance and Sustainability
Committee. Our new approach
to sustainability puts responsible
gambling and caring for our
customers at the centre of how
we operate, and underpins our
commitment to communities, our
people and ensuring we operate
our business sustainably for the
long-term.
Our continuing progress in
sustainability was recognised
in FY22, with Tabcorp ranked
first globally in the Casinos and
Gambling sector in the Dow Jones
Sustainability Index (DJSI) World
and DJSI Australia Indices for the
second successive year.
In FY22, we continued to enhance
our customer care technology and
human-led tools, creating an early
intervention model to proactively
contact customers and offer
responsible gambling tools to
assist customers. Looking ahead
we will continue to invest in
customer care and evolve our
practices to ensure we lead the
industry in safe and responsible
gambling practices.
At a community level, we
continued our strategic
partnerships with many
local racing and community
organisations. We also adopted
an Environment and Climate
Change Position Statement
formalising our commitment to
minimising our impact on the
environment and set medium
and long-term emission reduction
targets aligned with the Paris
Agreement goals.
Our People
We would like to acknowledge
our people who have done a
remarkable job in successfully
delivering the Demerger while
also working through the
ongoing challenges of COVID-19.
Throughout this period our
people have remained steadfastly
committed to delivering
outstanding experiences for
our customers.
We’re building a new culture at
Tabcorp and our people are key
to our transformation strategy. In
FY23 we will begin implementing
the changes required to create a
more engaging and easier place
to work so we can move faster,
be bold and win.
Conclusion
We want to thank our shareholders
for your ongoing support.
This is the beginning of a multi-
year transformation of Tabcorp
into a stronger, more competitive
business led by a renewed Board
and leadership team.
In the first twelve weeks since
the Demerger we’ve made good
progress and have positive early
momentum in transforming
Tabcorp into a more competitive
and growing business. We have
a clear plan including specific
actionable priorities for FY23,
which we are executing at pace.
We look forward to updating
shareholders on our progress
at Tabcorp’s Annual General
Meeting in October.
Bruce Akhurst
Chairman
Adam Rytenskild
Managing Director and
Chief Executive Officer
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Tabcorp Annual Report 2022
OUR STRATEGY
6
THINGS ARE CHANGING:
WE HAVE A NEW PURPOSE
AND STRATEGY TO PROPEL
US FORWARD
Tabcorp Annual Report 2022 WE’RE RAISING THE GAME
OUR PEOPLE
OUR PRODUCTS,
SERVICES & TECHNOLOGY
OUR COMMITMENT
TO CUSTOMER
Will be fundamental to…
Growth
Competitiveness
Financial Strength
• Leverage our unique betting
ecosystem to drive digital growth
across all channels
• Structural reform supporting
industry sustainability
• Strong free cashflow generation
• Balance sheet flexibility to pursue
• Leader in customer care and
value accretive growth
• Differentiate media content to
enhance TAB customer experience
sustainability
• Disciplined capital and cost
management
• Pivot Gaming Services to integrity
services
• Move faster, and invest in digital,
data capability and innovation
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Tabcorp Annual Report 2022OPERATING & FINANCIAL REVIEW
OUR STRATEGY CONTINUED
GROWTH:
CREATE THE MOST
INTEGRATED CUSTOMER
EXPERIENCE ACROSS
OUR BETTING
ECO-SYSTEM
Next-gen
Digitally enhanced, social betting
and entertainment experiences at
tracks, stadia, pubs and clubs
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Market leading digital experiences
Personalised and seamless
interactive betting experiences with
category leading insights and tools
Digital
e
n devic
O
At h
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e
OUR
CUSTOMERS
At a desti n a t i
n
o
Destinations
Vision &
Content
Revolutionise
Unrivalled access to the most
comprehensive live racing and
sports vision coupled with stats
and analysis delivered by the
best talent in market
Tabcorp Annual Report 2022 GROWTH:
HOW WE WILL UNLOCK GROWTH AND
INCREASE DIGITAL MARKET SHARE
WIN IN DIGITAL
Urgently improve digital
journeys, including launch
of all-new TAB App
Rebalance marketing spend
Maximise retail and
oncourse channels
MOVE FASTER &
EXTRACT VALUE
SOONER
Agile operating model
Start with the customer first:
• customer centred design
• data driven innovation
FOCUSED
DIFFERENTIATION
Localised media and
marketing strategy
Accelerate analytics and
data science foundations
Differentiated on demand
content
INVEST IN
TALENT FOR MUST
WIN AREAS
Data science and analytics
Digital acquisition and
optimisation
Digital Content, Product
Management, Engineering
and Design
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Tabcorp Annual Report 2022
9
SUPPORTING A SUSTAINABLE INDUSTRY
COMPETITIVENESS
We are seeking to address inequities in our license and regulatory environment to create a more
sustainable industry in the long run.
Level the Playing Field
Change the way we
participate in the domestic
wagering category
Harmonise Regulations
– Proactively engage to reshape licences
that level the playing field
– Selectively pursue licence structures that
maximise economic value
Work towards
driving national
regulatory reform
– Promote a unified national regulatory
framework making our participation
simpler and more efficient
– Improve approvals processes and speed
to market for new products
Tabcorp is one of the largest financial contributors to the Australian racing and wagering industry. Our taxes, licence fees and arrangements support
a vibrant local racing industry, Australian jobs, and retail venues such as pubs and clubs. Around 55% of Tabcorp’s FY22 revenue(i) was returned to
governments, racing industry and retail partners, totalling $1.5b(i). In contrast, other corporate bookmakers contribute only 43% of their revenue in
the form of taxes and fees(ii).
CHANGES ARE ALREADY
HAPPENING
QLD
NSW
ACT
Announcement of proposed structural
reforms to operator agnostic,
sustainable funding model
Revised POCT announced for all
wagering operators
Revised POCT announced for all
wagering operators
Industry funding model under review
(i) Based on FY22 TAB revenue including Victorian Racing Industry interest. Excludes GST.
(ii) Source: Sportsbet Investor Day presentation, September 2021.
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Tabcorp Annual Report 2022 O
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Through our involvement in the Aussie Fair Play Coalition, we have
partnered with industry stakeholders to promote a sustainable future
for our industry.
• Supporting Australian jobs, Australian industries and Australian communities.
• Fair and reasonable taxation of gambling products.
• Sustainable and well-funded Australian racing industry.
• Vibrant local pubs and community clubs.
• Well-regulated gambling sector, and a strong commitment to minimising gambling harm.
Tabcorp Annual Report 2022
11
GOVERNANCESUSTAINABILITYGOVERNANCESUSTAINABILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
FY22 OVERVIEW
HIGHLIGHTS
Year of transformation
Positioned for the future
Group financial results
KEY POINTS
• Demerger successfully implemented
• Renewed Board and Leadership Team
• New customer focused strategy launched to transform Tabcorp into a more competitive and growing business
• Levelling the Playing Field – announcement of proposed QLD structural reforms to an operator agnostic,
sustainable funding model. NSW POCT increase announced and industry funding model under review,
and ACT POCT increase announced
• Transformation underway of our culture to be customer obsessed, bold and unified to win
• Commenced staged rollout of new TAB App which is faster, easier and different – on track for launch
in September 2022
• Engaged in a sale process of the eBet business following Gaming Services strategic review and pivot
towards integrity services
• Clear strategy and ambition to be a leader in customer care and sustainability
• Genesis cost and efficiency program commenced aimed at restructuring the cost base
• FY22 result reflects a disrupted period and impacts of Demerger
• Statutory NPAT of $6,775.9m, including gain on Demerger of $6,513.8m after tax (FY21: $269.4m)
• Full year dividends totalled 13.0 cents per share fully franked, including a final dividend of 6.5 cents per
share fully franked
• Group revenue of $5,605.5m (FY21: $5,685.7m)
• Revenue from continuing operations of $2,373.3m (FY21: $2,479.9m)
• EBITDA from continuing operations before significant items(i) of $381.6m (FY21: $487.2m)
• Strong financial position with $20m net debt(ii) and $950m committed bank facilities
(i) Earnings before interest, taxation, depreciation, amortisation and impairment (EBITDA) from continuing operations and before significant items is non-IFRS financial information. Excludes earnings from Lotteries and Keno (discontinued operation).
(ii) Net debt is total loans and borrowings. Excludes lease liabilities and significantly restricted cash.
12
Tabcorp Annual Report 2022 REVIEW OF FY22 RESULTS
Demerger
Group results
On 1 June 2022, Tabcorp
successfully implemented the
demerger of its former Lotteries
and Keno business, which is now
operated by the ASX listed
company The Lottery Corporation
Limited (Demerger).
Following the Demerger, the
Group comprises two operating
businesses, which represent the
Group’s continuing operations:
• Wagering and Media
• Gaming Services
The Demerger process
commenced following the
conclusion of a strategic review
conducted over March to July in
2021, where the Board evaluated
various structural and ownership
options to maximise value for
Tabcorp shareholders.
On 12 May 2022, at a General
Meeting and Scheme Meeting
of Tabcorp, shareholders voted
overwhelmingly to approve the
Demerger. Eligible Tabcorp
shareholders received one share
in The Lottery Corporation for
every share held in Tabcorp.
Tabcorp continues to provide
certain transitional services to
The Lottery Corporation under the
terms of a Transitional Services
Agreement for an initial term of
up to 14 months. The majority
of these services relate to
information technology and
related services(i).
The former Lotteries and
Keno business is disclosed
as discontinued operations
in this report.
The financial results of the
Tabcorp Group for the financial
year ended 30 June 2022 (FY22)
relate to the Tabcorp Group’s
operations, which includes the
activities and results for these
continuing operations throughout
FY22 and the discontinued
operations for the 11 month
period until 1 June 2022.
The Group reported revenues
for FY22 from continuing and
discontinued operations of
$5,605.5m, down 1.4% on the
previous year. Revenues from
continuing operations were
$2,373.3m, down 4.3% on the
previous year.
Group NPAT was $6,775.9m,
which includes a one-off net gain
on Demerger of $6,513.8m after
tax and other significant items(ii).
In the previous year, Tabcorp
reported NPAT of $269.4m.
The Group reported a net loss
before income tax and finance
costs from continuing operations
of $75.1m, compared to a profit
of $66.9m for the previous year.
Group EBITDA from continuing
operations before significant
items(ii) (iii) was $381.6m, down from
$487.2m in the previous year.
The FY22 results for the
continuing operations were heavily
impacted by COVID-19 related
retail closures in the Group’s
largest markets of NSW and
Victoria in the first half of the
financial year (1H22) as well as
wet weather impacts in the
second half of the year (2H22)
that led to a record number
of race abandonments and
rain affected race tracks.
Refer to pages 22 to 28
for further details about the
performance of each continuing
operating business.
In FY22, the Group completed its
enterprise-wide ‘3S’ optimisation
program, delivering a further
$23m of EBIT savings from
continuing operations. The
continuing business operations
of the Group contributed over
75% of the savings over the
life of the program.
For the year ended 30 June
Group results including 11 months
from discontinued operations
Revenues
NPAT
Dividends per share (cents per
share fully franked)
Group results from continuing
operations
Revenues
(Loss)/profit before income tax
and finance costs
EBITDA before significant items(ii) (iii)
Cost discipline and commercial
rigor continues to be a key priority
for the Company. The new
‘Genesis’ cost and efficiency
program has commenced with
activities underway across the
business to enable the Group to
contain cost growth in a high
inflationary environment.
FY22
$m
5,605.5
6,775.9
FY21
$m
Change
%
5,685.7
269.4
(1.4)
NM(iv)
13.0
14.5
(10.3)
2,373.3
2,479.9
(4.3)
(75.1)
381.6
66.9
487.2
NM(iv)
(21.7)
(i) Refer to the Demerger Booklet dated 30 March 2022 for further information.
(ii) FY22 significant items comprise net gain on Demerger of $6,513.8m and gain on hedge
accounting of $64.3m, offset by $151.3m in costs associated with the Racing Queensland
settlement and industry reforms, $9.8m in assets write-offs and onerous contract, and
$3.5m impairment of non-current assets.
(iii) Earnings before interest, taxation, depreciation and amortisation (EBITDA) from continuing
operations and before significant items is non-IFRS financial information.
(iv) Percent change is not meaningful.
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Tabcorp Annual Report 2022
REVIEW OF FY22 RESULTS CONTINUED
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.
As part of the Demerger process,
Tabcorp’s previous US Private
Placement notes were cancelled
and equivalent notes were issued
by The Lottery Corporation to
those note holders.
Tabcorp’s post-Demerger capital
structure has been developed
having regard to its business
requirements, earnings profile
and cash flow generation profile.
The Company has a strong
balance sheet, and $950m
of committed bank facilities.
The Group’s average debt maturity
is approximately 4.15 years.
Gearing(i) is 0.5x as at 30 June
2022, and is projected to move
into the target range of 1.0-1.5x
after several upcoming payments,
including the final dividend,
remaining Demerger costs
of approximately $55m, and
Queensland payments(ii) (litigation
settlement of $150m and final
wagering licence installment
of $37.5m).
Dividends
A final dividend for FY22 of
6.5 cents per share fully franked
has been announced. The final
dividend reflects five months
of earnings from the now
discontinued Lotteries and Keno
business, and a full six months
of earnings for Tabcorp’s
continuing Wagering and Media,
and Gaming Services businesses.
The final dividend will be
payable on 23 September 2022
to shareholders registered at
1 September 2022. The ex-
dividend date is 31 August 2022.
The interim and final dividends
payable in respect of FY22 totalled
13.0 cents per share fully franked.
This equates to a FY22 dividend
payout ratio of 80% of NPAT
before significant items.
The Dividend Reinvestment Plan
will operate in respect of the
FY22 final dividend, with a 2.5%
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 to the Financial Report.
Description
2022 final
2022 interim
2021 final
Amount(iv)
6.5 cents
6.5 cents
7.0 cents
Record date
1 September 2022
23 February 2022
26 August 2021
Payment date
23 September 2022
7 March 2022
17 September 2021
Total
$144.7m
$144.7m
$155.5m
Target Net Debt
to EBITDA(i)
Net Debt(iii)
Committed Bank
Facilities Capacity
1.0-1.5X
$20M
$950M
Excluding significantly
restricted cash
Excluding lease liabilities and
significantly restricted cash
$400m 3-yr, $550m 5-yr
revolving loan facilities
(i) Gearing is net debt (including lease liabilities but excluding significantly restricted cash)/EBITDA.
(ii) Subject to the commencement of legislation that will implement the proposed reforms to the Queensland wagering industry announced by the Queensland Government.
(iii) Net debt is total loans and borrowings.
(iv) Amount per share fully franked.
14
Tabcorp Annual Report 2022 OUR FY23 PRIORITIES
We are working at pace to transform Tabcorp to be a more competitive and growing business
operating in a market that is a level playing field.
We have a clear focus on growing our customer base and creating products and experiences that
customers love.
GROWTH
COMPETITIVENESS
FINANCIAL STRENGTH
Launch new TAB App and
follow with new products
Urgently improve customers’
digital journeys
Rebalance marketing spend
to drive digital growth
Agile operating model
starting with Technology
and Customer teams
Invest in data and analytics
New customer focused
strategy leveraging our
unique combination of digital,
retail and media assets
Culture reinvigoration
program
Advocate for structural
reforms and regulatory
harmonisation
Gaming Services – build
and execute on the pipeline
of opportunities in integrity
services
Remain disciplined on
investment of capital,
particularly with regard
to licenses
Rigorous cost management
to deliver operating leverage
and create capacity to
reinvest
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Tabcorp Annual Report 2022
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Tabcorp Annual Report 2022
OUR PEOPLE
We have a winning team and our
people are at the heart of our
strategy, working together to
deliver outstanding experiences
for our customers, and achieve
our growth strategies.
16
Tabcorp Annual Report 2022
A GREAT PLACE
TO WORK
At Tabcorp, we strive to create an environment that fuels passion and drives innovation. We’re committed to fostering an inclusive and safe workplace, where everyone feels comfortable
to be their authentic self. We believe in empowering our team members and setting them up with the resources and support they need to succeed.
TOGETHER WE’RE RAISING THE GAME
INCLUSION AND
DIVERSITY
TEAM MEMBER
BENEFITS
WELLBEING
COMMUNITY
MINDED
An Employer of Choice for
Gender Equality – awarded by
the Workplace Gender Equality
Agency for the seventh
consecutive year
Gender affirmation support
Hesta 40:40 Vision signatory
Member of Pride in Diversity
and the Australian Network on
Disability
Flexible working
Happy and healthy teams
Market leading benefits such
as flexi leave, cultural leave and
18 weeks of paid parental leave
for all new parents
‘All Grow Academy’ learning
and development programs
Domestic and family violence
support
Free confidential external
support services
‘Tabcare’, our team member
and community engagement
program
Matched fundraising
Community volunteering
BUPA health and wellbeing
partnership
Volunteer leave
Visit the Careers section of our website www.tabcorp.com.au/careers for more information.
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Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCESUSTAINABILITY
RENEWED BOARD
We have a diverse Board with a broad set of skills and experience aligned with the Group’s strategy.
Bruce Akhurst
Chairman since June 2022
Independent NED since July 2017
Adam Rytenskild
Managing Director and Chief Executive Officer
since June 202222
Raelene Murphy
Observer since June 2022
Independent NED since August 2022
Justin Milne
Independent NED since August 2011
Bruce Akhurst is a Director of McMillan Shakespeare
Limited (from April 2021). He is also Chairman of the
Peter MacCallum Cancer Foundation and a Council
Member of RMIT University.
Mr Akhurst was the Executive Chairman of Adstream
Holdings Pty Ltd and was a Director of Vocus Group
Limited (from September 2018 to July 2021) 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, Compliance and Sustainability
Committee
• Chairman of Nomination Committee
• Member of Audit Committee
• Member of People and Remuneration Committee
• Member of Technology Committee
Qualifications:
• Bachelor of Economics (Honours)
• Bachelor of Laws
• Fellow of Australian Institute of Company
Directors (AICD)
Adam Rytenskild 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.
He became Managing Director and Chief Executive
Officer when Tabcorp’s demerger of its former
Lotteries and Keno business was completed
in June 2022.
Mr Rytenskild is also a Director of the Australasian
Gaming Council.
Mr Rytenskild has over 20 years’ experience in
gambling entertainment and leading complex,
customer focused businesses that are heavily
regulated, have multiple stakeholders, and operate
in dynamic and highly competitive digital markets.
His career also includes nine years with Mobil Oil
prior to joining Tabcorp.
Mr Rytenskild brings to the Board extensive
gambling industry experience, strategic and
commercial acumen, retailing and customer
experience.
In addition to the qualifications below, Mr Rytenskild
has attended the Senior Executive Program at
the London Business School, and the Executive
Breakthrough Program with Egon Zehnder.
Qualifications:
• Master of Business Administration
• Member of AICD
18
Raelene Murphy is a Director of Elders Limited
(from January 2021), Bega Cheese Limited
(from June 2015), Integral Diagnostics Limited
(from October 2017) and Altium Limited (from
September 2016).
Ms Murphy was previously a Director of Clean Seas
Seafood Limited (from July 2018 to October 2020),
Service Stream Limited (from November 2015 to
October 2019) and Tassal Group Limited.
Ms Murphy had an executive career in finance and
business turnaround, and has previously been the
CEO of The Delta Group and a Managing Director
of KordaMentha’s 333 Management practice.
Ms Murphy brings to the Board extensive experience
in finance, accounting, capital management,
strategy, risk and compliance.
Tabcorp Committees:
• Chairman of Audit Committee
• Member of Risk, Compliance and Sustainability
Committee
• Member of Nomination Committee
Qualifications:
Justin Milne is a former Chairman of NetComm
Wireless Limited (Director from March 2012 to July
2019), 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 Audit Committee
• Member of Risk, Compliance and Sustainability
Committee
• Bachelor of Business (Accounting)
• Member of Nomination Committee
• Fellow of the Institute of Chartered Accountants,
Australia and New Zealand
• Graduate Member of AICD
Qualifications:
• Bachelor of Arts
• Fellow of AICD
Tabcorp Annual Report 2022 Brett Chenoweth
Observer since June 2022
Independent NED since August 2022
David Gallop AM
Independent NED since July 2020
Janette Kendall
Independent NED since August 2021
Karen Stocks
Observer since June 2022
Proposed Independent NED(i)
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David Gallop AM is Chairman of Step One Clothing
Limited (from October 2021), 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
(from December 2017), Costa Group Holdings
Limited (from October 2016), and KM Property
Funds Limited.
Brett Chenoweth is Chairman of Adairs Limited
(from November 2020), Madman Entertainment Pty
Ltd, Canberra Data Centres and The Bombora
Group. He is also a Director of Vodafone New
Zealand Limited, Janison Education Group Limited
(from July 2014) and Surfing Australia Limited.
Mr Chenoweth was previously the CEO and
Managing Director of APN News and Media Limited,
and has held senior executive roles at The Silverfern
Group, Telecom New Zealand Limited, Ecorp Limited
and Village Roadshow 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 Chenoweth brings to the Board extensive
experience in retailing, marketing and consumer
experience, digital innovation, technology and
telecommunications, entertainment, strategy, legal,
risk and compliance.
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.
Tabcorp Committees:
• Member of Risk, Compliance and Sustainability
Committee
• Member of Technology Committee
• Member of Nomination Committee
Qualifications:
• Bachelor of Economics
• Bachelor of Laws
• Graduate Diploma in Applied Finance and
Investment
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.
Tabcorp Committees:
• Chairman of People and Remuneration
Committee
• Member of Risk, Compliance and Sustainability
Committee
Ms Kendall previously served as a Director of
Nine Entertainment Co. Holdings Limited, Wellcom
Worldwide Pty Ltd, Australian VenueCo 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.
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:
• Member of Audit Committee
• Member of People and Remuneration Committee
• Member of Technology Committee
• Member of Nomination Committee
• Member of Nomination Committee
Qualifications:
Qualifications:
• Bachelor of Laws
• Bachelor of Arts
• Graduate Member of AICD
• Bachelor of Business (Marketing)
• Fellow of AICD
• Member of Chief Executive Women
Karen Stocks is currently Managing Director,
Global Measurement Solutions at Google Inc.
Ms Stocks was previously the founding Managing
Director of Twitter Australia, and held several
leadership roles at Google Australia, including
as Managing Director, New Products and
Solutions APAC, and at Vodafone Australia.
Ms Stocks is a senior technology and media
executive, with extensive experience in the
technology sector, media, data, and customer
experience.
Ms Stocks was previously a Director of Netball
Australia.
Ms Stocks brings to the Board extensive experience
in information technology, digital innovation, media
and communications, marketing and customer
experience.
Tabcorp Committees:
• Observer of Technology Committee
• Observer of Nomination Committee
Qualifications:
• Bachelor of Financial Administration
• CPA Certificate
• Master of Business Administration
• Fellow of CPA Australia
(i) Subject to regulatory approval.
19
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCESUSTAINABILITY
EXPERIENCED MANAGEMENT AND NEW CAPABILITIES
Our Executive Leadership Team has a broad skill set across customer, technology, innovation, media and stakeholder engagement.
Jenni Barnett
Chief Customer Officer
Sharon Broadley
Chief People Officer
Tom Callachor
Chief Industry & Corporate Affairs Officer
Paul Carew
Chief Operating Officer
Jenni commenced as Chief Customer Officer
with Tabcorp in June 2022 following the
completion of Tabcorp’s demerger of its former
Lotteries and Keno business.
Jenni is a senior executive with over 20 years of
experience working with large organisations and
in the not-for-profit sector. Her broad experience
and expertise includes digital transformation,
marketing, and product management.
Prior to joining Tabcorp, Jenni held the role of
Executive Director, Telstra Digital, where she
led the digital transformation to meet customer
needs and deliver on Telstra’s T22 strategy. Prior
to this, Jenni worked at the Commonwealth
Bank of Australia in a range of senior product
and marketing roles, where she was one of the
executives responsible for establishing the digital
team at the Commonwealth Bank of Australia.
Jenni holds a Bachelor of Social Science, and
a Master of Business (Marketing), and is a
Graduate Member of AICD.
Sharon joined Tabcorp in October 2010 as
General Manager Talent and Organisational
Development and was Tabcorp’s General
Manager Employee Experience. She commenced
as Chief People Officer of Tabcorp in June 2022
following the completion of Tabcorp’s demerger
of its former Lotteries and Keno business.
Sharon has led the people workstreams of major
organisational change programs at Tabcorp
including for the combination with Tatts Group
and the Demerger of The Lottery Corporation.
Sharon has more than 20 years of experience
in organisational development, talent and
performance management, culture programs,
change management, employee engagement,
leadership and executive development. Prior
to joining Tabcorp she held senior people
leadership roles including with Fosters Group
Limited and Oracle Corporation.
Sharon holds a Bachelor of Education and
Training and an Associate Diploma of Training
and Development.
Paul commenced as Chief Operating Officer in
August 2022 and was previously Chief Operating
Officer – Gaming Services from February 2020.
Since joining Tabcorp in 2006, he has held
various senior management positions across
the Retail Wagering, Gaming and former
Keno businesses.
In his current role, Paul leads a diverse portfolio
of operational functions covering the Wagering
and Media business and Gaming Services
business.
Paul has over 25 years of experience in the
gaming and hospitality sector and has worked
across all Australian jurisdictions. He has held
senior roles in the beverage industry with Carlton
and United Breweries and was previously a
licenced venue owner and operator.
Paul holds a Bachelor of Commerce, Marketing
and Management, and has attended the
University of Nevada Executive Development
Program in the USA.
Tom commenced with Tabcorp in April 2015 and
has been the General Manager Government and
Industry Relations responsible for the Group’s
government and industry affairs strategy and
stakeholder engagement. He commenced as
Chief Industry & Corporate Affairs Officer of
Tabcorp in June 2022 following the completion
of Tabcorp’s demerger of its former Lotteries
and Keno business.
Tom has over 20 years of experience working
in government and public affairs. Prior to joining
Tabcorp, he spent five years working as a Chief
of Staff for various NSW Government Ministers.
During this time his responsibilities focused on
strategy, policy and working with government,
industry and other stakeholders to implement
key government decisions. Prior to his time in
NSW Government, Tom spent 10 years working
at PwC in the government and public sector
advisory areas.
Tom is an Alternate Director of the Australasian
Gaming Council.
Tom holds a Bachelor of Business (Accounting
and Human Resource Management), an
Executive Certificate in Positive Psychology
Coaching, and has attended Executive Education
at the Stanford University’s Graduate School of
Business. Tom is a Graduate Member of AICD.
20
Tabcorp Annual Report 2022 John Fitzgerald
Chief Legal & Risk Officer
Dan Renshaw
Chief Financial Officer
Alan Sharvin
Chief Information Officer
Angus Tiet
Chief Strategy & Ventures Officer
John commenced as Chief Legal & Risk Officer
of Tabcorp in July 2022 after the completion of
Tabcorp’s demerger of its former Lotteries and
Keno business.
Dan commenced as Chief Financial Officer of
Tabcorp in June 2022 following the completion
of Tabcorp’s demerger of its former Lotteries
and Keno business.
Alan commenced as Chief Information Officer
with Tabcorp in June 2022 following the
completion of Tabcorp’s demerger of its
former Lotteries and Keno business.
Angus commenced as Chief Strategy & Ventures
Officer with Tabcorp in June 2022 following the
completion of Tabcorp’s demerger of its former
Lotteries and Keno business.
John has extensive experience working as a
senior executive in roles spanning legal, risk,
audit, regulatory compliance and corporate
governance. His expertise includes leading
commercial advisory and governance functions,
and managing large-scale transactions, projects
and litigation.
Prior to commencing at Tabcorp, John was
General Counsel and Company Secretary at
AGL Energy Limited where he led the legal, risk,
compliance and advisory function, most recently
during that organisation’s demerger. John also
has experience working in both government
and private legal practice and is an experienced
Company Secretary.
John holds a Bachelor of Arts, a Bachelor of
Laws and a Master of Arts.
