‘Fresh start’: Lotteries boss feels lucky about life after Tabcorp

The boss of Tabcorp’s lotteries division says making its games more compelling and selling more tickets online, as well as service stations and convenience stores, will fuel its growth as it launches onto the ASX as a separate company next year.

Tabcorp bowed to investors calls in July to spin off its lotteries and keno division from its struggling bookmaking arm by mid-2022, unwinding part of its $11 billion merger with Tatts Group just four years ago.

Tabcorp’s managing director of lotteries and keno, Sue van der Merwe, who will be the new company’s CEO, said giving the business a “fresh start” will better position it to execute the strategy that has already seen it grow revenue 10 per cent and earnings by 20 per cent over the past three financial years (to $3.2 billion and $516 million respectively in 2021).

“We’ll have an executive team that will only be focused on the lotteries and keno business, and that’s going to be really positive going forward,” the 32-year industry veteran said in an interview on Friday.

“We’re expecting a re-rate of the company, and I think also expecting that the new company will open us up to a new suite of investors. That in itself will potentially open up further investment opportunities.”

The new lotteries and keno outfit is expected to be one of the 50 largest companies on the ASX, worth more than $10 billion. Freed from the wagering business, analysts expect it to trade at 16 to 20 times earnings, compared to Tabcorp’s 12 times, while investors should be attracted to the reliable “infrastructure-like” earnings that have been resilient even through the pandemic.

Ms van der Merwe said the business’ momentum started when it changed the rules of its most popular game, Powerball, in 2018 to produce more winners and bigger jackpots of $100 million or more which spur casual customers to buy a ticket. (An $80 million Powerball jackpot was won on Thursday night, the year’s biggest draw).

“That did bring a whole new level of engagement and interest in the portfolio of games,” she said.

OzLotto will be tweaked by the middle of next year to produce more jackpots and there will be more changes after that. But Ms van der Merwe said it was important to maintain a 50/50 revenue split with its lower Saturday, Monday and Wednesday draws preferred by its frequent customers.