Calls for Tabcorp to embrace digital future as chair and CEO depart

As Tabcorp comes under pressure from upstart online rivals, a major investor says what the company needs to look for in a new CEO.

Paula Dwyer is stepping down as Tabcorp chairman. ‘The time is now right for a new chairman to lead the Tabcorp board into the future,’ she said. Picture: David Geraghty

One of Tabcorp’s biggest shareholders has called for the company’s next chief executive to be technologically savvy as the gaming giant comes under growing pressure from its upstart online wagering rivals.

Tabcorp shocked the market on Thursday when it announced the dual departures of long-serving chief executive David Attenborough and chairman Paula Dwyer.

But prominent Melbourne investor John Wylie, the sixth-largest shareholder of Tabcorp via his Tanarra Capital, said the double exits were no surprise. He paid tribute to both Ms Dwyer and replacement Steven Gregg, while spelling out what he expected from Tabcorp’s new leadership.

“Any CEO needs to be digitally savvy these days, and that is very relevant to Tabcorp — somebody who understands the importance of brands and the digital world,” Mr Wylie said.

The departures of Mr Attenborough and Ms Dwyer, who both joined Tabcorp in 2011 when it demerged its casinos, come after its wagering business has been hit hard by the closure of pubs, clubs and most TAB outlets during the COVID-19 pandemic.

Tabcorp CEO David Attenborough will step down in the first half of next year. Picture: Stuart McEvoy

TAB retail outlets are a vital source of betting for the company, generating about 45 per cent of wagering turnover pre-coronavirus, and where most of its Sky Racing viewers are found. In April it stood down about 700 workers, mostly from the retail outlets, and applied for the federal government’s JobKeeper wage subsidy after showing that its revenues had collapsed by more than 50 per cent.

While customers are still betting on the TAB app, it is understood growth during the pandemic for its digital-only competitors such as Sportsbet, now merged with BetEasy, and ­Ladbrokes, has outstripped Tabcorp’s.

Even before COVID-19, the company’s wagering division was struggling, weighed down by the costs of integrating UBET, which was acquired during its $11bn merger with Tatts in 2017, and what Mr Attenborough branded as the company’s current “uncompetitive” offering.

But Tatts, on the whole, has been a big winner for the company. The lotteries business, which came with the merger, is now Tabcorp’s main revenue driver.

However, Mr Wylie said the company had undervalued its lucrative lotteries division but stopped short of saying it should be spun off, which some investors have been agitating for.

“We think there is more value to be unlocked in the lotteries business, which potentially has been a bit undervalued inside Tabcorp. The lotteries business has performed well during COVID and has shown that ability to keep performing well for about 30 years, despite whatever the economic conditions surrounding it have been.

“So I think the lotteries business still has some growth in it but that doesn’t necessarily mean a demerger. I think they can unlock some value in it internally.”

The completion of integrating the Tatts business was cited as the main reason for the departures of Mr Attenborough and Ms Dwyer.

Mr Wylie praised Ms Dwyer for overseeing the merger.

“Paula should be commended for getting the merger with Tatts across the line, because what would Tabcorp be without that? It would be a wagering business with a small lotteries arm at best.”

Mr Attenborough will step down in the first half of next year, when the Tatts integration is completed. Mr Gregg will succeed Ms Dwyer when she retires from the board at the end of the year.

Mr Wylie wasn’t the only investor to approve the plan. Tabcorp’s shares jumped 4.8 per cent to $3.62 on Thursday, compared with a 0.2 per cent rise across the broader sharemarket.

“We think Stuart Gregg is a good appointment and will approach it from a shareholder value point of view. We’ve come across him before in other spheres and think he will be good,” Mr Wylie said.

While it’s rare for a chief executive and chairman to both step down, is the second time in a little over 12 months that Ms Dwyer has made such a move. She stepped down as chair of Australia’s second-biggest private hospital operator Healthscope in June last year along with chief executive Gordon Ballantyne after overseeing the health group’s $4bn takeover from Brookfield.

“With the integration of Tatts nearing completion, the time is now right for a new chairman to lead the Tabcorp board into the future,” Ms Dwyer said.

Meanwhile Mr Attenborough, who intends to retire completely, said: “Renewing your leadership is what good organisations do and with integration coming to an end, next year is the right time to hand the baton to Tabcorp’s next CEO. We’ve been planning this for some time so that we have a smooth transition. “The board has now commenced a search process to appoint our next CEO.”