Dan previously held the roles of Executive
General Manager Finance and Commercial
for the Wagering and Media business, General
Manager Finance and Commercial for Keno and
Gaming Services, and General Manager Investor
Relations at Tabcorp.
Dan has over 20 years of experience in finance,
strategy, commercial, investor relations,
investment banking and equity markets. Prior
to joining Tabcorp Dan was Senior Director at
Merrill Lynch, leading Gaming Equity Research
across Australia, New Zealand and Asia. He was
also an Equity Analyst at Citigroup and was
Group General Manager Corporate Strategy
at Tote Tasmania for three years.
Dan holds a Bachelor of Commerce (Economics
and Finance) and is qualified as a Chartered
Accountant.
Alan is a senior technology executive with deep
experience across multi-national organisations.
His expertise includes digital strategy, omni-
channel, transformation and modern technology
practices, with extensive experience in wagering.
Prior to joining Tabcorp, Alan worked as Head of
Digital at Reece Group, where he led the digital
customer product and technology functions. Alan
previously worked at Tabcorp in 2018 to 2019
where he led the Technology function for the
Wagering and Media business. He has also held
senior roles at Amazon and Sportsbet.
Alan holds a Bachelor of Science, Computer
Science & Mathematics.
Angus has extensive experience working
as a senior executive in digital and growth
organisations, including within the gaming
sector. His expertise spans strategy, mergers
and acquisitions, finance and business
operations. He has held numerous leadership
roles in businesses across the USA, Europe
and Asia Pacific.
Prior to joining Tabcorp, Angus held the role
of Senior Vice President Strategy and Business
Development at Aristocrat Digital (now Pixel
United). Angus has also previously held the role
of Chief Financial Officer at Aristocrat Digital,
and Chief of Staff for the broader Aristocrat
Group, both based in the USA.
Angus holds a Bachelor of Laws and Bachelor
of Business, and an Executive Master of Business
Administration. He is also a member of Chartered
Accountants Australia and New Zealand.
Tabcorp Annual Report 2022
21
OPERATING & FINANCIAL REVIEWDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCESUSTAINABILITY WAGERING
AND MEDIA
22
Tabcorp Annual Report 2022
OUR BETTING ECO-SYSTEM
A unique eco-system, with scale, interacting
with customers across digital, destinations,
vision and content.
57%
Turnover is digital(i)
25%
Digital revenue
market share(ii)
783,000
Active customers(iii)
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4,000+
~140,000
71,000
Retail venues
Live races p.a. on SKY
Sky Racing Active
registered customers(iv)
Destinations
Digital
Vision &
Content
VENUE
MODE
Leverages our unique
retail footprint
Provides exclusive
customer offers
NEW
TAB APP
LAUNCH
Evolving our digital
betting experience
• Refreshed, easier
user interface
• Faster, more efficient
technology platform
(Google Flutter
technology)
• Commenced staged
rollout – full launch on
track for September 2022
(i) Digital proportion of wagering turnover in FY22 includes Victorian Racing Industry interest.
(ii) For FY22. Based on data supplied by industry partners which account for approximately one-third of the wagering market. All data is before generosities.
(iii) Wagering active digital customers measured on a rolling 12 month basis.
(iv) Reflects life to date Sky Racing Active registered customers.
Tabcorp Annual Report 2022
23
OPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
WAGERING AND MEDIA CONTINUED
Our diverse and complementary portfolio of operations
®
®
TAB is a leading omni-channel
provider of wagering experiences
in Australia, with a unique
combination of digital, retail
and media assets. TAB’s retail
network consists of TAB agencies,
hotels, pubs and clubs as well
as on-course operations, and
is complemented by TAB’s
nationally available online,
app and call-centre platforms.
The wagering licences held by
Tabcorp across each State and
Territory (excluding Western
Australia) enable it to exclusively
offer totalisator and cash betting
on racing and sporting events
through retail. TAB operates
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.
Refer to pages 46 to 47 for
further information.
24
Premier Gateway International
(PGI) operates an international
wagering and tote pooling hub,
licensed and operating out of the
Isle of Man. PGI is one of the
largest global tote hubs and is
also the only tote pooling hub
that operates 24 hours a day,
all year round.
Our Sky Media business is
a leader in multi-venue, multi-
channel racing and sports
broadcasting. Sky is distributed
to 4,875 agencies and licensed
venues nationwide (as at 30 June
2022), and telecast to millions
of viewers in Australia and
around the world. Sky operates a
combination of racing and sports
channels which are extensively
distributed directly to TAB’s venue
network, in-home to pay TV
subscribers and over various
digital platforms, including the
Sky Racing Active app.
Sky Racing World (SRW),
based in the US, manages the
international marketing and
distribution of international racing
content. SRW also assists with
importing racing content from
around the world into Australia
and facilitates associated tote
pools. SRW holds a Totalisator
Licence in North Dakota, which
enables the co-mingling of US
wagering operators with TAB’s
domestic pools.
Wagering licences/approvals year of maturity(i)
2097
2024
2098
2100
2062
2064
2035
NSW
VIC
QLD
SA
TAS
ACT
NT
(i) Refer to page 47 for further information.
Review of FY22
performance
In FY22, Wagering and Media
revenues were $2,181.9m, down
5.1%, and EBIT was $91.0m,
down 57.8%.
Wagering revenues were
$1,727.5m, down 11.7%.
The business was heavily
impacted by COVID-19 related
retail closures in 1H22 in the
business’s largest markets of
NSW and Victoria.
In addition, wet weather in 2H22
led to a record number of race
abandonments and rain affected
race tracks.
Given the challenging market
conditions, TAB retail wagering
turnover declined 22.9%. A
customer’s ability to transact
digitally in-venue and to make
account deposits are key drivers
of digital turnover. Despite neither
of these factors being possible for
substantial periods during the year,
TAB digital turnover grew 2.5%.
Tabcorp Annual Report 2022 Active digital customers remained
stable at 783,000 and digital
in-venue turnover grew 7.4%, to
$569m, driven by Venue Mode,
despite the impacts of retail
closures.
Market conditions remained
competitive throughout the period,
in particular during 1H22 when
the wagering market was
predominantly digital. This
resulted in increased customer
generosities in FY22. This
investment in generosities was
maintained through 2H22 at a
higher rate than in 2H21, but
lower than 1H22 levels.
The re-opening of venues from
the second quarter of FY22
resulted in promising signs of
recovery in 2H22, reinforcing the
fact that Tabcorp’s omni-channel
wagering offering performs best
when all channels are fully
operational.
Media and International revenues
were $454.4m, up 33.2%.
The Sky Media business
continued to expand racing and
sport content and its distribution
through digital and retail formats.
The number of Sky Racing active
registered customers (life to date)
increased 20.3% to 71,000 at
the end of FY22, and Sky venue
subscriptions were stable,
down 0.7%.
The performance of the
International business benefited
from the first full year of
ownership of PGI, and higher
vision export revenues.
Operating expenses for Wagering
and Media grew 5.1%, due to
cycling cash preservation and cost
reduction measures in the prior
year, increased technology
investment (including in the
development of the new TAB
App), partially offset by savings
from the 3S program.
POCT rate which is a step towards
establishing a sustainable industry
funding structure in those states.
These reforms are positive
developments in leveling the
playing field and will enable
TAB to compete more effectively
and support a more sustainable
racing industry.
In FY22, Tabcorp continued
to focus on driving positive
industry change with partners
and governments. In June 2022,
the Queensland Government
announced proposed reforms to
the Queensland wagering industry
which, when implemented, will
result in Tabcorp paying wagering
taxes and racing product fees
on the same basis as our
competitors. This was followed by
announcements in NSW and ACT
of proposed increases to the
In FY23, Tabcorp is focused on
transforming the Wagering and
Media business into a more
competitive and profitable
business, and executing on a
number of key deliverables at
pace. This includes the launch
of the new TAB App (targeted for
September 2022), follow on new
product releases, and improving
our customer experience and
marketing effectiveness.
Results for the year ended 30 June
Wagering revenues
Media and international revenue(iii)
Revenues
Taxes, levies, commission and fees
Operating expenses
EBITDA before significant items (iv)
Depreciation and amortisation
EBIT before significant items(iv)
FY22
$m
1,727.5
454.4
2,181.9
(1,382.6)
(493.3)
306.0
(215.0)
91.0
FY21
$m
1,956.8
341.2
2,298.0
(1,414.4)
(469.5)
414.1
(198.4)
215.7
Change
%
(11.7)
33.2
(5.1)
(2.2)
5.1
(26.1)
8.4
(57.8)
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P
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&
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Wagering turnover by channel(i)
17.7%
Other(ii)
25.1%
Retail
57.2%
Digital
Wagering revenue by product(i)
10.2%
Sport
1.9%
Trackside
37.8%
Fixed
odds
50.1%
Totalisator
(i) TAB turnover and TAB revenue includes
Victorian Racing Industry interest.
(ii) Other comprises call centre, on-course,
premium customers and PGI.
(iii) Includes a full year of PGI in FY22, following
the acquisition of the remaining 50%
interest of PGI in FY21.
(iv) Non-IFRS financial information.
Tabcorp Annual Report 2022
25
GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
GAMING
SERVICES
26
Tabcorp Annual Report 2022
MAX GAMING
SERVICES
A source of resilient B2B contracted
revenue with exposure to integrity
services growth.
REGULATORY
SERVICES
PERFORMANCE
SOLUTIONS
100%
73%
85%
3,500+
120,370
Sole monitoring
operator in
NSW/NT
Monitoring
share in
QLD
of national
EGMs1
Venue
footprint
EGMs
monitored daily
O
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Monitoring Licences Maturity and Renewal Rights (year)
Renewal rights
Renewal rights
2032
2027
2026
TECHNICAL
SERVICES
INTEGRATED
SYSTEMS
NSW
QLD
NT
(i) As at 30 June 2022. Based on total number of EGMs that MAX provides at least one product or service to.
Tabcorp Annual Report 2022
Tabcorp Annual Report 2022
27
27
Tabcorp Annual Report 2022OPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORT
GAMING SERVICES CONTINUED
Max Technical Services provides
customers 24/7 on-site technical
support and maintenance in
relation to EGMs, lottery and
wagering terminals and other
transaction devices.
Max Regulatory Services was,
by contrast, heavily impacted by
venue shutdowns in NSW, where
approximately 75% of monitored
EGMs are located. Revenues were
$73.6m, down 12.2%.
Max Venue Services comprises
the Max Performance Solutions,
Max Integrated Systems, and Max
Technical Services businesses
and operates in NSW, Victoria,
Queensland, Western Australia,
South Australia, Tasmania, ACT
and Northern Territory.
Max Performance Solutions
provides procurement and
financing support to venues
through EGM leasing
arrangements, and value-
added services to maximise
performance of EGMs within
venues.
Refer to pages 47 to 48 for
further information.
Review of FY22
performance
In FY22, Gaming Services
revenues were $192.9m, up 5.3%
and EBIT was $3.8m, up from a
loss of $9.7m in the prior year.
Max Integrated Systems develops
and markets a range of
technology solutions and system
enhancements for venues to
improve venue efficiency and
performance.
Revenues for Max Venue Services
were $119.3m, up 20.0% reflecting
fewer lost days of trading due to
COVID-19 related venue closures
in Victoria, the business’s largest
market.
The business provided significant
COVID-related fee relief to
customers through most of 1H22,
and returned to the full fee model
from 1 December 2021.
Operating expenses grew 5.8%
to $107.2m, due to the cycling
one-off cash preservation and
cost reduction opportunities
in the prior period.
The Gaming Services business
has begun to pivot towards Max
Regulatory Services and the
opportunity to provide our integrity
services capability to government.
Following a strategic review
process, we are engaging in a
sale process of the eBet business.
eBet is a supplier of loyalty and
tracking systems to gaming
venues in Victoria and NSW
within Max Integrated Systems.
Max Venue Services is pursuing
a capital light model focused on
generating consistent near term
free cashflow through the renewal
of contracts toward a more
advisory led model combined with
the sale of machines to venues
that don’t extend their contracts.
Approximately 50% of Victorian
EGM contracts have been
renewed (generally to 2027 to
2030) on a full service model,
approximately 10% of EGM
contracts will be extended on
a new advisory-only model, and
the remaining balance of EGM
contracts will not be extended.
FY22
$m
192.9
(10.6)
(107.1)
75.2
(71.4)
-
3.8
FY21
$m
183.2
(11.2)
(101.3)
70.7
(77.7)
(2.7)
(9.7)
Change
%
5.3
(6.2)
5.7
6.4
(8.1)
NM(ii)
NM(ii)
EGMs under contract
EGMs monitored
5.1%
NSW
1.2%
NT
23.8%
QLD
8,060
down 5.3%
120,370
down 1.3%
94.9%
VIC
75.0%
NSW
Operations
The MAX business is Australia’s
largest gaming services provider,
offering a comprehensive suite of
end-to-end products and gaming
services solutions for venues and
government, including monitoring
systems for regulatory purposes,
EGM financing and maintenance,
value-added technology solutions
and advisory services for venues.
MAX Regulatory Services provides
electronic gaming machine (EGM)
monitoring and related services
across NSW, Queensland and
Northern Territory.
Results for the year ended 30 June
Revenues
Taxes, levies, commission and fees
Operating expenses
EBITDA before significant items(i)
Depreciation and amortisation
Impairment
EBIT before significant items(i)
(i) Non-IFRS financial information.
(ii) Percentage change is not meaningful.
28
Tabcorp Annual Report 2022 SUSTAINABILITY
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Tabcorp Annual Report 2022OPERATING & FINANCIAL REVIEWDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCE SUSTAINABILITY
Sustainability is at the heart of
our business operations and our
vision of Raising the Game. Our
mission is to deliver experiences
safely and responsibly and set
the benchmark for sustainability
in our industry.
Despite another challenging year
with COVID-19 and navigating the
complexities of the Demerger, we
continued to make good progress
towards our goal of being a leader
in sustainability in our industry.
In FY22, Tabcorp was recognised
for its 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 for the second
successive year. Tabcorp has also
been independently assessed
according to the FTSE4Good
criteria and continued to be a
member of the FTSE4Good Index.
Following the Demerger, and an
extensive process of engagement
across our business and with key
stakeholders, we adopted a new
Sustainability Framework
(Framework). The Framework is
aligned with our new enterprise
strategy, with customer care at the
centre and a strong focus on
community, our people and
sustainable business practices.
The Framework builds upon our
good progress in recent years and
will help us to create long term
value in the management of our
environmental, social and
governance (ESG) risks and
opportunities.
During the year we also
aligned our Framework and
sustainability disclosures with
the United Nations Sustainable
Development Goals (SDGs).
To support the implementation
and oversight of our new
Sustainability Framework
and monitor the management
and reporting of our progress,
we enhanced our sustainability
governance by incorporating
sustainability into the remit of the
renamed Board Risk, Compliance
and Sustainability Committee
(effective 1 July 2022).
Looking ahead, we will continue to
evolve our sustainability practices
as we work closely with our
industry partners and stakeholders
to deliver leading practices and
outcomes.
Our detailed ESG approach and performance will be disclosed in our 2022 Sustainability Report which will be available at www.tabcorp.com.au
30
Tabcorp Annual Report 2022
OUR
PRIORITIES
GUIDING
PRINCIPLES
OUR GOALS
ALIGNMENT
WITH UN
SUSTAINABLE
DEVELOPMENT
GOALS
Customer
Care
Contribute to
our Community
Support our People
to Succeed
Build a Sustainable
Future
• We put our customers
• We build collaborative
first, delivering
experiences safely
and responsibly
partnerships to shape our
industry and impact our
communities for the better
• We provide our people with
an exciting workplace to
succeed
• We are building a
sustainable future for our
business
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• Deliver customer-centric
responsible wagering and
gaming initiatives designed
to minimise harm
• Build and maintain cyber
security controls that
protect our customers’
privacy and security
and drive competitive
advantage through
customer and stakeholder
trust
• Contribute to the strength of
our stakeholders through
shared economic benefits
and industry support
• Deliver strategic community
partnerships and investment
to support the communities
we operate in
• Engage on key industry
issues such as animal
welfare and sports integrity
• Foster a diverse, equitable
and inclusive workplace
• Invest in the health, safety
and wellbeing of our team
• Attract the best talent
and support our team to
shape their careers
• Deliver a robust,
transparent and effective
approach to ESG
• Develop a Net Zero
roadmap to support our
emission reduction targets
• Source products and
services responsibly
and sustainably
Tabcorp Annual Report 2022
31
REMUNERATION REPORTFINANCIAL REPORTGOVERNANCEDIRECTORS’ REPORTOPERATING & FINANCIAL REVIEW SUSTAINABILITY CONTINUED
FY22 Highlights
Customer
Care
Contribute to
our Community
Support our People
to Succeed
Build a Sustainable
Future
Implemented a new automated monitoring
system to improve detection and prevention
of self-excluded customers attempting to open
new accounts
Generated $1.5b in taxes, levies and
payments to state and federal
governments, the Australian racing
industry, and venue partners(i)
Contributed $7.5m to charities
and community organisations(ii)
Supported the racing industry’s
animal welfare efforts through
various campaigns, initiatives,
and sponsorships
Continued strategic partnerships
with Prostate Cancer Foundation
of Australia, Australia New Zealand
Gynaecological Oncology Group
(Team Teal) and National Jockeys
Trust
Delivered an early intervention model to
proactively contact customers that may be
exhibiting early signs of gambling harm and
offering responsible gambling (RG) tools
Rolled out enhanced RG training for key
customer facing teams to assist in recognising
indicators of gambling harm and improve quality
of RG conversations with customers
Completion of 11 security projects in FY22,
enhancing cyber defence and reducing cyber
risk to Tabcorp’s products, systems and data
Implementation of a governance program
to mitigate potential risks in respect of data
during and after the demerger of Tabcorp
and The Lottery Corporation
Enhanced crisis management arrangements
including disaster response planning
and testing
(i) Based on FY22 TAB revenue including Victorian Racing Industry interest. Excludes GST.
(ii) Includes 11 months contribution from the now discontinued Lotteries and Keno business before the Demerger was implemented.
32
Signatory to HESTA 40:40 Vision
gender diversity initiative
Named an Employer of Choice for
Gender Equality by the Workplace
Gender Equality Agency for seven
consecutive years
Lost Time Injury Frequency Rate
for the year was 1.3, falling from
2.3 the previous year(i)
Launched All Grow Academy,
Tabcorp’s new Learning Management
System for role specific learning
and capability building
Ranked first globally in the Casinos
and Gambling sector in the 2021 Dow
Jones Sustainability Index (DJSI)
World and DJSI Australia Indices
Member of the FTSE4Good Index
MSCI ESG rating AA – Leader
Formalised our commitment
to minimising our environmental
impact and responding to climate
change in our Environment
and Climate Change Position
Statement
Set carbon emission reduction
targets: 45% in operating emissions
by 2030 from 2019 levels, and net
zero by 2050
Published our second Modern
Slavery Statement in December 2021
Tabcorp Annual Report 2022 Customer Care
Customers are, and always will be, at the heart of our business. We’re committed
to putting our customers first, delivering experiences safely and responsibly, and
supporting a well-regulated and responsible industry.
At Tabcorp, we’re committed to being a leader in promoting responsible gambling, and support
consumer protection initiatives for responsible advertising.
It’s our goal to equip our customers with the tools, information and resources to help them make
informed decisions about how they gamble. Our approach to customer care and the responsible
provision of our products is underpinned by our Customer Care Principles.
We take responsible gambling seriously. More than simply following the letter of the law, we strive
to actively minimise potential harm to customers.
This means working with our partners on initiatives such as education campaigns, self-exclusion
programs, research and supporting counselling services.
In FY22, we continued to invest in initiatives to protect our customers:
• Implemented a new system to enhance our ability to pro-actively detect potential self-excluded
customers attempting to open accounts
• Enhanced our Early Intervention Model to proactively contact customers that may be exhibiting
early signs of problem gambling and offer support where required
• Developed additional Responsible Gambling training for our customer facing team members
• Introduced new Customer Care metrics to support the reporting and monitoring of Customer Care
• Improved visibility and durability of Responsible Gambling signage in our retail venues
We believe we have the right foundations and will continue Raising the Game on Customer Care,
with work underway on a range of customer-centric initiatives designed to support our customers
and minimise potential harm from problem gambling. We will report our progress in our 2022
Sustainability Report, which will be available on our website at www.tabcorp.com.au.
33
Tabcorp Annual Report 2022SUSTAINABILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTGOVERNANCEOPERATING & FINANCIAL REVIEW SUSTAINABILITY CONTINUED
Our Customer Care Principles
RESPECT THE
CUSTOMER DECISION
We always respect the customer decision,
however, there are times when we will take action
including proactively closing a customer’s account
for problem gambling
ENABLE INFORMED CHOICE
Responsible gambling microsite on tab.com.au
One stop shop responsible gambling information
Responsible gambling signage and information in
our retail venues
CREATE TOOLS THAT CARE
Take a break, deposit limits, self-exclusion
INTERACT RESPONSIBLY
Provision of Responsible Gambling Training to all
Tabcorp team members
Additional specialised Responsible Gambling
training for customer facing teams including
Customer Service Centre, VIP team, Retail and
Oncourse Operators
34
CUSTOMER CARE BY DESIGN
Responsible gambling assessments when
implementing new products and customer
initiatives
Responsible gambling review of marketing
collateral and promotions
ANALYSE CUSTOMER BEHAVIOUR
Early Intervention Program
Player Tracking
PROVIDE A SAFETY NET
Online Self-Exclusion
Retail Self-Exclusion
CYBER SECURITY
Best-in-class cyber security to protect customers’
privacy and security
Tabcorp Annual Report 2022 Environment and Climate Change Position Statement
We recognise our business has an impact on the environment, directly
through our operations, and indirectly through our value chain. We are
committed to minimising adverse environmental impacts through our
operations and the delivery of our products and services.
Carbon emission reduction targets:
• 45% in operating emissions by 2030 from 2019 levels
• Net zero by 2050
Climate change is a significant global challenge and we are committed to reducing our
greenhouse gas emissions profile and identifying and managing climate related risks and
opportunities across our business. In September 2021, we formalised this commitment by
adopting our Environment and Climate Change Position Statement and by setting medium
and long term greenhouse gas emissions reduction targets aligned with the Paris
Agreement goals.
In FY22, we continued our efforts to reduce our environmental impact by using less
electricity in our properties, recycling or donating office equipment, introducing hybrid
vehicles in our fleet, reducing the volume of stationery we use and encouraging team
members to minimise their impacts on the environment.
Looking ahead, we are progressing work to set a new baseline for our environmental
footprint post-Demerger and finalise the development of a ‘Net Zero’ roadmap to support
our emission reduction targets.
Tabcorp’s Environment and Climate Change Position Statement is available from
our website at www.tabcorp.com.au/sustainability/sustainable-future
Further details on Tabcorp’s environmental footprint and progress against the
Environment and Climate Change Position Statement, aligned with the Taskforce on
Climate-Related Financial Disclosures (TCFD) recommendations, will be available in
our 2022 Sustainability Report. The Report will be available at www.tabcorp.com.au
later this year.
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Tabcorp Annual Report 2022
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REMUNERATION REPORTFINANCIAL REPORTGOVERNANCEDIRECTORS’ REPORTOPERATING & FINANCIAL REVIEW GOVERNANCE
We recognise the importance of having strong and effective corporate governance arrangements and
maintaining high standards of corporate behaviour, culture and accountability. The governance arrangements
adopted by Tabcorp enable the Board and management to make well informed decisions, provide appropriate
accountability and transparency, and instil and reinforce a culture of acting ethically, responsibly and in line
with our values.
Board membership
Board Committees
As a result of the Demerger, the membership of the Board was renewed:
• Steven Gregg retired as Chairman, Harry Boon and Anne Brennan
retired as Non-Executive Directors (NEDs) and David Attenborough
retired as MD & CEO, on 31 May 2022.
• Bruce Akhurst was appointed Chairman on 1 June 2022.
• Adam Rytenskild was appointed MD & CEO on 1 June 2022.
• Brett Chenoweth and Raelene Murphy commenced as NEDs on
4 August 2022, having acted as Board Observers since 1 June 2022.
• Karen Stocks was appointed a Board Observer on 1 June 2022 and
• The Board established the Risk, Compliance and Sustainability
Committee to assist the Board in overseeing risk management,
compliance and sustainability, effective 1 July 2022 (replacing the
previous Risk and Compliance Committee).
• The Board has five standing Committees:
– Audit Committee
– Risk, Compliance and Sustainability Committee
– People and Remuneration Committee
– Technology Committee
will commence as a NED (subject to receipt of regulatory approvals).
– Nomination Committee
The refreshed Board has a diverse set of skills and experience
aligned with the Group’s strategic objectives and vision of Raising
the Game, including in key areas such as governance, strategic
and commercial experience, digital innovation, technology, marketing
and customer insights.
Refer to pages 18 and 19 for Directors’ biographies.
• Membership of the Committees was refreshed following the
Demerger.
• All Committee members, including Chairmen, are independent NEDs.
Tabcorp’s Corporate Governance Statement 2022, Appendix 4G, Board and Committee Charters, key policies and governance documents are
available from the Corporate Governance section of Tabcorp’s website at www.tabcorp.com.au/company/corporate-governance
36
Tabcorp Annual Report 2022 Board skills matrix
Technical skills
Leadership
Strategic and commercial acumen
Financial acumen/capital management
Governance
Legal and regulatory
Risk management and compliance
People
Organisational culture
Remuneration
Government/stakeholder relations and public policy
Experience
Gambling industry experience
Experience in other relevant industries
International experience
Information technology
Digital innovation
Retailing, marketing and customer experience
Sustainability
Not developed
Knowledgeable
Advanced
Number of Directors with relevant capability
NED diversity
Male
Female
Target of
40% female
NEDs by end
of FY23
3
4
NED tenure
>10 years
1
5 to 10
years
1
Average of
2.8 years
3
<1 year
2
2
1 to <5
years
Includes current and pending NEDs.
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Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWSUSTAINABILITY
RISK MANAGEMENT AND MATERIAL BUSINESS RISKS
Tabcorp adopts a structured and proactive approach to understanding, identifying and managing risk 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, Compliance and
Sustainability 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 and compliance management and governance,
refer to Tabcorp’s 2022 Corporate Governance Statement.
Outlined below are risks that could potentially have a material impact at a whole-of-Group level on the future
operating or financial performance or prospects of the Group, together with existing mitigations.
Risk
Description and potential consequences
Mitigations employed
Risk Management Framework
Business Strategy
Risk
Governance
Risk Categories
Key Risk Policies
Risk Management Lifecycle and Tools
Enterprise Risk Management (ERM) System
Breach of laws
and licences, and
compliance and
conduct risks
The Group’s businesses, as well as third parties that distribute the
Group’s products and services, including agencies and retail venues,
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 (including any exclusivity arrangements), 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.
38
• 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.
Tabcorp Annual Report 2022
Risk
Description and potential consequences
Mitigations employed
Licences, approvals
and other
arrangements
The conduct of wagering 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, including any exclusivity arrangements) may
have an adverse impact on the financial position, performance and
operations of the Group.
The Group’s media business holds rights to broadcast, and has
agreements in place to distribute, various race meetings domestically
and internationally. The loss of, or failure to renew those arrangements
on materially the same or similar terms, may have an adverse impact
on the operational and financial performance of the Group’s wagering
and media business.
• The Group operates 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.
• The Group engages closely with holders of broadcast rights and distribution partners
and actively seeks to extend those arrangements in advance of their expiry.
Changes in laws
and the regulatory
environment
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.
• 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.
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.
• 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.
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Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWSUSTAINABILITY RISK MANAGEMENT AND MATERIAL BUSINESS RISKS CONTINUED
Risk
Description and potential consequences
Mitigations employed
Litigation, disputes
and investigations
Consumer
discretionary
spending and
preferences
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. 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. If the
Group does not adequately respond to competition for consumers’
discretionary expenditure, or an existing or new competitor of the
Group adapts to changes more rapidly, this could result in a loss of
market share or missed opportunities for growth, and have an adverse
impact on the Group’s financial performance.
