A year on from the demerger from their lotteries business, wagering company Tabcorp (ASX: TAH) has reported $66.5 million in profit thanks to a major digital transformation and favourable regulatory changes that have returned the household brand back to becoming a preferred bookmaker amongst punters.
Demerging from The Lottery Corporation (ASX: TLC) in May 2022 was deemed a necessary move for Tabcorp whose wagering business was struggling against online bookmakers with minimal earnings growth, often eating into the lotteries business.
By demerging, Tabcorp has executed a major turnaround strategy to upgrade its technology, join the digital revolution and utilise its app to benefit punters rather than relying on rank-and-file in-venue punters, a rapidly declining segment over the past 10 years.
The results have been impressive despite difficult trading conditions where racing turnover has struggled over the past 12 months – traditionally Tabcorp’s largest revenue driver as the pari-mutuel operator of racing in Australia.
In FY23, Group revenue for $2.43 billion was a 2% increase on the previous year, while EBITDA jumped 8% to $391 million.
NPAT came in at $67 million but was not comparable to the previous year due to the massive cash injection received by Tabcorp via the TLC demerger. A final fully franked dividend of 1 cents per share was declared.
“Today’s earnings and record active customers highlight the successful completion of the foundation year in the TAB25 transformation strategy,” said Tabcorp CEO, Adam Rytenskild.
“We’ve built this foundation for growth by creating the right products, policy settings and attracting the people needed to transform our business. Our earnings, revenue and active TAB customers have all increased on last year and these strong metrics lay the platform to achieve our TAB25 ambitions.
“We are the only one of the large wagering operators in the Australian market to increase revenue and EBITDA in FY23.”
Tabcorp was able to rein in the gap of its online-only competitors courtesy of regulatory changes in Point-of-Consumption tax. This created a level playing field where bookmakers would be taxed based on where bets were placed by customers, rather than where the bookmaker was licenced, with many having benefited millions of dollars in tax concessions by domiciling in the Northern Territory where their tax was capped.
While Tabcorp has long prided itself as the largest operator of retail wagering stores across Australia through its dedicated shopfronts and terminals within pubs, the Company has finally embraced technology as the future of wagering, with excellent results.
“TAB is a very different business today, compared to a year ago,” said Rytenskilk.
“We’re delivering on what we promised. Not only has the new TAB App been launched, we’ve followed up with ten new product launches as we rapidly increase speed to market. Closing the product gap has been critical to the strong increase in active customers and our product team can now pivot from catching up to becoming a market leader for product innovation.”
In the backdrop of the results, a war is looming within the racing industry which is desperate to target younger customers who have been trending their wagering towards sports in recent years. As the pari-mutuel operator of racing in Australia, margins on racing turnover are significantly higher for Tabcorp than other sports.
Despite these struggles in the racing landscape, Rytinskild remains confident that regardless of where the racing industry heads, Taborp is well positioned to capture younger audiences.
“We will continue to invest for sustainable long term growth including rebranding TAB to a fresher, younger more innovative brand. Our new marketing campaign and branding is now live and will play an important role as we look to grow our customer base in sports betting.
“While there is an increased focus on sport, TAB remains the long term industry partner of racing and the wagering partner of Australia’s biggest racing events, the TAB Everest and the Melbourne Cup carnival. Racing will remain the bedrock of our Company.”
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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