Tabcorp sets focus on digital growth after revenue falls in “disrupted” FY22

| By Robert Fletcher
Tabcorp reported a decline in revenue and earnings for its 2022 financial year but has set its sights on digital growth amid a transformation of the business following the demerger of its lottery arm.

The operator in June implemented the scheme for the demerger of The Lottery Corporation, finalising the demerger of Tabcorp’s lottery operations from its wagering, media and gaming services. As a result, the new business now focuses only on the latter verticals.

Tabcorp first announced plans to spin off its Lotteries and Keno arm in July 2021 following a strategic review that began four months earlier and considered a number of structural and ownership options, including potentially selling off its wagering and media business. Businesses that considered bidding for the wagering and media business included Entain.

While Tabcorp opted to retain its wagering arm, it instead decided to spin off the lotteries business, which would result in two separate companies. 

One of these businesses was renamed The Lottery Corporation and comprises most of the former Tatts business, but without gaming services. The second business was named New Tabcorp and includes the wagering and media arm alongside gaming services.

With the demerger now complete, this leaves Tabcorp free to focus on wagering, media and gaming, with chief executive and managing director Adam Rytenskild saying much of its focus moving forward will be on growing its digital operations and market share.

“We’ve made an urgent start to transform Tabcorp into a competitive and growing business,” Rytenskild said. “We have a clear strategy and a focused ambition to grow our customer base. The hero metric for everyone in the company is digital revenue market share, without exception. 

“FY22 results reflect a disrupted period – it’s a line in the sand and the end of old Tabcorp. We’re resetting our business and culture to focus only on customers and growth.

“Our transformation has started. In the near term, we have a clear plan with specific actionable priorities for FY23 including the launch of our new Tab app which is faster, simpler and different. 

“We are improving our customer experience and will better leverage our venue and media assets for customers. Structural reforms to level the playing field with offshore bookmakers will further improve our competitiveness and our opportunity to grow.”

Revenue dip

Looking at Tabcorp’s report for its 2022 financial year, revenue from continuing operations, excluding the demerged lottery business, was AU$2.37bn (£1.39bn/€1.65bn/US$1.64bn), down 4.3% from $2.48bn in the previous year.

When including the lottery business, revenue for the year was 1.4% lower at $5.61bn.

Tabcorp’s wagering and media business was by far the main source of continuing operations revenue, but the $2.18bn generated in 2022 was down 5.1% year-on-year, primarily due to retail closures in the first half as a result of Covid-19 measures.

Revenue from wagering fell 11.7% to $1.73bn, again due to covid restrictions in the early part of the year and the impact of wet weather leading to the cancellation of some events. However, media and international revenue jumped 33.2% to $454.4m as the Sky Media business continued to expand racing and sport content and its distribution through digital and retail formats.

Turning to gaming services, revenue increased 5.3% to $192.9m. Tabcorp said that this was helped by a return to its full-fee model in December 2021, having offered customers covid-related relief through most of the first half.

In terms of costs, spending was higher in almost all areas of the group, with the exception of employment expenses, which were down 6.5%, while other expenses also fell 9.3% to $41.9m. Tabcorp’s main outgoing remained commissions and fees, with these rising 7.5% to $1.18bn.

After also accounting for $61.1m in net finance expenses, this left a pre-tax loss of $136.2m, compared to a $100.7m loss at the same point in the 2021 financial year. Tabcorp received $17.8m in income tax benefit, meaning it posted a net loss of $118.4m, an improvement on the $160.9m loss reported in the previous year.

However, earnings before interest, tax, depreciation and amortisation (EBITDA) before significant items fell 21.7% year-on-year from $487.2m to $381.6m.

“FY22 was a disrupted year with first half Covid-19 lockdowns in our two largest markets, a record number of race meetings washed out and the priority challenges of a company pre-demerger,” Rytenskild said.

“We are seeing stabilisation in our digital market share, and our total focus is now on executing our strategy to transform and pursue growth. We feel the next results, reflecting this half, will be a good test for the improvements we are making.

“None of this is possible without our people, and we are working quickly to change our culture and the way we work to be innovative, bold and unified to win.”

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