TABCORP’S CEO believes its joint venture, Sun Bets, is sustainable despite recording a significant loss in the 2017 fiscal year.
Following a huge win for the Australian gambling giant with the approval of the $11.3 billion Tatts deal, Tabcorp released a trading update revealing Sun Bets will lose $46 million in the 2017 financial year.
The losses recorded are $26 million more than projected at the beginning of 2017.
Still, Tabcorp CEO, David Attenborough, is optimistic about the UK joint venture telling the Financial Review that he is confident Sun Bets’ performance will improve in the coming months.
“We’ve got a range of initiatives planned or underway that will give the business a boost, including the next English Premier League season, racing and the 2018 soccer World Cup,” he said.
“It is core to Tabcorp.”
But these initiatives are tied up in controversy when it comes to Sun Bets, specifically with the EPL.
In February, the online betting company sponsored Sutton United when it took on Arsenal in the English FA Cup.
Sutton United reserve goalkeeper, Wayne Shaw, ate a meat pie on the sidelines, which was an available market at Sun Bets. He later admitted to knowing about the betting option and indicated his friends had placed money on the fact he would.
Attenborough also noted the incredibly competitive UK betting market – the online betting site competes against UK bookmaker giants, William Hill and Ladbrokes Coral – but he believes Sun Bets only needs to tap into a small percentage of the gaming market to be profitable.
Attenborough also said this in August last year, claiming only 1.5 percent of the UK digital betting market was required to “return a profit.”
Sun Bets was launched in 2016 as a result of a partnership by New Corp’s The Sun and Tabcorp. The joint venture set out to tap into the $AUD7 billion online gambling market.
Tabcorp predicted it would cost the company around $20 million in the first year – $26 million less then it has.
The agreement requires The Sun to promote the business in the UK media, while Tabcorp provides a share of the revenue from the business.
In February, Attenborough predicted an EBITDA of about $15 million based on its six-month results – in a media release Tabcorp announced “Sun Bets, launched with 85,000 customers acquired at 31 December 2016”. The company recorded revenues of $1.5 million and an EBITDA loss of $21.3 million.
Despite being way off the mark, Attenborough is confident the Sun Bets betting site will thrive next year, which may happen thanks to the World Cup in Russia, among other events.
Back home, Tabcorp is focusing on the deal with Tatts, announcing in the trading update that the company “is well advanced in securing the regulatory, industry and government approvals necessary for the implementation of the Scheme.”
The Tatts Scheme First Court Hearing is expected to be scheduled for next month, with a Scheme Booklet to be released by Tatts and a report to shareholders to follow.
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