New Victoria licence drives growth at Tabcorp in H1

Tabcorp’s latest financial results reveal significant growth across key performance indicators, highlighting the effective impact of its newly acquired licensing in Victoria. The Australian gaming giant demonstrates resilience in a competitive market, adapting to changing regulations and enhancing operational efficiencies.

For the six-month period ending December 31, 2024, Tabcorp reported impressive group revenue of AUS$1.33 billion (£672.4 million/€812.2 million/US$846.1 million), marking a robust increase of 10.1% compared to the same period last year.

A critical factor contributing to these results was the issuance of a new wagering license in Victoria, awarded in December 2023 and effective from August 2024. This exclusive 20-year license permits Tabcorp to independently offer wagering services in the state, eliminating the need for prior joint venture arrangements with the Victorian racing industry and relieving the company of additional funding obligations. Tabcorp will now engage in standardized wagering taxes and fees similar to other operators in the market.

Enhanced Cost Discipline and Operational Efficiency

Tabcorp’s CEO and Managing Director, Gillon McLachlan, emphasized the company’s revamped approach to cost management as a further catalyst for growth. In his remarks, he noted, “The improvement in earnings reflects the commencement of our reformed Victoria license, reinforced cost discipline, and increased competitiveness driven by innovative product offerings during marquee events such as the TAB Everest, Melbourne Cup Carnival, and Magic Millions.”

McLachlan outlined ambitious operational savings targets, aiming for operational expenditure (opex) savings of AUS$30 million in FY25—50% more than the previous target. Capital expenditure (capex) is expected to be between AUS$110 million and AUS$120 million, approximately AUS$25 million less than earlier projections. “As we refine our execution, we anticipate transitioning to an evolved strategy that seeks to unlock the inherent value within our unique asset portfolio,” he stated.

In analyzing revenue streams for H1, Tabcorp’s Wagering & Media sector generated AUS$1.24 billion—a year-on-year increase of 11.3%. Wagering revenue itself saw an impressive jump of 14.1%, primarily fueled by Victoria’s license impact; excluding this variable, the growth was a modest 0.8% year-on-year. Meanwhile, media revenue rose by 1.6%, reflecting progress in vision distribution, albeit partly countered by the challenges posed by a softer domestic wagering market, which recorded a 4.3% decline in turnover.

Additionally, Tabcorp’s Integrity Services division experienced a solid revenue increase of 9.7%, achieving AUS$88.1 million in H1, credited to consumer price increases, a rise in monitored electronic gaming terminals, and growth in project work, although adjustments were made for the sale of the Max Performance Solutions business earlier in the fiscal year.

Reinstated Profitability and Financial Health

Despite a rise in operating expenses by 12.2% year-on-year, Tabcorp successfully reduced depreciation and amortization costs by 18.6%. Finance costs totaled AUS$46 million, contributing to a pre-tax profit of AUS$38.9 million. Post-tax implications accounted for AUS$24.1 million, along with a net recovery of AUS$3.2 million from statutory adjustments.

Consequently, Tabcorp posted a net profit of AUS$25.3 million, a dramatic turnaround from the AUS$636.8 million loss experienced in the previous year, which was notably affected by substantial impairment charges. Furthermore, there was a 12% increase in underlying EBITDA (before significant items), totaling AUS$190.2 million.

McLachlan remarked, “The current results illustrate a company executing with improved discipline and accountability. Through strategic actions taken over the past six months, we have enhanced our cost and capital management.” He reiterated his commitment to unlocking the latent value of Tabcorp’s strategic assets to benefit shareholders moving forward.

Strategic Leadership Changes

Beyond financial results, Tabcorp has initiated strategic changes to its leadership structure, enhancing operational capabilities and oversight. McLachlan has been confirmed as CEO after several months as CEO-elect, and Brett Chenoweth took on the role of chairman in September. These changes followed the resignation of former CEO Adam Rytenskild amid significant workplace controversies.

Recent appointments include Jarrod Villani as the chief commercial and media officer, and Narelle McKenzie as chief legal officer, with Robert Fraser stepping into the role of chief technology and transformation officer. McLachlan noted that these adjustments are part of a streamlined model designed to consolidate operations and foster collaboration within the wagering division.

As Tabcorp continues to navigate the evolving landscape of the gambling industry, its proactive maneuvers, innovative offerings, and commitment to operational efficiency position it favorably for future growth and market leadership.