Tabcorp Holdings Limited. 2014/15 Full Year Results Presentation 13 August 2015

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Derek Elwin Hensley
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Tabcorp Holdings Limited ABN 66 063 780 709 2014/15 Full Year

1 Tabcorp Holdings Limited ABN /15 Full Year Results Presentation 13 August 2015 Draft version 15 ( )

2 FY15 overview Statutory NPAT $334.5m, up 157.5%, comprising of: NPAT from continuing operations before significant items, $171.3m, up 14.7% Net benefit from significant items after tax of $163.2m Statutory EPS 42.4 cents per share, up 146.5% EPS from continuing operations before significant items, 21.7 cents per share, up 9.6% Full year ordinary dividend 20.0 cents per share, fully franked, up 25.0% Special dividend of 30.0 cents per share, fully franked, paid in March FY16 target dividend payout ratio to increase to 90% of NPAT before amortisation of the Victorian Wagering and Betting Licence EBITDA from continuing operations before significant items $508.1m, up 4.5%, largely driven by strong Wagering & Media performance and continued expense discipline ACTTAB acquisition completed and integration on track for FY16 Agreements in place for NSW and Victorian thoroughbred media rights 2

3 Group Results $m FY15 FY14 Change Revenues 2, , % Variable contribution % Operating expenses (458.6) (433.4) 5.8% EBITDA from continuing operations before significant items % D&A (173.5) (164.4) 5.5% EBIT from continuing operations before significant items % Interest (78.5) (97.2) (19.2%) Tax expense (84.8) (75.1) 12.9% NPAT from continuing operations before significant items % Significant items (after tax) n/a NPAT from discontinued operations - (19.5) 100.0% Statutory NPAT % Significant items (after tax) comprises income tax benefits relating to the Victorian wagering and gaming licences payment and the NSW Trackside payment and associated interest income NPAT from discontinued operations in FY14 comprises the Health Benefit Levy expense Notes: - Earnings before significant items presented to provide the most meaningful presentation of Tabcorp s results - Victorian wagering and gaming licences payment (21 May 2015 ASX release), NSW Trackside payment (24 November 2014 ASX release) and Health Benefit Levy (1 July and 28 July 2014 ASX releases) 3

4 Business results Wagering Change Gaming Change Change Change Keno Group $m & Media on pcp Services on pcp on pcp on pcp Revenues 1, % % (2.4%) 2, % Variable contribution % % (2.6%) % Operating expenses (381.7) 6.8% (31.2) 0.3% (44.0) 6.8% (458.6) 5.8% EBITDA % % 66.4 (8.0%) % D&A (128.6) 10.3% (26.0) (4.8%) (18.9) (7.8%) (173.5) 5.5% EBIT % % 47.5 (8.1%) % Opex / Revenue (%) 20.6% 0.0% 31.3% (0.4%) 22.1% 1.9% 21.3% 0.1% EBIT / Revenue (%) 13.3% (0.2%) 41.8% 1.3% 23.9% (1.5%) 15.5% (0.3%) Capex % % % % ACTTAB (Wagering and Keno) included from 14 October 2014 EBIT loss of $3.0m, with revenue of $20.9m and opex of $14.0m including $5.8m of one-off acquisition and integration costs Note: Business results do not aggregate to Group total due to unallocated items. 4

5 Wagering & Media: KPIs $m 1H15 Revenue by product TAB Racing Change on pcp 2H15 Change on pcp FY15 Change on pcp - Totalisator (2.5%) (1.6%) 1,236.7 (2.1%) - Fixed Odds % % % Total TAB Racing % % 1, % TAB Sports % % % Trackside % % % Luxbet % 26.6 (5.0%) % Media % % % Turnover by distribution Retail 3,438.2 (0.2%) 3, % 6, % Digital 1, % 1, % 3, % Call Centre (12.4%) (4.4%) (8.6%) Other (6.7%) (1.1%) 1,038.5 (4.3%) Luxbet % (3.4%) % Returns to the Racing Industry % % % Total revenue growth (including the Victorian Racing Industry interest) of 6.2% reflecting Investment in multi-channel customer experience Market leading risk management Continued product expansion and innovation ACTTAB acquisition (October 2014) TAB Racing revenues driven by strong Fixed Odds performance TAB Sports revenues assisted by expanded product. Growth rates impacted by Soccer World Cup Media revenue growth driven by increased international vision and co-mingling Notes: - Other turnover includes Oncourse, Premium Customers and PGI - Victorian revenue includes JV partner interest 5

