Tabcorp Reports Q1 Revenue Decline Despite Digital Wagering Growth

Tabcorp, a prominent player in the gaming and wagering industry, recently released its trading update for the first quarter, covering the three months leading up to September 30. The report reveals a concerning trend in revenue, particularly in its wagering and media as well as gaming services segments.

Wagering and media revenue experienced a 5.4% drop, primarily due to lower fixed odds yields caused by unfavorable racing and sports outcomes. Fixed-odds yields stood at 14.8% in contrast to last year's 15.0% and a three-year average of 15.6%.

Although digital wagering turnover defied market challenges by increasing 1.0%, overall wagering turnover saw a 0.9% decline. Additionally, gaming services revenue fell by a significant 12.9% compared to the previous year, primarily due to the sale of eBet in February 2023.

In a more positive note, Tabcorp is close to finalizing the sale of its Max Performance Solutions business, as terms were agreed upon with an undisclosed buyer in August. The deal is expected to conclude by the end of the first half.

Tabcorp's CEO, Adam Rytenskild, highlighted the growth in digital turnover as a significant achievement, attributing it to the TAB25 strategy's ongoing impact, aiming for a 30% digital revenue market share by 2025.

Despite some challenges, Rytenskild remains confident in the company's transformation, emphasizing their commitment to long-term success amidst industry changes and cost reductions.

While the Q1 wasn't without its hurdles, Tabcorp faced substantial penalties in Australia. Notably, a record fine of AU$1.0m was imposed in Victoria due to Tabcorp's conduct during the 2020 Spring Racing Carnival when its Wagering and Betting System (WBS) experienced downtime. The Victorian Gambling and Casino Control Commission criticized Tabcorp for its inadequate information disclosure and non-compliance with directions.

Furthermore, Tabcorp incurred a $15,000 fine for violating advertising and promotion rules in New South Wales by enticing gambling participation through website promotions.

In August, Tabcorp's CFO, Daniel Renshaw, stepped down due to personal reasons. Damien Johnston has temporarily assumed the role while the company searches for a permanent replacement.

On a more positive note, Tabcorp received a refund of $83.0m after resolving a tax dispute with the Australian Taxation Office (ATO). This related to income tax treatment of payments for various licenses and authorities. Tabcorp has since paid the disputed amount of tax liabilities and interest in full, with the refunded sum representing 20% of the disputed tax liabilities and interest. As part of the settlement, Tabcorp will pay approximately $37.0m to The Lottery Corporation Limited (TLC), resulting in a benefit of approximately $45.0m after tax from the ATO settlement, which will be reflected in financial statements for the year ending June 30, 2024.