Tabcorp Holdings Limited

Good day and thank you for standing by. Welcome to TAPC reporting's limited half-year results 2026. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Gillian McLaughlin, Managing Director and CEO. Please go ahead.

Good morning, everyone, and welcome to our results for the first half of FY26. I'm Gillian McLaughlin, and I'm joined on the call by CEO Mark Howell. I'm going to take the presentation at bread and talk you through the key areas. Starting slide two, we released our revised game plan a year ago and I believe we're executing on that plan. The numbers today reflect the progress we've made and we're steadily building a culture of doing what we say we will do. For me, that's critically important. I want to stress that we're midway through our turnaround plan and there's still work to do. We're not yet at the level I want us to be, but I'm pleased we're on track against our FY26 objectives and we made good progress in the first half. Approved execution continued with AFL Missed by 1 and Megapod during the footy season. We showed up strongly through the spring carnival with tap takeover and tap time continued to sell out. The spring carnival, however, was a customer's carnival. Yields from September to November were historically low because of an unusually high number of favourites winning major races. Despite those challenges, the diversification of our business allowed us to deliver a pleasing result. It was a company-wide effort, cost and capital discipline, and improved omni-channel customer offering and growth in banks. These are the outcomes of creating a fitter company with greater capability. If you look at slide six, we continue to execute our first pillar of the appointments of general managers to lead retail, banks, marketing and strategy. People are everything, and these appointments are part of our continuous journey of improvement. I now refer you to slide seven and our second pillar. We are going to deliver a national title, and our target remains the end of this financial year. One pool will increase the liquidity of the partners and in time create new product opportunities. Australian Racing will also have a greater global reach and potential for more world pools, which will better connect us to a global calendar. And we recently received ACMA clearance, and we are now working to build our launch plan for New South Wales. Discussions with other states are advanced. On this slide, I also want to call out our integrity service, Business Max. It's a consistent and growing business. And our key partnerships are renewed in the hub, and we're looking at opportunities which could expand our footprint. And now I'll push you to slide eight. The core pillar of our game plan is to deliver unrivaled omnichannel experiences. as something unique in the market. With all the great exclusive in-venue generosities that incorporate both racing and sport, it encourages more people to enter venues. With a strong product and generosity pipeline for both AFL and NRL seasons, which we launched in venues this week. I'll push you to slide nine now. And the TAB brand is becoming more youthful, sports-oriented and experiential. Turnover among 18 to 24-year-olds was up 14% in the first half of 2016. I want to touch on Live Golf and Super Bowl as an example of how we're talking to a new cohort of sports fans. We know customers want live experiences and attention spans are getting shorter. Story, sell and brand connection is increasingly more important. Tenfold assets like Super Bowl and Live Golf are examples of how we're delivering in this space. We'll be activating our brand and entertainment propositions across these assets and showcasing these activations on tabloid channels. We'll be unmissively green at more than just races. Flemington and Randwick will continue to be our flagship properties, but we know we also need to connect with more sporting audiences. On slide 10, some numbers there, and this refreshed offering is delivering. Digital and venue turnover increased 12% in the half, including growth in sport of 26%, and 42% growth in the 18- to 24-year-old cohort. Looking ahead, next-generation EVTs will commence rollout in July, and the injunctional our offer in the market. Slide 11. Our fourth pillar is about delivering growth underpinned by a sustainable retail channel. To do this, we'll invest in retail through redirecting generosity, developing new products and rolling out modernised betting terminals to attract customers and grow turnover for the benefit of the tab and our venue partners. To enable this, we must create a structurally profitable channel that is sustainable. This requires a new commercial model that improves alignment with our partner venues and simplifies existing frameworks. Finally, slides 12 and 13 showcase our media business. I said in August that the look and feel of Sky will be different during the spring race at Carnival than the team delivered. We introduced new content, evolved our talent and overhauled our magazine programs to be more contemporary. Our leading tifters have a permanent place on the homepage of the tab app. Every partner can access their tips with pre-filled business. It continues our evolution to a true omni-challenge experience. We've also strengthened our core rights football. Our focus remains on enhancing our core offering and content and expanding distribution both in Australia and internationally. I'll now hand over to Mark to talk you through the detailed financial results.

