Ann: Term sheet signed with Lotterywest, page-52

I believe the frustration is more in relation to the share price rather than any misinterpretation of the announcement, although I agree that it could have made things a lot clearer. I also believe this deal will result in less revenue from WA in the short-term.

The issue I have with the share price is that if I were to take the worst case scenario approach to WA and completely remove the $6.6m in revenue received in FY20 it would still put JIN on track to either meet or exceed the FY20 NPAT figure in FY21. FY20 factored in a non-recurring $5m charge for the acquisition of Gatherwell which by itself almost offsets losing WA revenue altogether. On top of that FY21 will also receive full benefit from Gatherwell and the other 5 SAAS customers which will also more than likely offset the impact of the 1.5% service fee due to Tabcorp this year. None of this takes into account the increasing trend towards digital for lottery (why TTV of similar jackpots are higher now) which is why I am fairly confident NPAT for FY21 will exceed FY20.

So what about the increased service fees over FY22 and beyond? This absolutely is a risk, however this is where you need some faith in the company and management to grow TTV. I don't buy stocks based on what happened over the past year, I buy stocks based on their future potential. At the moment I am interpreting the current share price as saying zero new growth and Tabcorp will gobble up all of Jumbo's revenue over the next four years. This is despite the fact that even when the full service fee comes into effect in FY24 and beyond it will still only hit that portion of revenue derived from Tabcorp by ~25%. This gives Jumbo three years to grow its business in an environment that is experiencing significant tail winds off the back of Covid.