Tabcorp reports Q1 revenue decline despite higher digital spending

In a trading update, Tabcorp says revenue was lower across both its wagering and media and gaming services segments. The update covers the Q1 period for the three months to 30 September.

Wagering and media revenue fell 5.4%, reflecting the impact of lower fixed odds yields due to racing and sports results. Tabcorp says fixed-odds yields were at 14.8% compared to 15.0% last year and a preceding three-year average of 15.6%.

As for digital wagering revenue, this also fell 3.9% year-on-year during Q1. Digital wagering turnover defied softer market conditions and increased 1.0%, but overall wagering turnover slipped 0.9%.

Turning to gaming services revenue, this was down by 12.9% on the previous year. Tabcorp says this is primarily due to the removal of eBet revenue following the sale of the business in February 2023.

Also in relation to gaming services, Tabcorp says it is close to finalising the planned sale of its Max Performance Solutions business. The group agreed terms with an undisclosed buyer in August and expects to close the deal by the end of its first half.

Tabcorp eyeing a digital future

Reflecting on the period, Tabcorp managing director and CEO Adam Rytenskild was largely upbeat. He points to the increase in digital turnover as a major highlight and the ongoing impact of its TAB25 strategy to achieve 30% digital revenue market share by its 2025 financial year.

“Given the softer trading environment, I’m pleased we grew digital wagering turnover,” Rytenskild said. “It highlights that customers are responding to our new digital customer offering. We continue to be relentless in the way we execute our TAB25 strategy and remain focused on making the right decisions for the long-term success of the business.

“We’re in the midst of implementing significant change as a company and industry. Our strategy is on track as level playing field and licence reforms commence, our customer reputation grows and cost base reduces. 

“Our transformation continues at pace and I am confident we will deliver the value laid out in our TAB25 strategy.”

Ups and downs for Tabcorp in Q1

Q1 was far from a settled period for Tabcorp, which was hit with a number of penalties in Australia.

First, Tabcorp was fined a record AU$1.0m (£521,080/€603,977/US$642,016) in Victoria. This related to Tabcorp’s conduct when its Wagering and Betting System (WBS) went down during the 2020 Spring Racing Carnival.

The Victorian Gambling and Casino Control Commission (VGCCC) hit out at Tabcorp over its actions. It said the operator did not voluntarily provide adequate information about the outage and criticised its conduct during the investigation. Tabcorp was also criticised for its “repeated failure” to comply with directions.

Meanwhile, Tabcorp was fined a further $15,000 for breaching advertising and promotion rules in New South Wales (NSW).

Tabcorp advertised a promotion on its website that included an inducement to participate in gambling. The advert could be seen by anyone who visited the website, whether they had an account with Tabcorp or not.

Renshaw exits as CFO

Tabcorp in August also announced Daniel Renshaw was stepping down as chief financial officer. His departure, completed by the end of August, is due to personal reasons.

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

Tabcorp is yet to make any further announcement on a full-time replacement. 

Tabcorp refunded after resolving tax dispute

However, it was not all bad news for Tabcorp. Last month, the group was refunded $83.0m after resolving a tax dispute with the Australian Taxation Office (ATO).

The case relates to income tax treatment of payments for various licences and authorities. Tabcorp says it paid the disputed amount of tax liabilities and interest in full. The refunded amount represents 20% of the disputed tax liabilities and interest.

Each proceeding brought by the taxpayers will be dismissed. In turn, and in line with the ATO settlement, Tabcorp will pay approximately $37.0m to The Lottery Corporation Limited (TLC) under the businesses’ separation deed.

As such, Tabcorp will recognise a benefit of approximately $45.0m after tax from the ATO settlement. This will be reflected in financial statements for the year ending 30 June 2024 and treated as a significant item.