Tabcorp posts $66.5m profit post demerger, digital market share slides

Tabcorp posts .5m profit post demerger, digital market share slides
Tabcorp posts .5m profit post demerger, digital market share slides

“We’re well-disciplined. We’re not just throwing money going after turnover share just to prop up our metrics. We were focused on profit as well.”

Tabcorp has faced increasing competition from major international bookmakers such as Entain and Sportsbet as customers abandon in-person wagering and instead place bets online. That, combined with softer conditions caused by a weaker economy, contributed to a fall in revenue and earnings from media and wagering services in the second half of FY23.

Statutory revenue grew by 2.6 per cent to $2.4 billion and earnings before interest, tax, depreciation and amortisation climbed 88 per cent to $407.4 million in the first full financial year since Tabcorp demerged from its Lotteries and Keno business. It is the best result for the group since corporate bookmakers entered the market.

Mr Rytenskild said the main cause of the fall in the second half was a dramatic increase in marketing spend from Tabcorp’s biggest rival, Sportsbet. “Digital was softer, but if you add in retail … we are OK,” he said.

He did not provide a cost breakdown of the major brand campaign launched this week, but refuted suggestions the optics were bad (Tabcorp is a vocal supporter of a proposed gambling advertising ban).

“We’ve been mindful about how we go about it. We’ve avoided periods where it’s more likely families will be watching free-to-air television. It’s a brand campaign – we’re not pushing offers and things down people’s throats.”

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Taylor Collison gaming analyst Andrew Orbach said the result was tidy and had delivered on most claims, but raised concerns about the wagering giant’s ability to grow its digital market share to 30 per cent within two years.

“Unfortunately, the one deliverable we’d love to see executed on to gain confidence in our thesis (i.e. growing digital [non-gaming revenue] market share) hasn’t occurred,” Mr Orbach wrote. “We look for Victorian licence outcome to improve margins and news from NSW industry review to act as catalyst for re-rate.

“Feels like somewhat of a race against time for these to be delivered as underlying business continues its historic trends.”

Ord Minnett said the result came in better than expected. “However, 4Q23 sport yields relative to competitors negatively impacted the company’s sport and total digital revenue market share,” a note said.

Mr Rytenskild said he was confident he could meet market share targets, pointing to the Victorian wagering licence process – which is expected to conclude in October – and changes to consumption tax in Victoria and Queensland as factors that could assist.

Net profit after tax was $66.5 million, impacted by a $49 million non-cash impairment related to the gaming services business. Mr Rytenskild said his cost-cutting program, known as “Genesis”, had delivered a 1 per cent decrease in operating expenditure for the year.

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“The days of old Tabcorp where defensive behaviour and underperformance were rewarded are now gone,” Mr Rytenskild told investors. “We’ve had 10 updates to our app in nine months – in old Tabcorp that would have taken over two-and-a-half years.”

Mr Rytenskild did not provide any forward earnings guidance, instead focusing on predicted costs in the new financial year as he waits on whether the group has retained the Victorian wagering licence.

He conceded the market was softer, but rejected a potential government-led advertising ban as cause for alarm.

Tabcorp’s results coincided with the announcement of the departure of the company’s third key executive in 12 months – chief financial officer, Daniel Renshaw, who is leaving due to personal reasons. While his exit is not to do with a broader restructure of the business, Mr Rytenskild said there were some job losses over the past year as a result of his change in strategy.

“It’s not just about cutting costs or cutting jobs,” he said. “We did reshape our workforce a couple of times in the last 12 months and there was some … reduction in job numbers.” The company will pay a fully franked final dividend of 1¢ a share.

Source: afr.com

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