• 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 businesses 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 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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Tabcorp Annual Report 2022 FINANCIAL REPORT
Risk
Description and potential consequences
Mitigations employed
Competition and
disruption
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.
• As noted above, the Group operates businesses 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.
Financial and
balance sheet
risks
The Group is exposed to various financial and trading risks arising from
operating its Wagering and Media business, including risks associated
with a failure to appropriately set odds in respect of wagering so as to
maintain sufficient capital.
• 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.
• The Group has adopted a Sustainability Framework, with various activities and
programs in place aligned with the Group’s material ESG topics.
• Refer to the sections titled “Capital Management” on page 14 and “Capital and risk
management” on pages 102 to 111.
The Group is also 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, each of which could impact its financing activities. In addition,
changes in investor, financier and other stakeholder expectations
in relation to environmental, sustainability and governance (ESG)
practices and disclosures may adversely impact the Group’s ability to
access capital or other financing in future, or to do so on reasonable
financial terms, which could in turn adversely affect the financial
position and performance of the Group.
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.
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Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWSUSTAINABILITY RISK MANAGEMENT AND MATERIAL BUSINESS RISKS CONTINUED
Risk
Description and potential consequences
Mitigations employed
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 an increasingly remote
workforce increases the cyber attack surface and opportunistic
criminals seek to exploit organisations’ cyber defenses. Additionally,
ransomware cyber-attacks on companies across the world continue
to 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.
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 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.
• Tabcorp has policies, procedures, practices, frameworks and resources in place to
manage data security, privacy, and related risks.
• A dedicated Cyber Security Information Team 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.
• Tabcorp has in place a multi-year cyber security uplift program, focused on the
protection of customer data and company-held sensitive information against external
threats.
• 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. The Group also a Data Breach Response Plan that
sets out procedures for employees to follow in the event of an actual or suspected data
breach.
• The Board Technology Committee oversees the Group’s technology strategy and
priorities, including major technology investments to address the Group’s technology
and cybersecurity risks.
• 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.
Technology,
cybersecurity and
data protection and
privacy risks
Reliance on
infrastructure and
third party
commercial
arrangements
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Tabcorp Annual Report 2022 FINANCIAL REPORT
Risk
Description and potential consequences
Mitigations employed
Racing and sports
products
Changes in race
fields and sports
product fees and
taxes
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.
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 and Media or Gaming Services
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.
• As noted above, the Group operates a portfolio of businesses with operations spanning
multiple jurisdictions and market segments, which reduces the reliance on any single
revenue stream 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 endeavours to 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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Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWSUSTAINABILITY RISK MANAGEMENT AND MATERIAL BUSINESS RISKS CONTINUED
Risk
Description and potential consequences
Mitigations employed
Disruption or decline
of licensed venues,
agencies and retail
network
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, 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, an epidemic or
pandemic outbreak (such as the COVID-19 pandemic), or a 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 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.
COVID-19 and other
pandemics or
epidemics
The ongoing COVID-19 pandemic and government restrictions and
further strains such as Omicron 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.
• 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.
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, supply chains and the global sporting
and racing calendar have had, and may have, an adverse effect on
Tabcorp and its financial performance. There is also no certainty as
to whether further COVID-19 outbreaks or the emergence of another
epidemic or pandemic will have a material impact on these matters.
The long term impacts from COVID-19 on general economic or industry
conditions, consumer discretionary spending and consumer confidence
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.
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Tabcorp Annual Report 2022 Risk
People
Social licence
Description and potential consequences
Mitigations employed
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),
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.
Changes in societal attitudes and/or adverse media attention in
relation to gambling or other ESG issues relevant to Tabcorp, or a
failure by the Group to deliver its gambling products responsibly in
accordance with Group policies, relevant responsible gambling codes
or regulator and/or community expectations, could lead to negative
legal, regulatory and/or government policy changes, which could have
an adverse effect on the performance of the Group, the delivery of its
strategies, its ability to attract and retain talent and/or reputational
damage for the Group.
• 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’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 adopted a Sustainability Framework. A key focus of this Framework and
our business strategy is our commitment to delivering customer-centric responsible
wagering and gaming initiatives designed to minimise harm and set the benchmark
for sustainability in our industry.
• The Board Risk, Compliance and Sustainability Committee has responsibility for
overseeing the Sustainability Framework and the management of ESG issues relevant
to the Group, including responsible gambling.
• The Group operates under regulator prescribed Codes of Practice or company-initiated
Codes of Conduct with respect to responsible gambling. Further, the Group’s Customer
Care Principles sets out our approach to customer care and the responsible provision of
our products.
• The Group has adopted an Environment and Climate Change Position Statement
outlining our commitment to minimising our impacts on the environment.
• Remuneration outcomes for the MD & CEO, executives and senior managers are linked
to the achievement of specific sustainability measures such as risk and compliance
management, responsible gambling, community impacts and reputation management.
• Refer to our website www.tabcorp.com.au/sustainability for further information about
how we manage our ESG risks.
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Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWSUSTAINABILITY DIRECTORS’ REPORT
The Directors of Tabcorp Holdings Limited (Tabcorp or 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 2022.
1. PRINCIPAL ACTIVITIES
The principal activities of the Group during the financial year comprised the provision of gambling and entertainment services.
The Demerger of Tabcorp’s Lotteries and Keno business was implemented on 1 June 2022 and resulted in Tabcorp retaining its Wagering and Media business and Gaming Services
business, while the demerged The Lottery Corporation Limited now holds the former Lotteries and Keno business. Tabcorp’s former Lotteries and Keno business is reported as a
discontinued operation in this report.
Other than in respect of the Demerger, the Group’s principal activities remain unchanged from the previous financial year.
2. OPERATING AND FINANCIAL REVIEW
The financial results of the Group for the financial year ended 30 June 2022 comprised the operating segments of the Wagering and Media and Gaming Services businesses (for FY22)
and the now discontinued Lotteries and Keno business (for the period up to and including 31 May 2022, prior to implementation of the Demerger).
The activities and financial performance of the Group and continuing operating segments for the financial year are set out on pages 1 to 28 and below.
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.
• 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.
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.
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Tabcorp Annual Report 2022 • 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 USA. Sky Racing World also facilitates associated tote pools.
Wagering licences/approvals(i):
• NSW Wagering Licence expires in March 2097, with retail exclusivity period to expire in June 2033.
• Victorian Wagering and Betting Licence expires in August 2024.
• 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.
• 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 2022, with annual renewal capability.
(i) Ordered by population of states/territories.
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.
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DIRECTORS’ REPORT CONTINUED
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.
Discontinued Lotteries and Keno business
For the 11 month period from 1 July 2021 to 31 May 2022, the discontinued Lotteries and Keno business contributed the following to the Tabcorp Group. The business’ operating revenue
was $3,232.2m and profit before income tax was $547.3m in respect of that 11 month period, compared to $3,205.8m and $584.3m respectively for the full 12 months of the previous
financial year.
Tabcorp’s discontinued Lotteries and Keno business had the following operations and licences/approvals (as at 31 May 2022).
Lotteries operations:
• The Lott is Australia’s leading licensed lottery business with operations in all states and territories of Australia, except Western Australia.
• Lotteries game brands included 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.
• Lotteries products can be purchased in newsagencies, convenience stores and other retail outlets, online at theLott.com and The Lott mobile app.
Keno operations:
• Keno is a random number game that is played every 3 to 3.5 minutes with players able to win instant prizes and 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 operated across NSW, Victoria, Queensland and ACT.
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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.
Keno licences/approvals(i):
• NSW Keno Licence expires in April 2050. Keno in NSW is operated under a management agreement with ClubKENO Holdings Pty Ltd.
• Victorian Keno Licence expires in April 2042.
• 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.
(i) Ordered by population of states/territories.
3. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The Demerger of The Lottery Corporation Limited from Tabcorp was implemented on 1 June 2022 by way of a Scheme of Arrangement and associated capital reduction and dividend in
accordance with Tabcorp’s Demerger Booklet dated 30 March 2022. The Demerger resulted in Tabcorp retaining its Wagering and Media business, and its Gaming Services business,
while The Lottery Corporation Limited holds the Lotteries and Keno business previously held by Tabcorp. As a result of the Demerger, there were a number of changes to the composition
of the Tabcorp Board which are described on pages 36 and 50.
Other than the Demerger 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 2021.
4. SIGNIFICANT EVENTS AFTER THE END OF THE FINANCIAL YEAR
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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DIRECTORS’ REPORT CONTINUED
5. 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 strategies and priorities, which are discussed on pages 6 to 11 and 15.
The priorities of the Group’s continuing businesses are set out on pages 22 to 28.
6. LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Board participates in formal strategic review and planning processes 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 for the Group’s continuing
businesses 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 38 to 45.
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.
7. 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 18 and 19 and below.
In conjunction with the implementation of the Demerger and Tabcorp’s planned Board succession, the following changes to the Tabcorp Board occurred:
• Bruce Akhurst appointed Chairman effective 1 June 2022, following the retirement of Steven Gregg as Chairman and NED;
• Adam Rytenskild appointed MD & CEO effective 1 June 2022, following the retirement of David Attenborough as MD & CEO;
• Brett Chenoweth and Raelene Murphy commenced as NEDs effective 4 August 2022 following the receipt of regulatory approvals (having acted as Observers prior to this since 1 June 2022);
• Harry Boon and Anne Brennan retired as Non-Executive Directors effective 31 May 2022;
In addition, Karen Stocks has been appointed as an Observer effective 1 June 2022 and will commence as a NED following the receipt of all necessary regulatory approvals.
The attendance of Directors at Board and Committee meetings is set out on page 52.
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Tabcorp Annual Report 2022
The following Directors retired on 31 May 2022 in conjunction with the implementation of the Demerger. The details provided below were applicable at the time of their retirement.
Steven Gregg was Chairman from January 2021 and Non-Executive Director from July 2012. At the time of his retirement, Mr Gregg was Chairman of Ampol Limited and a Director
of Challenger Limited and William Inglis & Son Limited. Mr Gregg had an executive career in investment banking and management consulting. Prior to his retirement Mr Gregg
was Chairman of Tabcorp’s Nomination Committee and of the Victorian Joint Venture Management Committee. Mr Gregg holds a Bachelor of Commerce. In the past three years,
he was a director of other ASX listed companies as follows: Ampol Limited (previously called Caltex Limited) since October 2015; and Challenger Limited since October 2012.
Harry Boon was a Non-Executive Director from December 2017 having joined the Tabcorp Board following the Tabcorp-Tatts combination. He was previously the Chairman of Tatts,
and served as a Non-Executive Director of Tatts from May 2005. Mr Boon is the former Chairman of Asaleo Care Limited and a former Director of Toll Holdings Limited. Mr Boon was
previously CEO and MD of Ansell Limited . Prior to his retirement, Mr Boon was a member of Tabcorp’s Audit Committee, People and Remuneration Committee, Technology Committee
and Nomination Committee. Mr Boon holds a Bachelor of Laws (Honours) and a Bachelor of Commerce. In the past three years, he was a director of other ASX listed companies
as follows: Asaleo Care Limited from May 2014 to June 2021.
Anne Brennan was a Non-Executive Director from July 2020. At the time of her retirement from Tabcorp, Ms Brennan was a Director of GPT Group and Argo Investments Limited, and she
was also on the boards of NSW Treasury Corporation and Rabobank New Zealand Limited. Ms Brennan was previously Executive Finance Director of Coates Group, Chief Financial Officer
at CSR Limited and a partner at KPMG, then Arthur Andersen and Ernst & Young. Prior to her retirement Ms Brennan was Chairman of Tabcorp’s Audit Committee, and a member of the
Risk and Compliance Committee and Nomination Committee. Ms Brennan holds a Bachelor of Commerce (Honours), and is a Fellow of the Chartered Accountants Australia and New
Zealand and a Fellow of AICD. In the past three years, she was a director of other ASX listed companies as follows: Argo Investments Limited since September 2011; Charter Hall Group
from October 2010 to May 2021; GPT Group from May 2022; Metcash Limited from March 2018 to August 2019; Nufarm Limited from February 2011 to December 2020; and Spark
Infrastructure Group since June 2020.
David Attenborough retired as Managing Director and Chief Executive Officer of the Company. Mr 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. At the time of his retirement from Tabcorp, he was a Director of Hostplus Pty Ltd. 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 holds a Bachelor of Science (Honours)
and a Master of Business Administration, and is a Graduate Member of AICD. In the past three years, he was not a director of any other ASX listed companies.
8. 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.
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DIRECTORS’ REPORT CONTINUED
9. 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:
Name
Current Directors
Bruce Akhurst(ii)
Adam Rytenskild(iii)
Brett Chenoweth(iv)
David Gallop
Janette Kendall
Justin Milne
Raelene Murphy(iv)
Karen Stocks(v)
Former Directors(vi)
Steven Gregg(ii)
David Attenborough(iii)
Harry Boon
Anne Brennan
Board meetings
A
B
10
2
2
10
10
10
2
1
8
8
8
8
10
2
2
10
10
10
2
2
8
8
8
8
Audit Committee
A
1
1
-
5
6
1
1
-
5
5
5
5
B
1
1
-
5
6
1
1
-
5
5
5
5
Risk and Compliance
Committee(i)
B
A
5
1
1
1
-
5
1
-
4
4
-
4
5
1
1
1
-
5
1
-
4
4
-
4
People and
Remuneration
Committee
Technology
Committee
Nomination
Committee
A
5
1
-
5
5
-
-
-
4
4
4
-
B
5
1
-
5
5
-
-
-
4
4
4
-
A
5
1
1
-
5
5
-
1
2
4
4
-
B
5
1
1
-
5
5
-
1
4
4
4
-
A
1
1
1
1
1
1
1
0
-
-
-
-
B
1
1
1
1
1
1
1
1
-
-
-
-
A – Number of meetings attended
B – Maximum number of possible meetings available for attendance
(i) The Risk and Compliance Committee became the Risk, Compliance and Sustainability Committee effective from 1 July 2022.
(ii) Also attended meetings of the Victorian Joint Venture Management Committee as Chairman of this Committee.
(iii) The MD & CEO attends Committee meetings, but he is not a member of any Committee. Only Non-Executive Directors are members of Board Committees.
(iv) Commenced as Observers on 1 June 2022 and as Non-Executive Directors on 4 August 2022 following the receipt of all necessary regulatory and ministerial approvals.
(v) Commenced as an Observer on 1 June 2022 and will commence as a Non-Executive Director following the receipt of all necessary regulatory and ministerial approvals.
(vi) Former Directors retired from the Tabcorp Board on 31 May 2022 in conjunction with the implementation of the Demerger.
In addition to the meetings above, Directors also participated in 13 additional meetings of the Board or Board Sub-Committees established for special purposes during the year
to consider a broad range of matters, including the Demerger. 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.
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Tabcorp Annual Report 2022 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 SECRETARY
Chris Murphy commenced as Acting Company Secretary on 23 March 2018 and following receipt of the necessary regulatory and ministerial approvals was formally appointed as
Company Secretary on 6 February 2019. 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.
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 2022, no environmental breaches have been notified to the Group by any government agency.
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 FY22, Tabcorp’s political contributions totalled $216,160
(FY21: $186,940). 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, Directors’ Report and Remuneration Report have been rounded 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 resourced by Tabcorp, with specialist independent external support where necessary. In conjunction
with organisational changes associated with the Demerger, Tabcorp adopted on an interim-basis a co-sourced internal audit model, with dedicated internal resources supplemented by
independent external resources from KPMG. More information relating to the audit functions can be found in the Company’s Corporate Governance Statement.
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DIRECTORS’ REPORT CONTINUED
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 2022. 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
$1,558,000 in relation to the provision of other assurance services and $1,913,000 in relation
to the provision of non-audit services to the Company in respect of the financial year ended
30 June 2022. Of these services $1,290,000 and $1,662,751, respectively, relate to assurance
and other services with respect to the Demerger which are non-recurring and are not expected
to repeat in the near future. It is expected that the amount of other assurance and non-audit
services fees will not continue at the levels observed in 2022. Amounts paid or payable by
the Company for audit and non-statutory audit services are disclosed in note E6 to the
Financial 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
2022. This auditor’s independence declaration forms part of this Directors’ Report.
18. REMUNERATION REPORT
The Remuneration Report for the financial year ended 30 June 2022 forms part of this Directors’
Report, and can be found on pages 55 to 88.
This Directors’ Report has been signed in accordance with a resolution of Directors.
Bruce Akhurst
Chairman
Melbourne
24 August 2022
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Tabcorp Annual Report 2022 REMUNERATION REPORT (AUDITED)
Contents
Letter from the People and Remuneration Committee Chairman
1.
2. Key Management Personnel
(a) Non-Executive Director changes
(b) Executive KMP changes
3. Key messages
4. Remuneration governance
5. Executive KMP remuneration
(a) Strategy
(b) Structure
(c) Remuneration packages
(d) Remuneration structure
(e) Remuneration and accountability
(f) Policy prohibiting hedging
(g) Executive Shareholding Policy
(h) Executive KMP employment contracts
6. Executive KMP remuneration outcomes in FY22
(a) Five-year business performance
(b) FY22 STI outcomes
(c) LTI awards granted in FY22
(d) LTI awards tested in FY22
(e) Treatment of restricted equity on foot upon Demerger
i. 2019 LTI offer
ii. 2020 and 2021 LTI offers
iii. FY21 STI Restricted Shares outcomes
(f) Actual remuneration received in FY22
(g) Variable remuneration outcomes over the preceding five financial years
7. Review of executive remuneration arrangements for FY23
8. Non-Executive Director fees
(a) Strategy and framework
(b) FY22 fee structure
(c) Fees paid during FY22
(d) Non-Executive Director Shareholding Policy
9. Statutory remuneration disclosures
(a) Executive KMP statutory remuneration tables
(b) Transactions and loans with KMP
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GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
1. LETTER FROM THE PEOPLE AND REMUNERATION COMMITTEE CHAIRMAN
Dear Shareholder,
On behalf of the Tabcorp Board of Directors, I’m pleased to present Tabcorp’s Remuneration Report for the year ended 30 June 2022 (FY22). This report covers Tabcorp’s approach
to remuneration for its Key Management Personnel (KMP), the link between performance and reward and the remuneration outcomes for KMP for FY22.
As for many organisations, FY22 was again impacted by the COVID-19 pandemic and the government enforced shutdowns. Tabcorp’s retail business was impacted for more weeks than
any of the pandemic’s three years. This in conjunction with the devastating floods experienced in Queensland and NSW contributing to a record number of abandoned race meetings,
impacted revenues significantly. Despite these challenges, Tabcorp completed FY22 in a sound financial position and our focus is now on executing our strategy to transform the business
and pursue growth.
Key business achievements
On 1 June 2022, Tabcorp successfully implemented the demerger of the Lotteries and Keno businesses (Demerger) and created the separate ASX listed company The Lottery Corporation
Limited (The Lottery Corporation). This was a significant transaction delivered within 11 months and with strong shareholder support.
Following Demerger, a renewed Board and Executive Leadership Team commenced the implementation of Tabcorp’s transformation strategy to become a more competitive and innovative
business over the next three years.
In FY22, we made substantial progress in regulatory reform, including proposed reforms in Queensland that, when implemented, will see Tabcorp pay the same wagering taxes and fees
as its competitors in Queensland. Tabcorp also secured significant steps towards a level taxation playing field in NSW, with the government committing to a review of the NSW Wagering
Tax and Fees environment.
From a product perspective, Tabcorp progressed the development of a new TAB App which is on target for launch in September, in time for the 2022 Spring Carnival. The new App will
be the first of multiple upgrades as the business transforms to focus on digital market share.
Gaming Services earnings improved on the previous year and the business made progress on its plans to pivot the business into an integrity services provider to governments.
Following the successful Demerger, we have made a strong start and have a clear strategy to transform Tabcorp into a more competitive business.
Executive KMP remuneration
Fixed remuneration
There were no changes to Mr Attenborough’s remuneration during FY22 and he retired as MD & CEO after 11 years, effective 1 June 2022. Upon ceasing employment, Mr Attenborough
received a payment in lieu of working out the remaining eight months of his notice period (equivalent to $1.3 million) in addition to his statutory entitlements to accrued annual and long
service leave.
The appointment of Mr Rytenskild as the new Tabcorp MD & CEO, effective 1 June 2022, provided the opportunity to review the MD & CEO remuneration package to improve alignment
with the market and the achievement of Tabcorp’s strategy and shareholder value creation going forward. Mr Rytenskild’s remuneration package includes a lower fixed amount of
$1.5 million and a greater weighting on variable (at risk) remuneration in the form of short-and-long term incentives. Further detail on both remuneration packages is shown on page 68.
Two executive KMP received increases in their fixed remuneration during FY22 ranging from 2.5% to 3% in recognition of their performance and to better align to the market. Upon the
Demerger these KMP have taken up roles in The Lottery Corporation.
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Tabcorp Annual Report 2022 Short Term Incentive (STI)
Tabcorp’s FY22 financial performance was significantly impacted by the COVID-19 pandemic and the extreme flooding in Queensland and NSW, compared to STI targets which did not
include any assumptions on the potential impacts of COVID-19. This was partially offset by the Lotteries business, which experienced a favourable EBIT result throughout COVID-19
impacted period.
In determining the STI results, the Board took a balanced approach between financial outcomes over the 11 month period pre the Demerger and the one month period post the Demerger,
the challenges posed by COVID-19 lockdowns, key events impacting financial performance, including from COVID-19 and the floods, the significant effort by management in successfully
delivering the Demerger (and in turn delivering material shareholder value), the positive assessment of performance against key sustainability measures, and key strategic achievements
following the Demerger.
As a result, the Board exercised its discretion and resolved that a STI pool (at 100%) be made available to eligible employees after achieving 89% of the 90% EBIT target (STI hurdle, refer
to section 5(d)).
Noting the above factors and considering the performance by Mr Attenborough against his individual weighted scorecard, the Board determined to provide Mr Attenborough with an STI
award equivalent to 65% of his target STI opportunity (43% of his maximum opportunity).
The Board also determined to provide Mr Rytenskild with an STI award equivalent to 100% of his target STI opportunity (58% of his maximum opportunity) which recognised his time
(11 months) as Managing Director, Wagering and Media and one month as MD & CEO. Consideration was given to Mr Rytenskild’s weighted scorecard, his efforts in the lead up to the
Demerger and the strategic achievements for the Group delivered in his first month as MD & CEO, creating positive momentum to transform Tabcorp and execute on its strategic priorities.
Mr Renshaw, Chief Financial Officer, from 1 June 2022 received a STI award substantially in recognition of his former role of Executive General Manager Finance and Commercial,
Wagering and Media. Only the STI award in relation to his KMP role as Chief Financial Officer is disclosed in the remuneration report. Also disclosed are STI amounts accrued by Tabcorp
during FY22 for three KMP who commenced with The Lottery Corporation upon the Demerger (Ms Susan van der Merwe, Mr Adam Newman and Mr Patrick McGlinchey). The actual STI
amounts awarded to these former KMP are disclosed in the The Lottery Corporation FY22 Remuneration Report.
As disclosed in the Demerger Booklet, the Board determined to release Restricted Shares on foot (allocated to participants as part of the FY21 STI awards) from their two-year restriction
period prior to the Demerger. Details on the Restricted Shares released to executive KMP is shown on page 101.
Long Term Incentive (LTI)
The 2018 LTI offer performance measures were tested on 30 June 2021 and 19 September 2021. The testing resulted in relative total shareholder return (TSR) being positioned at the
50th percentile of the peer group, and accordingly 50% of the performance rights vested under this tranche. The targets set under the Combination Synergy measure were not met and
accordingly, 100% of this tranche lapsed. Overall, 37.5% of the Performance Rights under the 2018 LTI offer vested into Tabcorp shares. In addition, it was deemed that the Combination
Synergy measure for the 2019 LTI offer was not met, and the entire Combination Synergy tranche lapsed.
As disclosed in the Demerger Booklet, the Board determined that the performance conditions associated with the LTI Offers on foot as at the date of the Demerger (being the 2019, 2020
and 2021 LTI Offers), would be waived and the Performance Rights would vest on a pro-rata basis, considering the required service periods that had elapsed under the LTI Offers at the
date of the Demerger. Approximately 67%, 55% and 21% of the total Performance Rights granted under the 2019, 2020 and 2021 LTI Offers respectively, vested with the remainder of
the Performance Rights lapsing. In total, across all three LTI Offers, approximately 47% of the Performance Rights originally granted to participants vested into Shares and 53% lapsed.
This is in line with the average LTI vesting experience over the five years prior to the Demerger, of 47%.
Retention Shares
The Board approved a Retention Plan in 2021 to retain key employees through the volatile Demerger period and to assist both Tabcorp and The Lottery Corporation businesses in
possessing critical employee skills and knowledge post the Demerger. Executive KMP were included in the offer and received Retention Shares with a face value of between 30% and
50% of their fixed remuneration. Shares were allocated in July 2021 and are restricted until July 2023 under the condition of continuity of service (forfeitable on resignation or dismissal
for misconduct).
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REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Key Remuneration Framework Changes
In response to stakeholder feedback and market expectations, the Board approved the introduction of executive KMP STI scorecard weightings effective FY22. The introduction
of weightings provides greater clarity and focus for executives, allocated across key focus areas. The weightings and focus areas were approved by the Board at the beginning
of the financial year.
Also introduced was an EBIT hurdle and a sustainability multiplier. The EBIT hurdle, if achieved provides access to a STI pool and if the hurdle is not achieved, the Board may exercise
discretion and set a smaller STI pool in exceptional circumstances. The sustainability multiplier provides the Board with a mechanism to adjust the STI pool either up or down by
considering Tabcorp’s performance against sustainability measures of risk management, responsible gambling, community and reputation.
These changes provide greater clarity and focus for participants and strengthen the link between performance and reward.
Effective FY23 Tabcorp’s LTI variable remuneration will operate under a market priced option plan. The Options will be performance tested, with a three-year performance period.
The Options if vested will have a one-year exercise period and any Options not vested or exercised, will lapse. More detail will be provided in Tabcorp’s FY23 Remuneration Report.
The MD & CEO’s FY23 LTI grant will be detailed in Tabcorp’s Notice of the Annual General Meeting to be held on 26 October 2022.
Non-Executive Director Fees
In June 2022 (post the Demerger), the Board reviewed the Non-Executive Board and Committee fees, having regard to relevant considerations including ASX benchmark data and the
need to attract and retain suitably skilled and experienced Directors to support the delivery of the Group’s strategic objectives. The Board considered it appropriate to reduce Committee
fees by 10%, the Non-Executive Director base fee by 14% (with the introduction of a Nomination Committee fee) and the Board Chair fee by 15%. The Board also agreed to absorb the
increase in the Superannuation Guarantee Contribution rate, effective 1 July 2022 (from 10% to 10.5%). The revised fees were effective 1 July 2022.
FY23 is another important year for Tabcorp as it embarks on the delivery of a transformation strategy to become a more competitive and innovative business.
On behalf of the People and Remuneration Committee, I thank you for your ongoing support of Tabcorp. We invite you to read the Remuneration Report and we look forward to sharing
with you the company’s future success.
David Gallop
People and Remuneration Committee Chairman
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Tabcorp Annual Report 2022
2. KEY MANAGEMENT PERSONNEL
This report covers the KMP of Tabcorp who have the authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. This includes
both the Executive KMP as well as Non-Executive Directors.
(a) Non-Executive Director changes
As a result of the Demerger, the following changes occurred in FY22:
• Steven Gregg retired as Chairman and from the Tabcorp Board on 31 May 2022.
• Anne Brennan and Harry Boon both retired from the Tabcorp Board on 31 May 2022.
• Bruce Akhurst commenced as Chairman of the Tabcorp Board and as Chairman of the Nomination Committee, effective 1 June 2022.
• Raelene Murphy and Brett Chenoweth were formally appointed Non-Executive Directors on 4 August 2022, having initially been appointed as Board Observers from
1 June 2022.
• Karen Stocks commenced as a Board Observer from 1 June 2022, and will be appointed a Non-Executive Director, pending receipt of regulatory approvals.
