Tabcorp’s David Attenborough has faith in digital redemption

Tabcorp’s chief is backing digital expansion to resuscitate retail stores and protect the company’s market share.

Tabcorp CEO David Attenborough. Picture: Stuart McEvoy.

Tabcorp chief David Attenborough is backing digital expansion to resuscitate retail stores and protect the wagering giant’s market share from online bookmakers, as investments on future growth hit the company’s profit.

Mr Attenborough reported a 28.1 per cent drop in half-year profit to $58.9 million yesterday, with the hit linked to fighting the financial intelligence agency’s legal case against it and Tabcorp’s move on Tatts.

Shares in the company fell 5.2 per cent to a six-month low of $4.50 on the back of the result. CLSA analyst Sacha Krien said the financial report was “messy” and missed his forecasts.

He said Tabcorp had disappointing growth in wagering and higher significant items.

Significant items registered by Tabcorp totalled $43.8m. Almost half went towards civil proceedings, which were launched by the Australian Transaction Reports and Analysis Centre (AUSTRAC). The joint venture with News UK to create Sun Bets incurred costs of $17.9m, while Tabcorp’s move on Tatts had a $9.1m price tag.

Mr Attenborough said the company was progressing the regulatory, industry and other approvals required to finalise the Tatts deal, adding that engagement with the competition watchdog was ongoing. He said it was still targeting completion of the deal by the middle of the year.

A Macquarie-backed consortium has lodged a rival bid but its attempt to torpedo Tabcorp’s offer was rejected by the Tatts board. It has been mooted that the consortium could return with an improved bid for the target or find a wagering partner to strengthen its offer.

Mr Attenborough said he had not been contacted by the rival bidders and maintained that Tabcorp was only interested in buying all of Tatts, which derives most of its revenue from lotteries, not just its wagering arm.

“We are looking to create a diversified gambling business,” he said. “I won’t speculate on how they (consortium) might structure a new proposal … we are really focused on implementing the proposed combination of our businesses and we are well down the track.”

A highlight for Tabcorp was a 13.8 per cent increase in digital turnover. Mr Attenborough said digital was the segment where Tabcorp could best benchmark its performance against its online-only rivals.

“Digital continues to drive wagering turnover growth,” he said.

“We continue to see double-digit growth off a large base. It was pleasing to see our strong performance in the 57 days of the spring racing carnival. It was the strongest growth in active customers the company had seen for some time.”

The company has invested heavily in digital. In 2014 it had a staff of 30 in that segment and now 140 will take over a whole new floor at its Sydney office.

Mr Attenborough said the retail stores were resilient during the ongoing shift to digital.

“TAB agencies are the hub for people who love wagering and racing. They are in an environment where they can enjoy racing and sport without interruption with their mates,” he said.

Mr Attenborough said the company was focused on integrating the digital and retail experience. He said retail would become more popular, particularly as the government pushed through changes to the interactive gambling act. The new laws ban online in-play betting and aim to shut out illegal foreign bookmakers.

“Retail venues under the new legislation will be a place where people will go to bet once a game has started,” he said.

“As customers enjoy that integrated experience, there is no reason why overall turnover, digital and retail combined in venue, shouldn’t increase. The venue gets paid commission on the overall turnover in their venue, so the returns to the venue will go up, which makes them more, not less, viable.”

The company also flagged in its results that its target was to achieve 14 per cent return on invested capital in 2017, excluding the impact of significant items.

“The combined group will have a suite of long-dated licences and an expected strong investment grade balance sheet. This will provide more capacity to invest, innovate and compete in an evolving global marketplace,” Mr Attenborough said

The Tabcorp board approved an interim dividend of 12.5c a share, fully franked, to be paid on March 15.