Maintain market leadership in wagering Increased digital integration across retail Future Retail pilot sites live in 1H16 Focus on improved data analytics and customer insights Continued investment

6 Maintain market leadership in wagering Increased digital integration across retail Future Retail pilot sites live in 1H16 Focus on improved data analytics and customer insights Continued investment in digital Smooth transition to new tab.com.au Ongoing growth of mobile (63% of digital turnover) Focus on customer driven design and innovation Expanded product Cash Out launched seamlessly across all channels in April 2015 (100,000 bets cashed out to date, more than 60% on Multi bets) Focus on increased share of wallet and yield maximisation Supported by strong customer engagement focus More effective and targeted CRM use TAB active account customers up 12% in FY15 TAB Rewards members now exceed 300,000 (1H15: 253,000) Enhancement of Sky vision offering and launch of Sky Thoroughbred Central 6

Gaming Services: KPIs $m FY15 FY14 Change Operating revenue 98.4 95.1 3.5% Other revenue 1.2 3.0 (60.0%) Revenues 99.6 98.1 1.5% EBITDA 67.6 67.0 0.

7 Gaming Services: KPIs $m FY15 FY14 Change Operating revenue % Other revenue (60.0%) Revenues % EBITDA % EBIT % Victoria 8,700 EGMs under contract 84% of base now contracted through to 2022 (75% in FY14) First to market in-egm loyalty system operating in 88% of the network NSW 120 EGMs under contract in FY15 Positive momentum on sign ups, with a further 475 EGMs under contract for FY16 Additional venues under negotiation Other revenue reflects lower interest revenue following early customer repayment of loan capital by some customers 7

8 Building a sustainable and growing Gaming Services business Focus on driving venue performance Optimal product offer, including first-to-market games Drive visitation through loyalty programs and data (340,000 members) Capital to improve customer experience in venue Expand resources and capability Resources targeted for customer experience and to support business growth Additional opex investment of approximately $5m per annum to support growth Build on sign-up momentum, recent sign-ups include NSW: Maitland Leagues Club, Illawarra Steelers Club, Bankstown Trotting Recreational Club Victoria: Geelong Football Club 8

Keno: KPIs $m FY15 FY14 Change Revenues 199.0 203.9 (2.4%) EBITDA 66.4 72.2 (8.0%) EBIT 47.5 51.7 (8.1%) Venues 3,612 3,622 (0.

8% Improved customer activity in NSW and Victoria, offset by a softer Queensland market (total network turnover up 2.

9 Keno: KPIs $m FY15 FY14 Change Revenues (2.4%) EBITDA (8.0%) EBIT (8.1%) Venues 3,612 3,622 (0.3%) Ticket Count (m) (0.3%) Avg ticket size ($) % Improved customer activity in NSW and Victoria, offset by a softer Queensland market (total network turnover up 2.7%) Revenue performance NSW up 2.9% Qld down 5.1% Vic up 1.5%, impacted by jackpot activity Opex reflects investment in capability, the Keno brand and product transformation. Further investment planned for FY16 9

10 Transforming the Keno customer experience Brand transformation to broaden appeal and drive participation Marketing campaign launched in Victoria (June), NSW (July) and Queensland imminent Improve product offering Jackpot pooling launched in NSW and Victoria Queensland jackpot pooling to follow (subject to regulatory approval) Investment in digital and customer experiences Initial Keno retail concept venues deployed 10

