Tabcorp’s fitness kick and profits boosted by favourable Victorian licence

New boss Gillon McLachlan has talked up the gaming company’s new lean look, thanks in part to cost-cutting and a deal signed by previous management.

Tabcorp boss Gillon McLachlan. Picture: Arsineh Houspian

Wagering giant Tabcorp wants to get “fitter” by cutting costs and undertaking less capital expenditure, a health kick also helped by some favourable new contracts.

Revenue rose 10 per cent to $1.33bn for the six months ending December 31 from a year earlier, with underlying earnings up 12 per cent to $190.2m.

It resulted in a statutory net profit of $25.3m. While that figure is substantially lower than the big foreign-owned rivals like Sportsbet, Tabcorp said its earnings results were the first time it had met analyst consensus since its demerger from Tatts in 2022.

That, and a sharp focus on cost-cutting by new chief executive Gillon McLachlan, seemed to impress the market. Tabcorp’s share price rose almost 10 per cent in early trading on Thursday, before falling back to a rise of about 3 per cent.

Tabcorp attributed its higher revenues – an 11 per cent increase from the same period a year ago – to the terms of its long-held betting licence in Victoria it renewed in December 2023 under previous management.

The Victorian deal, which began last August, helped lead to a $81.2m decrease in costs for Tabcorp’s domestic wagering business, and was the main reason it achieved a 14 per cent increase in digital revenue despite a 8 per cent drop in digital wagering by Tabcorp punters in the six months.

It has about 801,000 active digital users.

Tabcorp boss Gillon McLachlan with star horse trainer Chris Waller during the spring racing carnival in Melbourne. Picture: Michael Klein

Total domestic wagering in the period, the best time of year for betting companies given it includes the lucrative Melbourne Cup carnival and The Everest race in Sydney during the spring, fell 4.3 per cent for Tabcorp to about $7.1bn.

Tabcorp, as per its Victorian licence and others it holds across the country, also has a retail betting monopoly via its TAB outlets and pubs. Again, the new Victorian licence terms helped drive a positive result, with total cash revenue increasing 16 per cent after a cash betting turnover rise of 2.2 per cent.

Overall and including its media and integrity services divisions, Tabcorp had a 12 per cent rise in EBITDA compared to the previous corresponding period, while net profit before significant items of $22.1m was 25 per cent increase.

“Tabcorp is getting fitter. We have increased our wagering and media capability at the leadership level, developed a simpler, more cost-effective operating model, and are operating with a bias for action and increased accountability,” Mr McLachlan, the former CEO of the AFL, said.

He said Tabcorp is targeting operating expenditure savings of $30m for the current financial year, 50 per cent more than previous targets. Total capex is expected to be about $110m-120m, about $25m less than its previous guidance.

Mr McLachlan said the wagering market continues “to remain soft” but noted the company had seen a “modest improvement in recent months.”

He played a straight bat to analyst questions about Tabcorp’s share of the digital wagering market, only revealing he was “pleased” with how his company was competing with bigger corporate bookmakers and that “digital is still a critical part of our business …[but] our strategy will be now to be an omnichannel wagering business measured on revenue and earnings growth” including its retail arm.

But Mr McLachlan also foreshadowed a major “structural change” to Tabcorp’s retail network “that will impact earnings”, without revealing exact details.

He played down suggestions Tabcorp could look to negotiate its Melbourne Cup broadcast and advertising deal or make a play for fast-growing digital gambling business Dabble, in which it holds a 23 per cent shareholding.

“Our focus to the end of this [calendar] year is to get our operating business rolling, and I think after that there is a chance that other corporate opportunities may present themselves,” Mr McLachlan said.

Tabcorp will pay a 1c a share interim dividend to shareholders.

Originally published as Tabcorp’s fitness kick and profits boosted by favourable Victorian licence