As the gaming and wagering business landscape continues its tumultuous trajectory, leading Australian betting operator Tabcorp has encountered significant headwinds. The financial data for the six months ending 31 December details a narrative of resilience amid trying times, with the operator’s steadfast dedication to strategic goals still shining through despite a considerable net loss. Revenue for Tabcorp in this period exhibited marginal decline, registering at $1.21 billion, a dip of 5.1%. The pinch, however, was felt acutely in terms of profitability, as increased operational expenses coupled with severe impairment charges led Tabcorp down the precarious path to a substantial loss.
During the half-year period, Tabcorp faced impairment charges totalling a staggering $852.0 million. Of this, $639.2 million was attributed to the write-down of assets within New South Wales and South Australia, while goodwill impairment accounted for the remaining $212.8 million. Post-tax, the impairment charges related to NSW and South Australia wagering assets amounted to $731.9 million. Tabcorp attributes these charges to the observable softness in the Australian wagering market, compounded by the effects of rising interest rates on discount rates and increased taxation burdens specific to NSW.
However, Tabcorp is looking beyond the gloom, indicating that the impairment charges do not fully encapsulate the potential benefits that could ensue from license reforms in NSW and South Australia, should they align with the company’s ambitious TAB25 strategy.
Amidst this financial backdrop, there have been flickers of good fortune for Tabcorp. September brought closure to a protracted tax controversy with the Australian Taxation Office (ATO), culminating in an $83 million tax refund for the business. The contention revolved around income tax treatments attached to various licences and authorities, which Tabcorp has since settled in full.
Additionally, Tabcorp has locked in exclusive rights for wagering and betting activities in Victoria for the next two decades, an extension of its current licence held since 2012. This landmark arrangement obliges Tabcorp to channel over $1.00 billion to the Victorian government over the 20-year span.
Regulatory challenges have not eluded Tabcorp, as it faced a record $1.0 million fine in Victoria due to its handling of a major system outage that occurred in 2020. However, in light of these roadblocks and the recorded net loss, Adam Rytenskild, the CEO and Managing Director, expressed an optimistic outlook. Rytenskild attested to the company’s ongoing transformation, stating it is progressing steadily with strategic steps paving the way for future expansion.
“We continue to concentrate on fortifying the three pillars of our strategic framework: investing in customer and competitive initiatives to reclaim the Australian market, equalizing the playing ground concerning fees, taxes, and regulation, and redefining our cost base to bolster efficiency and growth,” Rytenskild commented.
Despite a waning market, Tabcorp’s total and digital market shares exhibited growth relative to the previous half, marking a turnaround from the decline observed prior. This rise is reportedly a result of targeted investments in product development, branding, data analytics, technology, and enhancing the retail experience, all part of Tabcorp’s leverage of its comprehensive integrated wagering and media network across the nation.
Rytenskild further noted the company’s shift towards a more digitally-oriented business model, driven by recent forays into AI and new technological platforms. When combined with the renowned TAB brand presence across more than 4,000 venues, Tabcorp foresees a substantial opportunity for omnichannel growth.
A closer examination of the half-year financials revealed a revenue decline in both core segments of Tabcorp’s business. Wagering and media revenue fell by 4.2%, amounting to $1.12 billion, reflective of an overall downturn in market engagement. Retail cash wagering turnover decreased by 3.8%, with parallel revenue reductions. Digital wagering turnover and revenue both receded by 3.8% and 4.0%, respectively. Moreover, the Media and International business segment of Tabcorp reported a 5.4% slide in revenue, largely ascribed to the diminished turnover-linked digital distribution revenues influenced by market conditions.
The segment dedicated to gaming services also experienced a revenue plummet of 14.5%, equating to $93.0 million, which Tabcorp attributes to the impact engendered by the sale of eBet and Max Performance Solutions. However, the inauguration of a new Tasmanian monitoring license in July 2023, along with contractual CPI-linked price increases within the NSW Max Regulatory Services and a rise in the number of monitored electronic gaming machines, mitigated the decline somewhat.
Operational costs also surged, with net operating costs climbing by 16.5% to a notable $354.3 million, adding financial weight to Tabcorp’s impairment costs. While the company successfully reduced taxes, levies, commission, and fees by 5.9% to $723.6 million and scaled down depreciation and amortisation expenses by 2.9% to $119.8 million, other financial costs mounted by an additional $25.2 million.
After all expenditures were tallied, Tabcorp reported a pretax loss of $856.1 million, a stark contrast to the $64.1 million profit registered in the previous year. Even though Tabcorp did benefit from $219.3 million in tax advantages, the positive effects were tarnished by a deduction of $4.9 million in net fair value concerning cash flow hedges destined for equity and currency translation discrepancies of foreign operations.
Tabcorp ended the first half with a net loss total of $641.7 million, in stark comparison to a net profit of $53.2 million during the same period in the previous year. The EBITDA for H1 further underscored the financial challenges, showcasing a 34.7% contraction to $131.7 million.
In closing remarks, Rytenskild acknowledged the robustness of the performance, given the prevailing market state, and underscored the company’s enduring capacity to enhance performance over time. With unwavering confidence in the vitality of the Australian wagering market and Tabcorp’s prospective growth, the company forges ahead despite the tides of recent losses.