11 Capital expenditure and investments Capex trend Major capex projects Wagering & Media Digital strategy Technology enhancements Future Retail Gaming Services EGMs NSW expansion Pre-commitment technology FY12 FY13 FY14 FY15 Keno Gaming Services Wagering & Media FY16 expected D&A $180m - $185m FY16 capex up to $160m, including growth capex for TGS Keno Rebranded venue fit-out Product expansion Digital strategy Group Sydney office, data centre and Sky Sports Radio relocated in FY15 11

12 Key capital features Debt Structure $m 500 Bank facilities Tabcorp Subordinated notes US Private Placement FY16 FY17 FY18 FY19 FY20 FY21 FY22 June 2016 bank facility refinanced in May 2015 Undrawn bank facilities of $330m at 30 June 2015 Gross debt 2 / EBITDA of 2.1x Notes: 1 Tabcorp Subordinated Notes mature in March 2037, however illustrated above at first call date in Gross debt includes USPP debt at the A$ principal repayable under cross currency swaps 12

13 Conclusion Business performing well and strongly positioned for future ACTTAB acquisition completed and integration on track for FY16 Agreement in place for NSW and Victorian thoroughbred media rights Strengthened balance sheet and focus on shareholder returns Total FY15 dividend ordinary dividend of 20.0 cents per share, fully franked, up 25%. In addition, a special dividend of 30.0 cents per share, fully franked, was paid in March FY16 target dividend payout ratio to increase to 90% of NPAT before amortisation of the Victorian Wagering and Betting Licence FY16 focus Wagering & Media Future Retail roll-out, relaunch of Sky Thoroughbred Central and further product innovation Gaming Services improving existing venue performance and continued expansion Keno progress brand and product transformation, jackpot pooling in Qld and implementation of digital strategy Committed to ensuring the highest levels of regulatory compliance and resolving the matters raised by AUSTRAC as a priority Well positioned to drive future performance, maintain expense discipline and achieve 14% ROIC by FY17 13

14 Appendices 1. Group results 2. Wagering: Financial data 3. Wagering: Revenues by state and product 4. Balance sheet 5. Cashflow 14

15 1. Group results $m FY15 FY14 Change Revenues 2, , % Government taxes & levies (365.2) (349.5) 4.5% Operating commissions (260.5) (256.5) 1.6% Racing industry fees (563.1) (514.3) 9.5% Variable contribution % Operating expenses (458.6) (433.4) 5.8% EBITDA from continuing operations before significant items % D&A (173.5) (164.4) 5.5% EBIT from continuing operations before significant items % Interest (78.5) (97.2) (19.2%) Tax expense (84.8) (75.1) 12.9% NPAT from continuing operations before significant items % Significant items (after tax) n/a NPAT from discontinued operations - (19.5) 100.0% Statutory NPAT % Note: Earnings before significant items presented to provide the most meaningful presentation of Tabcorp s results. 15

16 2. Wagering & Media: Financial data $m FY15 FY14 Change Revenues 1, , % Taxes, levies, commissions and fees (1,099.4) (1,029.8) 6.8% Variable contribution % Operating expenses (381.7) (357.3) 6.8% EBITDA % D&A (128.6) (116.6) 10.3% EBIT % Ratios FY15 FY14 Change Variable contribution / Revenue 40.8% 40.7% 0.1% Opex / Revenue 20.6% 20.6% 0.0% EBIT / Revenue 13.3% 13.5% (0.2%) Returns to the Racing Industry FY15 FY14 Change Victoria % New South Wales % Race Field Fees % Media & International (5.3%) Total Returns to the Racing Industry % 16

17 3. Wagering: Revenues by state and product NSW Change Vic Change ACT Change Total Change $m FY15 on pcp FY15 on pcp FY15 on pcp FY15 on pcp Racing % % 18.3 n/a 1, % Sports % % 1.3 n/a % Trackside % % 0.1 n/a % Luxbet % Media % Other 68.7 (2.8%) Revenues 1, % % 19.7 n/a 1, % Notes: - NSW and ACT represents 100% of revenue - Vic includes Tabcorp s 50% proportional share of the JV 17

