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Tabcorp delivers FY23 growth despite “distorted” Australian market

| By Robert Fletcher
Tabcorp posted a year-on-year rise in revenue to AU$2.43bn (£1.24bn/€1.45bn/US$1.58bn) in its 2023 financial year despite operating in what it described as a “distorted” Australian market and having to contend with new competition.
Tabcorp Q1

Tabcorp said it was able to increase its overall revenue market share, while its digital market share remained stable. This came amid several major developments in Australia during the course of the year.

New competition creates “distorted market”

Tabcorp also noted “increased generosity and marketing spend” by competitors during FY23 creating challenges for the operator. These factors, including the launch of an “aggressive” new operator, created a “distorted market”.

However, Tabcorp said it was still able to either increase or maintain market share across key areas in 2023. It also reported a record number of digital active TAB customers at 805,000 for the year.

This is in line with its TAB25 strategy to achieve 30% digital revenue market share by its 2025 financial year.

“These earnings and record active customers highlight the successful completion of the foundation year in the TAB25 transformation strategy,” Tabcorp managing director and CEO Adam Rytenskild said.

“We’ve built this foundation for growth by creating the right products, policy settings and attracting the people needed to transform our business. Our earnings, revenue and active TAB customers have all increased on last year and these strong metrics lay the platform to achieve our TAB25 ambitions.

“Our total revenue market share grew, highlighting the strength of our wagering ecosystem.”

Wagering and media growth pushes revenue up at Tabcorp

Group revenue for the 12 months to 30 June was 2.4% higher year-on-year on a pro forma basis. This was reported as if the demerger of its lottery operations took place at the start of FY22, rather than in June of that fiscal year.

Tabcorp’s wagering and media division generated $2.23bn in revenue, up 2.2% pro forma. Wagering revenue edged up 1.9% to $1.76bn despite a 12.2% drop in digital revenue to $942.7m, due to a decline in the digital wagering market.

In contrast, cash wagering revenue increased 25.1% to $818.4m, with the previous year’s figure impacted by Covid-19 restrictions on retail.

Tabcorp also reported a 3.4% rise in media and international revenue to $469.7m for the year. The operator said this was helped by increased vision export revenue and new digital vision distribution agreements.

Gaming services revenue surpasses $200m

Turning to the Tabcorp gaming services division and revenue here climbed 3.4% year-on-year to $203.6m. Integrity services revenue was 19.0% higher at $117.9m, although other venue services revenue fell 12.4% to $85.7m.

Within this division, Tabcorp said the total number of integrity services monitored electronic gaming machines (EGMs) increased. By the end of the quarter, its network grew from 120,370 in FY22 to 122,210 in the most recent fiscal year.

Tabcorp operates EGMs across New South Wales, Queensland and Northern Territory in Australia.

Pro forma earnings growth

In terms of spending, variable contribution was 2.2% higher at $1.01bn, although operating expenses fell 1.5% to $617.5m. Depreciation and amortisation costs were also 16.0% lower at $240.5m.

This left $150.5m in earnings before interest and tax (EBIT), up 102.8% pro forma. 

After accounting for $32.5m in net interest, $31.0m worth of tax payments and $2.7 from equity accounted investment, net profit after tax (NPAT) stood at $84.3m. This was 76.7% lower than actual NPAT of $362.4m in FY22.

Tabcorp also noted a further $17.8m in significant items, meaning bottom line statutory NPAT for the year hit $66.5m. This was some way off $6.78bn in the previous year, although the FY22 figure included $6.41bn in significant items as a result of the demerger.

EBITDA from continuing operations before significant items amounted to $391.0m. This was 8.4% higher pro forma and also 2.5% higher than last year’s actual figure.

“The results show we have achieved the FY23 goal of laying the foundations to achieve our TAB25 targets,” Rytenskild said.

“We’ve reshaped the business and delivered structural reforms to bring customers market-leading offers, pricing and products that deliver the ultimate customer experience while creating a simpler, more valuable growth business for our shareholders.”

Renshaw to exit as Tabcorp CFO

Alongside the FY23 results, Tabcorp also announced that Daniel Renshaw will step down as chief financial officer at the end of the month. His departure is due to personal reasons.

Damien Johnston will stand in as interim CFO from 1 September while Tabcorp searches for a permanent replacement. Renshaw will be available to support the succession and transition process.

“I really appreciate Dan’s contribution to Tabcorp over a long period of time,” Rytenskild said. “Dan played a key role in the successful demerger of the lotteries and keno business and the successful launch of new Tabcorp. 

“Demergers and transformations are hard to deliver, and Dan was an important part of our leadership team that ensured a seamless transition for shareholders and a strong foundation year for Tabcorp’s TAB25 transformation strategy. 

“Dan leaves with the balance sheet set up for growth and a reset cost base.”

Renshaw added: “I’m really proud to have been involved in the successful demerger and the creation of new Tabcorp. I’m confident I will leave the business in a strong position and look forward to seeing the growth phase of the company.”

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