Tabcorp hit by Covid lockdown and heavy punter competition

The wagering giant’s chairman also hit out at its competitors, who he claimed are unfairly paying less tax.

Tabcorp is racing towards a demerger of its lotteries division. Picture: Grant Guy

Heavy competition for betting customers and the closure of retail venues during lockdown has hit Tabcorp’s wagering division.

In an update coinciding with Tabcorp’s virtual annual general meeting on Tuesday morning, the company said group revenue for the three months to September 30 was down 7.3 per cent compared with the same period last year.

Tabcorp chief executive David Attenborough Covid-19 restrictions “had a significant impact in the quarter” as did the competition among betting companies to win new customers during the spring racing carnival and football finals.

“There was a significant increase in wagering generosities and advertising in a highly competitive and largely digital market. The increased generosity spend also had a negative impact on variable contribution margin,” Mr Attenborough said.

Revenue in Tabcorp’s wagering and media division was down 17.2 per cent, though lotteries revenue was up 1.4 per cent in the quarter due to growth in Powerball and Saturday Lotto.

Mr Attenborough said he was hopeful wagering levels would pick up quickly when Tabcorp’s betting outlets and pubs and clubs were opened as NSW and Victoria emerges from months-long lockdowns.

“We’ve previously observed that demand for entertainment has been strong when lockdown restrictions have been lifted and we know our customers value the social connection.”

Revenue in Tabcorps gaming services division was down 14.6 per cent compared with the same period last year.

“Venue closures continued to adversely impact revenues and the business continued to provide fee relief to closed venues,” Mr Attenborough said. “Gaming Services had significant operating expense growth given Covid-19 cost mitigations.”

Tabcorp CEO David Attenborough. Picture: Britta Campion

Tabcorp remains on track to demerge its lotteries division by June 2022, with the first court hearing and scheme booklet for the $10bn transaction scheduled for April.

It said the demerger was expected to cost between $225m and $275m, the majority of which relate to technology separation spending.

Investors have long called for Tabcorp to split the strongly performing lotteries business from its struggling wagering division, which it finally announced its intention to do in July after rejecting several takeover bids for the wagering arm.

Meanwhile, Tabcorp chairman Steven Gregg hit out at his company’s corporate bookmaker competitors.

Tabcorp’s rivals, such as Sportsbet and Bet365, are owned by overseas companies and have their Australian operations domiciled in the Northern Territory and generally pay less tax than Tabcorp.

They are also more digital-savvy and have won big market share in recent years as consumers switch to betting online, a trend that accelerated with retail closures during Covid-19 lockdowns.

“It is unsustainable for our wagering business to return 40 per cent of its revenues to the racing industry while online bookmakers return roughly half of that and are subject to far less regulation,” Mr Gregg said in his speech for the Tabcorp AGM.

“The current regime benefits these online bookmakers, who channel their margin advantage into further advertising and aggressive customer acquisition. We need regulatory reform in the wagering market and a more equitable racing industry funding and taxation model where all operators have a level playing field.”

The corporate bookmakers hit back via their industry group Responsible Wagering Australia, arguing Tabcorp’s exclusive retail betting contracts with various state governments and sponsorship deals with racing clubs gave it a competitive edge it was failing to take advantage of.

“Tabcorp doesn’t want a level playing field. It wants to keep the monopoly rights it has negotiated across Australia, but doesn’t want to pay for them,” RWA spokesman James Duncan said.

Sportsbet, owned by the London-listed Flutter Entertainment, now estimates it has more than 40 per cent of the sports wagering market in Australia. It also spent about $140m on marketing in 2020, according to a recent presentation.

Tabcorp shares fell about 2.7% to $5.09 on Tuesday. They are up about 28 per cent since January 1.