Tabcorp boss warns more cost-cutting, staff culling ahead

New Tabcorp boss Gillon McLachlan will embark on a cost-cutting restructuring as the gaming giant came under fire for complacency in the battle against online competitors.

Craig Williams riding Bella Nipotina at TAB Everest race

New Tabcorp boss Gillon McLachlan will embark on a cost-cutting restructuring as the gaming giant came under fire for having a network of “dinosaur” outlets in pubs and clubs that were failing to attract younger customers from online competitors.

Mr McLachlan told the company’s annual general meeting this morning that his job was to further simplify the business to make it a “more cost effective, agile company and unlock the opportunities within the asset base”.

“You will see continued change in this business,” Mr McLachlan told the meeting in Sydney. “The people will change as the plan evolves. I’ve got a laser focus on people, capability and execution. A key focus will be bringing in additional wagering capability and experience at the senior leadership levels. Wagering is the foundation of our company.”

Former Rothschild banker David Kingston, who now heads K Capital, launched a broadside against the board at the meeting for its failure to compete against online competitors such as Sportsbet and Ladbrokes. Mr Kingston described Tabcorp’s retail shops and pubs outlets as “dinosaurs” and unappealing to young customers.

Mr McLachlan said the market would be informed about the new structure in the coming weeks but stressed “reducing costs and ensuring the right operating model is a top priority”.

“I am working with the team on a detailed review of our entire operating cost base as well as our capital spend to identify and execute on further opportunities to reduce our cost base,” Mr McLachlan said. The shares dropped 1.1 per cent to 46 cents in morning trade.

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

Gillon McLachlan seeking further cost cutting.

“I’m focused on making Tabcorp a fitter organisation. That requires a reset of team, culture and cadence around the business. An organisation that can do more with less because we are simpler and a more focused organisation.”

K Capital’s Mr Kingston that since the demerger from Lottery Corp two and a half years ago, Tabcorp shares have dropped over 50 per cent.

‘That’s a loss of shareholders value of $1 billion, a lot of money,” said Mr Kingston. ‘We can talk about the industry and the challenges, but in contrast, Sportsbet’s owner, Flutter, has risen 35 per cent in the last year,” said Mr Kingston. “Unfortunately at the moment TAB is the black sheep of the wagering family.’

Mr Kingston said Tabcorp needed to refresh its brand to make it more appealing to young people, describing its retail network and pub outlets as “dinosaurs.”

“My biggest concern is that TAB’s digital share is in the low 20s (per cent), massively under Sportsbet and way under the target that TAB put forward of 30 per cent,” he said.

“The entire board should be looking at whether retail assets are a dinosaur, given their costs and the ongoing digital growth.

“We all know a lot of people go into pubs and there might be a pub TAB, but they don’t bet on TAB, they’ll bet on Sportsbet or one of the competitors.”

The TAB Everest being run in Sydney last week.

The company 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.

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

Mr McLachan said much work had been done in reducing headcount, management layers and outsourcing transactional work.

“But I am clear, more can and will be done,” he said, “This time next year I’m confident that we will be a simpler, more cost-effective organisation.” Tabcorp shed an initial 130 jobs last year as part of cost-cutting program.

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Originally published as Tabcorp boss warns more cost-cutting, staff culling ahead