Tabcorp posts positive result and is buoyed by demerger project

by Noah Taylor Last Updated
Tabcorp posts positive result and is buoyed by demerger project

Tabcorp has set a June 2022 deadline to split its lotteries arm and its recently struggling wagering business into two ASX-listed companies.

The Sydney Morning Herald reports that the gambling giant has returned to earnings growth, showing it’s ready to thrive as a standalone business.

Tabcorp revealed in its full-year results that the TAB business was growing for the first time in four years, with revenue up 10 per cent and earnings before interest, tax, depreciation and amortisation up 11 per cent to $414 million.

“This is a result that does demonstrate that the underlying performance is good; the business is competing well,” Tabcorp chief executive David Attenborough said.

“I think it’s in a good position going forward particularly as we emerge from COVID.”

Tabcorp confident in venue-based products

The TAB business has been losing ground to its online competitors such as Sportsbet and Ladbrokes over the past decade, and the COVID-19 pandemic accelerated a shift towards online betting at the expense of retail outlets.

Tabcorp’s decision to demerge its booming lotteries business, announced last month, followed investor angst about the wagering unit’s poor performance after the $11 billion merger between Tabcorp and Tatts Group in 2017.

Lockdowns in Victoria and New South Wales cost TAB another $30 million to $40 million in lost revenue in July by forcing the closure of its retail outlets and many of the 4500 pubs and clubs equipped with TAB betting terminals.

And although TAB’s digital revenue grew 27 per cent in the year, Mr Attenborough said its online rivals continued to steal a greater share of gamblers’ wallets when lockdowns were in place.

“That’s a bit of a headwind but as we emerge through that…we’ll be seeing a return to some level of normality and we’ll see pubs and clubs reopening,” he said.

TAB’s digital strategy is centered on its “venue mode” feature which unlocks special offers when customers use its smartphone app to place bets in TAB venues, which Mr Attenborough said would continue to be a strong and unique offer when Victorian and NSW venues reopened “hopefully later this calendar year”.

Revenue from Tabcorp’s lottery arm jumped 10 per cent and EBITDA rose 14 per cent to $620 million.

That was despite lower than average jackpots during the year, which drive ticket sales.

Good step forward for TAB but room for improvement – fund manager

Patrick Potts, a fund manager at Tabcorp shareholder Martin Currie, said the group was showing positive signs ahead of the demerger, led by another strong performance from lotteries.

The wagering performance was also encouraging, he said, but could be overshadowed by Victoria and NSW returning to lockdown.

“It’s a good FY21 result but…it’s one step forward, maybe two steps back for the wagering side of the business given the lockdowns,” Mr Potts said.

Tabcorp reported a net profit of $269 million for the 12 months to June 30 after a $1 billion writedown to its TAB wagering and media business drove it to a $870 million loss last year.

Excluding last year’s write-down, Tabcorp said earnings before interest, tax, depreciation and amortisation grew 11 per cent to $1.1 billion in 2021.

Tabcorp’s poker machine servicing business suffered a 17 per cent decline in revenue and a 15 per cent fall in earnings.

It announced a final dividend of seven cents per share, bringing its full-year payout to 14.5 cents.

The company did not pay a final dividend last year, delivering only an interim payout of 11 cents.

Shares closed four cents lower at $4.81.

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