Twelve days ago, Tabcorp (ASX:TAH) surprised the market with a gloomy first-quarter update—gamblers were gambling less, especially in its core wagering business. This was doubly bad news for the shrunken gaming group, shorn of its lotteries business, ahead of its Spring racing carnivals in Sydney and Melbourne that usually generate significant revenue.
On Wednesday, unhappy shareholders took aim in the only way open to them and administered a ‘first strike’ to the company on the always touchy issue of the remuneration report. Every AGM gives shareholders the chance to vote on the report, which details executive pay for the year. Occasionally, shareholders produce a thumbs-down—a vote against accepting the report by 25% or more, which constitutes a first strike.
A second ‘strike’ in successive years can see the board spilled and new elections. However, that generally doesn’t happen as management and the board talk to investors, promise to do better, and try to soothe frayed nerves.
On Wednesday, just over 34% of the votes at Tabcorp’s annual meeting rejected the remuneration report, while just over 65% voted in favor of its acceptance. Tabcorp shares dropped 4% in afternoon trading to 81 cents, down from the 98 cents they were on October 11, the day before the shock update.
The company’s board has been very focused on maintaining alignment between management and shareholders. Chairman Bruce Akhurst told the meeting that the board had introduced what it believes are appropriate incentives against demanding targets for management to deliver the expected benefits for shareholders.
The problem for Tabcorp and many other companies, and consumers, is that they are being hit by spillover from high inflation, higher costs of living (especially higher energy costs), and the continuing impact of the Reserve Bank’s attempts to control inflation through the highest interest rates in years.
Tabcorp is not alone; its big foreign rivals, such as Entain (which owns Ladbrokes, for instance) and Flutter Entertainment (which owns the market-leading Sportsbet), have revealed a similar slowdown. For Flutter, 2023-24 will be the third year in a row revenues and profits have weakened at Sportsbet.
This offers no relief to Tabcorp shareholders who have witnessed a shrinking share price, nor to management which knows it can’t really stop the rot without giving up margin to punters.