(b) Executive KMP changes
As a result of the Demerger, several key changes were made to the executive KMP:
Appointments
• Adam Rytenskild commenced as MD & CEO on 1 June 2022. Prior to this Mr Rytenskild held the role of Managing Director Wagering and Media as executive KMP.
• Daniel Renshaw commenced as an executive KMP upon his appointment to the role of Chief Financial Officer on 1 June 2022. Prior to this Mr Renshaw held the role of General Manager,
Finance and Commercial – Wagering and Media.
Departures
• David Attenborough retired as MD & CEO and ceased as executive KMP on 31 May 2022.
• Adam Newman (Chief Financial Officer), Patrick McGlinchey (Chief Legal and Risk Officer) and Sue van der Merwe (Managing Director Lotteries and Keno) ceased as executive KMP
and ceased employment with Tabcorp on 31 May 2022 to take up employment within The Lottery Corporation.
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REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Table 1: KMP for FY22
Name
Non-Executive Directors
Bruce Akhurst
David Gallop
Janette Kendall
Justin Milne
Future Non-Executive Directors, pending regulatory approval
Brett Chenoweth(i)
Raelene Murphy(i)
Karen Stocks
Former Non-Executive Directors
Steven Gregg
Harry Boon
Anne Brennan
Executive Director
Adam Rytenskild
Former executive Director
David Attenborough
Executive KMP
Daniel Renshaw
Former executive KMP
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Position held
Period in position if less than full year
Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Observer
Non-Executive Director
Observer
Non-Executive Director
Observer
Chairman and Non-Executive Director
Non-Executive Director
Non-Executive Director
Chairman from 1 June 2022
1 June 2022 to 3 August 2022
From 4 August 2022
1 June 2022 to 3 August 2022
From 4 August 2022
From 1 June 2022
Until and including 31 May 2022
Until and including 31 May 2022
Until and including 31 May 2022
Managing Director and Chief Executive Officer (MD & CEO)
Managing Director Wagering and Media
From 1 June 2022
From 1 July 2021 to 31 May 2022
Managing Director and Chief Executive Officer (MD & CEO)
Until and including 31 May 2022
Chief Financial Officer
From 1 June 2022
Chief Financial Officer
Chief Legal and Risk Officer
Managing Director Lotteries and Keno
Until and including 31 May 2022
Until and including 31 May 2022
Until and including 31 May 2022
(i) Mr Chenoweth and Ms Murphy received regulatory approvals and were appointed as Non-Executive Directors effective 4 August 2022.
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Tabcorp Annual Report 2022 3. KEY MESSAGES
2018 LTI offer vesting outcomes
Vesting of Performance Rights granted under the 2018 LTI offer was subject to the achievement of targets set under two performance measures, being relative TSR (applicable to 75%
of the Performance Rights) and Combination Synergy (applicable to 25% of the Performance Rights). The performance conditions were tested on 19 September 2021 and 30 June 2021
respectively.
The three-year TSR result placed Tabcorp at the 50th percentile of the peer group, and accordingly 50% of the Performance Rights vested under the TSR tranche (or 37.5% of the total
Performance Rights allocated) and 50% lapsed (or 37.5% of the total Performance Rights).
In determining the vesting outcomes for the Combination Synergy tranche, the Board considered the achievement of committed cost synergies, balanced with the realised costs incurred
to integrate the Tabcorp and Tatts Group businesses, the delays in integration and the impacts of COVID-19 on the business. On balance, the Board determined that the targets set under
the Combination Synergy measure were not met and accordingly, 100% of the Combination Synergy tranche lapsed, resulting in participants receiving no benefit from this tranche. The
2019 LTI offer also included the Combination Synergy measure which applied to 25% of the Performance Rights granted. As a result of the Board’s decision regarding testing, the 2019 LTI
offer Combination Synergy tranche also lapsed.
Overall, 37.5% of the Performance Rights granted under the 2018 LTI offer vested into Tabcorp shares (62.5% of the Performance Rights lapsed).
Treatment of equity awards on foot as a result of the Demerger
During FY22, the Board carefully considered the impact of the Demerger on various employee incentives and other equity awards on foot held by executives, having regard to shareholders
expectations, impacts to Tabcorp and the executives themselves. The following principles underpinned the Board’s decision with respect to the treatment of executive equity awards
impacted by the Demerger:
No undue benefits
The Board approved treatment should not result in any undue benefits for executives.
Fairness
The Board approved treatment should strike an appropriate balance between what is fair for executives and shareholder expectations.
Simplicity and transparency
The Board approved treatment should minimise complexity and be transparent to both the executives and the market.
The Board approved the following treatment:
• LTI Performance Rights on foot at the date of Demerger (under the 2019, 2020 and 2021 LTI offers):
> Performance conditions that were not due to be tested before the Demerger implementation date were waived;
> Performance Rights vested on a pro rata basis, considering the service period that had elapsed at the date of Demerger, and the remainder lapsed;
> In total, across all three LTI offers, approximately 47% of the Performance Rights originally granted to LTI participants vested and 53% lapsed; and
> The Board considered this to be appropriate having regard to:
– the complexity of carrying over LTI offers into the post-demerged organisations and modifying them (adjusting values and performance conditions);
– the total vesting outcome of 47% of the Performance Rights vesting into Tabcorp shares aligns with the previous five-year average performance tested LTI outcomes;
– the anticipated unlocked financial benefits of the Demerger would likely generate higher outcomes for executives if tested; and
– the fact that 53% of the Performance Rights lapsed and participants received no benefit from this allocation.
• FY21 STI Restricted Shares
> Prior to the Demerger, the Restricted Shares (allocated as part of the FY21 STI awards and with a two-year service-based restriction period) were released from any trading
restrictions. The Board determined the release of the Restricted Shares to be appropriate, considering that executives had already earned these shares as part of their STI awards
in FY21 and the complexity of continuing restrictions post the Demerger.
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
2021 Retention Plan
In 2021, the Board approved a limited one-off retention plan (2021 Retention Plan) in the form of shareholder aligned Restricted Tabcorp Shares (Retention Shares). The Board approved
the 2021 Retention Plan in the context of:
• the significant workload placed on key critical employees working up to the Demerger implementation date and who were critical to the delivery of the Demerger;
• retaining critical skills and experience within Tabcorp leading up to the Demerger; and
• the need to retain these critical skills post-Demerger to ensure Tabcorp and The Lottery Corporation were up for success.
The 2021 Retention Plan was offered to a small cohort of key employees, including ELT. Executive KMP were offered Retention Shares with a face value of between 30% and 50% of their
fixed remuneration. All Retention Shares are subject to a two-year service-based restriction period (forfeitable on resignation or dismissal for misconduct) with a restriction end date of
31 July 2023.
Upon the Demerger these Restricted Shares were treated differently for different cohorts of employees. Employees who remained with Tabcorp post the Demerger received an equivalent
number of shares in The Lottery Corporation (the same as other shareholders). For these employees, the shares in Tabcorp remain restricted until 31 July 2023 and the shares in The Lottery
Corporation are under a holding lock until 31 July 2023. Employees who transferred to The Lottery Corporation forfeited their Tabcorp Retention Shares with the intention that these will be
substituted for The Lottery Corporation shares of an equivalent value and remain restricted until 31 July 2023. Employees who were not offered new roles in either Tabcorp or The Lottery
Corporation exited the business, retaining their shares with all restrictions waived.
Changes to the STI Plan
During 2021, the Board approved several changes to the STI plan including the introduction of executive scorecard weightings, an EBIT hurdle and a sustainability modifier. The
introduction of scorecard weightings provides greater clarity and focus for executives and, given the varying lifecycles applicable to each of Tabcorp’s businesses, ensures executive KMP
are rewarded effectively for Group, business unit and individual performance. Weightings were allocated across financial, strategic, operational excellence, customer first and people and
culture dimensions, and were approved by the Board at the beginning of the financial year, reflecting key Group priorities. The STI scorecard weightings that applied for FY22 are:
• For the MD & CEO and executive KMP that lead corporate functions, 50% of the STI scorecard is dependent on Group financial results, and 50% is dependent on the remaining
individual scorecard measures.
• For executive KMP that are aligned to a specific business unit, 30% of the STI scorecard relates to Group financial performance, 20% to the respective business unit’s financial
performance, and the remaining 50% relates to non-financial measures specific to their individual scorecards.
The EBIT hurdle acts as a gateway to the STI pool, which if achieved, a STI pool becomes available to eligible employees (subject to Board discretion). A sustainability modifier was also
introduced, acting as a lever to adjust the STI pool either up or down by the Board after considering sustainability measures such as risk management, responsible gambling, community
impacts and reputation management. The Board’s determination is assisted through feedback from the Risk, Compliance and Sustainability Committee.
Retired MD & CEO’s termination arrangements
David Attenborough retired as a Director of Tabcorp and ceased to be the Group’s MD & CEO, effective from 31 May 2022. Mr Attenborough ceased employment with the Group on 1 July
2022. As disclosed in the Demerger Booklet, Mr Attenborough did not have any equity on foot under any of Tabcorp’s equity plans at the date he ceased employment. Upon ceasing
employment, Mr Attenborough received a payment in lieu of working out the remainder of his notice period (equivalent to 8 months’ fixed remuneration ($1.3m)) and payment for any
accrued but unused annual and long service leave. He did not receive any other termination payments.
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Tabcorp Annual Report 2022 Overview of FY22 remuneration outcomes and FY23 changes
The following table summarises the key remuneration outcomes and changes for FY22 and proposed key changes for FY23 (on a per-annum basis):
Non-Executive Director fees
FY22
FY23
Board and Board Committee fees
No adjustments.
Board and Board Committee fees
A reduction in fees (effective 1 July 2022) was approved by the Board in June 2022.
Fixed remuneration
Outgoing MD & CEO
$2,000,000 per annum
Incoming MD & CEO
$1,500,000 per annum
STI opportunity and award
MD & CEO remuneration
FY22
LTI opportunity and vesting
Target opportunity: 75% of fixed remuneration
($1,500,000).
Target opportunity: 100% of fixed remuneration
($1,500,000).
Maximum opportunity: 112.5% of fixed
remuneration ($2,250,000).
Actual FY22 STI award: 65% of target
Maximum opportunity: 150% of fixed remuneration
($2,250,000).
Actual FY22 STI award: 100% of prorated target
(Refer table 4)
Target opportunity: 75% of fixed remuneration
($1,500,000).
Target opportunity: 100% of fixed remuneration
($1,500,000).
Maximum opportunity (face value at grant):
150% of fixed remuneration ($3,000,000).
Maximum opportunity (face value at grant):
200% of fixed remuneration ($3,000,000).
2018 LTI offer: Tabcorp’s three-year TSR performance placed Tabcorp at the 50th percentile of the peer
group and 50% of the TSR Tranche (which comprised 75% of the Performance Rights allocated) vested
(i.e. 37.5% of the total Performance Rights vested and 37.5% lapsed). The Combination Synergy measure
targets were not met and thus, 100% of the Combination Synergy tranche (which comprised 25% of the
Performance Rights allocated) lapsed. In total, 37.5% of the Performance Rights granted under the 2018
LTI offer vested (the remainder 62.5% lapsed).
2019 LTI offer: This offer included a Combination Synergy measure which applied to 25% of the
Performance Rights granted. As a result of the Board’s decision regarding testing of the Combination
Synergy measure, the 2019 LTI offer Combination Synergy tranche lapsed. For the remaining 75% of the
Performance Rights, the three-year TSR performance condition was waived and the awards vested on a
pro rata basis, considering the service period that had elapsed at the date of Demerger. Approximately
67% of the 2019 LTI Offer vested and the remainder lapsed.
2020 and 2021 LTI offer: The performance conditions (TSR and return on invested capital (ROIC))
that were not due to be tested before the Demerger implementation date were waived, and Performance
Rights vested on a pro rata basis considering the service period that had elapsed at the date of
Demerger. Approximately 55% of the 2020 LTI offer and 21% of the 2021 LTI Offer vested into Shares,
and the remainder of both offers lapsed.
FY23
Fixed remuneration
STI and LTI opportunities
N/A
N/A
No adjustments.
No adjustments.
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Fixed remuneration
In September 2021, as part of the Annual Remuneration Review the average increase for executive KMP was 2.75%.
Upon Demerger, the Chief Financial Officer was promoted internally to this role, with an approximate increase of 23%.
This was in line with the market and their skills and experience.
Target opportunity: 50% of fixed remuneration.
Maximum opportunity: 100% of fixed remuneration.
STI opportunity and award
Actual FY22 STI award (average of all current executive KMP): 107% of target
Other executive
KMP remuneration
FY22
LTI opportunity and vesting
Former executive KMP: STI awards in relation to former executive KMP were determined by The Lottery Corporation
(refer to table 11).
Target opportunity: The target opportunity for the CFO is 75% of fixed remuneration.
Maximum opportunity: 100% of fixed remuneration.
2018 LTI offer: Tabcorp’s 3-year TSR performance placed Tabcorp at the 50th percentile of the peer group and 50% of
the TSR Tranche (which comprised 75% of the Performance Rights allocated) vested (i.e., 37.5% of the total Performance
Rights vested and 37.5% lapsed). The Combination Synergy measure targets were not met and thus, the full Combination
Synergy tranche (which comprised 25% of the Performance Rights allocated) lapsed. In total, 37.5% of the Performance
Rights granted under the 2018 LTI offer vested (the remainder 62.5% lapsed).
2019 LTI offer: This offer included a Combination Synergy measure which applied to 25% of the Performance Rights
granted. As a result of the Board’s decision regarding testing of the Combination Synergy measure, the 2019 LTI offer
Combination Synergy tranche lapsed. For the remaining 75% of the Performance Rights, the three-year TSR performance
condition was waived and the awards vested on a pro rata basis, considering the service period that had elapsed at the
date of Demerger. Approximately 67% of 2019 LTI Offer vested and the remainder lapsed.
2020 and 2021 LTI offer: The performance conditions (TSR and ROIC) that were not due to be tested before the
Demerger implementation date were waived, and Performance Rights vested on a pro rata basis considering the service
period that had elapsed at the date of Demerger. Approximately 55% of the 2020 LTI offer and 21% of the 2021 LTI Offer
vested into Shares, and the remainder of both Offers lapsed.
FY23
Fixed remuneration
No adjustments. Fixed remuneration was increased upon promotions to executive roles.
STI and LTI opportunities
No adjustments.
Remuneration framework changes for FY23
Effective FY23 Tabcorp’s LTI variable remuneration will operate under a market priced option plan. The performance
period will remain as three years and performance will be measured via two internal measures of return on invested
capital (ROIC) and earnings per share (EPS). The Options if vested will have a two-year exercise period and any Options
not yet vested or exercised, will lapse. More detail will be provided in Tabcorp’s FY23 Remuneration Report.
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Tabcorp Annual Report 2022 4. 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
Incentive outcomes
People strategy and projects
Setting remuneration levels that are market-competitive and appropriate, encouraging and recognising strong performance and retaining key
skills.
Determining performance and incentive outcomes that align with Tabcorp’s risk and compliance framework and correlate with business
performance and shareholder value creation.
Oversee people strategies and projects, including talent and retention, diversity and inclusion, culture and engagement; as well as the 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 FY22 and to the date of this report.
In determining executive KMP remuneration outcomes, the Committee also receives feedback from the Board Risk, Compliance and Sustainability Committee.
The Committee is governed by its Charter, which is available on Tabcorp’s website (www.tabcorp.com.au) under the Corporate Governance section.
5. 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
Acting in line with Tabcorp’s risk management and
compliance framework
The generation of Tabcorp’s STI pool is based on
a financial hurdle and assessment of non-financial
measures (including risk management, customer care,
community and other environment and social
measures). 30%–50% of executive KMP STI awards are
based on Group financial performance, 50% on
individual scorecard performance and for executive
KMP who align to a specific business unit 20% relate
to their business unit’s financial performance.
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.
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 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
(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
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.
Remuneration structure
Fixed remuneration (FR)
Set and adjusted,
considering:
Role
responsibilities
Qualifications and
experience
Market movements
and economic data
Individual
performance
ASX 25 to
75 median
Cash
+
Short Term Incentive (STI)
Dependent on:
Group Earnings
before Interest and
Tax (EBIT)
performance hurdle
Sustainability
Assessment
Individual weighted scorecards
50% – Financial
20% – Strategic
10% – Customer
10% – Operational
excellence (including
risk and compliance)
10% – People
and culture
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).
+
Restricted Shares
(50% for the MD & CEO
and 25% for other
executive KMP). Restricted
for 2 years and subject
to forfeiture conditions.
Reward for the
creation of sustained
shareholder value.
LTI
Performance
Rights
(no dividends)
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+
Long Term Incentive (LTI)
Relative TSR performance and service periods (75%)
Financial Measure performance & service period (25%)
3 year relative test
and service period
Performance and
service condition
test point at end
of 3 year period
(no retesting)
Shares
(only issued if
performance and
service conditions
are met).
Tabcorp Annual Report 2022 (c) Remuneration packages
The following diagram details current executive KMP annual remuneration packages assuming minimum, target and stretch levels of performance (Group, business unit and individual)
effective post the Demerger on 1 June 2022. 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 to ensure they remain competitive and that their skills are retained. Fixed remuneration is also reviewed on a change in role.
Key Changes as a result of the Demerger
• 66% of the new MD & CEO’s target remuneration package is variable and at risk (77% at maximum). On average, 57% of the Chief Financial Officer’s target remuneration package is
variable and at risk (71% at maximum). In transitioning from the outgoing to the incoming MD & CEO’s, the pay mix has moved from 40% fixed remuneration, 30% on-target STI and
30% on-target LTI to 33% across each element. This change has been made to better align with market practice and to achieve a greater portion of variable (at risk) remuneration.
• Overall target remuneration packages for both the incoming MD & CEO and the executive KMP are lower than the outgoing KMP.
Diagram 2: Annual remuneration packages for incoming executive KMP from 1 June 2022
MD & CEO
Chief Financial Officer
Minimum
$1.5m
$1.5m
Minimum
$675k
$675k
Target
$1.5m
$750k
$750k
$1.5m
$4.5m
Target
$675k
$253k
$84k
$506k
$1.5m
Maximum
$1.5m
$1.125m $1.125m
$3.0m
$6.8m
Maximum
$675k
$506k
$169k
$1.013m
$2.4m
0
500000
1000000
1500000
2000000
2500000
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 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 grant date.
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Diagram 3: Annual remuneration executive KMP remuneration package comparison
MD & CEO
$5.0m
100
30%
15%
15%
20
40%
$4.5m
33%
17%
17%
33%
Executive KMP
$1.6m
$1.5m
100
80
25%
6%
60
19%
40
20
50%
33%
6%
17%
44%
0
Pre-Demerger
Post-Demerger
0
Pre-Demerger
Post-Demerger
Long term incentive
Short term incentive – Restricted Shares
Short term incentive – Cash
Fixed remuneration
(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 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 grant date.
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Tabcorp Annual Report 2022 (d) Remuneration structure
(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. This will be reviewed during FY23 once the volatility in Tabcorp’s share price post-demerger
eases.
(ii) Short term incentive (STI)
Diagram 4: Executive KMP STI operation
Target STI
opportunity
X
Group Financial
Hurdle
X
Sustainability
Assessment
X
Individual Weighted Performance Scorecard
Range
FY22
actual
0 or 1
1
l
e
d
r
u
H
EBIT Hurdle –
If the Financial
hurdle is not
met no STI awards
are payable
Board has discretion
to set a smaller pool
if the target is
not met
The Board
considers
sustainability
measures such
as risk management,
customer care,
community impacts
and reputation
management
and may exercise
discretion to adjust
the pool (up or down).
Sustainability
measures are
assessed by the
People and
Remuneration
Committee following
a report on Risk
from the Risk
and Compliance
Committee.
Outcomes are assessed against a range of financial and non-financial
performance measures within the balanced scorecard
Range
Financial
Strategic
Group
Business Unit
Operational Excellence
Customer First
People & Culture
MD & CEO
and Corporate
aligned KMP
Business Unit
aligned KMP
50%
-
20%
10%
10%
10%
30%
20%
20%
10%
10%
10%
Range
FY22
actual
MD & CEO
0% to 150% of fixed remuneration(i)
Other executive KMP
0% to 100% of fixed remuneration(i)
MD & CEO
Other executive KMP
Mr Attenborough: 26%
Mr Rytenskild: 70%
Average of 39% of individual
performance
(i) The percentage of fixed remuneration relates to post Demerger remuneration arrangements, other than for Mr Attenborough.
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
FY22
actual
MD &
CEO
0% to 150% of fixed
remuneration
Other
executive
KMP
0% to 100% of fixed
remuneration
MD &
CEO
Mr Attenborough: 65%
Mr Rytenskild: 100%
Other
executive
KMP
Average of 107%
Restricted Shares are restricted
for two years and subject to malus
and clawback
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
What is the target STI opportunity?
How does the EBIT Hurdle operate?
The value of the STI award if target performance levels are achieved and behaviours are in accordance with the Group’s values. The CEO has the
opportunity to receive 100% of TEC and all other Executive KMP have the opportunity to receive 50% of TEC. The minimum STI outcome is 0%
(if targets are not met).
The earnings before interest and taxation (EBIT) hurdle is based on the Group’s EBIT budget as set at the beginning of the financial year
and as approved by the Board. If the hurdle is not met, no STI awards are payable for that year. The Board has discretion to set a smaller pool
if the hurdle is not met, considering other factors such as non-financial performance, key strategic achievements, and critical skill retention.
How does the Sustainability
Assessment operate?
The People and Remuneration Committee consider sustainability measures such as risk management, customer care, community impacts and
reputation management and may exercise discretion to adjust the pool (up or down). These measures are assessed by the People and
Remuneration Committee utilising reports on Risk from the Risk and Compliance Committee.
Once the EBIT hurdle has been met, Executive KMP awards are dependent on a weighted balanced scorecard of measures across financial,
strategic, operational excellence, customer first and people and culture dimensions. Weightings are agreed with the Board at the beginning
of the financial year, reflecting key Group priorities.
For the MD & CEO and executive KMP that lead corporate functions, 50% of the STI scorecard is dependent on Group financial results
and rewards executives for their contribution. The remaining 50% is dependent on individual scorecard measures (mix of financial and
non-financial measures).
For executive KMP that are aligned to a specific business unit, 30% of the STI scorecard relates to Group financial performance and 20%
to the respective business unit’s financial performance. The remaining 50% of the Executive STI scorecard relates to non-financial measures.
Each scorecard category is assessed and is provided with a percentage from 0% to up to 200% (150% for the MD & CEO), weighted by each
category. For example, the financial category for KMP can range from 0% to 100% (0% to 75% for the MD & CEO), with 50% being on-target
achievement.
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 claw back conditions.
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).
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.
The STI scorecard contains non-financial measures which include adherence with risk management and compliance objectives, appropriate
customer outcomes and culture 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 claw back provisions.
The Board is required to determine, in its absolute discretion, the appropriate treatment regarding any Restricted Shares.
How does the individual performance
scorecard work?
In what form are STI awards made
to executive KMP?
What happens to Restricted Shares
if an STI participant leaves the Group
during the 2-year restriction period?
Can Restricted Shares be forfeited
or clawed back?
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?
70
Tabcorp Annual Report 2022 (iii) Long term incentive (LTI)
Diagram 5: FY22 LTI operation
Performance Rights granted
(at face value)
Relative total shareholder return (TSR)
(75%)
Return on invested capital (ROIC)
(25%)
Performance Rights lapse/
Shares allocated
Performance Rights lapse/
Shares allocated
Grant date
19 October 2021
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
30 June 2024
ROIC performance
test date
(no retesting)
28 September 2024
Relative TSR performance
and ROIC service
test dates
(no retesting)
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.
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 (post the 2019 LTI offer) because it focuses management
on achieving targeted returns on Tabcorp’s invested capital (equity and debt).
The ROIC performance condition requires three-year average ROIC performance (measured over three financial years, from 1 July 2021 to 30 June 2024)
to exceed specified targets.
A stretch three-year average ROIC target of 10.0% has been 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 2024). The Board is of the view that the stretch target is 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 has also been 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 2022 financial year and in line with targeted longer term
investment returns. The targets have also been set considering Tabcorp’s invested capital base.
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
When will the performance
and service conditions
be tested?
Due to the demerger, these performance and service conditions were waived and the Performance Rights vested on a pro-rata basis. Refer to 6(e).
Relative TSR
Return on invested capital
Percentile ranking
% of Performance
Rights that will vest
Peer Group
What are the performance
conditions?
Below 50th percentile
0%
50th percentile
75th percentile
50%
100%
S&P/ASX 100 index excluding
organisations operating in
the Metals & Mining and
Oil and Gas sectors.
Average three-year ROIC
(between 1 July 2021
and 30 June 2024)
% of Performance
Rights that will vest
Below 8.9%
0%
8.9%
10.0%
Above 8.9% and below
or at 9.5%
Straight line vesting to occur
between 10% and 50%
Straight line vesting above the 50th percentile and below the 75th percentile
Above 9.5% and below 10.0% Straight line vesting to occur
At or above 10.0%
100.0%
between 10% and 50%
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 the end of the performance period. The ROIC service condition
will be tested and agreed with the Board. 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)
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 performance 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
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 this adverse event 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).
What happens when an LTI
participant leaves the Group?
What happens in the event
of a change in control
of the Group?
Can Performance Rights be
cancelled or clawed back?
Accounting treatment
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Tabcorp Annual Report 2022 Treatment of equity awards on foot as a result of the Demerger
As part of the treatment on Demerger, the relative TSR and ROIC performance conditions that applied to the 2021 LTI offer were waived and a pro rata portion of the Performance Rights
(based on the portion of the service period that had elapsed) vested and the remainder lapsed. Unrestricted Tabcorp Shares were allocated on vesting of Performance Rights just prior
to the Demerger.
Approximately 21% of the Performance Rights originally granted under the 2021 LTI offer to current participants vested into Tabcorp Shares and 79% of the Performance Rights lapsed
(participants did not derive any benefit from the lapsed portion). This applied to all participants including the outgoing MD & CEO and executive KMP.
Refer to section 6(e) for further information.
(iv) 2021 Retention Plan
In July 2021, the Tabcorp Board considered and approved the introduction of a Retention Plan for critical employees. The 2021 Retention Plan was established to mitigate the risk identified
as a result of the pending Demerger. There was significant uncertainty of the impact of the Demerger on employee roles, a need to retain critical skills and knowledge to ensure the
Demerger was successful and to set the new companies up for future success. The 2021 Retention Plan was developed with the intention to retain key talent during a period of significant
ambiguity, job insecurity and change for Tabcorp. Restricted Shares were allocated under the 2021 Retention Plan in July 2021 and will be held in restriction until July 2023.
Why was a Retention Plan necessary?
Announcement of the Demerger created significant job insecurity and ambiguity for many Tabcorp employees. It was critical that key
employees were retained to ensure stability and retention of key knowledge and leadership through the period of the Demerger and
following the Demerger to ensure that each new company was set up for success.
How were participants determined?
Participants were determined based on their critical skills and relationships to both execute on the transaction and to continue
to operate the business during the key transaction period and post-Demerger.
How were the retention values determined?
Values were based on a percentage of fixed remuneration, with consideration given to a balance between cost and quantum that was
meaningful enough to retain participants.
What instrument was used?
Restricted Tabcorp Shares.
What are the service conditions that apply?
For vesting to occur, participants must remain employed until the vesting date in July 2023.
How was the Retention treated upon
Demerger for ongoing Tabcorp employees?
How was the Retention treated for Tabcorp
employees who moved to The Lottery
Corporation?
Accounting treatment
For participants who remained employed by the Tabcorp Group, Restricted Tabcorp Shares held under the 2021 Retention Plan continue
to be subject to their original terms and conditions (including trading restrictions) until the end of July 2023. On Demerger the Retention
Shares were split between Tabcorp shares and The Lottery Corporation shares, with a holding lock on The Lottery Corporation shares.
