Tabcorp is targeting a 30% market share of Australia’s online betting industry by 2025 after group revenue rose 10.8% in the first half of its financial year 2023 (six months ended 31 December 2022).
Topline numbers
Tabcorp generated group revenue of A$1.28bn in financial H1 2023, up 10.8% year-on-year.
Group EBITDA came in at A$201.6m, up 18.2%, with EBIT of A$78.2m close to triple the A$27.8m EBIT reported in H1 2022.Net profit after tax for the period was A$51.7m, compared to a A$24.2m net loss after tax from its continuing operations in the prior-year period.
Business segment breakdown
Tabcorp operates two business segments; its wagering and media division, which includes the TAB, Sky Media and Premier Gateway International brands, and the gaming services division, which provides electronic gaming machine monitoring and integrity services across Australia.
The wagering and media division generated A$1.17bn in revenue for H1 2023, a year-on-year increase of 8.6%, accounting for 91.5% of total group revenue.
During the period, the ASX-listed operator achieved total wagering market share by revenue of 34.8% according to its estimates, up from 31.2% in the prior year.
Following the launch of its new TAB app, online wagering revenue market share stayed at 25.1%, in line with the prior-year period, it added, as its online TAB brand held digital market share for the first time since 2019.
“I’m particularly pleased that, with new entrants entering the market and retail venues reopening, TAB held digital revenue market share for the first time since 2019,” said MD and CEO Adam Rytenskild.
“To retain our market share, while a new entrant (Betr) took share from competitors and retail reopened, highlights that customers are loving the new TAB app.”
Online wagering revenue was down 15% year-on-year, however, at A$493m, due to the betting market being primarily digital in the comparative period as a result of Covid-related lockdowns and retail closures.
Retail cash wagering revenue grew by 58.1% year-on-year to A$437.4m as customers returned to retail venues in the wake of the pandemic.
Meanwhile, the gaming services division generated A$108.8m in revenue, up 36.7% and accounting for the remaining 8.5% of group revenue.
News nugget
Alongside publication of the results, Tabcorp revealed plans for its TAB25 strategy, covering its business goals and KPI targets between now and the financial year 2025.Among the plans was a target to achieve 30% of online betting market share by revenue in Australia, as well as providing cost savings of between A$80m and A$100m by reducing its operating expenses to between A$600m and A$620m annually, and doubling its return on invested capital in FY25.
The firm’s TAB25 strategy includes “a transformation of our entire wagering ecosystem,” according to CEO Rytenskild, with the introduction of new products for customers, greater integration of Sky Racing with the TAB brand and the implementation of a new marketing strategy.
Tabcorp began its transformation strategy in June 2022 following the divestment of its lotteries and keno division.
Meanwhile, a cost-saving transformation programme called Genesis will see the business implement a simpler and more agile operating model, with tightened cost discipline aimed at helping deliver better results for shareholders.
Further details on the TAB25 strategy will be revealed at an investor day in May.
Another key nugget during the reporting period was Tabcorp’s investment in social-media driven online betting platform Dabble, in which it acquired a 20% equity interest for A$33m in October 2022.
After the end of the period, Tabcorp completed the sale of its eBet business (formerly part of the gaming services division) for gross proceeds of A$62m.
Best question
When asked by Simon Thackray, managing director and senior equity analyst at Jefferies, to provide an update on trading following the end of the reporting period, Rytenskild said:
“We’re not giving an update on trading, but I think it’s known that the market has been a bit softer. Post-Covid it took a hit, particularly in digital, and so our performance in that market is about improving market share position, holding digital, improving overall including our retail business, and growing turnover market share.
“My challenge is to keep this company very focused, not distracted, not worrying about what others are doing and keeping our eye on the prize which is that digital market share target for TAB25.”
Best quote
Despite not being worried about what others are doing, Rytenskild provided some colour on the competition in the market from disruptive new entrant Betr, which is run by Australian bookmaking legend Matt Tripp and backed by Rupert Murdoch’s News Corp.“I think what Betr showed, and [founder] Matt Tripp knows, is that as the market’s changing, scale is important. And the lever [Betr] used to try and get scale quickly was to throw some pretty substantial offerings out there that were deliberately loss leading, and it’s difficult to create stickiness on that.
“If I interpret News Corp’s results correctly, they lost something like A$100m in the quarter as a total for the Betr business, so that’s a substantial impact on the market.”
Share price impact
Shares in Tabcorp jumped 4% as the market opened, from A$1.00 to A$1.04.