Thanks, Gil. Morning, everyone. As Gil mentioned, the growth in earnings in the first half of 2016 reflects a modestly improving turnover environment, strong strategic execution and cost and capital discipline. We have delivered a pleasing set of results given the impact of below average wagering yields and have responded to the revenue environment with continued focus on cost control and disciplined capital investment. This has led to earnings growth, margin expansion and a reduction in our leverage ratio to one and a half times net debt to EBITDA at the end of the calendar year. Before I run you through the results in detail, there are four key aspects I want to call out. First, domestic wagering revenue pre-VRI impacts fell by 2.5% despite modest growth in turnover due to below-average yields during the half. The reduction in yield versus longer-term averages was due to a run of customer-friendly results during the NRL AFL final and through the spring racing carnival. Some of this softer yield was recovered through the back end of November and in December when yields were very strong. We estimate the net yielded impact across the period was around 15 basis points, or about $10 million of net revenue when compared to longer-term averages. Second, the benefit of the reformed Victorian wagering licence applied for the whole six months of the half versus only four and a half months in the PCP. We estimate this to live in an increment of $12.2 million of EBITDA in the first half of 2016. Third, we continue to focus on improving cost discipline across the business. OpEx adjusted for the reformed Victorian license decreased by 3.7%. This, together with some modest revenue growth and some benefits from phase one of the new retail commercial model, helped us deliver operating leverage and 190 basis point improvement in EBITDA margin to 16.2%. Fourth, we continue to focus on efficient investment of capital. In the first half 26, CapEx reduced by 11% on the PCP to $51 million. This provides additional capacity to invest in growth for the second half, including the rollout of new modernised bedding terminals in retail venues to support an improved customer experience in venue and support our omni-channel strategy. Our leverage ratio reduced to one and a half times, providing us with significant balance sheet flexibility as we deliver our strategies. So now moving on to the results. Slide 15 sets out the first half 26 group financial results. Group revenue grew 1%, 1.34 billion. Variable contribution increased 4.3%, while reported OPEX decreased 1.1%. Delivering 14.3% growth in EBITDA to 217.4 million and 18.9% growth in EBIT to $110.2 million. Net interest expense decreased due to the reduced net debt as we continue to deliver. As discussed in prior Tadcorp results, the high effective tax rate in the P&L was driven by non-deductible VIC licence amortisation and the interest discount unwind. And finally, NPAT for forcing items grew at 61.5%. An interim dividend of 1.5 cents per share has been declared, representing a 56% payout ratio and a 50% increase on the PCP. For the remainder of the presentation, I'll focus on three areas. The drivers of EBITDA growth, cost control to deliver operating leverage, and the freedom balance sheet. So turning to slide 17, you can see the drivers of the 14% EBITDA growth delivered during the arm. We are pleased to deliver this level of earnings growth in light of the modest turnover environment, which, as I've already discussed, was also impacted by unfavorable yields. The incremental earnings uplift from the Reformed Victorian Majoring License contributed an incremental $21.7 million to VC, which was offset by $9.5 million of cost to deliver a net benefit to EBITDA of $12.2 million. As discussed earlier, Other benefits to earnings include the increase in integrity services VC as a result of the annual CPI fee increase, as well as increased project work. And some benefit to VC from phase one of the new retail commercial model. Underlying costs improved by $13.5 million, which I'll turn to now. Slide 18 demonstrates the focus on costs, which we have had over the last 18 months. with first half 26 OPEX benefiting from the annualisation of actions taking net 25, as well as the continuation of cost discipline on discretionary costs. Cost inflation remains an ongoing headwind, particularly in technology, so we've more than offset this with $13.9 million of cost reduction and a further $10.5 million of cost benefits relating to A&P timing and some other smaller cost-related actions. Looking forward in the second half, we continue our ongoing focus to offset inflation. We also expect to incur additional advertising and promotion spend of around $5 million in relation to the 2026 FIFA World Cup. Slide 19 demonstrates a continued focus on capital discipline, with CapEx for the first half of 2026 reducing 11% to $51 million. Together with the increase in profitability, this has given a 360 basis point improvement on return on invested capital relative to the prior corresponding period. Our F26 CapEx forecast remains unchanged at $120 to $140 million, implying an uplift in the second half fund rate related to the rollout of the modernised betting terminals under the new retail commercial model. Turning to slide 20 in cash flow, underlying cash conversion was 86%, impacted by the timing of some large payments in the first half. This is in line with expectations and similar to the first half of last year. We continue to expect that on a full year basis, cash conversion to be between 90% and 100%. One point to note is that cash interest expense of $54.6 million includes $24.9 million of interest relating to our annual payment each August for the Victorian licence. This will not reoccur in the second half, but all things being equal, the cash interest in the second half should be closer to $30 million. On to slide 21. In November, we issued $300 million under a new Australian median term date program. The notes carried a competitively priced AUD fixed coupon of 5.99% and a tenner of five and a half years. The AMTN delivered on our three objectives, being to diversify our funding sources, extend our average maturity, which now stands at 5.4 years, and increase liquidity. The strong AMTN outcome reflected the significant improvement in the company's prospects over the last 18 months. Slide 22 shows that our balance sheet remains strong and provides us with the necessary flexibility in funding capacity to pursue our strategy. At 31 December, we've reached 1.5 times, well below our target range of less than 2.5 times through the cycle. As I remarked at the outset, overall this is a sound result and we continue to deliver on our strategic agenda. I'll now hand you back to Gil for some closing remarks.