The Lottery Corporation shares allocated as part of the Demerger were placed under a holding lock until July 2023.
The Retention shares for Tabcorp employees who moved to The Lottery Corporation were forfeited prior to the Demerger and an alternative
offer was made in The Lottery Corporation upon appointment.
Retention Shares are expensed on a straight-line basis over the vesting period from July 2021 to July 2023. The portion relating to The
Lottery Corporation shares allocated as part of the Demerger was fully expensed.
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
(e) Remuneration and accountability
In FY22 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 employees operate with integrity
and that customers and the communities that we operate in benefit from our products in a responsible manner. Tabcorp has a Board approved Code of Conduct which outlines
expectations of employees, 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 determine appropriate remuneration outcomes for the organisation, including executive KMP, several sources of information are
presented. These include risk culture reports which are presented to the Board Risk and Compliance Committee and are 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 employees where such events have occurred. If this was to occur, by default, all STI and LTI awards on foot would be
forfeited/lapsed.
(f) Policy prohibiting hedging
Participants in the Group’s incentive plans are restricted from hedging against those equity awards 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.
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Tabcorp Annual Report 2022 (g) Executive Shareholding Policy
The Executive Shareholding Policy (applicable to all executive KMP) ensures that the interests of executives, Tabcorp and shareholders are aligned. In accordance with 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 within five years of the
date of the Demerger (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.
(h) Executive KMP employment contracts
Table 2: Current executive KMP contracts and notice periods
Current executive KMP
Adam Rytenskild
Daniel Renshaw
Position
MD & CEO
Chief Financial Officer
Contract duration
Open ended
Open ended
Minimum notice period (months)
Tabcorp
12
9
Executive
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 not worked. Tabcorp may also terminate at any time without notice for serious misconduct.
On cessation of employment, STI and LTI awards may vest, lapse or be forfeited in accordance with the relevant plan rules.
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
6. EXECUTIVE KMP REMUNERATION OUTCOMES IN FY22
(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 at 30 June(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
% of maximum opportunity
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)(iv)
3.38
11.0
0%
0%
0%
0%
0%
0%
FY21
269(v)
12.3(vi)
5.18
14.5
100%
100%
67%
105%
52%
FY22
6,775.9(vii)
304.6(vii)
1.07
13.0
100%
65%(viii)
43%(viii)
107%
54%
54%
37.5%(ix)
(i) Opening share price as at 1 July 2017 was $4.37.
Includes interim and final dividends. For FY20, a final dividend was not paid.
(ii)
(iii)
Includes impairment of goodwill of $1,090m.
(iv) FY20 EPS before impairment of goodwill was 10.9c.
(v)
(vi) FY21 EPS before impairment of goodwill was 17.9c.
(vii) FY22 includes 11 months results for Lotteries and Keno prior to the Demerger.
(viii) This represents FY22 STPP outcome for David Attenborough for 11 months.
(ix) Overall, 37.5% of the Performance Rights granted under the 2018 LTI offer vested into Tabcorp shares (62.5% of the Performance Rights lapsed).
Includes impairment of goodwill of $122m.
(b) FY22 STI outcomes
Under Tabcorp’s STI plan, the FY22 STI pool is primarily based on the EBIT result with consideration given to the sustainability measures of risk management, responsible gambling,
community and reputation management via the sustainability modifier. The EBIT hurdle was 90% of the EBIT target against which an outcome of 89% was achieved. In determining
the STI pool, the Board considered financial and non-financial performance as well as the achievements provided by the sustainability modifier.
The Board exercised its discretion and determined that an STI pool (at 100%) be made available to eligible employees. In applying discretion, the Board carefully considered:
• the significant impact on the FY22 financial results due to COVID-19 related retail closures in NSW and Victoria in 1H22, as well as wet weather impacts in 2H22;
• the fact that the EBIT targets did not include any assumptions on the potential impacts of the COVID-19 pandemic;
• the exceptional effort by employees to deliver the Demerger within 11 months;
• the delivery of key strategic achievements following the Demerger; and
• the positive assessment of performance against key sustainable measures.
When reviewing the individual executive KMP STI outcomes for FY22, the Board considered individual, business performance and the items noted above.
76
Tabcorp Annual Report 2022 The evaluation of Mr Attenborough’s performance and associated STI award was based on his performance against his weighted scorecard, taking a balanced view of financial and
non-financial performance for the 11 month period prior to him retiring as MD & CEO.
The evaluation of Mr Rytenskild’s performance and associated STI award was based on his performance against his weighted scorecard, taking a balanced approach to financial and
non-financial performance, his efforts in the lead up to the Demerger and the key strategic achievements achieved during Mr Rytenskild’s first month as MD & CEO, creating positive
momentum to transform Tabcorp and execute on its strategic priorities.
Diagram 6: FY22 Group STI scorecard and performance outcomes
Category
Financial
Priority
Achieve profit targets
Cost Management
Capital Management
Measures
NPAT (before significant items)
EBITDA
Opex / revenue ratio
ROIC
Gross debt / EBITDA ratio
Strategic
Operational
Excellence
(including
risk and
compliance)
Support operating
business unit growth
and Sustainability
Successfully complete
the demerger
Seamless separation of
technology platforms
and resources
Compliance and
reputation
Sustainability
Optimal systems,
processes and
operational
performance
Business optimisation
Delivery of operating business unit
strategic plans to ensure success
post demerger
Demerger approved and
completed successfully
Implement plan to separate
technology platforms and resources
with no breaches or outages
Compliance and reputation
management
Advance sustainability initiatives
Achieve technology service
levels across key business
periods/events
Maintain essential learning
expectations
Customer
First
Customer retention
Customer experience
Ensure customer retention
during the demerger
Best digital experience across
all channels
FY22 Outcome
Comments
• Financial targets set in June 2021 did not include impacts of COVID-19, one less month of Lotteries
and Keno earnings or demerger dissynergies.
• NPAT from continuing and discontinued operations (before significant items) $362.4m, $72.8m
below target.
• EBITDA from continuing and discontinued operations (before significant items) $1,027.7m, $137.3m
Target
below target
• Opex/revenue ratio 15.3% less than target due to demerger impacts
• ROIC not meaningful due to demerger impact on invested capital
• Gross debt/EBITDA ratio not meaningful due to debt restructure
• Actual financial performance significantly impacted by government enforced lockdowns during July
2021 to October 2021 with retail outlets unable to trade.
• Importantly +6% compared to budget for the 7 months post the end of hard lockdown in NSW and
Victoria
• Floods throughout QLD and NSW resulted in a record number of abandoned race meetings
• Demerger of the Lotteries and Keno business successfully implemented, delivering value uplift to
shareholders
Target
• Key employees undertook multiple responsibilities to deliver the demerger
• Large scale, complex divestment of technology programs with over 1,300 applications in scope for
separation post the demerger
• Delivered significant progress in leveling the playing field in June with new arrangements to be
enacted in Qld during FY23
Target
Target
• Compliance and reputation management programme delivered with reporting tools established
• DJSI Global Leadership ranking maintained
• New Sustainability Framework established
• Annual Corporate Responsibility Report and Modern Slavery Statement published
• Launched Environment and Climate Change Position Statement and set medium and long term
targets
• Enhancements delivered to support responsible gambling
• Several charitable donations and community support programs
• Increase in active customers and retention rate for Lotteries as at 31 May 2022, although retention rate
slightly lower than target of 85%
• Keno retention rate above target of >40% as at 31 May 2022
• Wagering customers slightly greater than last year but below target of 820K
• Digital product strategy formed
• New TAB App on target for delivery by Spring Carnival 2022
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Category
People and
Culture
Priority
Employee engagement
Inclusion and diversity
Employee wellbeing
Executive leader
collaboration
Measures
Improve engagement results
Achieve 40% female representation
in total leadership cohort
LTIFR <2.3
Programs to enhance wellbeing
FY22 Outcome
Comments
• Employee engagement was measured in August 2021 as 56%, a slight decline on last year. A new
baseline will be established in August 2022 (post Demerger)
• Actual LTIFR result of 1.3 against target of <2.3
• Female representation in leadership cohort at 42%, above target of 40%
• Offered many employee wellbeing programs including:
Target
• ‘The Arena’ which focused on physical, psychological, nutrition, mindfulness and personal health
risk assessments
• Bespoke psychological support through repeated public lockdowns
• Physiotherapy advice for working from home
• Successful appointment of a new Executive Leadership Team and retained key talent post the
Demerger, positioning Tabcorp for future growth
• Managed employee impacts of COVID-19 and the floods within NSW and QLD, continuing to offer
assistance such as flexible work arrangements
Table 4: Executive KMP FY22 STI awards
Current executive KMP
Adam Rytenskild(iii)
Daniel Renshaw(iv)
Former executive KMP
David Attenborough(v)
Adam Newman(vi)
Patrick McGlinchey(vi)
Sue van der Merwe(vi)
Total STI awarded(i)
Actual STI
achieved
STI
foregone
Actual STI
achieved
Financial
year
FY22
FY21
FY22
FY22
FY21
FY21
FY21
FY21
Target
544,570
459,000
28,125
1,500,000
1,500,000
400,000
125,342
400,000
Total(ii)
$
544,570
440,640
29,690
975,000
1,500,000
440,000
127,849
440,000
Cash
portion
$
377,605
330,480
22,267
975,000
750,000
330,000
95,887
330,000
Deferred
portion
$
166,965
110,160
7,423
-
750,000
110,000
31,962
110,000
As a %
of target
100%
96%
107%
65%
100%
110%
102%
110%
As a %
of target
0%
4%
0%
As a % of
maximum
58%
48%
54%
35%
0%
0%
0%
0%
43%
67%
55%
51%
55%
(i) Individual outcomes vary in percentage. In FY21, the weighting for Group was 40% for all KMP. In FY22, this changed to 50% for all KMP.
(ii) The minimum STI value possible is zero.
(iii) STI and STI target for Mr Rytenskild reflects the full year including his role of Managing Director, Wagering and Media and his role of MD & CEO post Demerger, effective from 1 June 2022.
(iv) Mr Renshaw commenced as an executive KMP on 1 June 2022. His STI including the ‘set target’ represents the period as KMP.
(v) Mr Attenborough ceased to be MD & CEO on 31 May 2022 and ceased employment on 1 July 2022. STI represents the full year entitlement.
(vi) Ceased to be an executive KMP on 31 May 2022. STI for FY22 was determined by The Lottery Corporation.
(c) LTI awards granted in FY22
In FY22, LTI grants were provided to executive KMP following shareholder approval of the MD & CEO’s 2021 LTI grant received at the Tabcorp Annual General Meeting on 19 October 2021
and obtained under ASX Listing Rule 10.14. These LTI grants were subject to two performance conditions and a service condition as detailed in section 6(d). The Performance Rights
allocated under these grants vested on a pro rata basis at the time of the Demerger as detailed in section 6(d).
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Tabcorp Annual Report 2022
Table 5 : Performance Rights granted during FY22
Current executive KMP
Adam Rytenskild
Former executive KMP
David Attenborough(v)
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Total
Grant date(i)
19 October 2021
Number granted(ii)
176,538
19 October 2021
19 October 2021
19 October 2021
19 October 2021
576,923
158,461
147,836
176,538
1,236,296
Fair value per Performance Right(iii)
Relative TSR
$
2.94
Return on invested
capital (ROIC)
$
4.66
2.94
2.94
2.94
2.94
4.66
4.66
4.66
4.66
Fair value at
grant date(iv)
$ Scheduled vesting date
28 September 2024
594,932
1,944,229
534,013
498,207
594,932
4,166,313
28 September 2024
28 September 2024
28 September 2024
28 September 2024
(i) Vesting of the 2021 LTI allocation of Performance Rights was subject to three-year relative TSR and ROIC performance conditions and additional service conditions.
(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
$5.20). Approval for the issue of Performance Rights to Mr Attenborough was obtained under ASX Listing Rule 10.14.
(iii) The LTI allocation was 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) Mr Attenborough was granted a parallel award on 19 October 2021, which was dependent on the demerger proceeding. Details are outlined in section 6(e). The parallel award comprised 120,750 Performance Rights (being a pro rata portion of the 576,923
Performance Rights noted above) with a fair value at grant date of $614,618 and a vesting date of 23 May 2022. As the demerger proceeded, Tabcorp has only accounted for the parallel award and not the award outlined in the above table.
(d) LTI awards tested in FY22
The 2018 LTI grant comprised two measures – relative TSR (75%) and Combination Synergy (25%). The three-year TSR result was tested on 19 September 2021 and placed Tabcorp at the
50th percentile of the peer group, and accordingly 50% of the Performance Rights vested under this tranche. The Combination Synergy tranche was tested, and the Board determined that
the full tranche should lapse due to challenges in measuring and delays in finalising the integration of Tabcorp and Tatts Group, following the combination of these two organisations.
Overall, 37.5% of the Performance Rights granted under the 2018 LTI offer vested into Tabcorp shares (62.5% of the Performance Rights lapsed).
The 2019 LTI grant also included the Combination Synergy measure which applied to 25% of the Performance Rights granted. As a result of the Board decision, the Combination Synergy
tranche of the 2019 LTI grant was also lapsed.
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REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
(e) Treatment of restricted equity on foot upon Demerger
i. 2019 LTI offer
Vesting of Performance Rights held under the 2019 LTPP offer was subject to two performance conditions – relative TSR (75% of the Performance Rights) and a Combination Synergy
measure (25% of the Performance Rights). The Combination Synergy tranche lapsed as outlined in section 6(d).
The 2019 LTI Offer was due to be tested on 25 September 2022.
Prior to the Demerger, the relative TSR performance condition was waived and a pro rata portion of the Performance Rights in the relative TSR tranche (based on the portion of the service
period that has elapsed) vested and the remainder lapsed. Unrestricted Tabcorp Shares were allocated on vesting of the relative TSR tranche of Performance Rights prior to the Demerger.
Approximately 67% of the Performance Rights originally granted under the 2019 LTI offer to current participants vested and 33% lapsed (and participants derived no benefit from the
lapsed portion).
ii. 2020 and 2021 LTI offers
Vesting of Performance Rights held under the 2020 and 2021 LTI offers were subject to two performance conditions – relative TSR (75% of the Performance Rights) and a Return
on invested capital measure (ROIC) (25% of the Performance Rights).
The 2020 and 2021 LTI offers were due to be tested on 23 September 2023 and 29 September 2024 respectively.
Prior to the Demerger, the relative TSR and ROIC performance conditions were waived for all participants and a pro rata portion of the Performance Rights (based on the portion of the
service period that has elapsed) vested and the remainder lapsed. Unrestricted Tabcorp Shares were allocated on vesting of the Performance Rights prior to the Demerger. At the date
of this report, there are no Performance Rights on issue.
Approximately 55% of the Performance Rights originally granted to KMPs under the 2020 LTI offer to current participants vested into Tabcorp Shares and 45% of the Performance Rights
lapsed (and participants derived no benefit from the lapsed portion).
Approximately 21% of the Performance Rights originally granted to KMPs under the 2021 LTI offer to current participants vested into Tabcorp Shares and 79% of the Performance Rights
lapsed (and participants derived no benefit from the lapsed portion).
In total, across all three LTI offers (namely the 2019, 2020 and 2021 LTI offers), approximately 58% of the Performance Rights originally granted to KMPs vested into Tabcorp Shares and
42% lapsed. The Tabcorp Board approved this treatment considering that it aligns to the average testing and vesting outcomes of the LTI offers from FY17 to FY22 (and hence participants
were not deriving undue benefit), the anticipated unlocked financial benefits of the Demerger would likely generate higher outcomes if tested, the complexity with carrying over
Performance Rights into New Tabcorp and The Lottery Corporation post Demerger and modifying these (value and performance conditions) and executives losing the opportunity
to receive any benefit on the lapsed Performance Rights which are not compensated for.
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iii. FY21 STI Restricted Shares outcomes
Under Tabcorp’s STI plan, a portion of the STI awarded to the MD & CEO, members of the ELT and senior managers are provided in the form of cash (50% for the MD & CEO and 75%
for other participants) and Restricted Shares (50% for the MD & CEO and 25% for other participants). Restricted Shares awarded under the FY21 STI plan were restricted for two years
(until 20 August 2023) and subject to service-based conditions only.
On Demerger, the Restricted Shares held by all participants were released from any trading restrictions and service conditions. The Board determined the release of Tabcorp Shares to
be appropriate, considering they have already been earned by participants (under the FY21 STI plan) and the complexity of continuing restrictions post the Demerger.
Table 6: Performance Rights vested and lapsed, and shares issued during FY22
Current executive KMP
Adam Rytenskild
Daniel Renshaw
Former executive KMP
David Attenborough
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Total
Number of Performance
Rights vested
383,551
-
Value of Performance
Rights exercised(i)
$’000
2,021,250
-
Number of
Performance Rights
lapsed(ii)
443,478
-
1,258,197
271,828
219,605
332,185
2,465,366
6,629,063
1,451,562
1,172,691
1,752,936
13,027,502
1,457,195
284,478
242,727
393,060
2,820,938
Number of
shares issued
383,551
-
1,258,197
271,828
219,605
332,185
2,465,366
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) Reflects the number of 2018 LTI Performance Rights that were tested and lapsed during FY22 and the number of Performance Rights that lapsed upon Demerger. Details are outlined in section 6(e).
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Table 7: KMP interests in Performance Rights (number)
Current executive KMP
Adam Rytenskild
Daniel Renshaw(i)
Former executive KMP
David Attenborough
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Total
Balance at start
of year
650,491
-
Granted as
remuneration
176,538
-
2,138,469
397,845
314,496
548,707
4,050,008
576,923
158,461
147,836
176,538
1,236,296
Vested
383,551
-
1,258,197
271,828
219,605
332,185
2,465,366
Lapsed(ii)
443,478
-
1,457,195
284,478
242,727
393,060
2,820,938
Balance at end
of year(iii)
-
-
-
-
-
-
-
(i) Reflects Performance Rights held at 1 June 2022 for Mr Renshaw.
(ii) Reflects the number of 2018 LTI Performance Rights that were tested and lapsed during FY22 and the number of Performance Rights that lapsed upon Demerger. Details are outlined in section 6(e).
(iii) The number of Performance Rights vested and exercisable at year end was nil.
There are no current LTI Performance Rights allocations to KMP currently on foot.
(f) Actual remuneration received in FY22
Table 8 provides a non-statutory voluntary disclosure of the actual remuneration received by current executive KMP during FY22. 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 9 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 FY22.
Table 8: Actual value of remuneration received by executive KMP during FY22
Current executive KMP
Adam Rytenskild
Daniel Renshaw(v)
Former executive KMP(vi)
David Attenborough(vii)
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Total
Salary and fees(i)
$
942,932
54,286
STI cash bonus(ii)
$
330,480
-
Superannuation
$
23,568
1,964
Value of Restricted
Shares that became
unrestricted(iii)
$
220,471
-
1,811,729
729,729
679,959
748,429
4,967,064
750,000
330,000
256,928
330,000
1,997,408
21,604
21,604
21,604
95,425
185,769
1,528,717
327,171
117,242
237,052
2,430,653
Value of LTI
vested(iv)
$
2,021,250
-
6,629,063
1,451,562
1,172,691
1,752,936
13,027,502
Total
$
3,538,701
56,250
10,741,113
2,860,066
2,248,424
3,163,842
22,608,396
(i) Comprises salary and sacrificed benefits (including salary sacrificed superannuation and motor vehicle novated leases including FBT where applicable).
(ii) STI cash bonus reflects the portion of the FY21 STI which was paid in cash in August 2021.
(iii) Comprises both the value of the deferred component of the FY19 and FY20 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 FY22.
Calculated based on the market value of Tabcorp shares at the date the restrictions ceased (being 16 August 2021, 23 May 2022 and 7 October 2021 respectively).
(iv) Value of shares issued during FY22 on the vesting of the 2018, 2019, 2020 and 2021 LTI grants of Performance Rights and calculated based on the market value of Tabcorp shares at the date of exercise (being 5 October 2021 and 23 May 2022)).
(v) Commenced as KMP on 1 June 2022. Remuneration is reflective of period as KMP.
(vi) Former executive KMP ceased to be executive KMP on 31 May 2022. Remuneration is reflective of period as KMP.
(vii) Mr Attenborough received a termination benefit of $1,327,417 in July 2022.
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Tabcorp Annual Report 2022
(g) Variable remuneration outcomes over the preceding five financial years
Diagram 7: MD & CEO and executive KMP STI historical outcomes
MD & CEO – historical STI outcomes
Executive KMP (excluding MD & CEO) – historical STI outcomes
t
e
g
r
a
t
f
o
%
(
d
r
a
w
a
I
T
S
)
y
t
i
n
u
t
r
o
p
p
o
250%
200%
150%
100%
50%
0%
34%
FY18
86%
FY19
100%
FY20
FY21
Financial year
65%
FY22
500.0
300.0
100.0
-100.0
-300.0
-500.0
-700.0
-900.0
T
A
P
N
y
r
o
t
u
t
a
t
S
)
m
$
(
e
c
n
a
m
r
o
f
r
e
p
t
e
g
r
a
t
f
o
%
(
d
r
a
w
a
I
T
S
)
y
t
i
n
u
t
r
o
p
p
o
250%
200%
150%
100%
50%
0%
500.0
300.0
100.0
-100.0
-300.0
-500.0
-700.0
-900.0
T
A
P
N
y
r
o
t
u
t
a
t
S
)
m
$
(
e
c
n
a
m
r
o
f
r
e
p
33%
FY18
89%
FY19
104%
107%
FY20
FY21
FY22
Financial year
STI award as a % of target opportunity
Target opportunity
STI award as a % of target opportunity
Target opportunity
Maximum STI opportunity
Statutory NPAT result ($m)
Maximum STI opportunity
Actual NPAT result ($m)
Diagram 8: Executive KMP five-year LTI historical vesting outcomes (excluding Demerger 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%
80%
80%
54%
37.5%
0%
0%
2014 LTI Offer
(tested in 2017)
2015 LTI Offer
(tested in 2018)
2016 LTI Offer
(tested in 2019)
2017 LTI Offer
(tested in 2020)
2018 LTI Offer
(tested in 2021)
% of Performance Rights that vested
3-year Absolute TSR performance
Performance Rights allocated
3-year relative TSR percentile ranking
70%
60%
50%
40%
30%
20%
10%
0%
R
S
T
l
e
t
u
o
s
b
a
r
a
e
y
-
3
e
c
n
a
m
r
o
f
r
e
p
R
E
P
O
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
7. REVIEW OF EXECUTIVE REMUNERATION ARRANGEMENTS FOR FY23
The remuneration framework is regularly reviewed to ensure it remains fit for purpose and aligned to Tabcorp’s strategic direction.
Effective FY23, Tabcorp’s LTI variable remuneration will operate under a market priced option plan. The Options will be performance tested, with a three-year performance period.
The Options if vested will have a one-year exercise period and any Options not vested or exercised, will lapse. More details will be provided in Tabcorp’s FY23 Remuneration Report.
The MD & CEO’s FY23 LTI grant will be detailed in Tabcorp’s Notice of Annual General Meeting to be held on 26 October 2022.
8. 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. The peer group will be reviewed during FY23 once Tabcorp’s share price is better established post Demerger.
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) FY22 fee structure
Non-Executive Directors receive a Board fee and a fee for each Board Committee that they chair or are a member of (i). The Board Chairman receives a single fixed fee which is inclusive
of services on all standing Board Committees. Superannuation contributions form part of the fees and Non-Executive Directors are not eligible to receive any other retirement benefits.
In June 2022, the Board reviewed the Board and Committee fees post the Demerger, considering ASX benchmark data and the need to attract and retain suitably skilled and experienced
Directors to support Tabcorp’s strategic objectives. The Board considered it appropriate to reduce the Committee fees by 10%, the Non-Executive Director base fee by 14% (with the
introduction of a Nomination Committee fee) and the Board Chair fee by 15%. The Board also agreed to absorb the increase in the Superannuation Guarantee Contribution rate effective
1 July 2022 (from 10.0% to 10.5%). The revised fees are effective 1 July 2022 and are provided in Table 9.
Table 9: FY22 Non-Executive Director fee structure
Board
Audit Committee
Risk and Compliance Committee
People and Remuneration Committee
Technology Committee
Nomination Committee
Chairman
Member
Chairman
Member
Chairman
Member
Chairman
Member
Chairman
Member
Member
Fees as at 30 June 2022 (inclusive of
superannuation contributions)
$
580,350
186,150
54,750
24,090
49,275
21,900
49,275
21,900
49,275
21,900
-
Fees effective 1 July 2022 (inclusive
of superannuation contributions)
$
493,300
160,000
49,280
21,680
44,350
19,700
44,350
19,700
44,350
19,700
7,500
(i) From 1 July 2022, Non-Executive Directors (excluding the Chairman) will receive a fee for membership of the Nomination Committee. Prior to this, no additional fees were paid to Directors for membership of this Committee.
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Tabcorp Annual Report 2022 (c) Fees paid during FY22
The mandated Superannuation Guarantee increase of 0.5% (from 9.5% to 10.0%) in July 2021 was absorbed into existing fees at that time, resulting in no increase in overall fees (inclusive
of superannuation). Certain Non-Executive Directors may, from time to time, receive additional fees for membership of other Board Sub-Committees, however during FY22 no such fees
were paid. Upon completion of the Demerger and following the retirement of several Directors, changes were made to the Committee memberships during the year, effective 1 June 2022.
Table 10 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 10: FY22 Non-Executive Director fees during FY22
Current Non-Executive Directors
Bruce Akhurst(iii)
David Gallop
Janette Kendall
Justin Milne
Future Non-Executive Directors, pending regulatory approval
Brett Chenoweth(iv)
Raelene Murphy(iv)
Karen Stocks(v)
Former Non-Executive Directors
Steven Gregg(ii)(vi)
Anne Brennan(v)
Harry Boon(v)
Paula Dwyer
Vickki McFadden
Total
Short term
Post-employment
Non-monetary
benefits
$
Fees
$
Superannuation(i)
$
Total
$
276,653
241,667
235,757
224,500
230,945
160,318
238,079
205,000
17,420
17,586
15,761
483,625
383,500
219,000
231,621
211,700
228,667
277,588
80,000
1,946,526
2,032,861
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000
-
2,000
27,665
22,958
23,576
21,372
23,094
15,230
23,808
19,475
1,742
1,759
1,576
48,362
36,433
21,900
22,004
21,170
21,723
12,587
7,600
194,652
179,382
304,318
264,625
259,333
245,872
254,039
175,548
261,887
224,475
19,162
19,345
17,337
531,987
419,933
240,900
253,625
232,870
250,390
290,175
89,600
2,141,178
2,214,243
Year
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY22
FY22
FY22
FY21
FY22
FY21
FY22
FY21
FY21
FY21
FY22
FY21
(i) Contributions made to satisfy Tabcorp’s obligation under applicable superannuation guarantee legislation. Excludes Australian Taxation Office approved exemptions.
(ii) Up until his retirement on 31 May 2022, Mr Gregg also received per annum fee of $35,000 (plus superannuation) 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.
(iii) Appointed as Chairman on 1 June 2022 and receives a per annum fee of $24,000 (including superannuation) for the role of Chairman of the Victorian Joint Venture Management Committee. The fee is borne by the Joint Venture, which is jointly controlled
by Tabcorp.
(iv) Appointed as Observers on 1 June 2022, pending regulatory approvals and formally appointed as Non-Executive Directors on 4 August 2022 following receipt of regulatory approvals.
(v) Appointed an Observer on 1 June 2022, pending receipt of regulatory approval.
(vi) Retired from the Board on 31 May 2022.
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 $3.0 million,
as approved by shareholders at the Annual General Meeting held on 17 October 2018. The total fees paid (including superannuation) to Non-Executive Directors in FY22 was $2,141,178
(which includes Observer fees paid to Mr Chenoweth, Ms Murphy and Ms Stocks).
