Despite its position as the most recognised wagering brand in Australia, the burden of its wagering division continues to weigh down Tabcorp (ASX: TAH) whose attempts to enter the digital age appear to be futile, having missed the boat by several years.
As a result of being leapfrogged by digital-only operators which flurried into Australia more than 10 years ago while Tabcorp persisted with their shopfront model, Tabcorp has only recently made concerted efforts to target punters via increased marketing for its app.
Subsequently, with their historic reliance on TAB stores and betting terminals within pubs, the wagering company did not fare well during the recent lockdowns in New South Wales, its largest market for turnover, and Victoria.
This resulted in Tabcorp’s Wagering & Media division revenue falling 9.8% to $1,073m for the half year ended 31 December 2021 with EBITDA faring worse, declining 34.8% to $148m, attributed to the high costs of customer acquisition within the digital sportsbetting space.
In comparison, Tabcorp’s Lotteries & Keno division saw 10.9% revenue growth to $1,784m, delivering a 15.1% increase in EBITDA to $358m.
Across the entire Company, revenue grew 2.2% to $2,934m with EBITDA falling 5.5% to $529m, held down by the wagering operations. The 6.5 cents per share interim dividend was down 13.4% on last year also.
“While the Wagering & Media business was significantly impacted by the retail lockdowns imposed in NSW and Victoria, its performance across all channels improved once restrictions were lifted,” said outgoing Tabcorp Managing Director, David Attenborough.
Given the continued growth of their lotteries business alongside the sustained decline of their wagering business, shareholders have long been calling for a demerger of the lotteries business as a standalone operation. Following an extensive review and failed attempts to sell the wagering business, this demerger will finally take place and is on track to be implemented by June 2022 with Tabcorp’s Lotteries & Keno business to be named The Lottery Corporation.
“As well as progressing the demerger of The Lottery Corporation, we are continuing to execute distinct growth initiatives for each of the businesses. These include the launch of a new TAB app in 2022, which aims to position TAB as the first choice for digital wagering play,” said Attenborough.
“We will also introduce a change to Oz Lotto that is expected to create larger and more frequent jackpots in line with its promise to deliver ‘Big Aussie Fun’.”
One-off costs associated with the demerger are expected to be up to $275 million, with ongoing incremental costs of $40m-$45 million per annum.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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