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Australia – Tabcorp looking to grow its digital division

By - 17 August 2015

Having seen its profit surge 14 per cent last year, Australian operator Tabcorp signalled expansion in its digital division as the key to continuing its growth.

Tabcorp beat forecasts of $170n in its full-year result with its annual net profit increasing 14 per cent to $171.3mfrom $149.4m due to its performance in fixed odds and digital wagering.

Managing Director and Chief Executive Officer, David Attenborough said the firm would add100 employees in the next year, primarily in the digital division.

“We’re backing ourselves to grow,” Mr Attenborough said. “We plan to employ 100 additional full-time staff in 2016 with almost all of these in customer experience and in digital roles. All industries who have retail customers are facing the digitalisation of the way customers want to interact with them and we have to keep pace. Tabcorp’s 2015 financial performance demonstrates the progress we have made in the delivery of our multi-channel distribution strategy and our focus on customers, products and brands. Wagering and Media achieved strong revenue and EBITDA growth in FY15, with customers responding to our integrated retail and digital offer. This business continues to lead the market on the back of our product and channel innovations.”

Wagering and Media revenues were $1,856.9m, up 6.9 per cent. On a total business basis, including the Victorian Racing Industry’s 50 per cent share of the Victorian Joint Venture, Wagering and Media revenues were up 6.2 per cent.

The largest drivers of Tabcorp’s Wagering growth in recent years, Fixed Odds and Digital Wagering, were again the strongest contributors in FY15. The strong performance was supported by a focus on the customer experience and successful execution of majorevents such as the Spring Racing Carnival, The Championships and Soccer World Cup.

TAB Racing revenues were $1,666.3m, up 5.1 per cent. This comprised $1,236.7m in totalisator revenues, down 2.1 per cent, and fixed odds revenues of $429.6m, up 33 per cent. TAB Sports revenues were $219.2m, up 16.2 per cent. TAB’s Fixed Odds Cash-Out product was successfully introduced into the market across all channels, an example of ongoing product innovation.

Wagering turnover in Tabcorp’s NSW, Victoria and ACT retail channel grew 0.3 per cent to $6,601m. Digital channels continued to drive Wagering growth, with turnover of $3,416.8m, up 17.8 per cent. The use of mobile devices now accounts for 63 per cent of all digital turnover. The integration of the digital and retail channels is progressing with Tabcorp’s Future Retail pilot sites going live this half.

Gaming revenues were $99.6m, up 1.5 per cent. Operating expenses were flat at $31.2m while EBITDA was $67.6m, up 0.9 per cent.

TGS has made good progress by signing new venues in the NSW market as well as inn Victoria where it is well established. TGS has added Club Cats Geelong, Maitland Leagues Club, Illawarra Steelers Club and Bankstown Trotting Recreational Club to its portfolio of venues and now has 9,300 gaming machines under contract.

TGS has also extended a number of contracts across the Victorian network, with 84 per cent of the base now contracted through to 2022. The business is well placed to continue delivering additional venue sign-ups and sustainable, long-term performance. During FY16 TGS will expand its resources and capability to support its growth. The additional opex associated with these initiatives is expected to be $5mper year from FY16.

“The Tabcorp Gaming Solutions business has been enhanced by extending a number of contracts and signing new venues in NSW and Victoria. TGS is providing value to licensed venues and becoming a more sustainable business for Tabcorp shareholders,” Mr. Attenborough explained.

Total Keno network turnover was up 2.7 per cent, reflecting improved customer activity in NSW and Victoria, offset by a softer Queensland market. Keno revenues were $199m, down 2.4 per cent, impacted by jackpot activity. Operating expenses were $44m, up 6.8 per cent reflecting investments in capability, the Keno brand and product transformation. EBITDA was $66.4m, down eight per cent
The new Keno experience has been well received by customers in Victoria and NSW, where it has been launched. The linking of jackpots between NSW and Victoria has commenced, with Queensland planned to follow, subject to regulatory approvals.

Mr. Attenborough said: “Keno is undergoing a brand and product transformation, which commenced in June. Initial results have been pleasing and we are well placed to continue to benefit from investments we are making in the network.

“Our businesses generated more than $1.2bn in gambling taxes and racing industry funding in FY15, highlighting the value that Tabcorp’s operations provide to stakeholders,” Mr Attenborough added.

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