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
(d) Non-Executive Director Shareholding Policy
Non-Executive Directors are required to hold a minimum shareholding in Tabcorp equivalent to the annual Board Member fee (excluding superannuation), and the Board Chairman to hold
a minimum shareholding equivalent to double his annual Board Chair 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 or within three years of the date of Demerger (whichever is later).
A copy of this policy is available on Tabcorp’s website (www.tabcorp.com.au) under the Corporate Governance section.
9. 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.
Table 11: Executive KMP remuneration for FY22
Current
executive
KMP
Adam Rytenskild
Daniel Renshaw(vi)
Former executive
KMP
David Attenborough(vii)
Adam Newman(viii)
Patrick McGlinchey(viii)
Sue van der Merwe(viii)
Total
Short term
Financial
year
$
FY22
FY21
FY22
Salary and
fees(i)
$
942,932
896,306
54,286
Cash
bonus(ii)
$
377,605
330,480
22,268
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
1,811,729
1,978,306
729,729
778,306
679,959
242,769
748,429
712,264
975,000
750,000
283,250
330,000
264,258
95,887
279,878
330,000
4,967,064 2,202,259
1,836,367
4,607,951
Long term
Accrued
leave
benefits
$
350,227
13,913
2,406
34,096
189,078
27,256
44,530
26,622
20,579
143,160
(19,901)
583,767
248,199
Post-
employment
Charge for share-based
allocations(iii)
Accelerated and
modification charge for
share-based payments(iv)
Super-
annuation
$
23,568
21,694
1,964
Restricted
Shares
$
425,857
65,919
19,146
Performance
Rights
$
391,247
385,491
-
Restricted
Shares
$
38,690
-
21,604
21,694
21,604
21,694
21,604
7,231
95,425
90,814
185,769
163,127
240,120
456,688
57,691
135,674
26,031
15,813
35,529
70,137
804,374
744,231
1,202,146
1,236,155
337,117
232,784
287,947
48,890
328,202
293,143
2,546,659
2,196,463
283,678
-
41,606
-
32,392
-
41,606
-
437,972
-
Performance
Rights
$
Total
$
844,179 3,394,305
1,713,803
100,070
-
-
-
671,294
-
1,684,954 6,253,327
4,631,921
780,112 2,278,365
1,542,988
2,010,107
431,169
823,849 2,496,078
1,476,457
4,804,388 16,532,252
9,796,338
-
-
Performance
related(v)
$
61%
46%
41%
Termination
benefits
$
-
-
-
72%
53%
66%
45%
64%
37%
60%
47%
1,327,417
-
-
-
-
-
-
-
1,327,417
-
(i) Comprises salary and sacrificed benefits (including salary sacrificed superannuation and motor vehicle novated leases including fringe benefits tax where applicable).
(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 Australian Accounting Standards. For former executive KMP cash bonus refer to footnotes (vii) and (viii).
(iii) Represents the fair value of share-based payments expensed by Tabcorp.
(iv)
As a result of the Demerger, the remaining fair value of share-based payments not already recognised was expensed when vesting was accelerated for the FY20 and FY21 STPP Restricted Shares; and the 2019, 2020 and 2021 LTPP Performance Rights,
including the modification charge as outlined in Table 13. Also includes expensing the remaining portion of Retention Shares relating to The Lottery Corporation shares allocated as part of the Demerger (refer section 5 (d)(iv).
(v) Represents the sum of the cash bonus (from STI awards), Restricted Shares (from STI) and LTI Performance Rights as a percentage of total remuneration, excluding termination payments.
(vi) Commenced as an executive KMP on 1 June 2022. Remuneration reflects period as KMP.
(vii) Mr Attenborough ceased as MD & CEO and executive KMP on 31 May 2022. Cash bonus reflects accrual for 11 months for period as a KMP and was paid in cash post 30 June 2022.
(viii) Ceased as an executive KMP on 31 May 2022. Cash bonus reflects accrual for 11 months for period as a KMP, with the final bonus being settled by The Lottery Corporation post 30 June 2022.
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Tabcorp Annual Report 2022 Table 12: KMP interests in Tabcorp shares for FY22 (number)
KMP
Current Non-Executive Directors
Bruce Akhurst
David Gallop
Janette Kendall
Justin Milne
Future Non-Executive Directors, pending regulatory approval
Brett Chenoweth(i)(v)
Raelene Murphy(i)(v)
Karen Stocks(i)
Former Non-Executive Directors
Steven Gregg
Anne Brennan
Harry Boon
Current executive Director
Adam Rytenskild
Current executive KMP
Daniel Renshaw
Former executive Director
David Attenborough
Former executive KMP
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Total
Balance at start
of FY22
Granted as
remuneration
On vesting of
Performance
Rights
Net change
other(ii)
Balance at
end of year
120,000
7,637
-
50,846
-
-
-
45,820
8,182
76,364
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
630,000
10,000
29,254
250,000
86,538
-
20,000
-
-
-
750,000
17,637
29,254
300,846
86,538
-
20,000
45,820(iii)
8,182(iii)
76,364(iii)
432,137(iv)
116,897
383,551
1,489,289
2,421,874
162,732(i)
-
-
-
162,732
1,628,649
152,945
1,258,197
(59,508)
2,980,283(iii)
58,844
23,785
112,579
2,727,575
22,432
17,464
22,432
332,170
271,828
219,605
332,185
2,465,366
-
3,249
-
2,458,822
353,104(iii)
264,103(iii)
467,196(iii)
7,983,933
(i) Reflects shareholdings when they commenced as KMP, being on 1 June 2022 for Mr Chenoweth, Ms Murphy, Ms Stocks and Mr Renshaw.
(ii) Includes voluntary on-market transactions.
(iii) Reflects shareholdings when they ceased as KMP on 31 May 2022.
(iv) The closing balance for Mr Rytenskild reported in the FY21 remuneration report of 388,500 has been updated to 432,137 in the opening balance for FY22.
(v) Mr Chenoweth and Ms Murphy received regulatory approvals and were appointed as Non-Executive Directors effective 4 August 2022
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Tabcorp Annual Report 2022GOVERNANCESUSTAINABILITYDIRECTORS’ REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEW
REMUNERATION REPORT (AUDITED) For the year ended 30 June 2022
Table 13: Modification to Performance Rights during FY22
During FY22 as a result of the Demerger, performance conditions were waived for outstanding unvested Performance Rights and a pro rata portion of the Performance Rights vested on
the date on which the Demerger became effective, and the remainder lapsed. The effective date was 23 May 2022. The modification to the Performance Rights occurred on 18 March 2022
for all KMP other than the MD & CEO, where the modification date was 2 July 2021.
The conditions affecting the vesting and exercise of the Performance Rights prior to the alteration are outlined in section 6(e).
The market price of the underlying instruments, being Tabcorp Shares, at the date of the modification was $4.98 ($5.20 for MD & CEO).
KMP
Current executive Director
Adam Rytenskild
Former executive KMP
David Attenborough(ii)
Adam Newman
Patrick McGlinchey
Sue van der Merwe
Total
24 October 2019
Performance Rights – granted:
20 October 2020
19 October 2021
Pro rata vest
Number
Lapsed Number
Pro rata vest
Number
Lapsed Number
Pro rata vest
Number
Lapsed Number
Total fair value difference
immediately before and after
modification(i)
$
126,264
412,631
110,035
86,983
110,035
845,948
15,402
50,322
13,422
10,610
13,422
103,178
147,601
482,359
128,628
101,681
128,628
988,897
120,037
392,276
104,608
82,692
104,608
804,221
36,949
n/a
33,165
30,941
36,949
138,004
139,589
n/a
125,296
116,895
139,589
521,369
193,880
830,866
168,961
133,565
168,961
1,496,233
(i) Included as Executive KMP remuneration in Table 11.
(ii) Mr Attenborough was granted a parallel award on 19 October 2021 as detailed in footnote (v) of Table 5 and Tabcorp only accounted for the parallel award. There was no modification to the parallel award.
(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 FY22 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 a loan made (guaranteed or secured), directly or
indirectly, by the Company or a subsidiary during the reporting period.
88
Tabcorp Annual Report 2022
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
90
91
92
93
94
94
96
102
113
123
131
138
139
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89
DIRECTORS’ REPORTREMUNERATION REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
INCOME STATEMENT For the year ended 30 June 2022
Continuing operations
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
(Loss)/profit before income tax and net finance costs
Finance income
Finance costs
Loss from continuing operations before income tax
Income tax benefit/(expense)
Loss from continuing operations after income tax
Discontinued operations
Profit from discontinued operations net of tax
Net profit 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
(Loss)/earnings per share:
From continuing operations
Basic loss per share
Diluted loss per share
From continuing operations before goodwill impairment
Basic loss per share
Diluted loss per share
Total attributable to shareholders of Tabcorp
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.
90
Note
A4
A4
C2
A4
A4
A5
D5
E2
Note
A2
A2
A2
A2
A2
A2
A3
A3
2022
$m
2,373.3
7.2
(1,180.4)
(359.9)
(344.0)
(131.5)
(106.5)
(41.9)
(286.4)
-
(5.0)
(75.1)
0.4
(61.5)
(136.2)
17.8
(118.4)
6,894.3
6,775.9
65.9
(1.7)
(19.8)
0.5
(0.1)
44.8
6,820.7
2022
cents
(5.3)
(5.3)
(5.3)
(5.3)
304.6
304.6
483.9
13.0
2021
$m
2,479.9
46.2
(1,098.0)
(334.1)
(368.0)
(105.9)
(100.0)
(46.2)
(276.1)
(121.5)
(9.4)
66.9
1.1
(168.7)
(100.7)
(60.2)
(160.9)
430.3
269.4
(73.9)
0.9
22.1
4.1
(1.4)
(48.2)
221.2
2021
cents
(7.4)
(7.3)
(1.8)
(1.8)
12.3
12.3
7.5
14.5
Tabcorp Annual Report 2022 BALANCE SHEET As at 30 June 2022
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
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
Retained earnings/(accumulated losses)
Reserves
TOTAL EQUITY
The accompanying notes form an integral part of this balance sheet.
The Lottery Corporation was demerged in June 2022.
Note
C6
C7
B4
B2
E7
C7
B2
C1
C2
C4
C5
B4
C8
B3
C5
C9
B4
C8
B3
C5
A5
C9
B4
2022
$m
199.4
129.9
52.4
0.4
-
34.2
15.1
431.4
10.8
-
693.4
2,515.0
222.9
126.5
31.2
1.8
15.7
3,617.3
4,048.7
598.5
-
42.6
8.5
200.0
12.5
2.2
864.3
1.3
135.3
139.1
179.5
18.1
-
-
473.3
1,337.6
2,711.1
1,635.9
1,074.2
1.0
2,711.1
2021
$m
424.4
116.9
45.0
69.6
128.9
-
113.4
898.2
1.6
128.7
2,041.5
8,056.5
375.5
233.1
25.5
88.0
19.2
10,969.6
11,867.8
1,236.6
176.8
46.6
54.9
60.5
50.2
90.0
1,715.6
270.8
2,298.7
262.3
525.6
25.0
54.8
18.9
3,456.1
5,171.7
6,696.1
9,230.0
(1,863.5)
(670.4)
6,696.1
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Tabcorp Annual Report 2022
CASH FLOW STATEMENT For the year ended 30 June 2022
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
Payment for business acquisition net of cash acquired
Payment for property, plant and equipment and intangibles
Cash reduction through demerger of entities
Proceeds from sale of property, plant and equipment and intangibles
Proceeds from sale of shares in an associate
Proceeds from sale of other non current assets
Payment for other financial assets
Net cash flows used in investing activities
Cash flows from financing activities
Net cash flows from revolving bank facilities
Repayment of borrowings
Proceeds from issue of shares
Payment of transaction costs for share issue
Payment of transaction costs for capital reduction
Payment of demerger transaction costs
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.
The cash flow statement includes the cash flows of The Lottery Corporation for the period up to the demerger date. Refer to note D5.
92
Note
C6
D4
D5
C6
2022
$m
5,608.8
(2,569.9)
(1,980.3)
-
(133.4)
(188.2)
737.0
-
(202.5)
(261.7)
6.3
-
2.2
-
(455.7)
75.1
(127.0)
-
-
(19.7)
(75.3)
(48.0)
(279.8)
(31.6)
(506.3)
(225.0)
424.4
199.4
2021
$m
5,880.6
(2,683.8)
(2,120.3)
1.1
(166.9)
(191.2)
719.5
51.7
(181.8)
-
67.5
97.8
-
(72.8)
(37.6)
(0.9)
(994.8)
600.5
(13.6)
-
-
(49.8)
(145.8)
(2.8)
(607.2)
74.7
349.7
424.4
Tabcorp Annual Report 2022 STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022
Issued capital
Reserves
Number of
ordinary shares
m
Ordinary
shares
$m
Treasury
shares
$m
Retained
earnings/
(accumulated
losses)
$m
Hedging
$m
Demerger
$m
Other
$m
2,221.6
-
-
-
-
-
-
4.1
-
-
-
-
2,225.7
2,032.3
-
-
-
-
4.5
184.8
-
-
-
-
2,221.6
9,230.6
-
-
-
-
(7,601.5)
(14.3)
20.4
-
21.7
-
(20.4)
1,636.5
(0.6)
-
-
-
-
-
-
-
-
(0.4)
11.6
(11.2)
(0.6)
Total issued capital $1,635.9 m
8,618.2
-
-
-
-
20.5
600.5
(9.3)
3.1
-
(2.4)
9,230.6
(1.1)
-
-
-
-
-
-
-
-
0.9
(0.4)
(0.6)
(1,863.5)
6,775.9
0.4
6,776.3
(300.2)
-
-
-
-
(3,538.4)
-
-
1,074.2
(1,969.3)
269.4
2.7
272.1
(166.3)
-
-
-
-
-
-
(1,863.5)
(10.0)
-
46.1
46.1
-
-
-
-
(34.5)
-
-
-
1.6
(669.9)
-
-
-
-
(2,868.5)
-
-
-
3,538.4
-
-
-
Total reserves $1.0 m
41.8
-
(51.8)
(51.8)
-
-
-
-
-
-
-
(10.0)
(669.9)
-
-
-
-
-
-
-
-
-
-
(669.9)
9.5
-
(1.7)
(1.7)
-
-
-
-
-
(21.3)
12.9
-
(0.6)
8.5
-
0.9
0.9
-
-
-
-
(3.1)
3.2
-
9.5
Total
equity
$m
6,696.1
6,775.9
44.8
6,820.7
(300.2)
(10,470.0)
(14.3)
20.4
(34.5)
0.0
24.5
(31.6)
2,711.1
6,028.2
269.4
(48.2)
221.2
(166.3)
20.5
600.5
(9.3)
-
4.1
(2.8)
6,696.1
2022
Balance at beginning of year
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Demerger distribution(i)
Transaction costs for capital reduction
Dividend reinvestment plan
Discontinued cash flow hedges(ii)
Transfers
Share based payments expense
Net outlay to purchase shares
Balance at end of year
2021
Balance at beginning of year
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Dividend reinvestment plan
Ordinary shares issued(iii)
Transaction costs for share issue
Transfers
Share based payments expense
Net outlay to purchase shares
Balance at end of year
(i) Demerger distribution on the demerger of The Lottery Corporation. Refer to note A3.
(ii) Represents the recycling of the hedging reserve to the income statement on discontinuation of hedge accounting.
(iii) Ordinary shares issued under a pro rata accelerated renounceable entitlement offer. The proceeds have been used to pay down existing drawn bank facilities in the prior period. Refer to note B3.
Total issued capital $9,230.0 m
Total reserves ($670.4) m
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.
Opening 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. The reserve was brought to nil during the year, following the gain on demerger of The Lottery Corporation.
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.
93
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2022
ABOUT THIS REPORT
Tabcorp Holdings Limited (the Company) is a company limited by shares which are traded on the Australian Securities Exchange (ASX). 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 2022 comprises the Company and its subsidiaries (the Group) and the Group’s interest
in joint arrangements.
On 5 July 2021, Tabcorp announced its intention to demerge its Lotteries and Keno business. The demerger was completed on 1 June 2022, resulting in The Lottery Corporation Limited
as a separate ASX listed Company. The Lotteries and Keno business is presented as a discontinued operation. Refer to note D5 for further information.
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 continued to have an adverse impact on the financial performance of the Group in 2022. 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.
An assessment of the impact of COVID-19 on the Group’s balance sheet is set out below:
Balance sheet item COVID-19 assessment
Goodwill
The Group considered the ongoing 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 prior year.
Note
C2 and C3
Issued capital
In the prior year 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.
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 2022.
The Financial Report was authorised for issue by the Board of Directors on 24 August 2022.
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 hundred thousand 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.
The Group’s balance sheet reflects a net current asset deficiency. This largely arises due to customer account balances being classified as current liabilities under Australian Accounting
Standards as the Group does not have an unconditional right to defer payment beyond 12 months, notwithstanding these are not expected to be fully settled within the next 12 months.
As at 30 June 2022, it also included $150 million in relation to Racing Queensland settlement payment and $37.5 million for the Queensland wagering licence instalment, which are
expected to be settled during the next 12 months. The Group maintains sufficient undrawn facilities to meet working capital requirements, including settlement of customer account
balances as required. In order to minimise finance costs, excess cash is used to reduce non current interest bearing liabilities until the current liabilities become due.
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.
94
Tabcorp Annual Report 2022 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
Discontinued operations
96
98
98
99
100
101
123
125
127
128
129
B Capital and risk management
B1 Capital management
B2 Other financial assets
B3
Interest bearing liabilities
B4 Derivative financial instruments
B5 Fair value measurement
B6 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
102
102
103
105
108
108
131
133
134
135
136
136
136
137
C Operating assets and liabilities
C1 Licences
C2 Other intangible assets
C3
Impairment testing
C4 Property, plant and equipment
C5 Leases
C6 Notes to the cash flow statement
C7 Receivables
C8 Payables
C9 Provisions
113
114
115
117
118
120
121
121
122
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.
95
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: GROUP PERFORMANCE For the year ended 30 June 2022
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 30 June 2021 financial statements included the Lotteries and Keno segment. This segment was demerged from the Group effective 1 June 2022. Consequently, the segment is no
longer presented in the segment disclosures from continuing operations for the current and prior period. Information about discontinued operations is provided in Note D5.
The Group has two operating segments from continuing operations at year end.
Tabcorp
Group
Gaming Services
Gaming machine monitoring operations
in New South Wales, Queensland and
the Northern Territory and venue
services nationwide
Segment profit/(loss) before interest and tax
$m
2022
2021
Wagering and Media
Provision of totalisator and fixed odds
betting and retail wagering networks,
and global racing media business
Segment revenue
$m
2022
2021
2,181.9
2,298.0
192.9
183.2
91.0
3.8
Wagering and Media
Gaming Services
215.7
(9.7)
96
Tabcorp Annual Report 2022 2022
Revenue – external
Revenue – intersegment
Segment revenue
Segment profit before interest and tax
Depreciation and amortisation
Capital expenditure(i)
2021
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:
Wagering
and Media
$m
Gaming
Services
$m
2,180.4
1.5
2,181.9
91.0
215.0
100.4
2,296.7
1.3
2,298.0
215.7
198.4
-
98.1
192.9
-
192.9
3.8
71.4
33.6
183.2
-
183.2
(9.7)
77.7
2.7
26.7
Total
$m
2,373.3
1.5
2,374.8
94.8
286.4
134.0
2,479.9
1.3
2,481.2
206.0
276.1
2.7
124.8
Segment total (per above)
Intersegment revenue elimination
Unallocated items:
– significant items:
– gain on revaluation of previously held equity interest(i)
– implementation costs relating to combination with Tatts Group
– Racing Queensland arrangements(ii)
– settlement and other costs relating to Racing Queensland dispute(iii)
– asset write-off and onerous contract
– restructuring costs
– gain on sale of property
– impairment – goodwill(iv)
– impairment – other(v)
– strategic review costs
Revenue
2022
$m
2,374.8
(1.5)
2021
$m
2,481.2
(1.3)
Profit/(loss) from
continuing operations
before income tax
2022
$m
94.8
-
2021
$m
206.0
-
Depreciation
and amortisation
2022
$m
286.4
-
2021
$m
276.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(151.3)
(14.1)
-
-
-
(5.0)
-
(170.4)
34.9
(20.0)
(15.1)
-
-
(16.7)
5.3
(121.5)
(6.7)
(1.7)
(141.5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
– finance income
– finance costs(vi)
– other
Total per income statement
(i) Refer to note D4.
(ii) Additional fees related to the minimum performance obligations for three years to December 2020 under Racing Queensland arrangements.
(iii) Refer to note C9.
(iv) Prior year comprises write down of goodwill following the annual impairment review relating to Gaming Services. Refer to notes C2 and C3.
(v) Current year comprises write down of other intangible assets, property plant and equipment and right-of-use assets. Prior year comprises write down of right-of-use assets in respect of surplus corporate lease space.
(vi) Current year includes the gain on cash flow hedges on demerger, refer to note A4 (d). Prior year includes interest charges relating to uncertain tax positions of $8.8m (refer to note E4) and finance costs relating
to the strategic review of $4.1m.
-
-
-
2,479.9
-
-
-
2,373.3
1.1
(168.7)
2.4
(100.7)
0.4
(61.5)
0.5
(136.2)
-
-
-
286.4
-
-
-
276.1
Impairment
2022
$m
-
-
-
-
-
-
-
-
-
-
5.0
-
5.0
-
-
-
5.0
2021
$m
2.7
-
-
-
-
-
-
-
-
121.5
6.7
-
128.2
-
-
-
130.9
97
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: GROUP PERFORMANCE For the year ended 30 June 2022
A2 Earnings per share
Loss used in calculation of loss per share (EPS) from continuing operations
Adjustment for impairment – goodwill
Loss used in calculation of loss per share (EPS) from continuing operations before goodwill impairment
Loss from continuing operations after income tax
Profit from discontinued operations and net gain on demerger of The Lottery Corporation net of tax
Earnings used in calculation of EPS attributable to shareholders
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
2022
$m
(118.4)
-
(118.4)
(118.4)
6,894.3
6,775.9
2021
$m
(160.9)
121.5
(39.4)
(160.9)
430.3
269.4
2022
Number (m)
2,224.9
-
2,224.9
2021
Number (m)
2,183.5
5.9
2,189.4
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. There are no Performance Rights outstanding at 30 June 2022.
A3 Dividends
Fully franked dividends declared and paid during the year:
Prior year final dividend
Interim dividend
Demerger distribution(i)
Fully franked dividends determined in respect of the year:
Interim dividend
Final dividend (declared and recognised after balance date)
2022
cents per share
2021
cents per share
7.0
6.5
470.4
483.9
6.5
6.5
13.0
-
7.5
-
7.5
7.5
7.0
14.5
Franking credits available at balance date
Impact of estimated current tax (refundable)/payable
Franking credits available at the 30% company tax rate after allowing for tax payable or receivable
(i) Represents the fair value of The Lottery Corporation shares distributed to shareholders on 1 June 2022. Refer to note D5 for further details on demerger accounting.
98
2022
$m
155.5
144.7
10,470.0
10,770.2
144.7
144.7
289.4
191.2
(6.8)
184.4
2021
$m
-
166.3
-
166.3
166.3
155.5
321.8
132.8
40.0
172.8
Tabcorp Annual Report 2022
A4 Revenue and expenses
(a) Disaggregated revenue information:
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
2022
Revenue from contracts with customers
Other revenue(i)
2021
Revenue from contracts with customers
Other revenue(i)
Timing of revenue recognition
Goods and services transferred at a point in time
Goods and services transferred over time
(b) Other income
Gain on revaluation of previously held equity interest
Net (loss)/gain on disposal of non current assets
Other(ii)
(c) Employment costs include:
Defined contribution plan expense
(d) Finance costs(iii)
Interest costs on interest bearing liabilities
Interest costs on lease liabilities
Net gain on fair value of cash flow hedges(iv)
Other(v)
(e) Impairment – other
Other intangible assets – software
Right-of-use assets(vi)
Other tangible assets
Wagering
$m
1,022.2
941.3
1,963.5
993.6
1,098.7
2,092.3
Media
$m
216.9
-
216.9
204.4
-
204.4
Note
D4
Gaming
services
$m
192.9
-
192.9
183.2
-
183.2
2022
$m
2,226.6
146.7
2,373.3
-
(5.3)
12.5
7.2
26.5
108.1
8.2
(64.3)
9.5
61.5
0.5
2.5
2.0
5.0
Total
$m
1,432.0
941.3
2,373.3
1,381.2
1,098.7
2,479.9
2021
$m
2,363.3
116.6
2,479.9
34.9
0.6
10.7
46.2
26.1
134.9
13.1
-
20.7
168.7
2.7
6.7
-
9.4
Includes fixed odds betting revenue, refer accounting policy below.
(i)
(ii) Prior year includes subsidy received under the Federal Government’s JobKeeper scheme in relation to Gaming Services of $8.5m.
(iii) The finance costs presented includes all finance costs incurred by the Tabcorp Group under the financing arrangements in place prior to the demerger and do not reflect the anticipated financing arrangements of the Group going forward.
(iv) Includes recycling of discontinued cash flow hedges to the income statement; and hedge ineffectiveness. No finance costs have been attributed to the discontinued operations due to the nature of the facilities held by the Group leading up to the demerger.
(v) Prior year includes interest charges relating to uncertain tax positions of $8.8m (refer to note E4) and finance costs relating to the strategic review of $4.1m.
(vi) Prior year comprises write down of right-of-use assets in respect of surplus corporate lease space.
99
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: GROUP PERFORMANCE For the year ended 30 June 2022
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:
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.
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 from continuing operations are:
Current tax
Adjustments in respect of current income tax of previous years(i)
Deferred tax
Income tax reconciliation (continuing operations):
Loss from continuing operations before income tax
Income tax receivable at the 30% company tax rate
Tax effect of adjustments in calculating taxable income:
– impairment of goodwill
– net gain on fair value of cash flow hedges
– Racing Queensland settlement
– amortisation of licences
– uncertain tax positions relating to NSW gaming machine monitoring licence(i)
– gain on revaluation of previously held equity interest
– research and development claims
– amounts under/(over) provided in prior years
– other
Income tax benefit/(expense)
(i) Prior year includes $62.0m relating to uncertain tax positions. Refer to note E4 for details on related contingent asset.
100
2022
$m
7.3
2.7
7.8
17.8
(136.2)
40.9
-
19.3
(45.0)
(10.5)
-
-
2.6
2.7
7.8
17.8
2021
$m
(32.5)
(56.3)
28.6
(60.2)
(100.7)
30.2
(36.5)
-
-
(10.5)
(62.0)
10.5
2.9
(0.7)
5.9
(60.2)
Tabcorp Annual Report 2022 (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
Net deferred tax (liabilities)/assets
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 (liabilities)/assets
Balance at
30 June 2021
$m
(562.8)
(78.2)
(29.9)
(8.4)
(7.5)
92.6
25.6
11.8
11.3
15.6
4.3
(525.6)
Recognised in
income statement(i)
$m
219.7
34.2
23.8
(0.5)
2.5
(43.7)
(2.4)
(0.7)
1.7
3.2
-
237.8
Recognised
directly in equity
$m
-
-
-
-
-
-
-
-
(0.2)
-
(3.7)
(3.9)
Reduction through
demerger of entities
$m
117.7
0.2
11.8
0.2
-
2.0
3.8
(3.9)
(14.0)
(4.3)
(1.3)
112.2
Balance at
1 July 2020
$m
(582.5)
(90.8)
(33.6)
(8.7)
(6.4)
103.5
22.8
14.3
7.6
4.5
(17.8)
1.6
(585.5)
Recognised in
income statement(i)
$m
19.7
12.6
3.7
0.3
(1.1)
(10.9)
2.8
(2.5)
5.1
11.1
-
(1.6)
39.2
Recognised
directly in equity
$m
-
-
-
-
-
-
-
-
(1.4)
-
22.1
-
20.7
Balance at
30 June 2022
$m
(225.4)
(43.8)
5.7
(8.7)
(5.0)
50.9
27.0
7.2
(1.2)
14.5
(0.7)
(179.5)
Balance at
30 June 2021
$m
(562.8)
(78.2)
(29.9)
(8.4)
(7.5)
92.6
25.6
11.8
11.3
15.6
4.3
-
(525.6)
(i) Includes amounts for both continuing and discontinued operations.