Thanks, Martin. I believe the company continued to improve over the last six months. Our turnaround plan is on track. Earnings have increased. We continue to deliver meaningful cost savings, and our balance sheet is in good shape. We focus on executing our strategic agenda for the remainder of FY26 and beyond, and we're going to be relentless in executing it. We expect the waging turnover environment in the second half to be similar to the first half, and I'm pleased with the progress and happy to take your questions.

As a reminder, to ask a question, please press star 1 and 1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by as you compile the Q&A roster. Just a minute for the first question, please. First question comes from Andre Fawcett. From UBS, please go ahead.

Thank you. Good morning. First, I just wanted to focus on the turnover environment. You call out in the second half you're expecting similar conditions or the outlook looks similar to what you see in the first half. Is that a comment technically around sort of the level of growth in terms of like a year-on-year growth rate or are you talking more in in overall dollars of turnover. And I'm wondering as well if you can distinguish between the cash environment and the digital environment, because it looks like cash has outperformed in both the turnover growth and yield perspective in the half you've just reported.

Yeah, thanks, Andre. It's Mark. We're talking about growth, so I think we've talked about turnover growth to the first half being around 0.3%. We sort of see it in that. a range of what we call modest rows and we sort of see that continuing. In terms of the dissection between digital and cash, I'm probably not going to give you a forecast on that, but obviously we're just pleased with the trends we've been seeing as we've sort of exploited, I suppose, our omnichannel assets

Maybe another way to ask that, in terms of the mix of your cash business versus digital, how much of a role is that playing? Because it looks like racing as a category was weaker than sport, but also is this part of the strategy playing out that you're having more success through building participation in retail venues?

Yeah, thanks, Andre. It's Gil. We certainly see we're very confident in our retail strategy. We see, obviously, the DIV off low basis, the digital venue going up, cash is in positive growth. And, you know, with some of the strategic things we're announcing today, whether it be the approval from ACMA or the success of different products in retail... It's central to our strategy and we see underpinning our numbers.