18 4. Balance Sheet $m Jun 15 Jun 14 Change Total current assets % Licences (3.5%) Other intangible assets 1, , % Property, plant and equipment % Other non current assets % Total assets 3, , % Total liabilities 1, , % Shareholders funds 1, , % Net debt (reported) % Net debt (economic) (3.4%) Shares on issue (m) % Ratios 1,2 Gross debt / EBITDA (x) EBIT / Net interest (x) Return on Invested Capital (%) Subordinated notes ratios 3,4 Gross debt / EBITDA (x) EBITDA / Net interest (x) Notes 1 Debt includes USPP debt at the A$ principal repayable under cross currency swaps 2 EBITDA, EBIT and net interest are last 12 months (continuing operations). EBIT excludes amortisation of the Victorian Wagering and Betting Licence 3 Gross debt excludes subordinated notes, then divided by two 4 EBITDA and net interest are last 6 months. Net interest excludes interest on subordinated notes 18

19 5. Cashflow $m FY15 FY14 Change Net operating flows (6.2%) Net interest payments (77.8) (100.1) (22.3%) Income tax paid 2.8 (75.2) (>100%) Payments for PP&E and intangibles (131.6) (198.4) (33.7%) Sub-total % Ordinary dividends paid (127.9) (67.0) 90.9% Special dividends paid (229.7) - n/a Proceeds from share issue >100% Health Benefit Levy (32.9) 21.5 (>100%) ACTTAB acquisition (103.3) - n/a Others (9.8) 42.6 (>100%) Net cash flow (>100%) Net debt at beginning of period ,144.7 (15.5%) Non cash movements 53.4 (5.6) >100% Net debt at end of period % FY15 includes a cash inflow of $55.9m relating to the income tax benefit from the Victorian Wagering and Gaming licences, with a further $74.7m received in July 2015 Note: Health Benefit Levy relates to discontinued operations, refer to 1 July and 28 July 2014 ASX releases 19

20 Disclaimer This Presentation contains summary information about the current activities of Tabcorp Holdings Limited (Tabcorp) and its subsidiaries (Tabcorp Group). It should be read in conjunction with the Tabcorp Group s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available at No member of the Tabcorp Group gives any warranties in relation to the statements or information contained in this Presentation. The information contained in this Presentation is of a general nature and has been prepared by Tabcorp in good faith and with due care but no representation or warranty, express or implied, is provided in relation to the accuracy or completeness of the information. This Presentation is for information purposes only and is not a prospectus, product disclosure statement or other disclosure or offering document under Australian or any other law. This Presentation does not constitute an offer, invitation or recommendation to subscribe for or purchase any security and neither this Presentation nor anything contained in it shall form the basis of any contract or commitment. This Presentation is not a recommendation to acquire Tabcorp shares. The information provided in this Presentation is not financial product advice and has been prepared without taking into account any recipient's investment objectives, financial circumstances or particular needs, and should not be considered to be comprehensive or to comprise all the information which recipients may require in order to make an investment decision regarding Tabcorp shares. All dollar values are in Australian dollars (A$) unless otherwise stated. Neither Tabcorp nor any other person warrants or guarantees the future performance of Tabcorp shares or any return on any investment made in Tabcorp shares. This Presentation may contain certain 'forward-looking statements'. The words 'anticipate', 'believe', 'expect', 'project', 'forecast', 'estimate', 'likely', 'intend', 'should', 'could', 'may', 'target', 'plan' and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, financial position and performance are also forwardlooking statements. Any forecasts or other forward looking statements contained in this Presentation are subject to known and unknown risks and uncertainties and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Tabcorp, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. You are cautioned not to place undue reliance on forward looking statements. Except as required by law or regulation (including the ASX Listing Rules), Tabcorp undertakes no obligation to update these forward-looking statements. Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. 20

21 Draft version 14 ( ) 21

Tabcorp Holdings Limited 2015/16

Tabcorp Holdings Limited 2015/16 Tabcorp Holdings Limited ABN 66 063 780 709 2015/16 Full Year Results Presentation 4 August 2016 Draft version 15 (01-08-13) FY16 overview Statutory results NPAT $169.7m, down 49.3% EPS 20.4 cents per