Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tabcorp Holdings Ltd (TABCF, Financial) has improved its app and retail offerings, enhancing customer experience.
- The company has laid strong foundations for future growth and value creation.
- The Genesis program delivered benefits of $25 million, largely offsetting inflation.
- Cash wagering revenue showed growth, particularly in the second half of the year.
- The company maintains a strong balance sheet with significant liquidity and no debt maturities until 2029.
Negative Points
- EBITDA declined by 19% year-over-year, driven by a 3.9% decline in Group revenue.
- Group OpEx increased by 6.3%, surpassing prior guidance due to persistent inflation and higher regulatory costs.
- The company will not meet its TAB25 targets and has recognized significant impairments totaling $1.36 billion.
- The wagering market remains soft, with continued declines in turnover and revenue.
- The regulatory environment is tightening, leading to increased compliance costs and potential future challenges.
Q & A Highlights
Q: When you say that the softness from second half '24 is expected to continue in the near term, are you talking about continued declines in the overall market?
A: We've seen turnover negative through the second half, and recent trends are consistent with the first period of FY25. The one thing to note is the uncertainty around whether strong yields will remain or revert.
Q: Could you put a time frame on when we would expect you to come back to the market with your strategy?
A: This is day 18 for me, so I need time to speak to the right people and ensure the plan is considered and sharp. I'll come back to the market when the plan is set and right for shareholders.
Q: Should we still assume that the Genesis program remains in flight, both in terms of spending on transformation and the scale of benefits?
A: We're targeting Genesis benefits of $20 million in FY25. The amount spent on transformation in FY25 will be significantly reduced from FY24 levels.
Q: Keen to get your thoughts on the prospect of wagering ad bans and their impact on your business.
A: We expect advertising to come down, but our unique assets place us well to absorb changes. We are not modifying our outlook based on potential changes and believe a reduction is appropriate.
Q: Can you explain the proforma impact from the Victorian Wagering and Betting license?
A: The $140 million previously given was based on FY23 market conditions. The $115 million for FY24 reflects softer market conditions.
Q: From a customer's perspective, how competitive do you think the Tabcorp product is in this environment?
A: The TAB app has improved significantly and is competitive, but there are opportunities for further product improvement. The competitive landscape is tough, and we need to leverage our strengths.
Q: Can you provide any quantitative flavor on inflation and regulatory cost increases expected in FY25?
A: We won't provide specific guidance, but inflation is in line with CPI, and regulatory costs are more modest than what we've seen previously.
Q: How do you think about the use of capital in terms of taking on more leverage?
A: The target is less than 2.5 times net debt to EBITDA through the cycle, providing flexibility for growth. We don't have specific plans right now but are always reviewing the balance sheet.
Q: Is there any ability to make wholesale changes to the cost base in the near term?
A: The OpEx targets won't be hit due to persistent inflation and increased regulatory costs. We are focused on cost management and will look for further opportunities to right-size the cost base.
Q: Has the BetStop program impacted your retail business?
A: We haven't considered BetStop's impact on retail growth specifically. Our view is that the strong performance in pubs reflects broader market trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