Maybe the last one for me and following up on that retail strategy, I understand, Gil, you sort of launched the new framework with your venue members late last year. It doesn't come into effect until the middle of this year. But what's been the reception so far, you know, that Is it right to assume that there are some venues that are going to be better off immediately versus worse off immediately? And are you expecting any sort of attrition in your venues as you transition to the new model?

Thanks, Andre. I mean, we put retail at the centre of our strategy. I mean, you've called out the cash numbers and I call out the digital venue numbers as being strong. The model is simplified. We're going to invest more in the network than the changes and we're working through that. We think broadly speaking we're on track to deliver that new commercial model and we're actively engaged with the venues through that period and comfortable where it's at. Okay, thank you.

Thank you. Next, we have Matt Ryan from Baron Joey. Please go ahead.

Hi, thank you. I was just interested in some of the comments around tab time and some of the growth that you're seeing from your younger cohort. And if you could just provide any colour on what you're seeing there. Obviously, that's the pretty strong numbers, you know, the benefits that that's giving to your business.

I think, Matt, sorry, it's Gil. I think the standout number in the decks is the fact that across the board of total turnover, the 80 to 24-year-old category grew by 14.2 or over 14%. And, you know, I feel when we're talking about our push to, you know, talk to sport as much as racing, to be younger and more experiential and activate all our assets in that energetic way, whether it's tab time or tag takeover or whatever. That number is the one that jumps off the page, I think, to me and to us. There's some different numbers in retail specifically, but 14% across the board, not just in retail in terms of the turnover increase, I think, is one that says... a brand repositioning is starting to get some traction. And... I've called out... Sorry, Matt. I've called out the experiential part of that and that sort of energetic piece, but it's those products through Omnichannel, through retail, that are obviously, I think, important in all that, which I think you're calling out. Certainly, that's my perception of your question.

Yeah, that's what it looks like. I was just going to also just ask about Phase 2 of the new retail commercial model. I think you mentioned that EVTs may be arriving in the middle of this year. If you could just, I guess, talk about what the key features are of that Phase 2 and any comments around phasing or timing.

Yeah, we'll start rolling out the first week of July. EVTs are in production. I think what I'd say to them is they obviously... aesthetically, functionally compliance or significant improvements. They facilitate the use of cash clearly but also tap and play functionality. I think on a compliance basis we are future proofing what we can do to be a safe and compliant retail network. not only new hardware, but all the software is being replaced and redeveloped so that ultimately any changes, well, first of all, the EVTs will interact. It'll be the same functionality and same look and feel as the tab app on your phone. And then any upgrades and product development that plays out through the phone will play out through the terminal. So if we talk about having a seamless tab experience, that will play out both on... in venue, in cash, in the same way as using your phone. I think that's significant progression. So it's not only how it looks and feels, it's also the product, the fact that it's digital and cash, and there's obviously also compliance benefits as well. And it will talk to the future state of the full maximisation of our licence. So we think it's a very critical part of it, and we will start rolling out nationally first week of July.

Thank you.

Thank you. Just a moment for our next question, please. Next, we have David Fabris from Macquarie. Please go ahead.

Hi, Gil. Hi, Mark. Can I just start off with in-play betting? Great to see you've got the ACMA clearance now. Are there any more hurdles that we need to think about, and can you provide a timeline for the rollout across all your jurisdictions, or is this more just a New South Wales piece up front?

Thanks, David. I think you can draw the line that we want to be in lockstep with regulators, and we have the approval in New South Wales, and we're obviously well engaged with all state regulators. but the ACMA sign-off was important, so we paused because we don't want to be out of step with anyone. That approval coming through and being confirmed yesterday means now we will actively start rolling out in New South Wales and then work through the approvals in each state. So the timing of those, I don't know. Obviously, we're ready to go in New South Wales. I'm confident, given the discussions we've had, that now with the ACMA approval, that will play up. and we'll push you out quickly. Does that make sense?

