In his first results presentation since taking the helm of wagering operator Tabcorp (ASX: TAH), former AFL boss Gillon McLaughlan has not shied away from the Company’s overreliance on horse racing which is a sport in turmoil as wagering numbers have plummeted, prompting McLaughlan to drive a greater push for Tabcorp towards general sports.
For FY24, Tabcorp’s revenue fell 3.9% to $2.34 billion which was largely impacted by weak wagering markets as Australians have pulled back their spending amid cost-of-living pressures. This had a more critical impact on earnings, though, with EBITDA of $317.7 million, down 18.7% on the previous year.
A statutory net loss after tax of $1.36 billion was recorded, largely attributed to non-cash impairments on its wagering assets, primarily in New South Wales and South Australia.
These figures reflect the ongoing decline in horse racing’s popularity and the industry’s struggle to compete for a new generation of bettors as the sport’s poor administration led it down a path towards fighting for cultural relevance.
Notwithstanding the bleak financial situation, Tabcorp has declared a final dividend of 0.3 cents per share, unfranked, which is a long way off the 10 cent dividends shareholders were getting pre-COVID (and before the demerger of their lotteries business).
In recent years, horse racing has struggled to appeal to younger audiences, with the sport seen as increasingly antiquated. Instead, punters have turned to general sports wagering, a trend Tabcorp has been slow to capitalise on but is accelerating under its new leadership.
The Company is optimistic that the arrival of new CEO Gillon McLachlan could mark a turning point. McLachlan is tasked with increasing Tabcorp’s competitiveness in the broader sports wagering market, seeking to diversify the company’s portfolio beyond its historical reliance on horse racing.
McLachlan emphasised that while Tabcorp has made strides in improving its digital competitiveness, the Company is still in the midst of a turnaround.
“Today’s results demonstrate a competitive performance in the soft market conditions we face. It shows customers are responding to the improved product offering and there’s no doubt the business is more competitive today than it was at demerger, but it’s not where it ultimately needs to be,” he said.
“The building blocks are there to create the complete sports entertainment business. To achieve this, there will be a new cadence at Tabcorp which will ultimately unlock significant value for shareholders.
“Importantly, I want to stress that customer safety is personally very important to me. The evolution of technology and our processes to identify problem gamblers faster will not be compromised as we unlock additional value within the company.”
Tabcorp’s efforts to remain competitive in the declining horse wagering market are bolstered by its new 20-year Victorian Wagering and Betting Licence, which commenced in August 2024. This licence creates a level playing field in Victoria for taxes and fees where they had previously been disadvantaged against the online-only bookmarkers.
However, the broader economic landscape remains challenging. High inflation, rising interest rates, and tightening regulatory conditions continue to suppress consumer spending on gambling activities.
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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