Tabcorp's wagering profits fall as company chases new punters
Australia's biggest gambling company, Tabcorp, has seen profits from its wagering division slump after its more aggressive pursuit of new punters through advertising drives and bonus bet offers.
Tabcorp on Wednesday told shareholders its underlying profit for the six months to December was $210.6 million – more than twice the profit it made the same time last year, but it still fell short of analyst forecasts, which had been up to $223 million.
Revenue had more than doubled to $2.79 billion, the company said.
But in its wagering and media division, earnings before interest and tax were down 4 per cent to $159.6 million, missing expectations. JPMorgan had forecast $171.5 million.
After years of subdued advertising compared to its online-only bookmaker rivals, ASX-listed Tabcorp has noticeably ramped up marketing efforts since the 2018 football finals and spring racing carnival in a bid to chase new customers.
Chasing market share
The push came as online bookmakers also increased marketing ahead of a wave of new state-based taxes, which came into effect in January and are set to put pressure on their profit margins and restrict their marketing budgets.
"TAB grew customers and turnover in highly competitive market conditions as operators aggressively chased market share in advance of the introduction of further point-of-consumption taxes," Tabcorp said.
"TAB grew its active customer base by 6.7 per cent to 533,000 as it focused on customer acquisition and retention."
The company also explained the lower earnings from wagering with the "underperformance" of the Tatts Group's struggling UBET retail betting shops and online betting brand in several states.
Tabcorp in 2017 sealed a multibillion-dollar merger with Tatts Group, and now runs lotteries, digital betting services and retail betting licences in every state and territory except Western Australia.
The combined company has since begun formally replacing the UBET brand that has operated in Queensland, South Australia, Tasmania and the Northern Territory with the TAB brand.
Tabcorp chief executive David Attenborough said TAB's active customer numbers had grown in a market where there was a "significant increase in customer generosities".
He said UBET would be a different business in the 2021 financial year, and Tabcorp had "commenced its transition to the full TAB offering".
Lotteries and keno the 'standout'
Mr Attenborough described Tabcorp's lotteries and keno as the "standout" in the company's half-year results.
"The strong performance was driven by digital growth and game innovation, including bigger and more frequent Powerball jackpots," he said.
Revenues from lotteries and keno were up 18.1 per cent to $1.4 billion. Digital turnover was up 63.5 per cent, now representing 21.5 per cent of total lotteries turnover, while retail turnover grew 11 per cent.
Also on Wednesday, Tabcorp lifted its target for savings related to the Tatts merger to $95 million, up from $80 million. The company upgraded its expected savings for the 2019 financial year from $50 million to $55 million.
"The integration of Tabcorp and Tatts is delivering, with synergy targets upgraded," Mr Attenborough said. "We are forging a strong and engaged team with a refreshed purpose."
Tabcorp declared an interim dividend of 11¢.