Yeah, no, crystal clear. That's fine. I appreciate that. The next question, I don't know how you'll take this one, but just curious to understand the place of bet makers. I mean, are you signaling that there might be some shortfalls in your tech stack that bet makers may have been helpful with? And, you know, I'm curious to unpack that piece because if we think about bet makers, you know, they've got retail terminals and a global tote. So any commentary there would be helpful. Thank you.

Thanks, David. I'll make some comments. First of all, I don't believe we've been in the position for the last, you know, I mean, whatever it is, 17 or 18 months. I don't think we've been in the position and we've been clear with you guys that our primary task was to get fit and get our house in order. And I think the fact that we are working through that phase and I do believe we are now organised in a position that if there was Corporate opportunity, we're in a position with our balance sheet and our operating model to look at that. I would say to you that we are still focused on growing our business operationally and executing all the strategic initiatives in front of us. If any corporate opportunity presents itself, it would have to be absolutely on strategy and any opportunity we will be absolutely disciplined about price and about how we look at it. With respect to bet makers, we haven't made any comment. I know bet makers did. I would say I don't think you should draw a line in the fact that it was a tech-solved necessarily, but it would be some tech advantages as other broader strategic opportunities in why we had a look at that. But ultimately, it didn't make commercial sense to us because we're going to be disciplined about things and it'd have to really stack up absolutely. I think there'll be other stuff around that people want to put to us when we're in a position to talk to people, but you guys need to know it'll have to be a great strategic fit and we'll be disciplined about anything we look at.

I appreciate those insights. Very helpful. Thank you.

Thank you.

I would add, David, there, in terms of the tech piece, I want to commend the work that our CTO has done in the last year and the stability of our platform and the way our tech environment is working both within app and across retail and what we're able to do functionally and the upgrades and controls. I feel that we've made great progress on our technology and I'm just adding to your specific question.

Thank you. Next question comes from Justin Barrett from CLSA. Please go ahead.

Hi, guys. Thanks very much for your time. I just wanted to follow up on the tab live question. I appreciate your developing the launch and rollout plan for New South Wales, but I just wanted to try and get an indication of how soon that could potentially start rolling out, and I guess whether that is included in your FY26 CAPEX guidance, if you think it can be commenced in the next few months.

Yeah, so the TAB, I'll let Mark talk to the CapEx guidance, but there is obviously EVTs in there, and they do have the functionality to do with TAB Live, but they are broader than that. Obviously, I think we're well progressed and positioned with state-based regulators. I don't want to pre-empt how long that would take, but I would say that we've been progressing... our operating and operational plans for the rollout of TAB Live, confident in our position with ACMA, which was endorsed yesterday, and I think we're well advanced, and there'll be... Mark might talk to the capital review things.

Yeah. Thanks, Gil. Yeah, so the answer is yes. Within the envelope of the 120 to 140, there is allowance for terminal spend and having PlayStations in the second half, which will be rolled out into next year. There will obviously be some spend next year that will need to be incurred, but I'll provide some guidance on that at the end of the year. And what I'd say, per my speaker notes earlier, was that the uptick in run rates from a capital spend into half to will be largely driven by that terminal spend to support the new retail commercial model.

Yeah, fantastic. Okay, then. And then, Mark, just while I've got you, I just wanted to see if you could divulge a little bit more around the cost reductions that you saw in this first half. I appreciate some of it has been the annualising of of processes or cost out from the prior year. But I was just wondering if you could actually split it out and help us understand what potentially came from initiatives introduced in this financial year to date, please.

Yeah, most of it is, the vast majority of it comes from, Justin, from actions we took in FY25. Obviously, the biggest one was the zero-bate design that we did towards the back end of the financial year that's playing through this year and will play into half two as well. There's also some other smaller structural cost benefits that we took that's part of that $13.9 million that we called out in the OPEX bridge. And then the other part, the sort of $10.5 billion, was really around sort of tighter spend on some discretionary costs. We've talked about some benefits from ANP timing and some of that ANP spend, as I called out, will be incurred. About $5 million of that will actually come into half too to support the 2036 FIFA World Cup.

