CEO Adam Rytenskild has outlined Tabcorp’s journey to becoming a leaner, more agile business in the face of stiff competition from international operators.
Topline numbers
In financial year 2023 (12 months ended 30 June 2023), Tabcorp recorded revenue of A$2.4bn, indicating a 2% uptick compared to the fiscal year 2022.
Group EBITDA surged to A$391m, marking an 8% upswing from the previous financial year. EBIT showed an astonishing leap of 103% to A$150m.
The wagering and media sector generated the lion’s share, posting A$2.2bn in revenue, reflecting a 2% year-on-year growth.
EBITDA within this sector experienced a 7.3% year-on-year rise, totalling $308m in contrast to the financial year 2022.
The gaming services division disclosed a 3% year-on-year revenue increase, amounting to $204m.
EBITDA in this segment also exhibited a significant climb of 13% to $83m, as the division rebounded from the adverse effects of Covid-19.
News nugget
One year after launching its transformation strategy TAB25, Tabcorp CEO Rytenskild declared significant progress, propelling the company toward “product leadership.”
“We’ve grown revenue and earnings, got our product right with a new app, and 10 subsequent updates in nine months to close product gaps with our competitors,” he said.
Rytenskild added that Tabcorp observed a 3% increase in digital active TAB account customers, setting a new record of 805,000.
This shows, he said, that Tabcorp’s transformation is working.
Moreover, he stated that Tabcorp achieved these results in a “softer consumer market” despite increased sales and marketing expenditures by its competitors.
“By the end of financial year 2025, we will be a very different company with more customers and more profit,” he predicted.
Tabcorp also revealed that Daniel Renshaw will be stepping down as CFO at the end of August 2023 due to personal reasons.
Damien Johnston will be appointed interim CFO, commencing 1 September, while Tabcorp undertakes a recruitment process for a new CFO.
In addition, Rytenskild highlighted that Tabcorp is “adapting positively” to the changing regulatory environment.
“We embrace the role that regulators play, and we’ll continue to adapt our business to meet their requirements across every jurisdiction.
“Ultimately, though, we believe that their regulations and controls should apply to every operator that takes bets and advertises in the markets that they regulate. That is why we’ve advocated for national regulation,” he said.
Earlier this year, Rytenskild argued that Australia’s “patchwork quilt” of regulation led to the proliferation of gambling ads on Australian TV.
He suggested that an overarching national framework would establish essential safeguards for the community.
Best quote
“Make no mistake, we are driving a cultural revolution within Tabcorp. Culture is critical, and it will underpin the success of our transformation moving forward. The days of the old Tabcorp, with defensive behaviour and underperformance being rewarded, are now gone. We have implemented 10 updates to our app in nine months. In the old Tabcorp, that would have taken over two and a half years.”
Best question
Simon Thackray, managing director and senior equity analyst at Jefferies, sought insights about the current market dynamics.
He was interested in understanding the level of competition and how it’s impacting factors like competitive strategies, promotional efforts, and overall generosity in the market.
In his reply, Rytenskild highlighted that when Tabcorp launched its transformation strategy, it triggered a noteworthy response from the market.
“We saw our biggest competitor massively increase their marketing spending in the second half.
“We’ve stuck to our guns, just focused on delivering and are really happy that we’ve done that.”
While the market undeniably remains highly competitive, it was also undergoing a period of subdued activity, he added.
Rytenskild anticipates competition will intensify closer to the football finals and spring racing season.
However, irrespective of that, he said Tabcorp is “just focused on delivering the second leg of our plan”.
Current trading and outlook
In financial year 2023, the group’s operating expenses totalled $618m, marking a 1% decrease compared to the figures from the previous year and falling below the prior guidance for a 2% to 3% increase in costs.
“This is an outstanding achievement for the business and highlights our absolute commitment to being a leaner, more agile business,” Rytenskild said.
Looking ahead to fiscal year 2024, Tabcorp anticipates a rise in operational expenditure (OPEX) to somewhere between $630m and $640m.
This increase is attributed to investments earmarked for the repositioning of the TAB brand in the first half of financial year 2024, coupled with ongoing enhancements in data and analytics capabilities.
Despite the projected uptick in expenditures, the targeted OPEX range of $600m to $620m for financial year 2025 remains unaltered.
Investors rewarded Tabcorp’s progress as the company’s stock value gained nearly 5%.