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
Other than the events disclosed elsewhere in this report, no additional matters or circumstances have arisen since the end of the financial year that may significantly affect the Group’s
operations, the results of those operations or the state of affairs of the Group.
101
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2022
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.
Gearing is managed primarily through the ratio of net debt to earnings before interest, tax, depreciation, amortisation and impairment (EBITDA). Net debt is gross debt less unrestricted cash.
At 30 June the Group’s gearing ratio was:
Net debt
EBITDA (before significant items)(i)
Gearing ratio
(i) EBITDA represents continuing operations.
B2 Other financial assets
2022
$m
201.9
381.6
0.5
Prior to the demerger, other financial assets were held to fund payments to winners of certain lottery games, where winnings are payable for up to 20 years. These funds formed part of the
net assets disposed on demerger of The Lottery Corporation. Refer to note D5.
Equity instruments at fair value through other comprehensive income
Unlisted investments – managed fund
Debt instruments at amortised cost
Investment – term deposits
Current
Non current
2022
$m
-
-
-
-
-
-
2021
$m
21.7
235.9
257.6
128.9
128.7
257.6
Equity instruments at fair value through other comprehensive income were equity instruments for which an irrevocable election to classify as such upon transition to AASB 9
had been made.
After initial measurement, they were subsequently carried at fair value (refer to note B5). Changes in the fair value were recognised in other comprehensive income and accumulated
in a reserve within equity. No subsequent recycling of gains or losses to profit or loss was permitted.
Debt instruments at amortised cost were financial assets held in order to collect contractual cash flows that solely represented payments of principal and interest. They were carried
at amortised cost.
102
Tabcorp Annual Report 2022 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. At 30 June 2022, the Group has
undrawn facility of $810.0 million (2021: $909.0 million).
The following table details the debt position of the Group at 30 June:
Facility
Bank loans – unsecured
Details
Floating interest rate revolving facility. Subject to financial undertakings as to gearing
and interest cover beginning on 30 June 2023.
US private placement
Fixed interest rate US dollar debt. Prior to the demerger and the cancellation
of the US private placement the Group had cross currency swaps in place
for all US dollar debt. Prior to the cancellation, the facility was subject to financial
undertakings as to gearing and interest cover.
Current
Non current
Facility limit
$m
660.0
400.0
550.0
USD 133.0
USD 105.0
USD 450.0
USD 520.0
USD 175.0
AUD 97.3
AUD 97.3
Maturity
n/a(i)
Jul-25
Jul-27
n/a(i)
n/a(ii)
n/a(ii)
n/a(ii)
n/a(ii)
n/a(ii)
n/a(ii)
2022
$m
-
135.3(iii)
-
135.3
-
-
-
-
-
-
-
-
135.3
-
135.3
135.3
2021
$m
449.4(iii)
n/a
n/a
449.4
176.8
139.2
596.1
688.7
231.7
96.8
96.8
2,026.1
2,475.5
176.8
2,298.7
2,475.5
(i) Facilities were repaid in full and cancelled during the year (original maturity dates were Jul-22 and Apr-22 respectively).
(ii) All Tabcorp US private placement notes outstanding at 1 June were cancelled and equivalent notes issued by The Lottery Corporation to the existing note holders and formed part of the net assets disposed on demerger of The Lottery Corporation.
Refer to note D5.
(iii) At 30 June 2022 the value comprises the drawn down value of $140.0 million less borrowing costs of $4.7 million (2021: drawn down value of $451.0 less borrowing costs of $1.6 million).
O
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R
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I
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I
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103
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2022
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 2021
$m
Cash flows
$m
Foreign
exchange
movement
$m
Changes in
fair values
$m
Lease
additions
$m
176.8
2,298.7
(69.6)
(88.0)
7.0
46.6
262.3
2,633.8
(127.0)
75.1
(49.8)
68.7
-
-
-
(48.0)
-
(99.9)
-
-
-
-
-
18.9
-
-
69.6
(99.0)
4.0
-
-
(25.4)
-
-
-
-
-
0.8
10.4
11.2
Reduction
through
demerger of
entities
$m
-
(2,312.0)
-
187.0
(11.0)
-
(70.6)
(2,206.6)
Balance at
30 June 2020
$m
Cash flows
$m
Foreign
exchange
movement
$m
Changes in
fair values
$m
Lease
additions
$m
249.0
3,471.0
(102.6)
(426.0)
4.0
47.3
306.2
3,548.9
(171.0)
(824.7)
(77.0)
(176.3)
-
-
-
(49.8)
-
(1,045.5)
-
-
-
-
-
(253.3)
-
-
33.0
338.0
3.0
-
-
374.0
-
-
-
-
-
-
2.1
2.1
Other
$m
Balance at
30 June 2022
$m
-
4.8
-
-
-
43.2
(63.0)
(15.0)
Other
$m
175.8
(171.3)
-
-
-
49.1
(46.0)
7.6
-
135.3
-
-
-
42.6
139.1
317.0
Balance at
30 June 2021
$m
176.8
2,298.7
(69.6)
(88.0)
7.0
46.6
262.3
2,633.8
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.
104
Tabcorp Annual Report 2022 B4 Derivative financial instruments
The Group holds the following derivative financial instruments, all at fair value based on level 2 observable inputs, other than foreign exchange forward contracts which fair value based
on level 1 observable inputs (refer to note B5):
Current assets
Foreign exchange forward contracts
Cross currency swaps
Non current assets
Foreign exchange forward contracts
Cross currency swaps
Current liabilities
Cross currency swaps
Interest rate swaps
Fixed Odds open betting positions
Non current liabilities
Interest rate swaps
2022
$m
0.4
-
1.8
-
2.2
-
-
12.5
12.5
-
12.5
2021
$m
-
69.6
-
88.0
157.6
7.0
30.3
12.9
50.2
54.8
105.0
Derivative financial instruments are recognised initially at cost, and subsequently 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 were 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.
105
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2022
B4 Derivative financial instruments (continued)
B4.1 Interest rate swaps
Prior to the demerger of The Lottery Corporation in June 2022, these swaps were used to mitigate the risk of variability in cash flows due to movements in the reference interest rate of the
designated debt. There were no interest rate swaps at 30 June 2022.
In the prior year, the notional principal amounts and periods of expiry of these interest rate swap contracts were:
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
$m
427.0
137.0
585.0
1,149.0
1.9% – 4.9%
0.02% – 0.04%
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.
Further information about the Group’s interest rate risk management is disclosed in note B6.1.
B4.2 Cross currency swaps
Prior to the demerger of The Lottery Corporation in June 2022, these swaps were used to reduce the exposure to the variability of movements in the forward USD exchange rate in relation
to the USD private placement debt. There were no cross currency swaps at 30 June 2022.
In the prior year, the principal amounts and periods of expiry of the cross currency swap contracts were:
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.
Further information about the Group’s foreign currency risk management is disclosed in note B6.2.
106
2021
Receive principal
USD m
133.0
105.0
1,145.0
1,383.0
4.6% – 5.2%
Pay principal
AUD m
127.0
137.0
1,490.0
1,754.0
5.3% – 5.6%
2.1% – 3.9%
Tabcorp Annual Report 2022
B4.3 Foreign exchange forward contract
These foreign exchange forward contracts are used to reduce the exposure to the volatility of movements in the forward USD exchange rate in relation to the USD exposure.
Less than one year
One to five years
More than five years
Notional principal
Notional principal
2022
$m
6.1
22.0
0.0
28.1
2021
$m
-
-
-
-
Further information about the Group’s foreign currency risk management is disclosed in note B6.2.
B4.4 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.
B4.5 Impact of hedging on equity
Set out below is a reconciliation of the movement in the hedging reserve:
As at 1 July 2021
Effective portion of changes in fair value arising from:
– Interest rate swaps
– Cross currency swaps
Gain on revaluation of USD debt
Recycling of cash flow hedges to income statement
Other
Tax effect
As at 30 June 2022
As at 1 July 2020
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 2021
2022
$m
-
-
-
2021
$m
50.0
(295.0)
(245.0)
Hedging reserve
$m
(10.0)
35.5
37.9
(10.1)
(34.5)
2.6
(19.8)
1.6
Hedging reserve
$m
42.0
50.0
(295.0)
176.0
(5.0)
22.0
(10.0)
107
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2022
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 liabilities
US private placement
The fair value of the Group’s financial instruments is estimated as follows:
Carrying amount
Fair value
2022
$m
-
-
2021
$m
2,034.1
2,034.1
2022
$m
-
-
2021
$m
2,430.7
2,430.7
US private placement
Fair value was 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 was 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 was determined with 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 2022.
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 had 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.
108
Tabcorp Annual Report 2022
Prior to the demerger, it had 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 paid fixed interest rates and receives the bank bill swap rate (BBSW) calculated on the notional principal amount of the contracts. The Group had
also entered into floating rate term deposits where it receives variable interest that is priced against the BBSW. These formed part of the net assets disposed on demerger of The Lottery
Corporation. Refer to note D5.
At 30 June 2022 none of the Group’s borrowings are at a fixed rate of interest (2021: 99.4%).
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
Sensitivity analysis – interest rates – AUD and USD
2022
$m
102.9
96.5
-
-
199.4
(135.3)
-
-
(135.3)
2021
$m
243.6
83.0
128.9
106.5
562.0
(449.4)
(1,149.1)
(849.1)
(2,447.6)
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
+1.0% (100 basis points) (2021: + 0.5%)
-1.0% (100 basis points) (2021: - 0.5%)
USD
+ 0.2% (20 basis points) (2021: + 0.2%)
- 0.2% (20 basis points) (2021: - 0.2%)
Post tax profit
higher/(lower)
2022
$m
0.2
(0.2)
-
-
2021
$m
1.0
-
(21.0)
22.0
Other comprehensive
income higher/(lower)
2021
2022
$m
$m
-
-
-
-
52.0
(54.0)
(29.0)
29.0
The movements in the income statement are insignificant at 30 June 2022 due to the USPP liabilities, derivatives and some of the loans being transferred to The Lottery Corporation on
demerger.
Significant assumptions used in the prior year 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.
109
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: CAPITAL AND RISK MANAGEMENT For the year ended 30 June 2022
B6 Financial instruments – risk management (continued)
B6.2 Foreign currency risk
At 30 June 2022, the Group is not materially exposed to foreign currency risk. In the prior year and in the period prior to demerger, the Group’s primary currency exposure was to US dollars
as a result of issuing US private placement debt. In order to hedge this exposure, the Group had entered into cross currency swaps to fix the exchange rate on the USD debt until maturity.
The Group agreed 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 were designated
to hedge the principal and interest obligations of the US private placement debt. The US private placement debt together with all existing cross currency swaps formed part of the net
assets disposed on demerger of The Lottery Corporation. Refer to note D5.
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 (2021: +10 cents)
AUD/USD -10 cents (2021: -10 cents)
Post tax profit
higher/(lower)
2022
$m
-
-
2021
$m
-
-
Other comprehensive
income higher/(lower)
2021
2022
$m
$m
(2.8)
(39.0)
3.5
(51.0)
The movements in the income statement are insignificant at 30 June 2022 due to the USPP liabilities, derivatives and some of the loans being transferred to the Lottery Corporation on demerger.
Management believe the balance date risk exposures are representative of the risk exposure inherent in the financial instruments.
Significant assumptions used in the prior year 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.
The translation of the results of the Group’s foreign subsidiaries into the Group presentation currency has not been considered as it represents translation risk rather than transaction risk.
110
Tabcorp Annual Report 2022 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 (2021: 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 $20.4m (2021: $34.4m).
111
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2022
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.
At 30 June 2022 no debt facilities (2021: 7%) 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 outflow
Derivative financial instruments
Financial assets
Interest rate swaps – receive AUD floating
Cross currency swaps – receive USD fixed
Foreign exchange forward contracts
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
(598.5)
(4.8)
-
(48.0)
(651.3)
-
-
0.4
0.4
-
-
(12.5)
(12.5)
(12.1)
2022
1 – 5 years
$m
> 5 years
$m
< 1 year
$m
2021
1 – 5 years
$m
(1.3)
(150.0)
-
(127.2)
(278.5)
-
-
-
(29.2)
(29.2)
-
-
1.8
1.8
-
-
-
-
1.8
-
-
-
-
-
-
-
-
-
(1,236.6)
(6.7)
(225.1)
(57.2)
(1,525.6)
0.3
214.1
-
214.4
(29.1)
(196.9)
(12.9)
(238.9)
(24.5)
(106.9)
(451.3)
(498.7)
(169.5)
(1,226.4)
26.8
454.6
-
481.4
(79.9)
(425.4)
-
(505.3)
(23.9)
> 5 years
$m
(166.8)
-
(2,055.8)
(135.4)
(2,358.0)
23.2
1,757.2
-
1,780.4
(32.1)
(1,770.6)
-
(1,802.7)
(22.3)
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.
112
Tabcorp Annual Report 2022
SECTION C – OPERATING ASSETS AND LIABILITIES
C1 Licences
2022
Carrying amount at beginning of year
Additions
Amortisation
Disposals through demerger of entities (refer to note D5)
Carrying amount at end of year
Cost
Accumulated amortisation
2021
Carrying amount at beginning of year
Amortisation
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
Lotteries
licences
$m
Wagering
licences
$m
1,236.9
-
(42.0)
(1,194.9)
-
-
-
-
1,282.8
(45.9)
1,236.9
1,391.0
(154.1)
1,236.9
595.4
-
(41.4)
-
554.0
978.5
(424.5)
554.0
636.8
(41.4)
595.4
978.5
(383.1)
595.4
Gaming
machine
monitoring
licence
$m
152.8
-
(13.4)
-
139.4
199.7
(60.3)
139.4
166.2
(13.4)
152.8
199.7
(46.9)
152.8
Keno
licences
$m
56.4
25.0
(5.1)
(76.3)
-
-
-
-
62.3
(5.9)
56.4
127.9
(71.5)
56.4
Total
$m
2,041.5
25.0
(101.9)
(1,271.2)
693.4
1,178.2
(484.8)
693.4
2,148.1
(106.6)
2,041.5
2,697.1
(655.6)
2,041.5
Amortisation policy – straight line basis over useful life (years):
10 – 55
12 – 93
10 – 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
2027
2032
2042
2047
2050
(i) ACT sports bookmaking licence granted in 2014 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.
113
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2022
C2 Other intangible assets
2022
Carrying amount at beginning of year
Additions:
– acquired
– internally developed
Disposals through demerger of entities (refer to note D5)
Amortisation
Impairment
Transfers
Disposals
Transferred to assets held for sale
Other
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
Includes capital works in progress of:
2021
Carrying amount at beginning of year
Additions:
– acquired
– internally developed
Acquisition via business combinations (refer to note D4)
Amortisation
Impairment
Transfers
Disposals
Carrying amount at end of year
Cost
Accumulated amortisation and impairment
Goodwill(i)
$m
NSW Trackside
concessions
$m
Customer
related assets
$m
Brand
names
$m
Media content
and broadcast
rights
$m
7,038.1
-
-
(5,304.1)
-
-
-
-
-
-
1,734.0
3,651.1
(1,917.1)
1,734.0
7,159.6
-
-
-
-
(121.5)
-
-
7,038.1
8,955.2
(1,917.1)
7,038.1
131.7
-
-
-
(1.7)
-
-
-
-
-
130.0
150.0
(20.0)
130.0
133.5
-
-
-
(1.8)
-
-
-
131.7
150.0
(18.3)
131.7
87
2097
161.0
222.6
-
-
(18.4)
(14.8)
-
-
-
-
(1.8)
126.0
168.0
(42.0)
126.0
123.1
-
-
49.3
(11.4)
-
-
-
161.0
196.2
(35.2)
161.0
-
-
(107.8)
(1.0)
-
-
-
-
(0.4)
113.4
114.5
(1.1)
113.4
218.1
-
-
4.8
(0.3)
-
-
-
222.6
222.9
(0.3)
222.6
30.6
-
-
-
-
-
-
-
-
-
30.6
30.6
-
30.6
30.6
-
-
-
-
-
-
-
30.6
30.6
-
30.6
8 – 20 5 – Indefinite
Indefinite
Other
$m
Software
$m
Total
$m
33.2
439.3
8,056.5
-
-
-
(2.7)
-
-
-
-
-
30.5
54.5
(24.0)
30.5
36.0
-
-
-
(2.8)
-
-
-
33.2
54.5
(21.3)
33.2
20
2033(ii)
47.1
87.5
(88.4)
(126.9)
(0.5)
3.6
(3.0)
(8.2)
-
350.5
950.5
(600.0)
350.5
108.4
47.1
87.5
(5,518.7)
(147.1)
(0.5)
3.6
(3.0)
(8.2)
(2.2)
2,515.0
5,119.2
(2,604.2)
2,515.0
108.4
433.2
8,134.1
43.0
91.5
54.1
(131.5)
(124.2)
(4.6)
(5.9)
8,056.5
10,672.6
(2,616.1)
8,056.5
105.9
43.0
91.5
-
(115.2)
(2.7)
(4.6)
(5.9)
439.3
1,063.2
(623.9)
439.3
105.9
3 – 15
Includes capital works in progress of:
(i) The impairment of goodwill in the prior year relates to the Gaming Services segment. Refer to note C3.
Amortisation policy – straight line basis over useful life (years):
Expiration date:
(ii) In line with New South Wales Wagering Licence retail exclusivity period
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, including NSW Trackside concessions and customer related 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.
114
Tabcorp Annual Report 2022 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
Wagering and Media
Lotteries and Keno
Other intangible assets with indefinite useful lives
NSW Wagering
Sky Racing
Sky Sports Radio
ACTTAB
Lotteries
2022
$m
1,734.0
-
1,734.0
98.8
30.6
6.7
4.5
-
140.6
2021
$m
1,734.0
5,304.1
7,038.1
98.8
30.6
6.7
4.5
108.1
248.7
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 0% to 2.5% (2021: 1.0% to 3.5%). These cash flows are then discounted using a relevant long term post tax
discount rate 8.88% (2021: 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 recoverable amount estimates:
› Unless otherwise disclosed, the Group’s 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.
› The Group’s existing exclusive Wagering Licence in Victoria will expire in 2024. In relation to the ongoing wagering operations in Victoria, probability-weighted scenarios were modelled,
including the expected conditions and probability of possible exclusive, non-exclusive retail wagering licence or no licence outcomes.
› State tax regimes and the regulatory environment in which the Group currently operates remain largely unchanged, other than those publicly announced.
› 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 rates used are either in line with or do not exceed the forecast long term underlying growth rate in the Consumer Price Index.
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.
115
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2022
C3 Impairment testing (continued)
Sensitivities
› Probability-weighted scenarios were developed for a number of possible exclusive, non-exclusive Victorian retail wagering licence or no licence outcomes. Under the probability-
weighted scenario and each of the individual scenarios, the estimates of recoverable amount exceed the carrying amount.
› An increase in the long term, post tax discount rate of 1.3% would result in the estimated recoverable amount being equal to carrying amounts.
› A decrease in the cashflows of the business of 12% would result in the estimated recoverable value of the segments to equal to the carrying amount.
Typically, changes in any one of the aforementioned assumptions (including operating performance) would be accompanied by a change in another assumption which may have an
offsetting impact. Action is usually taken to respond to adverse changes in assumptions to mitigate the impact of any such change. However, adverse movements in key assumptions may
lead to impairment.
Impairment Charges
Wagering and Media
No impairment charges were identified in the year ended 30 June 2021 or 30 June 2022.
Gaming Services
The impairment assessment in the prior year determined the carrying value of the Gaming Services Segment exceeded its recoverable amount. As a result, an impairment charge of
$121.5m was recognised in the prior year. At 30 June 2021, the Goodwill attributable to the Gaming Service segment was nil.
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.
116
Tabcorp Annual Report 2022 C4 Property, plant and equipment
2022
Carrying amount at beginning of year
Additions
Disposals
Disposals through demerger of entities (refer to note D5)
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:
2021
Carrying amount at beginning of year
Additions
Acquisitions via business combinations (refer to note D4)
Disposals
Depreciation
Transfers
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
17.6
-
(0.1)
-
-
-
-
-
17.5
17.5
-
17.5
-
17.6
-
-
-
-
-
17.6
17.6
-
17.6
14.0
-
-
(0.1)
(2.1)
-
-
(1.0)
10.8
35.1
(24.3)
10.8
-
15.7
0.4
-
-
(2.1)
-
14.0
35.4
(21.4)
14.0
-
66.0
0.7
(0.1)
(17.5)
(13.0)
-
-
(0.6)
35.5
133.3
(97.8)
35.5
0.1
80.0
(0.8)
-
(0.2)
(12.9)
(0.1)
66.0
160.2
(94.2)
66.0
-
Total
$m
375.5
41.9
(7.8)
(69.5)
(88.1)
(1.1)
(26.0)
(2.0)
222.9
805.7
(582.8)
222.9
33.6
456.3
30.9
0.6
(15.6)
(97.3)
0.6
375.5
1,172.7
(797.2)
375.5
13.6
277.9
41.2
(7.6)
(51.9)
(73.0)
(1.1)
(26.0)
(0.4)
159.1
619.8
(460.7)
159.1
33.5
343.0
31.3
0.6
(15.4)
(82.3)
0.7
277.9
959.5
(681.6)
277.9
13.6
3 – 10
Depreciation policy – straight line basis over useful life (years):
7 – 40
5 – 14
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.
117
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2022
C5 Leases
(a) Group as a lessee
The Group has lease contracts for various properties, motor vehicles and other equipment with lease terms expiring from 1 to 22 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:
2022
Carrying amount at beginning of year
Additions
Lease remeasurements
Terminations(i)
Derecognition(ii)
Depreciation
Impairment
Carrying amount at end of year
2021
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
Terminations(i)
Payments (cash outflow)
Carrying amount at end of year
Current
Non current
(i) Includes the termination of certain operating leases, as the leases were novated or sub-leased to The Lottery Corporation on demerger.
(ii) Derecognition of right-of-use assets as a result of entering into finance sub-leases with The Lottery Corporation on demerger.
118
Property
$m
225.8
9.4
(9.1)
(59.4)
(4.9)
(38.4)
(2.5)
120.9
265.8
0.8
6.8
(41.0)
-
(6.6)
225.8
Other
$m
7.3
1.8
0.1
-
-
(3.6)
-
5.6
9.3
1.3
1.0
(4.4)
0.1
-
7.3
2022
$m
308.9
11.2
(15.5)
9.8
(74.9)
(57.8)
181.7
42.6
139.1
181.7
Total
$m
233.1
11.2
(9.0)
(59.4)
(4.9)
(42.0)
(2.5)
126.5
275.1
2.1
7.8
(45.4)
0.1
(6.6)
233.1
2021
$m
353.5
2.1
3.1
13.1
-
(62.9)
308.9
46.6
262.3
308.9
Tabcorp Annual Report 2022 (b) Group as a lessor
The Group has sub-leased properties that have previously been presented as part of right-of-use assets. The sub-leases have terms of 3 and 5 years and the Group has classified the
leases as finance sub-leases.
During the year, the Group recognised a gain of $7.3m on derecognition of the right-of-use assets pertaining to the properties and presented the gain as part of profit from discontinued
operations after tax (see note D5).
The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date.
Less than one year
Between one to two years
Between two to three years
Between three to four years
Between four to five years
Total undiscounted lease receivable
Unearned finance income
2022
$m
3.1
3.3
2.7
1.9
1.9
12.9
(0.8)
12.1
During the year, the Group terminated its non-cancellable operating sub-leases. 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
2022
$m
-
-
-
2021
$m
-
-
-
-
-
-
-
-
2021
$m
2.1
7.3
9.4
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.
The Group enters into lease arrangements as lessor in respect of some property leases. When the Group is an intermediate lessor it accounts for its interests in the head lease and the sub-lease separately.
The sub-lease is a finance lease where it transfers substantially all the risks and rewards of ownership to the lessee. All other sub-leases are operating leases. The determination of whether a sub-lease is classified as a finance lease or operating lease is
made by reference to the right-of-use asset arising from the head lease. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease. Rental income from operating
leases is recognised on a straight-line basis over the term of the relevant lease.
The Group recognises on the Balance Sheet a net investment in a lease as the sum of the lease payments receivable plus any unguaranteed residual value, discounted at the interest rate implicit in the lease.
119
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: OPERATING ASSETS AND LIABILITIES For the year ended 30 June 2022
C6 Notes to the cash flow statement
(a) Cash and cash equivalents comprise:
Cash on hand and in banks
Short term deposits
2022
$m
102.9
96.5
199.4
2021
$m
341.4
83.0
424.4
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 to 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 $84.3m (2021: $275.0m).
(b) Reconciliation of net profit after tax to net cash flows from operating activities
Net profit after tax
Add items classified as investing/financing activities:
– gain on demerger of The Lottery Corporation (net of transaction costs)
– net gain on disposal of investment in an associate
– net loss on disposal of property, plant and equipment and tangibles
– net gain on disposal of non current assets
Add non cash income and expense items:
– depreciation and amortisation
– impairment – goodwill
– impairment – other
– gain on revaluation of previously held equity interest
– costs relating to Racing Queensland settlement
– share based payments expense
– unwinding of prepaid borrowing costs
– other(i)
Net cash provided by operating activities before changes in assets and liabilities
Changes in assets and liabilities:
(Increase)/decrease in:
– debtors
– prepayments
– other assets
(Decrease)/increase in:
– payables
– provisions
– deferred tax liabilities
– current tax liabilities
– other liabilities
Net cash flows from operating activities
(i) Includes recycling of discontinued cash flow hedges to the income statement, refer to note A4.
120
2022
$m
6,775.9
(6,513.8)
-
5.0
(1.2)
382.3
-
5.0
-
150.0
24.5
4.8
(65.7)
766.8
10.1
(18.9)
(77.4)
117.0
(9.6)
(19.2)
(43.5)
11.7
737.0
2021
$m
269.4
-
(69.6)
-
(0.9)
380.5
121.5
9.4
(34.9)
-
4.1
-
13.6
693.1
(15.9)
-
(1.5)
4.6
5.1
(34.0)
57.0
11.1
719.5
Tabcorp Annual Report 2022 C7 Receivables
Current
Trade debtors
Allowance for expected credit losses
Finance lease receivable(i)
Other
Non current
Trade debtors
Finance lease receivable(i)
Other
2022
$m
89.2
(3.5)
85.7
2.8
41.4
129.9
1.6
9.2
-
10.8
2021
$m
91.8
(5.6)
86.2
-
30.7
116.9
0.8
-
0.8
1.6
(i) Further information about the Group’s leases is disclosed in note C5.
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
Non current
Payables
2022
$m
598.5
2021
$m
1,236.6
1.3
270.8
Non current payables in prior year included the final Queensland wagering licence instalment and prizes payable to the winners of certain lottery games where winnings are payable for up
to 20 years, which were disposed through demerger of entities. Refer to note D5.
Current payables consist of trade payables, accruals, customer account balances and other payables.
121
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2022
C9 Provisions
Current
Employee benefits
Premises
Other(i)
Non current
Employee benefits
Premises
Other
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 used during year
Reduction through demerger of entities
Carrying amount at end of year
2022
$m
39.9
4.3
155.8
200.0
4.1
6.0
8.0
18.1
Premises
$m
18.5
4.8
(4.7)
(8.3)
10.3
2021
$m
43.2
6.0
11.3
60.5
9.1
12.5
3.4
25.0
Other
$m
14.7
161.2
(11.3)
(0.8)
163.8
(i) Includes provision of $150m relating to Racing Queensland dispute. On 5 June 2022 Tabcorp and Racing Queensland entered into an agreement to settle the legal proceedings in relation to disputes concerning the calculation of fees payable by
Tabcorp following the introduction of point of consumption tax in Queensland. The settlement is conditional upon the commencement of legislation that will implement the proposed reforms announced by the Queensland Government by 31 March 2023.