Yeah, okay. So just to follow that up, in terms of that ANP spend, is this a new baseline for us to sort of think about AMP spend going forward, or was it just the timing events in this half that sort of drove that cost reduction?

Yeah, so about half of that $10.5 million was the AMP, and as I said, that will go into half two. So I think across the year, you'll see it sort of, you should be able to work out then what that brings to the baseline spend.

Fantastic. Thanks very much for that.

Thank you. Next, we have Kai Ehrman from Jefferies. Please go ahead.

Thanks, guys, for taking my questions. The first one is a bit of a follow-up from David's question earlier. You've listed flag as sort of, you know, your capex reduction you had in the first half and giving capex guidance for the full year. You'll likely continue to de-lever this year and you're below your target gearing. excluding any sort of M&A, how should we think about uses of capital, balance sheet, capital management going forward?

Thanks, Kai. Look, I think what I've sort of said to help you guys on that, there are a number of relatively sizable payments in the first half that have impacted cash flow. So to call a couple out, the VIC licence, the $30 million cap value add, the contribution, the stub liability is paid in the first half and then some sponsorships are weighed into first half as well. And then I've given you sort of the capital envelope for the second half. So that sort of, as you think about cash and cash flow, and I suppose the other piece of the puzzle is we've said that we expect cash flow conversions in that 90% to 100% range. So I think that should give you sort of all the building blocks as it relates to sort of capital allocation for the year.

And then as a follow-up, you know, the sort of trend of sports outperforming racing has sent to continue. Based on your turnover numbers, do you guys think you're sort of outperforming the market in those categories or that's pretty reflective of what the market's sort of done in the last half?

I think it's hard to know that. We just focus on what we are doing. I think everyone has a better idea over the coming days, but there's also a lot of numbers out there that no one gets to see. So we're just focused on being better and growing our business. I'd say also that while sports outperform racing is levelling out and stabilising, which I think is pertinent. Thanks. I'll pass it on there.

Thank you. Next, we have Rohan Sundra from MST Financials. Please go ahead.

Hi, Sam. Just a question on the national token. Apologies, Bill, if you already touched on it. But it looks like everything's progressing in terms of timelines. How would you describe the industry discussions and engagement to date and Maybe if you could just reiterate the upside for customers and for Tabcor in achieving this. Thanks.

Thanks, Rowan. I think it called out in my commentary that I'm appreciative of the support of all the PRAs and their ability to lean into this. There is, you know, it is change and we've had strong support to a national table that's unequivocal now. Our tech development is largely complete and getting regulatory approval in most jurisdictions. We think we've got a commercial model that can take us through. And so there's some executional stuff to play out, but we feel actually we're... on-target deliver in this financial year. In terms of what that brings, I think the liquidity that we'll bring will actually get its own additional liquidity, and that's what's ultimately important here. And with that, then, that hopefully and confident will then also bring the opportunity for product development and broader international commingling and liquidity opportunities. So, you know, The liquidity will actually drive, I think, broader liquidity. We will develop products, and hopefully not just products for racing, but also for sport, and also there is international commingling opportunities. So I think it's a very important thing for us. I'm pleased with where we are in a very difficult thing, both sort of politically, technically, and commercially, to get done. I feel we're going okay.

Thanks, Gil.

Thank you. I see no further questions at this time. I will now hand the conference back to Gillan for closing remarks.

Thank you. Thank you all for your questions. Thanks for dialling in. I think I'll just reiterate where I finished. We're operationally going better every day but we've got work to do. We're very comfortable with our strategic plan and where we're going and we've got high conviction on that and I think certainly across the business. I think we're starting to see some of that come through in our numbers whether it's younger customers or what's going on in retail. We've got a lot of initiatives on the boil that we need to get done. We've confirmed where we think the market's going and we're pleased with where we're at, but not overconfident. We know we've got lots to do, but happy to be where we're at at the heart. Thanks for your support. Ongoing. Look forward to seeing you guys out over the coming days. Appreciate it. Thanks, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.