Tabcorp boss Gillon McLachlan sets new agenda amid heavy losses

New Tabcorp boss Gillon McLachlan has ditched aggresssive performance targets set by his predecessor as the former AFL chief executive establishes his own agenda.

Tabcorp says punters are heading back to the pubs.

New Tabcorp boss Gillon McLachlan has ditched aggresssive performance targets set by his predecessor as the former AFL chief executive establishes his own agenda in the battle against competition from online rivals Sportsbet and Entain.

Tabcorp booked a worse-than-expected $1.36bn loss for the year amid continung belt-tightening by customers and heavy writedowns on wagering asssets in NSW and South Australia. 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.

“People are playing locally,” said Mr McLachlan. “It might be a hangover from Covid but I am seeing it my own neighbourhood. There is a return to the community.”

Digital wagering revenue dropped 2.2 per cent, but cash betting edged up 0.4 per cent in a sign customers are returning to hotels in larger numbers following the Covid-19 pandemic

The company reported non-cash impairment charges totalling $1.38bn as punters pulled back on spending. Last year, Tabcorp posted a net profit of $66.5m.

Underlying earnings dropped 19 per cent to $317.7m for the year ended June 30. The company’s shares fell 16.8 per cent to 47 cents as investors digested the result.

In a clear break from his predecessor Adam Rytenskild, Mr McLachlan has dumped targets under a strategy known as TAB25 to increase revenue, cut costs and reach a 30 per cent market share in digital waging revenue in Australia. Mr Rytenskild resigned in March over allegations of offensive and inappropriate language in the workplace.

“It is clear the business will not meet its TAB25 targets,” said Mr McLachlan, adding the company expects inflation and high interest rates to continue to impact its customers’ spending. Combined with a tighter regulatory environment, Tabcorp expects the soft wagering market experienced last year to continue. Revenue fell 3.9 per cent to $2.34bn, primarily reflecting current wagering trading conditions.

Tabcorp CEO Gillon McLachlan.

Mr McLachlan said Tabcorp had the building blocks to create a complete sports entertainment business. “To achieve this, there will be a new cadence at Tabcorp which will ultimately unlock significant value for shareholders,” he said.

“Tabcorp expects the macro-economic environment for customers to remain challenging given expectations around interest rates remaining elevated and the high inflation levels that persist,” said Mr McLachlan. “In addition, the regulatory environment continues to tighten and impact

the wagering market.” Barrenjoey analysts Matt Ryan, Isabel Gray and Matthew Kearney said cash wagering grew by a surprisingly strong 5 per cent year on year in the second half, possibly benefiting from robust gaming revenue trends in pubs.

“There are lots of moving parts, which will take time to get through,” the analysts said in a note to investors. “On the positive side wagering performance looks better than expected, while cost growth appears higher than expected.”

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

Queensland and Victoria have made tax changes where everyone pays the same, with other states currently looking at the same “level playing field.”

“The Australian wagering market is historically resilient and Tabcorp remains confident in its

long-term growth prospects,” Ms McLachlan said. “In addition, Tabcorp’s strong customer proposition and unique portfolio of assets, including the investments made in our digital capabilities, position the company well to compete throughout the economic cycle.”

Tabcorp is banking on its retail network to improve performance.

Mr McLachlan said he welcomed any Federal Government move to restrict sports gambling advertising. He added the evolution of technology and processes to identify problem gamblers faster would not be compromised as the company unlocked additional value.

Last week, Tabcorp was ordered to overhaul its operations and fined $4.6m after it was found to have repeatedly breached Victoria’s gambling code.

The penalty imposed by the Victorian Gambling and Casino Control Commission is the largest one imposed on Tabcorp by the regulator, and comes weeks after Mr McLachlan took over the top job. Tabcorp was found to have repeatedly breached the gambling code of conduct between August 2020 and February 2023, as it failed to adequately train staff in responsible gambling and sent direct marketing materials to a customer who had opted out.

Tabcorp will pay an unfranked final dividend of 0.3c a share on September 20, taking the total for the year to 1.3c. That’s sharply down from 2.3c a share last year.