Tabcorp share price rocketing on strong post-COVID rebound results

Tabcorp's demerger from The Lottery Corporation was said to be "seamless" with the separation process remaining on track.

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Key points

  • The Tabcorp share price is up 5% on Tuesday morning
  • The ASX 200 gambling company reported an 11% lift in half-year revenues
  • Tabcorp has enjoyed a strong rebound from its COVID impacted earnings in 1H FY22

The Tabcorp Holdings Ltd (ASX: TAH) share price is up 4.5% on Tuesday morning.

Shares in the S&P/ASX 200 Index (ASX: XJO) gambling company closed yesterday trading for $1. Shares are currently changing hands for $1.05.

This comes following the release of Tabcorp's half-year results for the six months ending 31 December (1H FY23).

Here are the highlights.

Tabcorp share price soars on revenue and earnings lift

  • Revenue of $1.28 billion, up 11% from the $1.15 billion reported in 1H FY22
  • Earnings before interest, taxes, depreciation and amortisation (EBITDA) of $197 million, up 24% compared to the 1H FY22 pro forma EBITDA
  • Statutory net profit after tax (NPAT) of $52 million
  • Operating expenses (OPEX) increased 4% year on year to $323 million
  • Fully franked interim dividend of 1.3 cents per share declared, down from 6.5 cents per share in 1H FY22

What else happened during the half year?

Tabcorp credited the 24% increase in half-year EBITDA – a figure that looks to be boosting the share price this morning – to 58% growth in its cash wagering revenue. This followed on a strong rebound from the COVID-impacted earnings in 1H FY22 when restrictions on public gatherings remained in place.

The company noted its dividend payout ratio reflects 61% of NPAT before significant items and equity accounted loss.

The demerger from The Lottery Corporation was reported as "seamless" with the separation process remaining on track.

The half-year also saw the ASX 200 gambling company launch its new TAB App, alongside acquiring a 20% stake in online racing and sports bookmaker Dabble.

And Tabcorp improved its funding position, raising $425 million equivalent in debt from the US Private Placement market.

What did management say?

Commenting on the results sending the Tabcorp share price soaring today, CEO Adam Rytenskild said:

Today's results highlight that our transformation strategy, which commenced on 1 June 2022, is working… The COVID lockdowns presented an opportunity for digital only operators, but our retail customers have quickly returned, and our digital transformation is amplifying that opportunity.

I'm particularly pleased that, with new entrants entering the market and retail venues reopening, TAB held digital revenue market share for the first time since 2019. To retain our market share, while a new entrant took share from competitors and retail reopened, highlights that customers are loving the new TAB App.

What's next?

Looking ahead to what might impact the Tabcorp share price down the road, Rytenskild said the company is targeting 30% digital revenue market share by FY25, up from 25% currently.

The company is also aiming to cut its operating costs to between $600 million and $620 million in FY25.

As for the full 2023 financial year, Tabcorp upgraded its OPEX guidance to 2% to 3% growth on FY22 pro forma OPEX, from the prior 3% to 4% growth.

Its FY23 Capex guidance of $150 million and depreciation & amortisation guidance of $250 million to $260 million remained unchanged.

Tabcorp share price snapshot

As you can see in the chart below, the Tabcorp share price is now well into the green over the past 12 months, up just over 7%.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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