Tabcorp Holdings Limited

Good day and thank you for standing by. Welcome to TAP Corp Holdings Limited Full Year Results 2026. At this time, all participants are in listen early mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Managing Director and Chief Executive Officer of TAP Corp, Gillian Mellochlan. Please go ahead.

Thank you and good morning everyone and welcome to our FY26 results call. I'm Gillan McLaughlin, and I'm joined on the call by our CFO, Mark Howe. I'll take the presentation as read, and I'll talk you through the key highlights before handing over to Mark, who will step you through the financials. I'll refer you first to slide two. Ultimately, FY26 was an important year for us. We continue to execute on the plan we presented two years ago, delivering significant strategic milestones. The numbers today reflect the progress we have made. We're steadily building a culture of doing what we say we will do, and for me that's critically important. We've improved our execution and are delivering an omnichannel racing and sports entertainment experience which customers are responding to. Products like TabTime, TabShout, TagMakeover and Megapod are the outcome of using our unique assets more effectively. Sky now has the domestic and international rights for every Australian race, creating a strong foundation to grow the B2B media business globally. Max Integrity Services continue to deliver consistent performance, providing growth and diversity in earnings across our group. This execution has been achieved while maintaining strong cost discipline and improving our balance sheet. In addition, we have delivered on key strategic initiatives, including the reshaping of the commercial model with our retail network, enabling us to grow and invest in that channel. Since year end, we've also reached agreement with the racing industry on a national tote, a significant milestone for TabCorp and the industry. As we announced earlier this month, the strategic acquisition of Bitmakers will modernise our technology and create a global beta value growth engine. Before I get into the detail, I'd like to note the company is subject to an auspice investigation which we take very seriously. There is no update from our original disclosure. We are cooperating transparently with the regulator and continuing the compliance uplift which we commenced in 2024. I'll now refer you to slide 6 and the first pillar of our game plan. It's all about people. The right people in the right slots. We continue to grow capability and build a culture of strong execution. As part of the uplift, we've appointed key senior leaders in financial crime, wagering, retail, marketing, max, strategy and cyber security. We've increased cultural accountability with 360 degree views of all executives and senior leads, including talent roundtables. We're also investing in the next generation of leaders. In N.26, we launched Tab W, a program focused on developing and investing in emerging female leaders. And Tab Kickoff, bringing our 150 top leaders together at the start of each calendar and financial year to align on the strategic priorities. We will continue to focus on growing capability and culture as the foundation of our future success. I've now referred to slides 7 and 9 in our second pillar, growth of the industry and ourselves. The creation of a national tote is a significant milestone for the industry. I want to acknowledge the principal racing authorities in each state who work collaboratively to make this a reality. The industry has tried and failed many times to create a national tote, and this group has achieved it. I'm pleased to share the national tote will launch early in the spring carnival. A merged pool will increase liquidity for funders and create greater price stability. The next step will be product innovation. We're focused on creating more jackpot-style bed types and products exclusive to Tote, and there will be new opportunities for global pooling. We'll refresh the look and feel of Sky with greater focus on Tote promotions. And I refer to slide 10. Delivering unrivaled omni-channel experiences at greater strength and differentiator. As I mentioned, we continue to innovate with new products and a better look and feel to create a genuine racing and sports entertainment offering. We told you at our half-year results about the success of Tap Time, Tap Shop, Tap Takeover and exclusive in-venue generosities. Today, we can add the FIFA World Cup to that list. We achieved record turnover and revenue. Retail turnover for the event increased 57% compared to the last World Cup and digital turnover grew by 53% compared to the last World Cup. I'm particularly pleased with the increase in our broader retail turnover. More people are coming into pubs and clubs on the back of our investment in the channel. Digital in venue turnover for FY26 grew by 9% and by 25% for sport. We continue to broaden our appeal with digital in venue turnover for the 18 to 34 year old cohort increasing by 23%. This reflects our brand refresh and improved look and feel of our offering. I'd like to take you now to slide 11 of the new retail commercial model. Our fourth pillar is about delivering wagering growth underpinned by a sustainable retail channel. Creating structural sustainability in our retail model has allowed us to invest more in uplifting the retail experience. Support from pubs and clubs has been strong. More than 3,300 venues are operating in our network, representing 97% of historical turnover. Our new commercial model allows us to invest for mutual benefits. The improved product offering and week-long generosity calendar is delivering results and we're looking to build on that growth in FY27. Now I'll take you to slide 13 and our investment in modernised bedding terminals. We've commenced replacing every existing EBT with new next-gen terminals. The terminals will deliver both compliance and commercial benefits. Technology is a key enabler for our continued uplift. in regulatory compliance, and the new terminals provide us options for further automation and operate a safe and compliant network. Commercially, we expect the benefits from the new model will generate returns on investment of at least 25%. This includes terminal spend in FY27 and FY28, along with the Phase 1 benefits including our FY26 results that Mark will talk to shortly. The changes we have delivered in retail this year are significant and I want to acknowledge the work of our people as well as the ongoing support of our venue partners in positioning the venue network for a strong and sustainable future. On to slide 15 in our media business. Sky's recent domestic and international rights renewals underpin our ability to grow a global B2B distribution business. A key focus in the year ahead will be using our rights acquisitions to expand this part of our business. which will be complemented by the proposed acquisition of betmakers. On screen, Sky is now a fully integrated part of our wagering experience, including QR code integration and viewers to scan and receive pre-filled tabbed bet slips based on our presenter tips. There's another step in creating a complete omnichannel experience. The look and feel is continuing to evolve and you'll see further changes as we launch the national tote. Slide 16 summarises our agreement to acquire betmakers. The acquisition represents a unique opportunity to accelerate our transformation to a modernised technology-led company and establish a global B2B growth engine. We believe with Betmakers we can create new products faster and more cheaply, uplift capability in our workforce and benefit from complementary assets to grow scale and diversify internationally. The transaction will require various approvals including by Betmakers shareholders. Completion is targeted during the third quarter of FY27. I'll now hand over to Mark to talk you through the detailed financial results.

