For Oz’s Tabcorp Doubling Down, Less is More

Australia’s largest gambling company, Tabcorp, has doubled down on the mantra that “Less is More” by announcing the proposed demerger of its lottery and keno businesses from its other extensive gaming operations.

The move comes despite the Ozzie giant returning to a net profit after tax of AUD$269 million (£146.25m/US$202.1m/€173.55m)–on revenue of AUD$5.68 billion (£3.08bn/US$4.27bn/€3.66bn) for its 2020-21 financial year, ending June 30—after recording a massive AUD$870 million loss (£473m/US$653.5m/€561.3m) over the previous pandemic-hammered 12 months.

Perhaps, like his better-known naturalist namesake, Tabcorp’s CEO David Attenborough has seen the light and realises that the juggernaut has to radically alter its footprint in the age of change if it is to survive and indeed prosper.

Back To The Future

This is not the first time that Tabcorp has pulled a rabbit out of its top hat.

In 2011 it demerged its land casino operations into the Echo Entertainment Group, AKA The Star Entertainment Group, which runs gambling palaces in Sydney and Australia’s fabled Gold Coast, most notably.

The cost of this latest division of the spoils–let’s not call it a divorce—into two separate entities of proposed long term growth–Lotteries & KenoCo and Wagering & GamingCo—will be high, like any half-way decent alimony payment, around AUS$250 million (£135.9m/US$187.8m/€161.3m) – more or less one year’s NPAT.

“This decision to set up two market-leading businesses, will deliver a range of operational and strategic benefits,” said Attenborough.

“Lotteries & KenoCo is expected to be a significant business in the lottery category. Its infrastructure-like qualities, low capital intensity, and upside from continuing digital growth make it an attractive business.

“Similarly, Wagering & GamingCo will operate some of Australia’s best-known wagering and gaming brands – TAB, Sky Racing and MAX.

Natural High

“It has a strong platform for organic growth supported by its domestic scale and diversified assets and well established and profitable international businesses,” Attenborough added.

Underlining the optimism, 2020-21 revenue from Tabcorp’s Lotteries and Keno verticals rose 10 per cent, year-on-year, to AUD$3.2 billion (£1.74bn/US$2.4bn/€2.06bn).

“A record profit result,” noted Tabcorp Chair Steven Gregg, “driven by well-executed game changes, effective marketing and continued focus on the customer experience and digital innovation.”

Wagering and Media revenue topped AUD$2.3 billion (£1.25bn/US$1.73bn/€1.48bn). But revenue in the Gaming Services division dropped by 17 per cent to AUD$183 million (£99.5m/US$137.5m/€118m).

Total earnings, before interest, tax, depreciation and amortisation (EBITDA), were AUD$1.1 billion (£598m/US$826.45m/€710m), an increase of 11 per cent over the previous year.

A tidy sum at half, never mind twice, the price.

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