Tabcorp has reported a statutory net loss after tax of AU$1.4bn (£719.2m/€853.7m/$951.1m) for its FY2024 amid a soft wagering market and impairment charges.
Tabcorp’s net loss follows its FY2023, in which it reported a net profit after tax of AU$66.5m. Its dividends per share also fell 43.5% to AU$1.3 from AU$2.3 in FY2023, with final dividends of AU$0.3 a share.
The company’s net loss included significant items, including non-cash impairment charges of AU$1.4bn after tax. Among these outlays were transformation costs of AU$45.6m and Victorian licence costs of AU$53.8m.
Tabcorp attributed its impairment charges to a “slower than expected” recovery from the Australian wagering market in the final half of FY2024, with higher inflation and interest rates leading to less consumer spending on betting. The company also reported impairment charges of AU$644.5m after tax following the first half of FY2024.
“Soft” wagering market hits revenue and prompts impairments
Tabcorp blamed the soft wagering market in Australia for its revenue drop of 3.9%, falling to AU$2.3bn from AU$2.4bn in FY2023, “reflecting current wagering trading conditions”. EBITDA also dropped 18.7% year-on-year to AU$317.7m from AU$391m.
This soft wagering market, specifically in New South Wales, was also the reasoning that Tabcorp gave for the impairment identified within the group’s wagering and media segment. A charge of AU$852.0m was recorded with AU$596.4m attributed to the New South Wales cash-generating unit. In total Tabcorp recognised AU$1,531.6m in impairments compared to just AU$49m in 2023, with this being the main driver for the total loss of AU$1,367.8m compared to the profit of AU$69.6m in 2023.
Net debt for Tabcorp as of 30 June 2024, the end of its financial year, was AU$860m, which was AU$565m higher year-on-year, although the business attributed this to a AU$600m payment for its new 20-year exclusive licence in Victoria, which it paid on 26 June 2024.
Gillon McLachlan, Tabcorp’s managing director and CEO-elect, believes that despite the sizeable loss, the company’s fortunes will improve in future.
“The foundations to unlock value have been built,” McLachlan said. “But the reality is the company is only part way through a turnaround and we need to continue to enhance execution to create greater value.
“Today’s results demonstrate a competitive performance in the soft market conditions we face. It shows customers are responding to the improved product offering and there’s no doubt the business is more competitive today than it was at demerger, but it’s not where it ultimately needs to be. It will require change but the goal remains unchanged.”
Gaming service performance costs Tabcorp
Tabcorp’s wagering and media revenue dropped to AU$2.13bn from AU$2.23bn, a 3% drop. However, gaming service revenue fell more dramatically, with the company reporting a 13.5% reduction in revenue to AU$176.1m from AU$203.6m.
The performance downturn was even more stark when it comes to EBITDA, for which the wagering and media sector slumped 18.4% year-on-year to AU$251.2m from AU$308m. Additionally, gaming service EBITDA plummeted 18.7% to AU$66.5m from $83.1m in FY2023.
Tabcorp attributed the group revenue drop of 3.9% to the soft wagering market, as well as the sale of its Max Performance Solutions (MPS) business, which closed during its FY2024.
After reporting a 2.4% year-on-year revenue increase on a pro forma basis in its FY2023 results, the company stated it was on track to meet its TAB25 strategy of achieving 30% digital revenue market share by its 2025 financial year.
However, changes in economic and regulatory conditions, as well as a downturn in company performance since its demerger, have prompted the company to state it will not meet its TAB25 targets.
“It is clear the business will not meet its TAB25 targets,” McLachlan said. “It is my job to unlock an enhanced cadence with a focus on people and capability. As we evolve, we’ll be better placed to continue executing on the growth opportunities.
“The building blocks are there to create the complete sports entertainment business. To achieve this, there will be a new cadence at Tabcorp which will ultimately unlock significant value for shareholders.”
Room for optimism?
Despite the huge net loss after tax and revenue and EBITDA drops, Tabcorp outlined there was hope for the future after something of an upturn in performance in 2H24.
Digital wagering revenue was 2.2% lower across FY2024 but flat in the second half of that period, with cash wagering revenue also up 5.3% in H2-24.
Meanwhile, underlying gaming services EBITDA, adjusted for the sale of MPS and its eBet business, was also up 14.3% in FY2024.
Additionally, the company highlighted strategic achievements over FY2024 which it hopes will lead to a turnaround year in FY2025.
Tabcorp claims its 20 TAB App releases have improved the company’s competitiveness in the market, as has upgrading 31 of its retail stores. The average turnover of those venues is 19% up when compared to the 13 weeks prior to their refurbishment.
McLachlan feels the business is on the right track thanks to improvements in its product.
“The company has done a good job at building solid foundations since demerger and there is no doubt TAB is competing better in the market,” McLachlan added. “The product is better, speed to market has improved, the retail offering is being revitalised and we’re achieving structural reforms that will make the company more competitive.
“Tabcorp has a unique asset base which can ultimately create a complete sports entertainment experience for our customers and unlock value for shareholders. The challenge of connecting those assets to continue executing on the opportunities they present is what I find appealing about the opportunity for the company going forward.”
