Tabcorp boss warns more cost-cutting, staff culling ahead

New Tabcorp boss Gillon McLachlan will embark on a cost-cutting restructuring as the gaming giant came under fire for complacency in the battle against online competitors.

Craig Williams riding Bella Nipotina at TAB Everest race

New Tabcorp boss Gillon McLachlan will embark on a cost-cutting restructuring as the wagering giant comes under fire for having a network of “dinosaur” outlets in pubs and clubs that were failing to attract younger customers from rivals Sportbet and Ladbrokes.

Mr McLachlan told the company’s annual general meeting Wednesday that his job was to further simplify the business to make it a “more cost effective and agile company.”

“I’m focused on making Tabcorp a fitter organisation,” said Mr McLachlan. “That requires a reset of team, culture and cadence around the business. An organisation that can do more with less because we are a simpler and a more focused organisation.”

Tabcorp in August booked a worse-than-expected $1.36bn loss for the year amid continuing belt-tightening by customers and heavy writedowns on wagering assets in NSW and South Australia. While much work had been done in reducing headcount, management layers and outsourcing transactional work, Mr McLachlan foreshadowed more was come. “More can, and will be done,” Mr McLachlan said. “This time next year I’m confident that we will be a simpler, more cost-effective organisation.” Tabcorp shed an initial 130 jobs last year as part of cost-cutting program.

“You will see continued change in this business,” Mr McLachlan told the meeting in Sydney. “The people will change as the plan evolves. I’ve got a laser focus on people, capability and execution. A key focus will be bringing in additional wagering capability and experience at the senior leadership levels. Wagering is the foundation of our company.”

Former Rothschild banker David Kingston, who now heads K Capital, launched a broadside against the board at the meeting for its failure to compete against online competitors. Mr Kingston described Tabcorp’s retail shops and pubs outlets as “dinosaurs” and unappealing to young customers. He said that since the demerger from Lottery Corp two and a half years ago, Tabcorp shares have dropped over 50 per cent.

‘That’s a loss of shareholder value of $1 billion, a lot of money,” said Mr Kingston. ‘We can talk about the industry and the challenges, but in contrast, Sportsbet’s owner, Flutter, has risen 35 per cent in the last year. Unfortunately at the moment, TAB is the black sheep of the wagering family.”

Gillon McLachlan seeking further cost cutting.

The company has faced increasing competition from major international bookmakers such as Ladbrokes and Sportsbet as customers placed more bets online

The TAB Everest being run in Sydney last week.

Tabcorp, which has a substantial network of betting shops, pays double the wagering fees and taxes of bookies like Sportsbet and Ladbrokes that are only licenced in the Northern Territory and only pay a point of consumption tax on a state-by-state basis.

Mr Kingston said Tabcorp needed to refresh its brand to make it more appealing to young people. “My biggest concern is that TAB’s digital share is in the low 20s (per cent), massively under Sportsbet and way under the target that TAB put forward of 30 per cent,” he said.

“The entire board should be looking at whether retail assets are a dinosaur, given their costs and the ongoing digital growth.

“We all know a lot of people go into pubs and there might be a pub TAB, but they don’t bet on TAB, they’ll bet on Sportsbet or one of the competitors.”

Tabcorp said its national network of outlets in pubs and clubs would serve it well despite softer wagering conditions and an impending crackdown on sports betting advertising

Mr McLachlan said the market would be informed about the new structure in the coming weeks but stressed “reducing costs and ensuring the right operating model is a top priority”.

“I am working with the team on a detailed review of our entire operating cost base as well as our capital spend to identify and execute on further opportunities to reduce our cost base,” Mr McLachlan said. Tabcorp shares rose half a cent to 47c.

Tabcorp avoided last year’s first strike against its remuneration report, with 98.8 per cent waving through planned payments to executives.

Last year, 34.25 per cent of shareholders voted against the adoption of the remuneration report. The revolt last year by shareholders was led by the Australian Shareholders Association, which had encouraged a no vote, saying that Tabcorp’s remuneration framework had not reflected the reduction in size and complexity of the company after the demerger with The Lottery Corporation.

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Originally published as Tabcorp boss warns more cost-cutting, staff culling ahead