Australian operator Tabcorp has set a target of achieving 30% digital revenue market share by its 2025 financial year as part of a long-term growth plan that also includes a reduction in operating expenses.
Tabcorp experienced a significant uptake in its digital offering during the pandemic when many of its land-based venues were forced to close or were forced to operate under strict measures to help prevent the spread of the virus.
Since returning to normal operation, many players have continued to gamble with Tabcorp’s digital services, and despite digital revenue within its wagering and media business having fallen year-on-year in the first half of FY23, the operator said digital has a bright future.
During the six-month period, digital market share reached 25.1%, representing the first time market share held, while the launch of its new app helped increased active digital customers by 8.3%.
“Today we release TAB25 – our target for Tabcorp by FY25,” Tabcorp chief executive and managing director Adam Rytenskild said. “I’m excited to announce that we are targeting 30% digital revenue market share by FY25.
“We’ll do this with a transformation of our entire wagering ecosystem, including new products for punters, a reinvigoration of Sky Racing that will include a greater integration with TAB and the implementation of our new marketing strategy.
“The successful launch of the new TAB App, which helped us retain digital market share despite the introduction of a new competitor, has provided a strong launch pad to reach our 30% target.
“We’re also targeting a reduction in our operating costs to $600m-$620m in FY25 as we fast track our Genesis transformation program. Now that our demerger has been successfully implemented we are in a position to create a new operating model that is simpler, more agile and delivers faster for customers.
“The cost discipline will also deliver stronger results for shareholders.”
Looking at the first-half results in full, revenue increased 10.6% year-on-year to AU$1.15bn (£660.1m/€743.3m/US$792.7m) in the six months to 31 December 2022.
Wagering and media revenue amounted to $1.17bn, up 8.6% on the previous year. Digital revenue fell from $579.0m to $493.0m, but land-based revenue jumped from $276.6m to $437.4m following the return to normal retail operations.
However, despite the digital decline, and the drop in turnover from $5.26bn to $4.92bn, Tabcorp noted an increase in active users from 780,000 to 797,000, which demonstrated a lasting demand for digital despite the full reopening of retail.
Turning to gaming services, revenue here was 35.9% higher at $108.8m. This comprised of $57.9m in integrity services revenue, up 31.9% year-on-year, while other venue services revenue also increased 42.6% to $50.9m.
In terms of spending, operating expenses for the six months reached $323.2m, up 4.1% on the previous year. Tabcorp also noted $519.8m in variable contribution and $123.4m in depreciation and amortisation costs.
When also accounting for $14.1m in net finance costs, this left a pre-tax profit of $64.1, compared to a $41.7m loss at the same point last year. Tabcorp paid $12.4m in income tax, leaving a net profit of $51.7m, down 70.4% from $174.5m last year, though the FY22 figures included now-discontinued lottery operations.
In addition, Tabcorp noted that earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations before significant items increased by 23.6% to $196.6m.
“I said in our FY22 results that we had drawn a line in the sand and we have,” Rytenskild said. “We are delivering on our actionable priorities for FY23.
“Our revenue and EBITDA has rebounded from the challenges of COVID, our new TAB App is live and the strength of the product ensured we retained digital revenue market share for the first time in four years.
“This rapid transformation shows our strategic direction is the right one.”
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