As at 30 June 2021, the Company had disclosed a contingent liability in connection with this litigation.
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.
122
Tabcorp Annual Report 2022 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 Wagering Assets (Vic) Pty Ltd
Tabcorp Assets Pty Ltd
Aussie Fair Play Coalition Pty Ltd (formerly Tabcorp Participant Pty Ltd) Tabcorp Wagering Participant (Vic) Pty Ltd
Luxbet Pty Ltd
Tabcorp Wagering Holdings Pty Ltd
Tabcorp ACT Pty Ltd
Tabcorp Gaming Holdings Pty Ltd
Tabcorp Gaming Solutions (NSW) Pty Ltd
Tabcorp Gaming Solutions Pty Ltd
Intecq Limited
eBET Gaming Systems Pty Limited
Tabcorp Investments No.6 Pty Ltd
Tabcorp Wagering (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
Ubet Qld Limited
Ubet NT Pty Ltd
Ubet Radio Pty Ltd
Ubet SA Pty Ltd
Ubet Tas Pty Ltd
Tasradio Pty Ltd
Maxgaming Holdings Pty Ltd
Maxgaming NSW Pty Ltd
Maxgaming Qld Pty Ltd
Reaftin Pty Ltd
Bytecraft Systems Pty Ltd
Bytecraft Systems (NSW) Pty Ltd
Tatts Group Limited
100% previously owned Australian subsidiaries removed from the deed of cross guarantee with Tabcorp Holdings Limited during the period by way of a revocation deed(i):
Keno (Qld) Pty Ltd
TAHAL Pty Ltd
Keno (NSW) Pty Ltd
TattsTech Pty Ltd
tatts.com Pty Ltd
Tattersall’s Sweeps Pty Ltd
Tatts NT Lotteries Pty Ltd
Tatts Lotteries SA Pty Ltd
Golden Casket Lottery Corporation Limited
50-50 Software Pty Ltd
New South Wales Lotteries Corporation Pty Limited
Keno (Vic) Pty Ltd (formerly Tabcorp Investments No.5 Pty Ltd)
The Lottery Corporation Limited (formerly Tattersall’s Holdings Pty Ltd)
100% previously owned Australian subsidiaries incorporated and lost control during the period(ii):
Tatts Keno Holdings Pty Ltd
L&K Operations Pty Ltd
L&K Finance Pty Ltd
Keno (ACT) Pty Ltd
Keno Online 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
Maxgaming Investments Pty Ltd (formerly George Adams Pty Ltd)
Tabcorp Investments No.11 Pty Ltd
Tabcorp Wagering Manager (Vic) Pty Ltd
OneTab Australia Pty Ltd
OneTab Holdings Pty Ltd
Sky Australia International Racing Pty Ltd
COPL Pty Ltd
eBET Systems Pty Limited
Industry Data Online Pty Ltd
Tabcorp Employee Share Administration Pty Ltd
Sky Channel Marketing Pty Ltd
Ubet Enterprises Pty Ltd
123
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2022
D1 Subsidiaries (continued)
International subsidiaries
Name
Premier Gateway International Limited
Premier Gateway Services Limited
Tabcorp Europe Holdings Limited
Tabcorp Europe Limited
Bytecraft Systems (NZ) Limited
Tabcorp UK Limited(iii)
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
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
(i) Control of these entities was lost on 1 June 2022 on the demerger of The Lottery Corporation.
(ii) The entities were incorporated during the year and the control of these entities was lost on 1 June 2022 on the demerger of The Lottery Corporation.
(iii) 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.
124
Tabcorp Annual Report 2022 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. Certain subsidiaries, as identified in note D1, exited the closed group during the year
on the demerger of The Lottery Corporation.
The consolidated income statement and balance sheet of all entities included in the Closed Group are set out below.
Income statement
Revenue
Expenses
(Loss)/profit before income tax and net finance costs
Finance income
Finance costs
(Loss)/profit before income tax
Income tax expense
(Loss)/profit for the period
Gain on demerger after tax
Net profit after tax
Other comprehensive income
Change in fair value of cash flow hedges taken to equity that may be reclassified to profit or loss
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 after tax
Accumulated losses at beginning of year
Adjustment for companies exiting the Closed Group on demerger
Other comprehensive income
Transfer to demerger reserve
Dividends paid
Retained earnings/(accumulated losses) at end of year
2022
$m
2,216.2
(2,299.4)
(83.2)
0.6
(61.5)
(144.1)
18.9
(125.2)
7,021.2
6,896.0
65.9
(19.8)
0.5
(0.1)
46.5
6,942.5
6,896.0
(2,044.0)
(22.0)
0.4
(3,538.4)
(300.2)
991.8
2021
$m
5,700.3
(5,113.2)
587.1
1.1
(168.7)
419.5
(213.7)
205.8
-
205.8
(73.9)
22.2
3.0
(0.9)
(49.6)
156.2
205.8
(2,085.6)
-
2.1
-
(166.3)
(2,044.0)
125
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2022
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
Retained earnings/(accumulated losses)
Reserves
TOTAL EQUITY
126
2022
$m
107.8
93.3
52.0
0.4
-
34.2
14.5
302.2
10.8
7.6
-
693.4
2,474.0
216.6
126.5
31.2
1.8
13.9
3,575.8
3,878.0
510.4
-
42.6
8.1
200.0
12.5
1.3
774.9
1.3
135.3
139.1
179.7
18.1
-
-
473.5
1,248.4
2,629.6
1,635.9
991.8
1.9
2,629.6
2021
$m
327.7
83.3
45.0
69.6
128.9
-
113.4
767.9
1.6
36.4
128.7
2,041.5
7,909.4
375.5
233.1
25.5
88.0
19.2
10,858.9
11,626.8
1,182.0
176.8
46.6
54.9
60.5
50.2
90.0
1,661.0
270.8
2,298.7
262.3
525.6
25.0
54.8
13.0
3,450.2
5,111.2
6,515.6
9,230.0
(2,044.0)
(670.4)
6,515.6
Tabcorp Annual Report 2022 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
Demerger reserve
Other reserves
Total equity
Contingent liabilities
Refer to note E4.
Capital expenditure
Tabcorp Holdings
2022
$m
4,462.7
0.5
4,463.2
41.7
4,337.7
54.7
56.6
1,635.9
2,645.2
-
-
4,281.1
2021
$m
471.3
3.1
474.4
36.4
8,928.7
101.4
101.4
9,230.0
258.7
(669.9)
8.5
8,827.3
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 2022 or 30 June 2021.
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.
The Lottery Corporation Limited and its 100% controlled entities left the Tabcorp Holdings Limited tax consolidation group effective 1 June 2022.
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.
127
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE For the year ended 30 June 2022
D4 Business combinations
Acquisition of Premier Gateway International Limited and Premier Gateway Services Limited in the prior year
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)
Intangible assets have a useful life of 5 – 8 years.
(i)
(ii) At the acquisition date, the Group’s existing 50% investment in PGI was remeasured to fair value and a gain of $34.9m 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 $24.0m. 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 in the prior year
2021
$m
71.2
30.6
1.5
0.6
54.1
(103.6)
54.4
-
(34.9)
19.5
2021
$m
71.2
(19.5)
51.7
Since the date of acquisition the additional 50% investment in PGI contributed $41.3m revenue and $0.1m profit before income tax expense, after amortisation of the identifiable intangible
assets of $2.4m. If the acquisition had taken place at the beginning of the prior year, the Group’s revenue and loss before income tax expense from continuing operations would have been
$2,562.4m and $101.4m respectively.
128
Tabcorp Annual Report 2022 D5 Discontinued operations
Demerger of The Lottery Corporation Limited
The Lottery Corporation was demerged on 1 June 2022 and is reported as a discontinued operation. The Lottery Corporation operates Lotteries and Keno pursuant to licences and
approvals in certain Australian states and territories.
The demerger distribution of The Lottery Corporation was recognised at the fair value of The Lottery Corporation shares of $10,470m. The fair value was determined using the volume
weighted average price (VWAP) of The Lottery Corporation’s shares as traded on the ASX over the first five trading days starting from the date of commencement of trading (including
on a deferred settlement basis).
The demerger distribution is accounted for as a reduction in equity, split between a share capital reduction and a demerger reserve; and was settled through the transaction of The Lottery
Corporation shares under the scheme of arrangement. The difference between the book value of the net assets of The Lottery Corporation transferred and the demerger distribution value
is recognised as a gain on demerger.
(a) Financial performance of discontinued operations
Revenue
Expenses
Profit before income tax
Income tax expense
Gain on demerger after tax(i)
Profit from discontinued operations after tax
(i) Net of pre-tax transaction costs of $89.2m, including non cash items of $7.0m.
(b) Assets and liabilities at date of demerger
The major classes of assets and liabilities demerged were:
Assets
Cash and cash equivalents
Other current assets
Debt instruments
Licences
Other intangible assets and goodwill
Property, plant and equipment
Right-of-use assets
Derivative financial instruments
Other
TOTAL ASSETS
Liabilities
Payables
Interest bearing liabilities
Lease liabilities
Provisions
Derivative financial instruments
Deferred tax liabilities
Other
TOTAL LIABILITIES
NET ASSETS
2022
$m
3,232.2
(2,684.9)
547.3
(166.8)
6,513.8
6,894.3
2021
$m
3,205.8
(2,621.5)
584.3
(154.0)
-
430.3
1 June 2022
$m
261.7
105.6
285.8
1,271.2
5,518.7
69.5
60.4
187.0
64.3
7,824.2
1,023.4
2,312.0
70.6
19.6
11.0
383.3
120.7
3,940.6
3,883.6
129
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2022
D5 Discontinued operations (continued)
(c) Cash flow from discontinued operations (contained in the Group cash flow statement)
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow from financing activities
Net cash inflow
(d) Earnings per share from discontinued operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
(e) Gain on demerger
Consideration – demerger distribution
Book value of net assets disposed
Transaction costs
Gain on demerger before income tax
Income tax benefit
Gain on demerger after tax
2022
$m
586.8
(112.0)
(437.3)
37.5
2022
$m
309.9
309.9
June 2022
$m
10,470.0
(3,883.6)
(89.2)
6,497.2
16.6
6,513.8
2021
$m
19.7
19.7
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations, or is a controlled entity acquired
or held exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified
as a discontinued operation, the comparative income statement is re-presented as if the operation had been discontinued from the start of the comparative period.
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.
130
Tabcorp Annual Report 2022 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.
Prior to the demerger of The Lottery Corporation Limited, the Performance Rights on foot were modified whereby the performance conditions were waived for all participants, and a pro
rata portion of the Performance Rights vested and the remainder lapsed. The remaining fair value in relation to the Performance Rights was expensed prior to the demerger, together with
any uplift in fair value attributable to the modification of the Performance Rights. There are no Performance Rights outstanding at 30 June 2022.
The dilutive effect, if any, of outstanding Performance Rights is reflected in the computation of diluted earnings per share.
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. As a result of the demerger, the Restricted Shares
were released from any trading restrictions and the remaining cost was expensed prior to the demerger.
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.
In addition, the Company has granted Restricted Shares to key critical employees including executives as part of a one-off retention plan as a result of the demerger. At the time of the
demerger, Restricted Shares issued under this plan were cancelled for employees ceasing employment and a reversal of the expense was recognised. For continuing employees, the cost
of the Tabcorp Restricted Shares are recognised over the vesting period until July 2023, and the cost of The Lottery Corporation shares allocated as part of the demerger were placed
under a holding lock and the remaining cost was expensed prior to the demerger.
Further explanation of the share plans is disclosed in the Remuneration Report.
131
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2022
E1 Employee share plans (continued)
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
2022
17 October 2018
17 October 2018
24 October 2019
20 October 2020
19 October 2021
2021
27 October 2017
17 October 2018
17 October 2018
24 October 2019
20 October 2020
Expiry date
19 September 2021
30 June 2021
25 September 2022
24 September 2023
29 September 2024
15 September 2020
19 September 2021
30 June 2021
25 September 2022
24 September 2023
Balance
at start
of year
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
Movement during the year
Granted
Forfeited
Expired(i)
Vested
-
-
-
-
2,309,593
2,309,593
-
-
-
-
3,288,875
3,288,875
(670,845)
(446,999)
(455,596)
(107,765)
-
(1,681,205)
(596,613)
(145,937)
(48,646)
(266,033)
(143,016)
(1,200,245)
-
-
(127,026)
(1,332,469)
(1,826,217)
(3,285,712)
-
-
-
-
-
-
(670,185)
-
(1,173,801)
(1,705,625)
(483,376)
(4,032,987)
(700,357)
-
-
-
-
(700,357)
Balance
at end
of year(ii)
-
-
-
-
-
-
-
1,341,030
446,999
1,756,423
3,145,859
6,690,311
(i)
As a result of the demerger of The Lottery Corporation, Performance Rights vested on a pro rata basis, considering the service period that had elapsed at the date of the demerger. Any Performance Rights that did not vest lapsed. These are shown
as expired during the year.
(ii) 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 $2.94 (2021: $2.06).
The assumptions underlying the Performance Rights valuations are:
Grant date
27 October 2017
17 October 2018
17 October 2018
24 October 2019
24 October 2019
20 October 2020
20 October 2020
19 October 2021
19 October 2021
Expiry date
15 September 2020
19 September 2021
30 June 2021
25 September 2022
25 September 2022
24 September 2023
24 September 2023
29 September 2024
29 September 2024
Share price at
date of grant
$
4.45
4.76
4.76
4.85
4.85
3.44
3.44
5.09
5.09
Expected
volatility in
share price(i)
%
22.00
21.00
21.00
20.00
20.00
30.00
30.00
27.50
27.50
Expected
dividend
yield(ii)
%
5.50
5.06
5.06
4.62
4.62
3.40
3.40
3.00
3.00
Risk free
interest
rate(iii)
%
2.04
2.05
2.05
0.73
0.73
0.27
0.27
0.00
0.00
Value per
Performance
Right
$
2.37
2.59
4.16
2.42
4.24
1.71
3.11
2.94
4.66
(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.
132
Tabcorp Annual Report 2022 E2 Pensions and other post employment benefit plans
The Group had two defined benefit superannuation plans (closed to new entrants) during the year, the Tabcorp Superannuation Plan (‘Tabcorp plan’) and the New South Wales Lotteries
Corporation Pty Limited defined benefit plan (‘NSW Lotteries plan’), which provide benefits based on salary and length of service. The NSW Lotteries plan was derecognised by the Group
during the year on the demerger of The Lottery Corporation (refer to note D5). 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)
Tabcorp plan
Balance at 30 June 2020
Actuarial gains
Actual return on plan assets excluding interest income
Benefits paid
Other
Balance at 30 June 2021
Actuarial gains
Actual return on plan assets excluding interest income
Benefits paid
Other
Balance at 30 June 2022
NSW Lotteries plan
Balance at 30 June 2020
Actuarial gains/(losses)
Benefits paid
Other
Balance at 30 June 2021
Actuarial gains/(losses)
Benefits paid
Other
Reduction through demerger of entities
Balance at 30 June 2022
(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.
Fair value of
plan assets
$m
Present value of
defined benefit
obligation
$m
Net defined
benefit plan
assets/
(liabilities)
$m
13.8
-
2.2
(3.2)
0.3
13.1
-
(0.5)
(1.5)
0.3
11.4
17.7
1.7
(1.1)
1.5
19.8
(0.8)
(1.1)
1.5
(19.4)
-
(12.9)
0.8
-
3.2
(0.4)
(9.3)
1.0
-
1.5
(0.2)
(7.0)
(26.0)
(0.6)
1.1
(0.6)
(26.1)
4.8
1.1
(0.9)
21.1
-
0.9
0.8
2.2
-
(0.1)
3.8
1.0
(0.5)
-
0.1
4.4
(8.3)
1.1
-
0.9
(6.3)
4.0
-
0.6
1.7
-
133
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2022
E2 Pensions and other post employment benefit plans (continued)
Amounts recognised in other comprehensive income
Tabcorp plan
NSW Lotteries 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
2022
$m
0.5
-
0.5
2021
$m
3.0
1.1
4.1
Tabcorp plan
NSW Lotteries plan
2022
%
7.0
19.0
25.0
28.0
6.0
15.0
100.0
2021
%
4.0
12.0
26.0
27.0
8.0
23.0
100.0
2022
%
13.7
4.6
17.7
33.0
6.4
24.6
100.0
2021
%
12.2
6.4
19.9
33.2
7.9
20.4
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.
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
2022
$m
6.1
8.2
14.3
2021
$m
7.7
5.3
13.0
Included within prior year are capital commitments for The Lottery Corporation of $0.5m which has been classified as a discontinued operation in the current year.
134
Tabcorp Annual Report 2022 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 prior 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 $62.0m and interest charges of $8.8m 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 has appealed this decision in the Federal Court of Australia. If Tatts is ultimately successful in its claim,
the Company expects that the amended assessment amounts will be refunded.
(b) Insurance recoveries
There are outstanding insurance matters on foot between controlled entities and third parties at 30 June 2022. Given the nature of insurance claim processes it is not practicable for the
business to disclose an estimate of the asset arising from the settlement and the impact it will have on the Group’s financial position.
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 regulatory matters and legal actions on foot and other potential legal exposures between controlled entities and third parties at 30 June 2022. It is expected that any
liabilities arising from such regulatory matters and legal action or other potential exposures would not have a material adverse effect on the Group’s financial position.
135
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY NOTES TO THE FINANCIAL STATEMENTS: OTHER DISCLOSURES For the year ended 30 June 2022
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 $81,420,029 were received by the Group in 2022 (2021: $75,830,728).
(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(i)
– other services(ii)
2022
$
9,115,849
583,767
380,421
8,615,616
1,327,417
20,023,070
2022
$
2,671,947
1,558,000
1,913,000
6,142,947
2021
$
8,479,179
248,199
342,509
2,940,694
-
12,010,581
2021
$
1,828,966
268,000
842,000
2,938,966
(i) In 2022, other assurance and agreed upon procedures include $1,290,000 in relation to assurance services with respect to The Lottery Corporation Group demerger, and $268,000 other assurance procedures.
(ii) 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. In the current year other services include $1,662,751 (2021: $509,000)
in relation to services provided with respect to the demerger of The Lottery Corporation, and $250,064 (2021: $333,000) in relation to other services.
In the current and prior year, there were no fees paid or payable to Ernst and Young in relation to assurance services that are required by legislation to be provided by the auditor.
E7 Assets held for sale
Property, plant and equipment
Software
2022
$m
26.0
8.2
34.2
2021
$m
-
-
-
During the year, the Group entered into sale agreements in relation to electronic gaming machines. As the sales are highly probable, the related assets have been classified as held for
sale, at 30 June 2022. The sales are expected to be completed within 12 months of balance date.
136
Tabcorp Annual Report 2022 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.
(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.
137
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY 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 2022 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 2022.
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.
Bruce Akhurst
Chairman
Adam Rytenskild
Managing Director and Chief Executive Officer
Sydney
24 August 2022
138
Tabcorp Annual Report 2022
INDEPENDENT AUDITOR’S REPORT
139
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140
Tabcorp Annual Report 2022 141
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142
Tabcorp Annual Report 2022 143
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144
Tabcorp Annual Report 2022 FIVE YEAR REVIEW
Financial performance
Revenue from continuing operations
Revenue from discontinued operations
EBITDA(ii)
(Loss)/profit from continuing operations before interest and tax
Profit from discontinued operations net of tax
Profit/(loss) after income tax attributable to members
Dividend(iii)
FY22
Unit
$m 2,373.3
$m 3,232.2
211.3
$m
(75.1)
$m
$m 6,894.3
$m 6,775.9
289.4
$m
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(iii)
Operating cash flow per share(iv)
Net assets per share
Return on shareholders’ funds
Total shareholder return(v)
Share price close
Market capitalisation
Segment revenue from continuing operations(vi)
Wagering and Media
Gaming Services
Lotteries and Keno(vii)
Employee
Safety(viii)
Females in senior management roles
Other stakeholder benefits
Returns to racing industry
State and territory gambling taxes and GST
Income tax (benefit)/expense
FY21
5,685.7
-
1,031.4
651.2
-
269.4
321.8
11,867.8
5,171.7
6,696.1
719.5
181.8
424.4
12.3
14.5
24.6
3.07
4.1
55.8
5.18
11,508.0
2,298.0
183.2
3,205.8
FY20
5,223.9
-
(195.6)
(573.7)
-
(870.4)
222.9
12,415.6
6,389.0
6,026.6
670.9
290.0
348.5
(42.9)
11.0
18.8
2.97
(12.8)
(19.9)
3.38
6,869.2
FY19 (i)
5,488.0
-
1,081.7
729.9
-
361.1
443.8
13,623.0
6,443.1
7,179.9
769.6
278.4
463.0
17.9
22.0
24.4
3.56
5.0
4.2
4.45
8,985.9
2,084.1
220.9
2,917.1
2,317.9
304.0
2,864.9
$m 4,048.7
1,337.6
$m
2,711.1
$m
737.0
$m
202.5
$m
199.4
$m
cents
cents
cents
$
%
%
$
304.6
13.0
24.0
1.22
(2.2)
15.1
1.07
$m 2,370.4
$m 2,181.9
192.9
$m
-
$m
LTIFR
%
1.3
42
2.3
43
4.1
39
3.6
36
946.5
$m
$m 2,227.9
(17.8)
$m
1,036.8
2,239.6
214.2
953.9
2,085.7
103.2
974.5
2,099.9
160.9
FY18
3,764.7
-
490.0
241.4
-
28.7
422.5
12,940.8
5,702.2
7,238.6
447.5
291.7
352.7
1.9
21.0
10.5
4.89
0.6
7.5
4.46
8,977.9
2,122.1
249.7
1,390.7
2.3
36
916.8
1,166.4
84.8
The Tabcorp-The Lottery Corporation demerger was implemented
on 1 June 2022, therefore FY22 represents 11 months results
from the Lotteries and Keno business as a discontinued
operation. Periods prior to FY22 have not been re-presented.
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) 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.
(iii) Dividends attributable to the year, but which may be
payable after the end of the period.
(iv) 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.
(v) 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. For FY22, includes the value of The Lottery
Corporation Limited shares at 31 May 2022 of $4.74, prior
to implementation of the Demerger.
(vi) Revenue includes both external and internal revenue.
(vii) No revenue is shown for Lotteries and Keno segment
as the segment information is only for the continuing
operations and Lotteries and Keno segment was
discontinued in FY22 and presented within the
discontinued operations.
(viii) The lost time injury frequency rate (LTIFR) is the number
of lost time injuries per million hours worked.
145
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY
SHAREHOLDER INFORMATION As at 29 July 2022
Securities on issue
Tabcorp has on issue 2,225,771,703 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 2021 due to 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.
During FY22, a total of 3,425,545 shares were acquired on market at an average price of $4.93 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. 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
Cooper Investors Pty Ltd
Date of interest
13 July 2022
1 July 2022
Number of ordinary shares(i)
213,701,339
112,569,499
% of issued capital(ii)
9.60
5.058
(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.
146
Tabcorp Annual Report 2022 Investor name
J P Morgan Nominees Australia Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
Argo Investments Limited
Wentworth Investments Pty Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd
Wentworth Investments Pty Ltd
Australian Executor Trustees Limited
Pacific Custodians Pty Limited
Invia Custodian Pty Limited
Tabcorp NRT Limited
Colonial First State Inv Ltd
Total of top 20 registered holders
Number of ordinary shares
536,442,115
478,672,818
263,226,859
121,941,644
60,848,676
58,379,109
25,720,262
17,878,458
14,543,407
10,548,951
7,654,934
7,177,137
6,583,101
5,509,366
5,311,910
5,025,720
4,579,781
3,549,330
3,020,448
2,754,293
1,639,368,319
% of issued capital
24.10
21.51
11.83
5.48
2.73
2.62
1.16
0.80
0.65
0.47
0.34
0.32
0.30
0.25
0.24
0.23
0.21
0.16
0.14
0.12
73.66
Distribution of securities held
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
71,216
60,035
10,572
8,388
391
150,602
Ordinary shares(i)
Number of
securities
23,716,912
143,951,719
75,628,550
190,459,230
1,792,015,292
2,225,771,703
% of
securities
1.07
6.47
3.40
8.55
80.51
100%
(i) Ordinary shares include Restricted Shares offered to employees under the Company’s incentive arrangements.
Unmarketable parcels
There were 54,135 shareholders holding less than a marketable parcel of ordinary shares ($500 or more, equivalent to 505 ordinary shares) based on a market price of $0.99 at the close
of trading on 29 July 2022.
147
Tabcorp Annual Report 2022DIRECTORS’ REPORTREMUNERATION REPORTFINANCIAL REPORTOPERATING & FINANCIAL REVIEWGOVERNANCESUSTAINABILITY GLOSSARY
AASB
ACT
ACTTAB
AGM
AML/CTF
ASIC
ASX
AUD
Board
Australian Accounting Standards Board
Australian Capital Territory
The Tabcorp business located in the ACT
Annual General Meeting
Anti-Money Laundering/Counter-Terrorism Financing
NED
NM
NPAT
NSW
NT
Non-Executive Director
Not meaningful
Net profit after tax
New South Wales
Northern Territory
Australian Securities and Investments Commission
Performance Rights
Australian Securities Exchange
Australian dollar
The Company’s Board of Directors
Company or Tabcorp
Tabcorp Holdings Limited (ABN 66 063 780 709)
Demerger
Director
DPS
DRP
EBIT
EBITDA
EGM
EPS
ESG
The demerger of the Group’s former Lotteries and Keno business
that is now operated by the ASX listed company The Lottery
Corporation Limited
Director of the Company
Dividends per share
Dividend Reinvestment Plan
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation, and
which is non-IFRS financial information
Electronic gaming machine
Earnings per share
Environmental, social and governance sustainability matters
Financial year or FY
The Group’s financial year is 1 July to 30 June
Gaming Services
The Group’s business that provides services to licensed gaming
venues and EGM monitoring services
Group
IFRS
KMP
The Tabcorp group of companies
International Financial Reporting Standards
Key management personnel
Lotteries and Keno
The Group’s former business that is reported as a discontinued
operation following the Demerger
LTI
MAX
Long term incentive
The Group’s Gaming Services brand
MD & CEO
Managing Director and Chief Executive Officer
148
PGI
POCT
QLD
Securities allocated to executives under the LTI plan, which may
vest subject to achieving specified performance hurdles
The Premier Gateway International wagering pooling hub located
in Europe
Point of Consumption Tax
Queensland
Restricted Shares
Ordinary shares allocated to executives under the STI plan, and
which may not be traded for a specified period
ROIC
SA
Sky Racing
Return on invested capital
South Australia
Part of the Group’s Media business, broadcasting racing and
sport throughout Australia and internationally
SRW or Sky Racing
World
The vision distribution and wagering pooling hub based in the
US
STI
TAB
Tabcare
TAH
TAS
Short term incentive
The Group’s wagering brand
The Group’s community and employee engagement program
The ASX ticker code used to identify Tabcorp
Tasmania
Tatts or Tatts Group
Tatts Group Limited (ABN 19 108 686 040) which was acquired
by Tabcorp Holdings Limited in December 2017
Trackside
The Group’s animated racing game
TSR
USD
VIC
Total shareholder return
United States dollar
Victoria
Wagering and Media
The Group’s business that operates fixed odds and pari-mutuel
betting products and services on racing, sport and novelty
products, and racing and sports broadcasting
Tabcorp Annual Report 2022 COMPANY DIRECTORY
Registered office
Tabcorp Holdings Limited
Level 19, 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 13
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
2022
Last day for receipt of AGM director nominations
Annual General Meeting
2023*
Half year results
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
7 September
26 October
14 February
17 February
20 February
21 February
14 March
30 June
17 August
24 August
25 August
28 August
6 September
18 September
25 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 Brisbane time (11.00am Sydney/Melbourne time)
on 26 October 2022.
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.
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