Thanks, Phil, and good morning, everyone. We've delivered what we think is a pleasing set of results. We've responded to the modest growth turnover environment with continued focus on cost control while delivering a number of important strategic initiatives that have sustainably improved our earnings, both in F26 and into the future. Before I run you through the results in detail, there are four key aspects I want to call out. First, the initial phase one benefits of the new retail commercial model were delivered in line with expectations with a positive EBITDA impact of 22 million realised in F26. This was partly offset by the low average yield in the first half that we called out in February. Second, the benefit of the reformed Victorian wagering licence applied for the full 12 months of the financial year versus only 10 and a half months in the PCP. We estimate this delivered an incremental 12 million of EBITDA and EB26. Third, we continue to focus on cost discipline across the business. OPEX adjusting for the Victorian licence decreased by 80 basis points, a strong result in a high inflationary environment. This allowed us to deliver operating leverage and 140 basis point improvement in EBITDA margin to 16.4%. And finally, we continued to focus on efficient investment of capital to support our strategy, requiring another year of improved return on capital, up to 12%, a 240 basis point improvement on the prior year. In addition, we reduced leverage to 1.2 times and improved the diversity and tenor of our debt facilities, including a new AMTN and the extension of our syndicated debt facility. This provides us with significant flexibility to support our strategic investments going forward, including the rollout of modernised betting terminals over the next couple of years and the strategic acquisition of bet makers. So now moving on to the result. Slide 17 sets out the F26 group financial result. Group revenue grew by 0.8% to 2.64 billion. Variable contribution increased 4% while OPEX was largely flat, delivering strong operating leverage with 10.3% growth in EBIT data to $432 million and 15.9% growth in EBIT to $219 million. Net interest expense decreased by 5.8%, reflecting the reduction in net debt. This in turn delivered 44% growth in NPAT before significant items to $71.1 million. a final dividend of 1.5 cents per share has been declared, bringing the total F26 dividends to 3 cents per share, a 50% increase on the PCP. This represents a 58% payout ratio for the year towards the midpoint of our 50% to 70% payout policy. You'll also note that on this slide we have provided an MPEDA view of the result. This is in response to investor feedback and just the certain non-cash items and an ongoing part of our P&L, focused particularly on the amortization of wagering and monitoring license in our portfolio. 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 strength and balance sheet. Turning to slide 19, you can see the key drivers of the 10% EBITDA growth delivered in F26. The reformed Victorian wagering licence contributed for a full 12 months and it added $22 million of variable contribution and $12 million of EBITDA. We also benefited from phase one of the new retail commercial model that contributed $22 million which was partly offset by the impact of below average wagering yields in the first half. Integrity Services VC increased by $6 million as a result of the annual CPIC increases and additional project work through the year. Underlying costs improved by $6 million, which I'll turn to now. Slide 20 demonstrates the focus on costs we have had over the last two years, with F26 OPEX benefiting from the annualisation of actions taken in F25, as well as a continuation of cost discipline on discretionary items. General inflation remained an ongoing headwind, particularly in relation to technology costs. However, we more than offset this with $18 million of cost reduction and a further $9.3 million of more tactical items. This outcome was achieved whilst continuing to invest in the business, including advertising and promotion spend of around $5 million in relation to the FIFA World Cup. Slide 21 demonstrates the continued focus on discipline, investment and returns. Canvex increased by 22% in F26. which was driven by investment in the new EVTs, which we have now commenced rolling out. We expect this investment to continue through the next two years and generate attractive returns for the business. In F27, we expect to spend around $65 million on the new EVTs, which explains a further step up in our expected capex spend in F27 of up to $160 million. Importantly, our LOIT continues to improve and was 12% at the end of F26, up from 9.6% in F25. Turning to slide 22 in cash flow. Underlying cash conversion was strong at 98%, and in line with our expectation provided at the half, where we flagged full-year cash conversion of between 90% and 100%. This has helped us further reduce leverage across the year. On to slide 23. We have made significant improving our balance sheet in F26. In November 25, we issued a $300 million under a new AMTN program at a fixed coupon of 5.99% and a tenner of five and a half years. In addition, in June 26, we extended both tranches of our syndicated debt facility by around two years. These initiatives diversified our funding sources, increased liquidity and extended their average maturity of drawn debt to 4.9 years. Leverage at the end of F26 stood at 1.2 times and liquidity stood at $1.2 billion, providing us with significant flexibility in funding capacity to pursue growth opportunities. As promised on the betmaker's announcement call a couple of weeks ago, we have rolled forward the leverage calculation to June 26 and our updated pro forma leverage is 1.6 times for the transaction. I'll now hand you back to Gil for some closing remarks.