For the first half of the operator’s financial year, revenue was up 2.2% year-on-year to AU$2.93bn (£1.55bn/€1.86bn/$2.11bn).
The largest contributor to the group total was the Lotteries and Keno division, comprising The Lott and Keno brands. It saw revenue increase 10.9% to AU$1.78bn in spite of keno venues being impacted by Covid-19 trading restrictions. While keno revenue was down 9.8% to AU$119.0m, lottery was up 12.7% to AU$1.67bn across retail and digital channels.
A highly visible retail network – comprising newsagents, petrol stations, kiosks and pharmacies – helped turnover grow 5%, while digital’s share of lottery turnover was up from 32.1% in the prior year to 36.7%.
Game development helped keep jackpot games and Saturday Lotto turnover growing. However, other titles, such as scratchcards, Set for Life and the Monday and Wednesday Lotto draws, were down compared to a particularly strong performance over the six months to 31 December 2020. By the end of the reporting period, the operator had grown its active customers to 3.88 million.
Tabcorp managing director and chief executive David Attenborough said the division’s performance showcased “the broad appeal of the business’ much-loved products and brands, and the success of its omnichannel strategy”.
The operator announced in July last year that it was to spin off the Lotteries and Keno division into a separate listed entity, with this process on track to be completed by June 2022.
The first court hearing and a scheme booklet are due to be issued by April at the latest, followed by a demerger scheme meeting and second court hearing in May. Should these all go to plan, the demerger, which will create The Lottery Corporation, is expected in June.
This decision followed months of speculation that Tabcorp’s Wagering and Media division was to be divested, with the likes of Apollo Global, BetMakers and Entain putting forward bids. Instead, this will remain part of the core business.
For the first half, Wagering and Media revenue was down 9.8% from the prior year to AU$1.07bn, due to its retail outlets being shuttered in its largest state market, New South Wales. This division comprises the Tab, broadcaster Sky Racing, the channel’s B2B arm Sky Racing World and totalisator operator Premier Gateway International.
In the state’s metropolitan areas, retail properties lost 102 days of trading, compared to 13 in the prior year. Its regional locations were closed for 74 days, having lost no trading days in H1 2021.
Retail turnover for Wagering and Media was down 36% as a result. While the ability to make digital transactions and account deposits in retail outlets is a key driver of the online offering, the channel’s turnover was actually up 2% year-on-year. However with more competition for digital customers, margins were reduced by bonusing, advertising and promotions.
“While the Wagering and Media business was significantly impacted by the retail lockdowns imposed in [New South Wales] and Victoria, its performance across all channels improved once restrictions were lifted,” Attenborough commented.
“The Wagering and Media business, and its digital performance, is much stronger when venues are open and customers can participate fully in the omnichannel experience, which is a key strategic point of difference.”
The smallest contributor to group revenue was the gaming services division, which provides machines and support services to clubs across Australia, though it saw revenue climb 6.8% to AU$78.0m.
This was down to properties in Victoria losing fewer trading days, and a relatively small exposure to Covid-19 closures in New South Wales.
However, revenue was impacted by Tabcorp reducing fees to customers, to help them cope with Covid-19. It did not begin charging full fees for machines until 1 December 2021. Looking ahead, Tabcorp plans to reshape and resize its supplier brand Max Venue Services, with around half of electronic gaming machine contracts to continue on a full-service model, and a third of contracts to end at term.
Tabcorp’s variable contribution – revenue minus the variable costs associated with production and sales – came to AU$942m, down 0.9% year-on-year.
After operating expenses of AU$413m, its earnings before interest, tax, depreciation and amortisation (EBITDA) was down 5.5% at AU$529m. This came almost entirely from Lotteries and Keno, which accounted for AU$358m of the total, up 15.1%, to mitigate declines from Wagering and Media, and Gaming Services.
Depreciation and amortisation expenses reduced its earnings before interest and tax to AU$333m, and interest and tax expenses resulted in a net profit before significant items of AU$187m, down 12.7%.
The business then incurred charges of AU$12m related to the Lottery and Keno demerger, for a statutory net profit of AU$175m, a 5.4% decline from the prior year.
Looking ahead, Attenborough said the business’ priority for the second half of its 2022 fiscal year, ending 30 June, was to complete the demerger of Lottery and Keno, and execute growth initiatives for each of division.
“These include the launch of a new Tab app in 2022, which aims to position [the brand] as the first choice for digital wagering play,” he explained. “We will also introduce a change to the Oz Lotto that is expected to create larger and more frequent jackpots in line with its promise to deliver ‘Big Aussie Fun’.”
The demerger, he added, was on track and would allow shareholders to benefit from the increased scale and diversification of the two entities.
“We are enthusiastic about this opportunity to create two significant, cash generative businesses with existing futures.”
Original article: https://igamingbusiness.com/strong-lottery-showing-helps-tabcorp-revenue-grow-2-2-in-h1/
