Tabcorp market share half of Sportsbet, may borrow to pay dividend

The wagering group said its new app will help win customers off its corporate bookmaker rivals. Its borrowings are low but it may need more money to pay dividends and other expenses.

Tabcorp’s “hero metric”, its 25 per cent market share of digital bets it takes from Australian punters, is about half that of its biggest competitor Sportsbet – a situation management says it is “totally obsessed” with changing.

But Tabcorp will also need to dip into borrowings to pay its dividend, demerger costs from spinning out its lottery business earlier this year, and a $150m settlement with Racing Queensland.

The wagering giant, which owns the TAB brand in states and territories outside of Western Australia, reported a 4 per cent fall in revenue for 2022 to $2.4bn and a 21.7 per cent decline in EBITDA from continuing operations before significant items of $381.6m.

While it stressed it had a “strong” balance sheet with net debt of $20m excluding lease liabilities and had $950m in committed bank facilities, Tabcorp said “we note several upcoming payments (such as the final dividend, remaining demerger costs, Queensland litigation settlement and final licence instalment payments) will impact the drawn debt level.”

Chief executive Adam Rytenskild said he was comfortable with Tabcorp using part of its facilities to pay for $55m in demerger costs, the $150m to Racing Queensland, a $37.5m wagering licence instalment and the dividend.

“That is what it is there for [and] it is why the facility was put in place before the demerger,” Mr Rytenskild told The Australian.

Tabcorp is also bidding for the WA state wagering licence and has put in a non-binding offer for the new Victorian licence that Mr Rytenskild said would leave the company better off if it won in full, in part or missed out altogether in comparison to its current deal.

A winning WA bid could cost Tabcorp $1bn but management said debt markets could be an option to pay for any future details.

Tabcorp will pay a fully franked final dividend of 6.5c per share on September 23, taking its full year payout to 13c, lower than last year’s total 14.5c payout.

The company said it would sell the non-core eBet gaming services business, which generated EBITDA (earnings before interest, tax, depreciation and amortisation) of $4.4m in 2022, but stressed its major focus would be on winning digital betting share via a refreshed app.

Mr Rytenskild said he and management had made “an urgent start to transform Tabcorp into a competitive and growing business” since it had spun out its lotteries division in May to stand alone as a mostly betting-focused company.

That means, he said, competing more with the digital only foreign-owned corporate bookmakers such as Sportsbet, Bet 365, Ladbrokes and Neds.

Tabcorp said on Wednesday that it had 24.9 per cent of the market for digital betting revenue in Australia, though that figure rises to about 28 per cent if WA – where Tabcorp can’t promote its TAB brand given the name is used by the state government – is excluded.

Sportsbet’s parent company Flutter Entertainment, listed in London, has previously claimed a market share of about 50 per cent in Australia.

“The hero metric for everyone in the company is digital revenue market share, without exception,” Mr Rytenskild said. “I’m determined for us to be different and to be totally obsessed with creating products and experiences that Australia loves.”

Sportsbet, the biggest online wagering operator in Australia, recently revealed it had about 993,000 average monthly customers. Tabcorp said on Wednesday it had about 783,000 active digital customers, measured on a rolling 12-month basis.

Mr Rytenskild said Tabcorp had aggressive growth plans to try to take market share, and three and year targets. We are a betting company, we are a gambling company, we need to be clear about that and provide fantastic experiences for customers in a safe way.”

Flutter recently said Sportsbet contributed about $170m in adjusted EBITDA for the six months to June 30. Tabcorp’s media and wagering division, which includes lucrative profits that flow from the Sky Racing broadcast business and international broadcast deals, had a $306m EBITDA for the full year.

Tabcorp said its wagering and media revenue grew 11.2 per cent in July compared to the same month in 2021, though noted that last year’s figure has been hit by retail outlet closures due to Covid.

The company’s new app will launch in September, ahead of the most important events in the spring racing carnival, and Tabcorp said early feedback from about 1700 users trialling the product had been positive.

“I can’t wait to rollout our new TAB App. We’re gearing up for an exciting spring and to follow that with a terrific customer experience for the FIFA World Cup [in November],” Mr Rytenskild said.

“There will be no more excuses, no more being slow to get new product into the market. We are here to grow.”

Tabcorp shares closed up 4c, or 4.4 per cent, at 96c.