Australia’s leading wagering company, TAB, has somehow announced a loss of $1.4 billion for the 2024 financial year. The revelation has left industry experts questioning how a company designed to profit from gambling could fuck things up so spectacularly.
The loss, which includes a $1.38 billion writedown of “assets” in South Australia and New South Wales, has prompted newly appointed CEO Gillon McLachlan to vow an overhaul of the company’s strategy. McLachlan, who recently transitioned — from his role as AFL CEO — expressed confidence in turning around the company’s fortunes despite the massive shortfall.
“We’ve had a challenging year, but I’m optimistic about the future. At least we don’t have to pay tax this year and we’ll have a lot of losses and depreciation to carry forward, too,” McLachlan said in a statement.
“But you know, I’ve only been in the job for 2 weeks so it’s not like it’s my fault, is it? But, we’re currently reviewing all aspects of our operations to ensure this kind of financial outcome doesn’t happen again. How exactly we managed to lose $1.4 billion is something we’re still trying to fully understand. It’s a lot of money, isn’t it?”
Analysts have expressed disbelief over the scale of the loss, noting that the role of a bookmaker is traditionally to take money from customers, not lose it. The writedown of assets in key states, coupled with increased operating costs, has been cited as the primary reason for the company’s poor financial performance.
“It’s almost unimaginable that a bookie could end up in this situation. Their entire business model is built around minimising losses, yet here we are discussing a billion-dollar deficit,” said one shareholder to The Advocate.
“What’s the point of investing in a business that’s not profitable? What am I buy? Good vibes? Certainly not with these bastards.”
McLachlan acknowledged the challenges posed by increased regulation and the ongoing cost-of-living crisis but remained hopeful.
“Yes, the numbers are significant, but I’m confident we can recover. After all, if we’ve learned anything, it’s that nothing is impossible—not even a bookmaker losing money.”
More to come.
Tabcorp’s CEO Overhauls Strategy After $1.36 Billion Loss
The bottom line of the ASX-listed wagering behemoth was hit by increased operating costs and a $1.38 billion write-down of the company’s South Australian and NSW assets, its second over the 12 months to June 30. Tabcorp had already booked a $732 million impairment in February, but said the business kept suffering from poor trading due to the cost-of-living crisis and increased regulation, coupled with higher costs.
Revenue fell 3.9 per cent to $2.39 billion in the period, while operating earnings slid almost 20 per cent to $318 million, the company said in a statement to the ASX on Wednesday morning. Tabcorp’s share price slumped more than 11 per cent to 50¢ in late-morning trade.
The former AFL boss started his tenure at Tabcorp this month, and has discarded its three-year strategy known as “TAB25”, saying it was unrealistic. The group had been targeting a 30 per cent share of the digital wagering market and aimed to reduce its operating costs to $600 million.
McLachlan told analysts he was not yet ready to commit to new targets or unveil a new strategy as he was only 18 days into leading the group, but that it was clear TAB25’s strategy was underpinned by incorrect assumptions. He said it was important to be realistic about the company’s prospects.
“We’re seeing persistent inflation and inflated costs of regulation, which is sticky in our cost base,” he said. “The underlying assumptions of the [TAB25] strategy have been proven not to be correct,” he said.
“Today’s results demonstrate a competitive performance in the soft market conditions we face. [...] There’s no doubt the business is more competitive than it was at the [2022 demerger from The Lottery Corporation], but it’s not where it ultimately needs to be. It will require change, but the goal remains unchanged.”
McLachlan warned it was unlikely the challenges befalling the major players in the wagering industry would shift any time soon, so investors should not expect high returns from this December half.
“In the near term, we expect the macroeconomic environment to remain challenging. Given expectation of the interest rates remaining elevated and the high inflation levels that persist, the regulatory environment will also continue to tighten,” he said.
The company will pay a final dividend of 0.3¢ per share, taking its payout to shareholders for the year to 1.3¢ per share, down 43.5 per cent from last year’s return.
Tabcorp’s Future Uncertain Amidst Industry Challenges
Analysts have weighed in on the company’s performance and its outlook. Taylor Collison analyst Andrew Orbach said the wagering market wasn’t playing out as expected, with big operators such as Tabcorp and Sportsbet underperforming, while smaller firms such as PointsBet have gained market share.
“Tabcorp needs a second brand. The TAB brand will not resonate with 20-something-year-old sports punters. Ever,” Orbach said in a note to his clients.
“It’s unlikely Tabcorp can turn this around organically in any period of time,” he continued, arguing the group needs to consider acquiring another business over the next six to 12 months.
“[They] need it for brand, team, tech and scale reasons. Seems obvious,” Orbach said.
Barrenjoey analyst Matt Ryan said it was a mixed result. “On the positive side, wagering performance looks better than expected, while cost growth appears higher than expected,” he told clients. Barrenjoey has a 78¢ price target on Tabcorp.
The TAB's Big Loss: What Went Wrong?
Tabcorp’s financial results for the 2024 fiscal year have been far from rosy. The company reported a significant loss, primarily driven by a substantial write-down of its assets in South Australia and New South Wales. This write-down reflects the challenging market conditions that the wagering industry is facing, including increased regulation, the cost-of-living crisis, and rising operating costs. Tabcorp’s new CEO, Gillon McLachlan, has acknowledged these challenges and is committed to overhauling the company’s strategy to navigate the difficult landscape.
The company's performance has been disappointing, particularly given the traditional role of bookmakers. It remains to be seen if McLachlan's new strategy will be enough to turn things around. The wagering industry is facing significant headwinds, and Tabcorp's future success will depend on its ability to adapt and innovate. The company's investors will be watching closely to see what steps McLachlan takes to address these challenges and return the business to profitability.
